UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 26, 1999
[ ] 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
Class A Common Stock, $0.01 par value
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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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of February 29, 2000, there were approximately 100,775,096 shares of the
registrant's Class A voting common stock and 8,314,848 shares of the
registrant's Class B non-voting common stock outstanding.
The approximate aggregate market value of the registrant's Class A voting common
stock held by non-affiliates of the registrant, as of the close of business on
February 29, 2000, based on the closing price of $.07 per share as reported on
the Nasdaq Bulletin Board on Friday, February 29, 2000 was $4,606,576. The
approximate aggregate market value of the registrant's Class B non-voting common
stock held by non-affiliates of the registrant, based on the assumption that
such stock on a per share basis should be valued at 80% of the value per share
of the registrant's voting common stock, as of the close of business on February
29, 2000 was $368,594. Such assumption is based in part on the convertibility
restrictions imposed upon, and the lack of public trading in, the registrant's
Class B non-voting common stock.
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PART I
- ------
ITEM 1. BUSINESS
The statements that follow which express belief, anticipation or expectation, as
well as other statements which are not historical fact, are forward looking
statements. Consequently, actual results may vary materially from such beliefs,
anticipations and expectations. Meaningful factors which could cause actual
results to differ include, but are not limited to, the approval and
effectiveness of the Company's plan of reorganization, uncertainty of future
profitability, ability to service debt and obtain satisfactory financing,
uncertainty of market acceptance, impact of competitive products, as well as
other factors discussed in Item 7 of this Form 10-K -- "Management's Discussion
and Analysis of Financial Condition and Results of Operation."
GENERAL
Planet Hollywood International, Inc., a Delaware corporation (the "Company"), is
a creator and worldwide developer of consumer brands that transcend
international barriers and capitalize on the universal appeal of movies, sports
and other entertainment-based themes. Since the Company commenced operations in
October 1991, the PLANET HOLLYWOOD name and distinctive logo design have become
among the most widely- recognized trademarks in the world. To date, the Company
has promoted its brands primarily through the operation of theme restaurants,
most notably PLANET HOLLYWOOD and the OFFICIAL ALL STAR CAFE, that provide a
unique dining and entertainment experience in a high-energy environment and,
through their integrated retail stores, offer a broad selection of merchandise
displaying the Company's logos. The Company had revenue of approximately $281.0
million in fiscal 1999.
Historically, an important part of the Company's strategy has been to promote
its brands through the active involvement of celebrities and celebrity
stockholders. In addition, the Company's theme restaurants are characterized by
distinctive design features and are generally located at high profile sites or
in major tourist markets. Units generally range in size from approximately
12,000 to 36,000 square feet and in seating capacity from 230 to 600 persons,
and offer high-quality, popular cuisine, attentive service and an atmosphere of
excitement created by combining unique layouts and decor with custom-designed
videos and audio soundtracks. Units prominently display celebrity memorabilia
and offer merchandise. Sales of merchandise yield higher operating margins than
do food and beverage sales and provide additional off-site promotion and retail
distribution opportunities for the Company's brands.
On October 12, 1999 (the "Petition Date"), the Company and twenty-five of its
domestic operating subsidiaries (the "Debtors") filed voluntary petitions
commencing cases under Chapter 11 of the United States Bankruptcy Code with the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). An Official Committee of Unsecured Creditors (the "Committee"), which
represents the interests of all unsecured creditors of the Debtors, was
appointed in the Chapter 11 cases. In a Chapter 11 filing, substantially all
liabilities as of the Petition Date are subject to compromise or other treatment
under a plan of reorganization. Generally, actions to enforce or otherwise
effect payment of all pre-Chapter 11 liabilities are stayed while the Company
and its subsidiaries continue their business operations as
debtors-in-possession. The Debtors' Chapter 11 cases resulted from a sequence of
events stemming primarily from significant operating losses experienced in
fiscal 1998 and 1999. These losses were primarily due to declines in same unit
revenues combined with high fixed occupancy costs; overall disappointing
operating results; expenses due to the development of the now discontinued SOUND
REPUBLIC concept; and losses from the OFFICIAL ALL STAR CAFE concept.
The Company attributes the decrease in revenues primarily to a decline in
customer traffic resulting from increased competition in the theme dining
industry and tourism in several retail markets. There has likewise been a
decline of significant promotional and specialty retail sales by the Company.
The restaurant and retail merchandising industry has been and continues to be
affected by (a) intense competition; (b) changes in consumer tastes;(c)
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international, national regional and local economic conditions; and (d) patterns
in tourist travel, among other factors.
On November 8, 1999, the Debtors filed their Chapter 11 Plan of Reorganization
and Disclosure Statement with the Bankruptcy Court. Prior to the Petition Date,
the Company had negotiated an agreement in principle with an unofficial
creditors' committee representing over two-thirds of the holders of its $250
million 12% senior subordinated notes payable. On December 13, 1999, the First
Amended Disclosure Statement and the First Amended Joint Plan of Reorganization
as of December 13, 1999 was filed with the Bankruptcy Court. The amended plan,
as modified by the Bankruptcy Court (the "Plan"), was confirmed by the
Bankruptcy Court on January 21, 2000 but is not yet effective. The Plan provides
that as a condition to the occurrence of the effective date of the Plan, certain
actions and agreements necessary to implement the provisions of the Plan must
have been effected, executed or duly provided for in a manner reasonably
satisfactory to the Debtors and the Creditors' Committee. The Company has been
negotiating the terms and provisions of several agreements required under the
Plan. While the Company currently believes that such agreements are
substantially in final form and that the effective date of the Plan will occur
shortly, there can be no assurance that the Conditions to the occurrence of the
effective date of the Plan will be satisfied or waived, or as to the timing
thereof.
The Plan proposes the satisfaction of the Company's $250.0 million 12% senior
subordinated notes payable (the "Old Notes") plus accrued interest of $32.0
million through the issuance of a combination of $47.5 million in cash, $60.0
million of new secured notes payable (the "PIK Notes"), and shares of newly
issued Class A common stock ("New Class A Common Stock") equivalent to a 26.5%
ownership of the reorganized Company. Other general and unsecured creditors
whose claims are deemed impaired by the Plan will receive a combination of cash
and PIK Notes with an aggregate value approximately equal to that received by
the holders of the Old Notes. The Plan also contemplates a $30.0 million
infusion of new equity by a group of investors organized by Robert Earl, the
Company's Chairman and Chief Executive Officer, in exchange for approximately
70% of the equity of the reorganized Company in the form of Class B common stock
("New Class B Common Stock"); a debt facility in the form of newly issued Senior
Secured Subordinated Notes (the "Notes") totaling $22.0 million; and up to a
$15.0 million secured working capital facility. The remaining 3.5% of the equity
of the reorganized Company will be reserved for issuance to holders of the Notes
as a loan commitment fee.
The Plan also calls for the cancellation of all existing common stock interests
and options to acquire such interests and all other equity securities in
exchange for 200,000 newly issued warrants in the reorganized Company to be
provided to holders of existing common stock; provided that no distribution will
be made to a holder of less than 5,450 shares. Each warrant will entitle the
holder to purchase one share of the New Class A Common Stock at a price of
$65.50 per share, exercisable within three years.
The Plan requires the Company to implement a new business plan, which calls for
a reduction in the number of operating locations worldwide, the sale or other
disposition of secondary business ventures, a renewed concentration on
management and improvement of the core PLANET HOLLYWOOD concepts. In fiscal 1998
and 1999, the Company completed the following steps toward its general
reorganization and the fulfillment of the terms of the Plan:
- Effected a number of lease terminations and settlement agreements for
the resolution of lease termination claims, or the restructuring or
other disposition of lease obligations.
- Closed or sold certain Company owned PLANET HOLLYWOOD, COOL PLANET,
OFFICIAL ALL STAR CAFE, and SOUND REPUBLIC units.
- Franchised or licensed certain Company owned PLANET HOLLYWOOD units.
- Sold and leased back the Company's Orlando, Florida corporate office
building, land and warehouse
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facility.
- Sold the Company's 20% ownership interest in the Hotel Pennsylvania and
cancelled the related OFFICIAL ALL STAR CAFE license agreement.
- Refocused on its core PLANET HOLLYWOOD operations by introducing a new
menu, updating the look and appearance of the restaurants, launching a
new merchandise strategy aimed at providing more fashion-oriented
merchandise through the introduction of seasonal lines, and initiating
a new marketing and public relations strategy aimed at delivering a
fresh, exciting and consistent message to consumers.
Additional details of the Plan are included in the Company's Current Report on
Form 8-K filed with the SEC on February 4, 2000.
The Company recorded charges totaling $48.7 million, $139.0 million and $120.7
million in fiscal 1997, 1998 and 1999, respectively, relating to the write-down
of net assets associated with units closed, franchised, licensed or sold, the
impairment of long lived assets, restructuring and severance costs, accelerated
celebrity compensation costs and reorganization costs. Included in the 1999
charges was $12.1 million of impaired goodwill. See Item 7 of this form 10-K --
"Management Discussion and Analysis of Financial Condition and Results of
Operations" for further discussion of these charges.
The Company has been involved with several strategic ventures in movie theatres,
lodging, and consumer products. These ventures include PLANET MOVIES BY AMC,
OFFICIAL ALL STAR HOTEL, PLANET HOLLYWOOD HOTEL, COOL PLANET Ice Cream and SOUND
REPUBLIC. In conjunction with the Company's plan of reorganization and the
Company's focus on its core PLANET HOLLYWOOD operations the Company has sold or
is in the process of selling a majority of its investment in the OFFICIAL ALL
STAR HOTEL, PLANET HOLLYWOOD Hotel and SOUND REPUBLIC units. The Company funded
approximately $5.7 million toward the AMC joint venture in fiscal 1999 for the
construction of the first "PLANET MOVIES BY AMC" complex located near Columbus
Ohio, which opened in July 1999. However, the Company has no definitive plan for
future development under the joint venture. See item 7 of this form 10-K --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further discussion of these ventures.
CELEBRITY INVOLVEMENT
Historically, a number of motion picture and sports celebrities have promoted
the Company and have allowed the Company to use their names, pictures and select
memorabilia in advertising, promoting and operating its units. Celebrities
generally grant the Company the right to use their name, approved likeness,
approved biography and selected career memorabilia in connection with the
promotion, advertising and operation of the Company's units. The Company must
obtain prior consent with respect to any use of a celebrity's name or likeness
in connection with sales of merchandise. In addition, each celebrity generally
assists/participates in various promotional activities, including attending the
grand openings of new units, screening new movies at the units and making
periodic appearances at parties and other special events at the units. The
Company generally issued to these celebrities shares or options to acquire
shares of its common stock.
The Company's plan of reorganization includes the expansion of the Company's
roster of celebrity stockholders, with an emphasis on new, up-and-coming stars,
in order to further expand its appeal to broader segments of consumers. The
Company anticipates that it will be able to attract new celebrities to enter
into promotional agreements with the Company similar to those currently in
effect. There can be no assurance, however, of the extent to which major motion
picture, sports, music or other celebrities will promote the Company or its
brands in the future and certain sports celebrities surrounding the OFFICIAL ALL
STAR CAFE concept have challenged the Company's rights to enforce certain
promotional agreements.
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ADVERTISING AND PROMOTION
The Company attracts new customers through word-of-mouth, the visibility of its
branded merchandise, radio and print advertising, billboards and through media
coverage. In addition, certain Company-owned units employ their own public
relations manager. Motion picture premieres have become occasions for media
events at the Company's units, further enhancing the awareness and cachet of the
brand. The Company issues redeemable vouchers for food and merchandise purchases
to tour operators in an effort to encourage tourists to include certain of the
Company's units on their itineraries. The Company also hosts fund-raising
parties for local charities at its units with the support of celebrities.
FRANCHISING
A number of the Company's foreign units have been franchised. The Company's
standard franchise agreement grants the exclusive right for up to 50 years to
operate restaurant and/or merchandise locations, and sell branded merchandise in
a specified market and to use the Company's brands and trademarks. In addition,
some of the franchisees have obtained the exclusive rights to open up units in
specified countries, and the Company has entered into master franchise
arrangements with respect to several larger territories. In return for the
franchise, the Company is paid initial nonrefundable fees historically of up to
$2.0 million upon execution of the franchise agreements as well as royalties
based on a percentage of the total revenues from the units, ranging from 3% to
10% of food and beverage revenues and 5% to 15% of merchandise revenues. See
Note 14 to the Company's Consolidated Financial Statements for condensed
financial information, summarized by geographic area.
The franchisee generally assumes responsibility for the development and
construction of the unit, including all costs. The Company provides limited
pre-opening consultation services to the franchisee and has the right to reject
sites, plans and proposals that do not meet its specifications or standards. The
franchisee is obligated to operate the unit in accordance with the Company's
operating guidelines, which provides strict guidelines for the unit's design,
decor and furnishings, dress style of the staff, food menus and operating
procedures. The guidelines also include specific requirements regarding
accounting procedures and records and the leasing and display of the Company's
memorabilia.
The licensed rights for Asia are currently held by Planet Hollywood (Asia) Pte
Ltd. ("PH Asia"), an entity that is 50% owned by each of the Company and Leisure
Ventures Pte Ltd., a Singapore company (and shareholder of the Company) of which
Mr. Ong Beng Seng (a director of the Company) is the largest stockholder. From
time to time, some of the Company's franchisees have also entered into
management agreements with PH Asia pursuant to which PH Asia has agreed to
manage the franchisee's restaurants. See Note 6 to the Company's Consolidated
Financial Statements for condensed financial information relating to affiliated
companies, including PH Asia.
The Company is party to a master franchise agreement with ECE S.A. de C.V., a
publicly-traded Mexican company ("ECE") in which the Company is a 20%
stockholder. Mr. Claudio Gonzalez (a director of the Company) is one of ECE's
principal stockholders and the Chairman of its Board of Directors. ECE is
currently operating and has rights to open PLANET HOLLYWOOD and OFFICIAL ALL
STAR CAFE units in certain international markets, including Mexico and South
America. Pursuant to the franchise agreement, ECE previously paid nonrefundable
franchise fees of $5.0 million for the right to open a total of five PLANET
HOLLYWOOD units and two OFFICIAL ALL STAR CAFE units in Mexico through 2000. ECE
is obligated to pay continuing royalties to the Company pursuant to such
agreement, based on a percentage of the total revenues from its units.
The Company is party to master franchise agreements with Kingdom Planet
Hollywood, Ltd. ("Kingdom"), an affiliate of HRH Prince Alwaleed Bin Talal
Abdulaziz Al Saud of Saudi Arabia and a significant stockholder of the Company,
pursuant to which Kingdom may develop numerous PLANET HOLLYWOOD, OFFICIAL ALL
STAR CAFE and SOUND REPUBLIC units, in a total of 23 countries throughout the
Middle East and Europe. During 1997, Kingdom paid the Company approximately $9.5
million for seven locations and had an option for an additional $1.5 million to
develop up to two more units in Italy. Kingdom also purchased approximately
1,087,000 shares of the Company's common stock directly from the Company in 1997
for approximately $19.6 million. In 1998,
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Kingdom entered into certain other transactions with the Company relating to the
formation and operation of three corporations to be owned equally by Kingdom and
the Company. Those corporations were to own and operate PLANET HOLLYWOOD units
in Tokyo, Japan and Zurich, Switzerland and an OFFICIAL ALL STAR CAFE unit in
London, England. In connection therewith, the Company received approximately
$4.3 million in cash and $1.0 million in the form of a note receivable from
Kingdom from the sale of 50% of the Company's interest in three corporations
during fiscal 1998. The Company does not currently plan to develop a restaurant
in London. During fiscal 1999, the assets of the Zurich PLANET HOLLYWOOD unit
were sold for $1.9 million. The Company applied the proceeds of the sale to the
note receivable from Kingdom and recorded a $0.9 million gain from the sale
during 1999.
INTELLECTUAL PROPERTY
The Company has registered the PLANET HOLLYWOOD name and associated designs and
logos; has registered, applied for registration and received certain licenses
for the OFFICIAL ALL STAR CAFE name and associated designs and logos; and has
applied for the registration of the PLANET MOVIES, COOL PLANET and SOUND
REPUBLIC concept brand names and associated designs and logos, as trademarks,
trade names and service marks with the United States Patent and Trademark
Office. The Company also has registered or has applied for registrations in
corresponding offices in other countries in which its units are located and,
wherever legally permissible, has filed applications to register its trademarks,
designs, trade names and service marks in foreign countries where it has an
expectation of opening units in future years. There can be no assurance that
such registrations and other steps will prove effective in protecting the
proprietorship of the Company's brands. The Company regards its trademarks,
designs, trade names, service marks and trade dress as having significant value
and as material to its business.
The Company licenses its brands and trademarks to its licensees, franchisees
and joint ventures. A typical license agreement grants the licensee the right to
use on a non-exclusive basis and to sublicense certain intellectual property
rights of the Company, including the Company's brand names, logos, trademarks
and service marks. These intellectual property rights may be used only in
connection with the operation and promotion of a unit and the sale of branded
merchandise at a specified unit.
The Company has entered into a master license agreement with PH Asia entitling
PH Asia to use and sublicense the PLANET HOLLYWOOD name in connection with
developing, franchising and operating PLANET HOLLYWOOD units throughout most of
Asia and in certain Middle East countries. The Company receives no royalties
from PH Asia under this agreement but through its equity interest in PH Asia is
entitled to a corresponding percentage of the distributable profits realized by
PH Asia.
Sales of counterfeit merchandise bearing the Company's trademarks have occurred
from time to time. The Company has attempted, and will continue to attempt, to
control the sale of counterfeit merchandise by instituting legal proceedings
against manufacturers or distributors of counterfeit merchandise. Management
believes that sales of such counterfeit merchandise have not had material
adverse effect on the Company's merchandise sales.
COMPETITION
The restaurant and retail merchandising industries are affected by changes in
consumer tastes and by international, national, regional and local economic
conditions and demographic trends. Discretionary spending priorities, traffic
patterns, tourist travel, weather conditions, employee availability and the
type, number and location of competing restaurants, among other factors, also
directly affect the performance of the Company's units. Changes in any of these
factors in the markets where the Company currently operates units could
adversely affect the Company's results of operations. Moreover, the theme
restaurant industry is relatively young, is particularly dependent on tourism
and has seen the emergence of a number of new competitors.
The restaurant and retail merchandising industries are highly competitive based
on the type, quality and selection of the food or merchandise offered, price,
service, location and other factors. Many well-established companies
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with greater financial, marketing and other resources and longer operating
histories than the Company compete with the Company in many markets. In
addition, some competitors have design and operating concepts similar to those
of the Company. There can be no assurance that the Company will be able to
respond to various competitive factors affecting the restaurant and retail
industries.
The motion picture exhibition industry is affected by a number of factors,
including the availability of desirable motion pictures and their performance in
the exhibitors' markets. Poor performance of, or disruption in the production of
or access to, motion pictures, whether produced by the major studios or
independent producers, could adversely affect the performance of the PLANET
MOVIES BY AMC joint venture. In addition, were the joint venture to experience
poor relationships with one or more major motion picture distributors, its
business could be adversely affected. The joint venture will be subject to
varying degrees of competition with respect to licensing films, attracting
patrons, obtaining new theater sites and acquiring theater circuits. In
addition, the joint venture's theaters face competition from a number of motion
picture exhibition delivery systems, such as pay television, pay-per-view and
home video systems, and from other forms of entertainment that compete for the
public's leisure time and disposable income.
EMPLOYEES
As part of its reorganization, the Company eliminated 60 and 48 corporate
management and administrative positions during fiscal 1998 and 1999,
respectively. An additional 3,743 restaurant and merchandise positions were
eliminated during fiscal 1999 as a result of the closing, sale, franchising or
licensing of certain Company owned restaurant units. As of December 26, 1999,
the Company employed approximately 4,459 persons, 162 of whom were corporate
management and administrative employees, 410 were restaurant and merchandise
management personnel, and 3,887 were employed in non-management restaurant and
merchandising operations. Subsequent to December 26, 1999, the Company
eliminated an additional 38 corporate management and administrative positions.
The Company's employees are not covered by a collective bargaining agreement,
and the Company has never experienced an organized work stoppage, strike or
labor dispute. The Company considers relations with its employees to be
satisfactory.
GOVERNMENTAL REGULATION
ALCOHOLIC BEVERAGE REGULATION. The Company's units are subject to licensing and
regulation by a number of governmental authorities. The Company is required to
operate its units in strict compliance with federal licensing requirements
imposed by the Bureau of Alcohol, Tobacco and Firearms of the United States
Department of Treasury, as well as the licensing requirements of the states and
municipalities where its units are located. Alcoholic beverage control
regulations require each of the Company's units to apply to a state authority
and, in certain locations, county and municipal authorities for a license and
permit to sell alcoholic beverages on the premises. Typically, licenses must be
renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations relate to numerous aspects of the daily
operations of the units, including minimum age of patrons and employees, hours
of operation, advertising, wholesale purchasing, inventory control and handling,
storage and dispensing of alcoholic beverages. The Company has obtained all
regulatory permits and licenses necessary to operate its units that are
currently open, and intends to do the same for all future units. Failure on the
part of the Company to comply with federal, state or local regulations could
cause the Company's licenses to be revoked and force it to terminate the sale of
alcoholic beverages at its units. To reduce this risk, each Company unit is
operated in accordance with procedures intended to ensure compliance with
applicable laws and regulations. The failure to receive or retain, or any delay
in obtaining, a liquor license in a particular location could adversely affect
the Company's ability to obtain such a license elsewhere.
The Company is subject to "dram-shop" laws in several of the states in which it
has units. These laws generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully served
alcoholic beverages to such person. While the Company carries liquor liability
coverage as part
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of its existing comprehensive general liability insurance, there can be no
assurance that it will not be subject to a judgment in excess of such insurance
coverage or that it will be able to obtain or continue to maintain such
insurance coverage at reasonable costs or at all. The imposition of a judgment
substantially in excess of the Company's insurance coverage, or the failure or
inability of the Company to obtain and maintain insurance coverage, could
materially and adversely affect the Company.
OTHER REGULATIONS. The Company's units are subject to regulation by federal and
foreign agencies and to licensing and regulation by foreign, state and local
health, sanitation, building, zoning, safety, fire and other departments
relating to the development and operation of restaurants and retail
establishments. These regulations include matters relating to environmental,
building construction, zoning requirements and the preparation and sale of food.
Various federal, foreign and state labor laws govern the Company's relationship
with its employees, including minimum wage requirements, overtime, working
conditions and citizenship requirements. Significant additional government
imposed increases in minimum wages, paid leaves of absence and mandated health
benefits, or increased tax reporting and tax payment requirements for employees
who receive gratuities could have an adverse effect on the Company. Delays or
failures in obtaining the required construction and operating licenses, permits
or approvals could delay or prevent the opening of new units.
Units established in countries other than the United States are subject to
governmental regulation in the jurisdiction in which they are established
principally in respect of sales of liquor, construction of premises and working
conditions of employees. The Company does not believe that such regulations
materially adversely affect its business.
ITEM 2. PROPERTIES
As of December 26, 1999, the Company, together with its franchisees and
licensees, operated 72 theme restaurants located in 23 countries throughout
North America, Europe and Asia, of which 36 are Company-owned. At present, all
Company-owned units are located on leased sites, with lease terms (including
renewal options) generally ranging from 15 to 25 years. Typically, the lease
rental includes a minimum fixed rent and additional rent based on a percentage
of total revenue from the unit. In fiscal 1999, total rental expense represented
approximately 16% of direct revenues. In connection with its reorganization
plan, the Company effected a number of lease terminations and settlement
agreements for the resolution of lease termination claims or the restructuring
or other disposition of lease obligations during fiscal 1999. As of December 26,
1999, the following tables provide information about the Company-owned and
franchised or licensed units that were operating.
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<TABLE>
<CAPTION>
COMPANY-OWNED UNITS
PLANET HOLLYWOOD
LOCATION YEAR OPENED LOCATION YEAR OPENED
-------- ----------- -------- -----------
<S> <C> <C> <C>
New York, New York................... 1991 Paris, France.................................. 1995
London, England...................... 1993 Beverly Hills.................................. 1995
Washington, D.C...................... 1993 San Antonio, Texas............................. 1996
Mall of America, Minnesota........... 1993 Myrtle Beach, South Carolina................... 1996
Lake Tahoe, Nevada................... 1994 Nashville, Tennessee........................... 1996
Las Vegas, Nevada.................... 1994 Seattle, Washington............................ 1996
Dallas, Texas........................ 1994 Disneyland Paris, France....................... 1996
Reno, Nevada......................... 1994 Berlin, Germany................................ 1996
Orlando, Florida..................... 1994 Gatwick Airport, England....................... 1996
San Diego, California................ 1995 Cannes, France................................. 1997
Atlantic City, New Jersey............ 1995 Munich, Germany................................ 1997
Honolulu, Hawaii..................... 1995 St. Louis, Missouri............................ 1997
Atlanta, Georgia..................... 1995 Dublin, Ireland................................ 1997
San Francisco, California............ 1995 Baltimore, Maryland............................ 1998
<CAPTION>
OFFICIAL ALL STAR CAFE
LOCATION YEAR OPENED LOCATION YEAR OPENED
-------- ----------- -------- -----------
<S> <C> <C> <C>
New York, New York................... 1995 Miami, Florida................................. 1997
Las Vegas, Nevada.................... 1996 Orlando, Florida............................... 1998
Myrtle Beach, South Carolina......... 1997
<CAPTION>
PLANET MOVIES BY AMC
LOCATION YEAR OPENED
-------- -----------
<S> <C>
Columbus, Ohio........................ 1999
COOL PLANET
LOCATION YEAR OPENED
-------- -----------
<S> <C>
Santa Monica, California.............. 1998
Anaheim, California................... 1998
</TABLE>
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FRANCHISED OR LICENSED UNITS
<TABLE>
<CAPTION>
PLANET HOLLYWOOD
YEAR FRANCHISED YEAR FRANCHISED
LOCATION OR LICENSED LOCATION OR LICENSED
- -------- ----------- -------- -----------
<S> <C> <C> <C>
Cancun, Mexico......................... 1992 Melbourne, Australia........................... 1997
Hong Kong.............................. 1994 Rome, Italy.................................... 1997
Jakarta, Indonesia..................... 1994 Kuala Lumpur, Malaysia......................... 1997
Barcelona, Spain....................... 1995 Gold Coast, Australia(a)....................... 1997
Sydney, Australia...................... 1996 Madrid, Spain.................................. 1997
Puerto Vallarta, Mexico................ 1996 Taipei, Taiwan................................. 1997
Nassau, Bahamas(a)..................... 1996 Niagara Falls, Canada.......................... 1997
Acapulco, Mexico....................... 1996 Amman, Jordan.................................. 1999
Moscow, Russia......................... 1996 Auckland, New Zealand.......................... 1999
Bangkok, Thailand...................... 1996 Oberhausen, Germany............................ 1999
Cape Town, South Africa................ 1996 Vancouver, Canada.............................. 1999
Beirut, Lebanon........................ 1996 Toronto, Canada................................ 1999
Dubai, United Arab Emirates............ 1996 Montreal, Canada............................... 1999
Tel Aviv, Israel(b).................... 1996 New Orleans, Louisiana......................... 1999
Singapore.............................. 1997
Guam................................... 1997
<CAPTION>
OFFICIAL ALL STAR CAFE
YEAR FRANCHISED
LOCATION OR LICENSED
- -------- -----------
<S> <C>
Melbourne, Australia................... 1996
Mexico City, Mexico (a)................ 1998
Atlantic City, New Jersey.............. 1999
Honolulu, Hawaii....................... 1999
<CAPTION>
COOL PLANET
YEAR FRANCHISED
LOCATION OR LICENSED
- -------- -----------
<S> <C>
Minneapolis, Minnesota................. 1999
Norfolk, Virginia...................... 1999
</TABLE>
- ----------
a) A stand-alone retail store is presently operating at this location and the
franchise has the right to open a restaurant unit under certain conditions.
b) The Company is leasing the assets at this location to a third party that
operates the facility.
The Company has entered into certain lease agreements with the Walt Disney
Company or its affiliates, for various PLANET HOLLYWOOD and OFFICIAL ALL STAR
CAFE restaurants and merchandise stores. Each of the respective leases contain
certain unique provisions which are consistent with the standard terms imposed
by the Walt Disney Company. One such provision requires the consent of the
landlord prior to certain transfers of a controlling interest in the Company,
the tenant or its subsidiaries, which may include transfers of 50% or more of
the share of any such entity, the transfer of a controlling interest in the
entity by the Company or Robert Earl, or the termination of Mr. Earl's active
management of any such entity. In addition, the landlord has a right of first
refusal to match certain offers to acquire more than 10% of the stock of the
Company, the tenant or its affiliates. Similarly, the landlord has a right of
first refusal to match any offer to locate a restaurant within or adjacent to
any
11
<PAGE>
theme park that is not owned or licensed by the landlord or its affiliates.
Another provision grants the landlord an option to terminate the lease for any
reason upon 60 days notice and acquire the improvements on the premises at fair
market value, as defined by the particular lease agreement. Subsequent to
December 26, 1999, the Company's lease agreement related to the OFFICIAL ALL
STAR CAFE was terminated in connection with the sale of the unit to the Walt
Disney Company.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are potential and named defendants in several
lawsuits and claims arising in the ordinary course of business. While the
outcome of such claims, lawsuits or other proceedings against the Company cannot
be predicted with certainty, management expects that such liability, to the
extent not provided for through insurance or otherwise, will not have a material
adverse effect on the consolidated financial statements of the Company.
As a result of the Company's Chapter 11 proceedings, all actions under its
litigation matters were stayed and jurisdiction over the resolution of these
matters has been transferred to the Bankruptcy Court. Claimants against the
Company in these matters are treated a unsecured creditors. See Item 1 of this
Form 10K - "Business" for a description of the Company's Chapter 11 proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
- -------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A voting common stock, $0.01 par value, was traded on the
Nasdaq National Market from April 19, 1996 through Friday, September 19, 1997.
From Monday, September 22, 1997 through Friday, August 20, 1999, the Class A
Common Stock was traded on the New York Stock Exchange. On August 20, 1999, the
New York Stock Exchange deleted the Company's Class A Common Stock from listing
on the New York Stock Exchange. Since Monday, August 23, 1999, the Class A
Common Stock has been traded on the over-the-counter market on the Nasdaq
Bulletin Board. The Company's Class B non-voting common stock, $0.01 par value
is not traded on an established public trading market and transfer of such stock
is generally restricted. As of February 29, 2000 there were approximately 4,532
stockholders of record of the Class A Common Stock and 19 stockholders of record
of the Class B Common Stock. The following table shows the high and low per
share bid prices for the Class A Common Stock for each full quarterly period
during the Company's last two fiscal years (ending December 26, 1999):
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
(Jan.-Mar.) (April-June) (July-Sept.) (Oct.-Dec.)
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Fiscal 1998 High $14.13 $10.84 $ 7.25 $ 4.38
Low $ 7.00 $ 7.13 $ 4.00 $ 2.38
Fiscal 1999 High $4.00 $1.25 $0.94 $0.30
Low $1.00 $0.69 $0.15 $0.07
</TABLE>
The Company has never declared any cash dividends on its Class A or Class B
Common Stock. The Company does not anticipate paying any cash dividends in the
foreseeable future, and intends to retain its available cash to finance the
development and growth of the Company. Any future dividend policy will be
determined by the Company's Board of Directors based upon conditions then
existing, including the Company's earnings, financial
12
<PAGE>
condition and capital requirements, as well as such economic conditions, tax
implications and other factors as the Board of Directors may deem relevant. The
Plan calls for the cancellation of all existing Class A and Class B Common Stock
interests and options to acquire such interests and all other equity securities
in exchange for 200,000 newly issued warrants in the reorganized Company to be
provided to holders of existing common stock; provided that no distribution will
be made to a holder of less than 5,450 shares. Each warrant will entitle the
holder to purchase one share of New Class A Common Stock at a price of $65.50
per share, exercisable within three years. In addition, the newly issued PIK
Notes, Senior Secured Subordinated Notes and the secured working capital
facility each restrict the Company's ability to declare common stock dividends
or any other distributions on the Company's common stock.
RECENT SALES OF UNREGISTERED SECURITIES
During fiscal 1999, the Company did not make any sales of its unregistered
equity securities.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
PLANET HOLLYWOOD INTERNATIONAL, INC.
SELECTED FINANCIAL AND OPERATING DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
FISCAL YEAR ENDED
------------- ------------- ------------- ------------- -------------
1995 1996 1997 1998 1999
STATEMENTS OF OPERATIONS DATA:
REVENUES
<S> <C> <C> <C> <C> <C>
Food and beverage $160,997 $222,481 $273,344 $259,644 $203,568
Merchandise 104,051 124,955 173,966 107,652 64,799
Movie -- -- -- -- 3,865
Franchise fees 4,000 21,400 16,100 11,600 500
Royalties and other 1,558 4,528 11,715 8,078 8,237
------------- ------------- ------------- ------------- -------------
TOTAL REVENUES 270,606 373,364 475,125 386,974 280,969
------------- ------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Food and beverage cost of sales 38,537 50,190 61,930 61,474 51,932
Merchandise cost of sales 35,769 40,626 57,519 49,400 22,589
Movie cost of sales -- -- -- -- 2,043
Operating expenses 116,805 156,893 208,484 237,930 212,822
General and administrative 22,213 23,041 54,683 64,548 44,465
Preopening expenses 13,907 14,257 18,868 10,384 1,842
Depreciation and amortization 8,275 13,038 19,957 25,024 19,104
Restructuring and reorganization charges -- -- -- 6,925 16,029
Accelerated compensation expense -- -- -- 6,191
Impairment of long-lived assets -- -- 48,699 125,843 104,684
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
TOTAL COSTS AND EXPENSES 235,506 298,045 470,140 587,719 475,510
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS 35,100 75,319 4,985 (200,745) (194,541)
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Interest income 598 2121 1,327 4,847 1,499
Interest (expense) (11,827) (4,995) - (26,822) (27,628)
Equity in income (loss) of unconsolidated
affiliates 848 4,308 6,900 (11,022) (1,370)
Gain on sale of subsidiary interests 611 -- -- -- --
Net loss on disposals of assets (918)
Minority interests (3,728) (1,037) -- -- 1,888
Provision for income taxes (875) (27,636) (4,954) (5,206) --
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CHANGE IN ACCOUNTING PRINCIPLE $20,727 $48,080 $8,258 $(237,948) $(221,070)
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
FINANCIAL POSITION:
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Working capital $15,528 $60,551 $31,518 $9,822 $41,778
Total assets 240,185 401,260 505,559 472,627 234,941
Long-term debt 122,745 7,529 70,491 258,235 1,648
Liabilities subject to compromise -- -- -- -- 304,671
Minority interests 10,466 -- -- - 3,212
Redeemable warrants 15,000 -- -- - --
Stockholders' equity (deficit) 28,145 312,131 338,541 106,315 (115,045)
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
OTHER STATISTICS:
Cash flow from operations $33,370 $48,830 $31,273 $(38,010) $(43,479)
Capital expenditures 80,291 81,675 120,033 105,819 22,151
Units open at fiscal year end:
Company-owned 23 37 53 60 36
Franchised 6 21 34 35 36
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
TOTAL 29 58 87 95 72
- --------------------------------------------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-K. 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: risks associated with any other
required approvals or confirmations of the Plan; the ability of the Company to
consummate asset dispositions and/or to obtain financing as necessary in order
to carry out the terms of the Plan and the terms and conditions of any such
dispositions and financing; difficulties or delays in realizing improved results
from operating consolidations or the sale of certain facilities or assets held
for sale or franchise; difficulties or delays in the Company's implementation of
initiatives and strategies, including the introduction of a new menu and new
merchandising and marketing strategies; acceptance by new guests of the
Company's brands and concepts; the availability of sufficient capital to service
the Company's debt obligations and to finance the Company's business plans on
terms satisfactory to the Company; the success of the Company's franchisees and
licensees and the manner in which they promote, operate or develop the Company's
brands; actions taken by competitors, including business combinations, pricing
strategies, new product offerings and marketing and promotions successes;
changes in labor, equipment, food and capital costs; changes in, or the failure
to comply with, regulations affecting the Company's business; 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.
OVERVIEW
Historically, the Company has derived substantially all of its revenues from its
theme restaurants, which revenues have consisted of (i) food and beverage
revenues, (ii) merchandise revenues, (iii) royalties and (iv) franchise fees.
Food and beverage revenues and merchandise revenues derived from Company-owned
units, as well as merchandise revenues from other retail channels, are referred
to herein collectively as "Direct Revenues." For fiscal 1999, food and beverage
revenues were approximately 74.8% of Direct Revenues, merchandise revenues were
approximately 23.8% of Direct Revenues and Movie revenues were approximately
1.4% of Direct Revenues.
Franchisees are typically required to pay an up-front franchise fee of up to
$2.0 million, which is recognized when all the Company's pre-opening obligations
in respect of the unit are fulfilled. Thereafter, the franchisee is required to
pay royalties based on its gross revenues from food, beverage and merchandise
sales. These royalties typically range from 3% to 10% of the franchisee's food
and beverage revenues and 5% to 15% of the franchisee's merchandise revenues.
While the Company has historically received payments for franchise fees and
royalties, the Company has experienced significant delays in collecting other
amounts due from several franchisees, including cost reimbursements and
memorabilia lease payments. The Company intends to more aggressively pursue
collection of such amounts in the future.
During the initial period following its opening, a new unit typically realizes
higher revenues than in subsequent periods of operation, due primarily to the
substantial promotional activity during such period, including its celebrity
grand opening event. Because of this "honeymoon" period, a unit is included in
the "same unit" analysis discussed below, which only includes Company-owned
units, only after it has been open for a full fiscal period after the eighteenth
month of its operations, at which time its performance for that period can be
compared to its
15
<PAGE>
performance for the first full period following the first sixth months of its
operations (the comparable year ago period).
On October 12, 1999, the Company and twenty-five of its domestic operating
subsidiaries filed voluntary petitions commencing cases under Chapter 11 of the
United States Bankruptcy Code with the United States Bankruptcy Court for the
District of Delaware. An Official Committee of Unsecured Creditors, which
represents the interests of all unsecured creditors of the Debtors, was
appointed in the Chapter 11 cases. In a Chapter 11 filing, substantially all
liabilities as of the petition date are subject to compromise or other treatment
under a plan of reorganization. Generally, actions to enforce or otherwise
effect payment of all pre-Chapter 11 liabilities are stayed while the Company
and its subsidiaries continue their business operations as
debtors-in-possession. The Debtor's Chapter 11 cases result from a sequence of
events stemming primarily from significant operating losses experienced in
fiscal 1998 and 1999. These losses were primarily due to declines in same unit
revenues combined with high fixed occupancy costs; overall disappointing
operating results; expenses due to the development of the now discontinued SOUND
REPUBLIC concept; and losses from the OFFICIAL ALL STAR CAFE concept.
The Company attributes the decrease in revenues primarily to a decline in
customer traffic resulting from increased competition in the theme dining
industry and tourism in several retail markets. There has likewise been a
decline of significant promotional and specialty retail sales by the Company.
The restaurant and retail merchandising industry has been and continues to be
affected by (a) intense competition; (b) changes in consumer tastes; (c)
international, national regional and local economic conditions; and (d) patterns
in tourist travel, among other factors.
On November 8, 1999, the Debtors filed their Chapter 11 Plan of Reorganization
and Disclosure Statement with the Bankruptcy Court. Prior to the Petition Date,
the Company had negotiated an agreement in principle with an unofficial
creditors' committee representing over two-thirds of the holders of its $250
million 12% senior subordinated notes payable. On December 13, 1999, the First
Amended Disclosure Statement for the First Amended Joint Plan of Reorganization
as of December 13, 1999 was filed with the Bankruptcy Court. The Plan was
confirmed by the Bankruptcy Court on January 21, 2000, but is not yet effective.
The Plan provides that as a condition to the occurrence of the effective date of
the Plan, certain actions and agreements necessary to implement the provisions
of the Plan must have been effected, executed or duly provided for in a manner
reasonably satisfactory to the Debtors and the Creditors' Committee. The Company
has been negotiating the terms and provisions of several agreements required
under the Plan. While the Company currently believes that such agreements are
substantially in final form and that the effective date of the Plan will occur
shortly, there can be no assurance that the Conditions to the occurrence of the
effective date of the Plan will be satisfied or waived, or as to the timing
thereof.
The Plan proposes the satisfaction of the Company's $250.0 million 12% senior
subordinated notes payable plus accrued interest of $32.0 million through the
issuance of a combination of $47.5 million in cash, $60.0 million of new secured
PIK notes payable, and shares of New Class A Common Stock equivalent to a 26.5%
ownership of the reorganized company. Other general and unsecured creditors
whose claims are deemed impaired by the Plan will receive a combination of cash
and PIK Notes with an aggregate value approximately equal to that received by
the holders of the Old Notes. The Plan also contemplates a $30.0 million
infusion of new equity by a group of investors organized by Robert Earl, the
Company's Chairman and Chief Executive Officer, in exchange for approximately
70% of the equity of the reorganized Company in the form of New Class B Common
Stock; a debt facility in the form of newly issued Senior Secured Subordinated
Notes totaling $22.0 million; and up to a $15.0 million secured working capital
facility. The remaining 3.5% of the equity of the reorganized Company will be
reserved for issuance to holders of the Notes as a commitment fee.
The Plan also calls for the cancellation of all existing common stock interests
and options to acquire such interests and all other equity securities in
exchange for 200,000 newly issued warrants in the reorganized Company to be
16
<PAGE>
provided to holders of existing common stock; provided that no distribution will
be made to a holder of less than 5,450 shares. Each warrant will entitle the
holder to purchase one share of the New Class B Common Stock at a price of
$65.50 per share, exercisable within three years.
The Plan requires the Company to implement a new business plan, which calls for
a reduction in the number of operating locations worldwide, the sale or other
disposition of secondary business ventures, a renewed concentration on
management and improvement of the core PLANET HOLLYWOOD concepts. In fiscal 1998
and 1999, the Company completed the following steps toward its general
reorganization and the fulfillment of the terms of the Plan:
- Effected a number of lease terminations and settlement agreements for
the resolution of lease termination claims, or the restructuring or
other disposition of lease obligations.
- Closed or sold certain Company owned PLANET HOLLYWOOD, COOL PLANET,
OFFICIAL ALL STAR CAFE and SOUND REPUBLIC units.
- Franchised or licensed certain Company owned PLANET HOLLYWOOD units.
- Sold and leased back the Company's Orlando, Florida corporate office
building, land and warehouse facility.
- Sold the Company's 20% ownership interest in the Hotel Pennsylvania and
cancelled the related OFFICIAL ALL STAR CAFE license agreement.
- Refocused on its core PLANET HOLLYWOOD operations by introducing a new
menu, updating the look and appearance of the restaurants, launched a
new merchandise strategy aimed at providing more fashion-oriented
merchandise through the introduction of seasonal lines, and initiated a
new marketing and public relations strategy aimed at delivering a
fresh, exciting and consistent message to consumers.
Additional details of the Plan are included in the Company's Current Report on
Form 8-K filed with the SEC on February 4, 2000.
The Company recorded charges totaling $48.7 million, $139.0 million and $120.7
million in fiscal 1997, 1998 and 1999, respectively, relating to the write-down
of net assets of units closed, franchised, licensed or sold, the impairment of
long lived assets, restructuring and severance costs, accelerated celebrity
compensation costs and reorganization costs. The charges are as follows (dollars
in thousands):
17
<PAGE>
<TABLE>
<CAPTION>
Official
Planet All Star Sound Cool
Fiscal 1999 Hollywood Cafe Republic Planet Corporate Total
- ----------- --------- ---- -------- ------ --------- -----
<S> <C> <C> <C> <C> <C>
Write-down of net assets
associated with closed,
franchised or sold units............ $54,740 $284 -- $138 $32,269 $87,431
Impairment of long lived assets .... 17,253 -- -- -- -- 17,253
-------- ------ ------ ------ ------- -------
71,993 284 -- 138 32,269 104,684
-------- ------ ------ ------ ------- -------
Restructuring and reorganization
costs:
Lease termination costs for units
closed or not to be opened..... 6,587 1,157 (505) 136 -- 7,375
Professional fees & other
reorganization costs........... -- -- -- -- 7,207 7,207
Interest income during
reorganization period.......... -- -- -- -- (100) (100)
Other costs associated with
unit closings.................. -- -- -- -- 1,547 1,547
-------- ------ ------ ------ ------- -------
Total restructuring and
reorganization costs........... 6,587 1,157 (505) 136 8,654 16,029
-------- ------ ------ ------ ------- -------
Total fiscal 1999 charges........... $78,590 $1,441 $ (505) $ 274 $40,923 $120,713
======= ====== ======= ===== ======= ========
Fiscal 1998
Impairment of long lived assets..... $33,492 $47,284 $37,133 $3,748 $4,186 $125,843
Celebrity stock option expense -- 4,746 1,445 -- -- 6,191
-------- ------ ------ ------ ------- -------
33,492 52,030 38,578 3,748 4,186 132,034
-------- ------ ------ ------ ------- -------
Restructuring costs:
Employee severance............. -- -- -- -- 2,940 2,940
Lease termination costs for units
closed or not to be opened 700 300 2,480 -- 505 3,985
-------- ------ ------ ------ ------- -------
Total restructuring costs........... 700 300 2,480 -- 3,445 6,925
-------- ------ ------ ------ ------- -------
Total fiscal 1998 charges........... $34,192 $52,330 $41,058 $3,748 $7,631 $138,959
======= ======= ======= ====== ====== ========
Fiscal 1997
Impairment of long lived assets..... $25,200 $21,194 $ -- $ -- $2,305 $48,699
======= ======= ======= ====== ====== =======
</TABLE>
18
<PAGE>
As a result of operating losses and projected future losses for certain of the
Company's restaurant units and the Company's decision to focus its resources on
the PLANET HOLLYWOOD concept, the Company recorded fiscal 1997, 1998, and 1999
impairment of long lived asset charges of $48.7 million, $125.8 million and
$17.3 million respectively, relating to certain under-performing domestic and
foreign PLANET HOLLYWOOD units as well as certain assets associated with the
Company's OFFICIAL ALL STAR CAFE, COOL PLANET and SOUND REPUBLIC concepts. The
Company considers continued and projected operating losses to be its primary
indicators of potential impairment. An impairment was recognized as the future
undiscounted cash flows or appraised values were estimated to be insufficient to
recover the related carrying value of the long lived assets. As a result, the
carrying values of these assets were written down to their estimated fair
values.
PLANET HOLLYWOOD UNITS. During fiscal 1998, an impairment charge of $33.5
million for PLANET HOLLYWOOD units was recorded as the future undiscounted cash
flows for these units were estimated to be insufficient to recover the related
carrying values of these assets. Lease termination costs totaling $0.7 million
were recorded for two locations. Also included in this amount was a charge for
the Company's PLANET HOLLYWOOD Boston unit which was sold in 1999. During fiscal
1999, the Company closed sixteen Company owned PLANET HOLLYWOOD units resulting
in net asset write-offs of $31.4 million. An additional write-down of $18.1
million was recorded in fiscal 1999 for three units expected to be closed during
fiscal 2000. The unit closings resulted in lease termination costs of $6.6
million for fiscal 1999. In addition to the unit closings, the Company
franchised three Company owned units and sold two Company owned units during
1999 in exchange for nominal or no consideration. The franchise and sale
transactions resulted in the Company recording net asset write-offs of $5.2
million. Subsequent to the end of fiscal 1999, the Company closed one additional
unit.
OFFICIAL ALL STAR CAFE UNITS. The OFFICIAL ALL STAR CAFE units were deemed
impaired during fiscal 1998 due to the future undiscounted cash flows being
insufficient to recover the related carrying values of these assets. Lease
termination costs of $0.3 million were recorded in fiscal 1998 for a site which
will not be developed. As a result of the Company's decision to discontinue the
funding of the expansion of this concept in 1998, the Company also recorded a
$0.5 million charge for the write-down of OFFICIAL ALL STAR CAFE trademark costs
and a $4.7 million charge was recorded to expense options granted to celebrities
associated with the OFFICIAL ALL STAR CAFE units. During fiscal 1999, the
Company closed or licensed certain Company owned units resulting in a net asset
write-off of $0.3 million. The unit closings resulted in lease termination costs
of $1.2 million for fiscal 1999. Subsequent to the end of the fiscal 1999, the
Company closed one unit and franchised one unit. The Company intends to sell,
franchise, license or joint venture certain OFFICIAL ALL STAR CAFE units in the
future.
SOUND REPUBLIC UNITS. The Company opened its first SOUND REPUBLIC in the fall of
fiscal 1998 in London, England and was constructing a second unit in New York
City. As part of its decision to focus on the core PLANET HOLLYWOOD concept, the
Company discontinued the expansion of this concept. A $27.9 million charge was
recorded in fiscal 1998 for the impairment of the London unit based on continued
and projected operating losses for the unit. An impairment charge of $9.0
million was recorded in fiscal 1998 for the New York SOUND REPUBLIC site based
on estimated proceeds from the sale of the assets under construction. During
fiscal 1998, the Company also wrote off the trademark costs of $0.2 million
associated with this brand due to management's decision to exit the sites
associated with this concept and $1.4 million was recorded to expense options
granted to celebrities associated with the SOUND REPUBLIC. A reserve of $2.5
million was recorded by the Company in fiscal 1998 for estimated lease
termination costs for two other SOUND REPUBLIC sites which were sold in fiscal
1999. During fiscal 1999, the Company sold its London, England SOUND REPUBLIC
unit at a nominal sales price, resulting in a $1.6 million gain on the sale. The
Company also sold its investment in the New York City SOUND REPUBLIC site
resulting in a loss on the sale of approximately $2.1 million. The unit closing
and site sale resulted in the net reversal of $0.5 million of 1998 lease
termination accruals in fiscal 1999.
COOL PLANET UNITS. During the summer and fall of 1998, the Company opened its
first three COOL PLANETS units in California. These ice cream and dessert units
feature COOL PLANET ice cream products and a decor derived from the
19
<PAGE>
PLANET HOLLYWOOD units. During fiscal 1998, a charge of $1.9 million was
recorded to write-down the assets associated with these units. Additionally, the
Company recorded an impairment of $1.8 million for a prepaid celebrity
promotional agreement associated with the COOL PLANET concept. During fiscal
1999, one Company owned COOL PLANET unit was closed resulting in an additional
net asset write-off of $0.1 million. The unit closing resulted in lease
termination costs of $0.1 million for fiscal 1999.
CORPORATE. In 1998, the Company's credit facility with SunTrust Bank, Central
Florida, N.A. and other lenders was amended. The amendment required the Company
to commence marketing its headquarters property in Orlando, Florida and its New
York Times Square Hotel property. An impairment charge of $2.8 million was
recorded in fiscal 1998 on the headquarters property for the excess of the
carrying value of the property over its fair value. During fiscal 1999, the
Company sold its headquarters property for approximately $17.0 million.
Immediately following the sale, the Company entered into a lease arrangement for
the headquarters property with the purchaser for an annual lease payment of
approximately $2.7 million through 2014. The Company is currently in the process
of selling its New York Times Square Hotel property. In conjunction with the
Company's decision to postpone any further development of certain concepts, the
closing or planned closings of certain units and the expected sale of the New
York Times Square Hotel property, impairment charges of $1.4 million and $32.3
million were recorded in fiscal 1998 and 1999, respectively, for impaired
goodwill and fixed assets, costs incurred for sites that will not be developed,
and various memorabilia items. Included in the 1999 impairment was $12.1 million
of goodwill.
As part of its reorganization, the Company eliminated 60 and 48 positions in
fiscal 1998 and 1999, respectively. Total costs paid to terminated employees in
fiscal 1998 were approximately $1.4 million. Approximately $1.5 million was
accrued at December 27, 1998 for future severance payments and outplacement
services to be provided to these employees. As a result of the terminations, the
Company closed several satellite offices. Approximately $0.5 million was
recorded as a reserve for lease termination costs associated with these offices
in fiscal 1998. Subsequent to December 26, 1999, the Company eliminated an
additional 38 positions.
In fiscal 1999, the Company incurred approximately $7.2 million of legal and
professional fees and other reorganization costs in connection with its
restructuring and Chapter 11 filing. In addition, approximately $1.4 million of
other expenses were incurred relating to the closing of certain units in fiscal
1999.
As a summary of restructuring cost activity during fiscal 1999 is as follows:
<TABLE>
<CAPTION>
Notes
Accrued at payable Accrued at
December 27, Paid issued Expensed December 26,
1998 1999 in 1999 1999 1999
---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Restructuring Costs:
Employee Severance $1,495 $1,495 $ -- $ -- $ --
Lease termination costs for units
closed or not to be opened 6,118 5,568 980 7,375 6,945
----- ----- --- ----- -----
$7,613 $7,063 $980 $7,375 $6,945
====== ====== ==== ====== ======
</TABLE>
OPERATING RESULTS
20
<PAGE>
The following table sets forth certain components of the Company's operating
results expressed as a percentage of total revenues (except where otherwise
indicated) for fiscal 1997, 1998 and 1999. The table also sets forth certain
relevant operating data for the periods presented.
<TABLE>
<CAPTION>
FISCAL
-------------------------------
INCOME STATEMENT DATA 1997 1998 1999
<S> <C> <C> <C>
Revenues:
Food and beverage....................................................... 57.5% 67.1% 72.5%
Merchandise............................................................. 36.6 27.8 23.1
Movies.................................................................. -- -- 1.4
Franchise fees.......................................................... 3.4 3.0 0.2
Royalties and other..................................................... 2.5 2.1 2.8
----- ----- -----
Total revenues.......................................................... 100.0% 100.0% 100.0%
===== ===== =====
Costs and expenses:
Food and beverage cost of sales (a)..................................... 22.7% 23.7% 25.5%
Merchandise cost of sales (b)........................................... 33.1 45.9 34.9
Operating expenses (c).................................................. 46.6 64.8 78.2
General and administrative expenses..................................... 11.5 16.7 15.8
OPERATING DATA:
Food and beverage sales (c)............................................. 61.1% 70.7% 74.8%
Merchandise sales (c)................................................... 38.9 29.3 23.8
Movie sales (c)......................................................... -- -- 1.4
Total Direct Revenues................................................... 100.0% 100.0% 100.0%
Units in operation at fiscal year end:
Company-owned units..................................................... 53 60 36
Franchised units........................................................ 34 35 36
----- ----- -----
Total................................................................ 87 95 72
</TABLE>
- -----------
(a) As a percentage of food and beverage revenues.
(b) As a percentage of merchandise revenues.
(c) As a percentage of Direct Revenues.
FISCAL 1999 COMPARED TO FISCAL 1998
REVENUES. Total revenues decreased to $281.0 million for fiscal 1999 from $387.0
million for fiscal 1998, a decrease of $106.0 million or 27.4%. The decrease in
total revenues was primarily attributable to continued declines in same unit
revenues, the closing, sale, franchising or licensing of 26 units, and a
decrease in franchise revenues and specialty retail sales.
Direct Revenues decreased 25.9% from $367.3 million in fiscal 1998 to $272.2
million in fiscal 1999. The decrease in Direct Revenues was primarily due to
decline in revenues in the units comprising the Company's same unit base. The
declines in same unit revenues was primarily due to declines in customer
traffic, a decline in the merchandise sales mix, and the closing, sale,
franchising or licensing of units in 1999, a majority of which were completed in
October.
21
<PAGE>
Franchise fees were $0.5 million in fiscal 1999 compared to $11.6 million in
fiscal 1998. The decrease in franchise fees was primarily due to the Company
recognizing revenue for one franchise in fiscal 1999 compared to eleven
franchises in fiscal 1998. The Company anticipates franchise revenues will
continue to fluctuate due to the timing of franchise unit openings.
COSTS AND EXPENSES. Food and beverage costs increased from 23.7% of food and
beverage revenues in fiscal 1998 to 25.5% in fiscal 1999. The increase was
primarily a result of costs associated with the introduction of a new menu
during fiscal 1999 and reduced menu prices. Merchandise costs decreased from
45.9% of merchandise revenues in fiscal 1998 to 34.9% in fiscal 1999 primarily
as a result of the fiscal 1998 write off of $6 million of discontinued and
obsolete inventory items that did not repeat in fiscal 1999 and due to shifts in
sales composition. Operating expenses, which consist primarily of labor,
occupancy and other direct unit operating costs, increased from 64.8% of Direct
Revenues in fiscal 1998 to 78.2% in fiscal 1999. This increase was primarily due
to the relatively fixed nature of unit operating costs in relation to lower
sales volumes and expenses incurred to update the look of certain PLANET
HOLLYWOOD locations.
General and administrative expenses decreased from $64.5 million in fiscal 1998
to $44.5 million in fiscal 1999. The decrease was due primarily to the
restructuring and downsizing of the Company's corporate staff and facilities
during 1999.
PREOPENING COSTS. Preopening costs decreased from $10.4 million in fiscal 1998
to $1.8 million in fiscal 1999 due to the Company opening eight units in fiscal
1998 compared to one unit in fiscal 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense decreased
from $25.0 million in fiscal 1998 to $19.1 million in fiscal 1999. The decrease
of $5.9 million was primarily due to the Company's closing, selling and
franchising of certain restaurant units as part of its plan of reorganization.
RESTRUCTURING AND REORGANIZATION CHARGES. Restructuring charges increased from
$6.9 million in fiscal 1998 to $16.0 million in fiscal 1999. In the fourth
quarter of 1998, the Company recorded charges consisting of $2.9 million of
severance related costs and $4.0 million of lease termination costs for units
and offices closed or for units which will not be opened. During fiscal 1999,
the Company recorded $7.4 million of lease termination costs for closed units,
$7.2 million of legal and professional fees in connection with restructuring and
bankruptcy filing activities and $1.4 million of other expenses associated with
the closing of certain units.
CELEBRITY OPTION EXPENSE. Concurrent with its decision to joint venture,
franchise, sell or otherwise dispose of units operating under the OFFICIAL ALL
STAR CAFE and SOUND REPUBLIC concepts in fiscal 1998, the Company recorded a
$6.2 million expense for the remaining unamortized value of stock options
granted to certain celebrities associated with the OFFICIAL ALL STAR CAFE and
SOUND REPUBLIC concepts. These options were previously being amortized over the
life of the option agreements and recorded in general and administrative
expense.
IMPAIRMENT OF LONG LIVED ASSETS. As a result of the Company closing, selling,
franchising and licensing certain of its restaurant units and its reorganization
activities, the Company recorded an impairment charge of $87.4 million in fiscal
1999 . In addition, as a result of the operating losses, projected future losses
for certain of the Company's assets and management's plans to sell certain
assets, the Company recorded an impairment charge of $17.3 million in fiscal
1999 compared to $125.8 million in fiscal 1998.
INTEREST EXPENSE. Interest expense for fiscal 1999 increased to $27.6 million
from $25.8 million in fiscal 1998. The interest primarily results from the
Company's $250 million debt offering completed in March 1998. As a result of the
Company's bankruptcy filing in 1999, contractual interest expense of
approximately $6.6 million
22
<PAGE>
associated with the $250 million debt offering for the period from October 12,
1999 through December 26, 1999 has not been recorded.
INTEREST INCOME. Interest income decreased from $4.8 million in fiscal 1998 to
$1.5 million in fiscal 1999. The decrease was due to the reduction of the
Company's investments during fiscal 1999 as a result of continuing negative cash
flows from operations.
EQUITY IN INCOME (LOSSES) OF UNCONSOLIDATED AFFILIATES. Equity in income
(losses) of unconsolidated affiliates decreased from ($11.0) million in losses
for fiscal 1998 to ($1.4) million in losses for fiscal 1999. The losses are
primarily the result of losses incurred by Planet Hollywood (Asia) Pte, Ltd.
("PH Asia), an entity which is owned 50% by the Company, and ECE, an entity in
which the Company owns a 20% interest, offset by gains from the Company's sale
of its ownership interest in the Hotel Pennsylvania and the Planet Hollywood
Zurich unit during 1999. PH Asia incurred losses in fiscal 1998 and 1999 due to
downturns in tourism throughout Asia, which resulted in significant declines in
revenue for the units owned and operated by PH Asia. Fiscal 1998 and 1999 ECE
losses were primarily due to the abandonment and closure of certain sites and
related asset impairment charges. During fiscal 1999, the Company sold its 20%
ownership interest in the Hotel Pennsylvania resulting in a gain of
approximately $5.8 million. The Company also sold its PLANET HOLLYWOOD unit in
Zurich, Switzerland resulting in a gain of approximately $0.9 million.
NET LOSS ON DISPOSALS OF ASSETS. During fiscal 1999, the Company recorded a net
loss on the sale of assets of $0.9 million. The loss is comprised of a loss on
the sale of the Company's New York SOUND REPUBLIC project, offset by a gain of
approximately $1.6 million related to the Company's sale of its London, England
SOUND Republic unit.
PROVISION FOR INCOME TAXES. In fiscal 1998, the Company recorded a provision for
income taxes of $5.2 million which primarily represents income taxes on foreign
operations. In fiscal 1999, no benefit for losses incurred was recorded due to
uncertainty surrounding the recovery of these losses.
FISCAL 1998 COMPARED TO FISCAL 1997
REVENUES. Total revenues decreased to $387.0 million for fiscal 1998 from $475.1
million for fiscal 1997, a decrease of $88.1 million or 18.5%. The decrease in
total revenues was primarily attributable to continued declines in same unit
revenues and a decrease in promotional and specialty retail sales. These
declines were partially offset by the opening of eight Company-owned units in
fiscal 1998.
Direct Revenues decreased 17.9% from $447.3 million in fiscal 1997 to $367.3
million in fiscal 1998. The decrease in Direct Revenues was primarily due to a
$51.2 million (18%) decline in revenues in the units comprising the Company's
same unit base and a decrease in direct promotional and specialty retail sales.
These decreases were partially offset by an $18.7 million incremental increase
in revenues from units opened in fiscal 1997 and fiscal 1998. The decline in
same unit revenues was primarily due to declines in customer traffic resulting
from increased competition in the theme-dining industry and declines in tourism
in several of the Company's major markets. Overall, restaurant average spends
were relatively consistent from fiscal 1997 to fiscal 1998; however, merchandise
revenues were adversely impacted by a decline in retail average spends due to
changes in merchandise sales mix. The decline in direct merchandise revenue was
due to the absence of significant promotional and specialty retail sales in
fiscal 1998.
As a percentage of Direct Revenues, merchandise sales decreased from 38.9% in
fiscal 1997 to 29.3% in fiscal 1998. The decline in merchandise sales as a
percentage of Direct Revenues in fiscal 1998 compared to fiscal 1997
23
<PAGE>
was primarily attributable to the absence of significant promotional and
specialty retail sales in fiscal 1998, the Company's decision to sell through
existing merchandise and not introduce any new merchandise lines, the Company's
expansion into secondary markets, and the OFFICIAL ALL STAR CAFE concept, which
has a lower merchandise sales mix than PLANET HOLLYWOOD units.
Franchise fees were $11.6 million in fiscal 1998 compared to $16.1 million in
fiscal 1997. The Company recognized revenues for 11 franchises in fiscal 1998
compared to 13 franchises in fiscal 1997. Franchise royalty revenues decreased
from $4.5 million in fiscal 1997 to $3.3 million in fiscal 1998. The decrease
was primarily due to same unit revenue declines among franchised units.
Non-franchise royalties and other revenues decreased from $7.2 million in fiscal
1997 to $4.8 million in fiscal 1998. The decrease was mainly attributable to a
decrease in other revenues from license agreements in fiscal 1998.
COSTS AND EXPENSES. Food and beverage costs increased from 22.7% of food and
beverage revenues in fiscal 1997 to 23.7% in fiscal 1998. This increase was
mainly a result of a decline in higher margin liquor sales as a percentage of
total sales, increases in commodity prices and menu specification changes.
Merchandise costs increased from 33.1% of merchandise revenues in fiscal 1997 to
45.9% in fiscal 1998. The increase was primarily due to the write-off of certain
discontinued and obsolete inventory items. These costs totaled $6.0 in fiscal
1998 versus $3.0 million in fiscal 1997. These write-downs were necessitated by
the Company's decision to launch a new merchandising strategy. Items identified
as discontinued were replaced by new merchandise as the lines were introduced in
the Spring of fiscal 1999. Operating expenses, which consist primarily of labor,
occupancy and other direct unit operating costs, increased from 46.6% of direct
revenues in fiscal 1997 to 64.8% in fiscal 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
promotional and service 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 expense increased from $54.7 million in fiscal 1997
to $64.5 million in fiscal 1998. The increase was primarily due to the
following:
o Labor and related expenses increasing due to higher payroll associated with
employees hired in the second half of fiscal 1997 and in fiscal 1998.
o Public relations and promotional costs increasing in fiscal 1998 due to the
Company increasing the frequency of celebrity promotions in its
restaurants.
o Various professional fees increasing in fiscal 1998 as a result of new
ventures.
The above increases were partially offset by a decrease in bad debt expense in
fiscal 1998 from fiscal 1997. In fiscal 1997, the Company recorded approximately
$13.5 million of bad debt expense as a result of the change in the Company's
business strategy and financial uncertanties facing certain franchisees. In
fiscal 1998, the Company recorded approximately $3.9 million of bad debt expense
due to financial difficulties of certain franchises.
PREOPENING COSTS. With the adoption of SOP 98-5 in fiscal 1998, the Company now
expenses preopening costs as they are incurred. This change resulted in the
Company recording $10.4 million in preopening costs in fiscal 1998, primarily
for its London SOUND REPUBLIC unit and the Baltimore and Montreal PLANET
HOLLYWOOD units and the Honolulu and Orlando OFFICIAL ALL STAR CAFE units. In
fiscal 1997, preopening costs were $18.9 million and reflected the amortization
of preopening costs during a unit's first year of operations.
24
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
from $20.0 million in fiscal 1997 to $25.0 million in fiscal 1998. The increase
of $5.0 million was primarily due to the Company's continued expansion of
restaurant units, sixteen units were added during fiscal 1997 and eight units in
fiscal 1998, and the construction of the Company's corporate office, which was
completed in fiscal 1998.
RESTRUCTURING CHARGES. In the fourth quarter of 1998, the Company recorded
restructuring charges of $6.9 million. These charges consisted of $2.9 million
of severance related costs and $4.0 million of lease termination costs for units
and offices closed or for units which will not be opened.
CELEBRITY OPTION EXPENSE. Concurrent with its decision to joint venture,
franchise, sell or otherwise dispose of units operating under the OFFICIAL ALL
STAR CAFE and SOUND REPUBLIC concepts, the Company recorded a $6.2 million
expense for the remaining unamortized value of stock options granted to certain
celebrities associated with the OFFICIAL ALL STAR CAFE and SOUND REPUBLIC
concepts. These options were previously being amortized over the life of the
option agreements and recorded in general and administrative expense.
IMPAIRMENT OF LONG LIVED ASSETS. As a result of operating losses incurred in
fiscal 1998 and fiscal 1997, projected future losses for certain of the
Company's assets and management's plans to sell certain assets, the Company
recorded an impairment charge of $125.8 million compared to a charge of $48.7
million in fiscal 1997.
INTEREST EXPENSE. Interest expense for fiscal 1998 increased to $25.8 million as
a result of the Company's $250.0 million debt offering in March 1998 and the
write off of $2.3 million of costs associated with its credit facility which was
amended in December 1998. All interest in fiscal 1997 was capitalized to
construction in progress.
INTEREST INCOME. Interest income increased from $1.3 million in fiscal 1997 to
$4.8 million in fiscal 1998. The increase was due to the investment of funds
received from the Company's $250.0 million debt offering in March 1998.
EQUITY IN INCOME (LOSSES) OF UNCONSOLIDATED AFFILIATES. Equity in income
(losses) of unconsolidated affiliates decreased from $6.9 million in income for
fiscal 1997 to ($11.0) million in losses for fiscal 1998. The decline was
primarily the result of losses incurred by PH Asia, an entity which is owned 50%
by the Company, and ECE, an entity in which the Company owns a 20% interest. The
losses for PH Asia were due to downturns in tourism throughout Asia, which
resulted in significant declines in revenue for the units owned and operated by
PH Asia. The losses for the Company's investment in ECE were due to costs
recorded in the fourth quarter of 1998 by ECE for the abandonment and closure of
certain sites and a charge for obsolete/discontinued inventory.
PROVISION FOR INCOME TAXES. The provision for income taxes was $5.0 million or
37.5% of pretax income in fiscal 1997. In fiscal 1998, the Company recorded
income taxes of $5.2 million which primarily represents income taxes of foreign
operations.
SEASONALITY AND QUARTERLY COMPARISONS
The Company's revenues have generally been seasonal, due to the greater number
of tourists who patronize the Company's units during the summer and year-end
holiday season. Although units in certain locations are affected by different
seasonal influences, the Company has historically experienced is strongest
operating results from June through August. Moreover, as a result of the
substantial revenues associated with each new Company-owned unit and the
recognition of franchise fees, the timing of new unit openings may result in
significant fluctuations in quarterly results.
LIQUITY AND CAPITAL RESOURCES
25
<PAGE>
The following table presents a summary of the Company's cash flows for fiscal
1997, 1998 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL
------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net cash provided by (used in) operating activities............ $31,273 $(38,010) $(43,479)
Net cash provided by (used in) investing activities......... (151,952) (110,079) 21,042
Net cash provided by (used in) financing activities............ 81,153 184,439 (8,781)
Net effect of exchange rates on cash........................... (1,216) (13) (65)
Net increase (decrease) in cash and cash equivalents........... (40,742) 36,337 (31,283)
</TABLE>
The Company's cash and cash equivalents decreased to $14.1 million at December
26, 1999, from $45.4 million at December 27, 1998. The decrease in cash and cash
equivalents was primarily due to the funding of the Company's operating losses
and the payment of $25.8 million of borrowings under the Company's leveraged
lease facility note during fiscal 1999, offset by proceeds of $41.5 million from
asset sales.
Net cash provided by (used in) operating activities in fiscal 1997, 1998 and
1999 was $31.3 million, ($38.0) million and $(43.5) million, respectively. The
decrease in cash provided by operating activities from fiscal 1997 to fiscal
1998 and from fiscal 1998 to fiscal 1999 was primarily due to losses from
operations. Expenditures for pre-opening expenses, which were capitalized and
amortized over a 12-month period following the opening of the unit were $18.8
million in fiscal 1997. In fiscal 1998, the Company adopted SOP 98-5 and now
expenses pre-opening costs as they are incurred. This change resulted in the
Company recording $10.4 million of pre-opening expense in fiscal 1998.
Pre-opening expenses were $1.8 million in fiscal 1999.
Net cash provided by (used in) investing activities in fiscal 1997, 1998 and
1999 was $(152.0) million, ($110.1) million and $21.0 million, respectively. In
fiscal 1998, investing activities decreased as the Company completed the
construction of its corporate headquarters and opened fewer units than in fiscal
1997. In fiscal 1999, the Company received proceeds from investing activities
resulting from the sale of its corporate headquarters, several Company owned
units and unit sites and its investment in the Hotel Pennsylvania. Capital
expenditures for fiscal 1997, 1998 and 1999 were $120.0 million, $105.8 million
and $22.2 million, respectively.
Net cash provided by (used in) financing activities in fiscal 1997, 1998 and
1999 was $81.2 million, $184.4 million and ($8.8) million, respectively. In
fiscal 1997, the primary sources of financing were borrowings on the Company's
credit agreement and proceeds from a private sale of the Company's common stock.
In fiscal 1999, the primary use of the financing was the repayment of borrowings
on the Company's credit agreement, offset by a change in the Company's
restricted cash and investments balance and a minority interest contribution.
On March 25, 1998, the Company issued $250.0 million of 12% Senior Subordinated
Notes (the "Old Notes") due in 2005. Interest on the Old Notes is payable
semi-annually in arrears on April 1 and October 1 of each year, commencing on
October 1, 1998. The Company is in default of the terms of this obligation due
to the Company's failure to make both the April 1, 1999 and October 1, 1999
interest payments. The Old Notes, plus accrued interest of $31.8 million at
December 26, 1999, are included in liabilities subject to compromise under the
Company's bankruptcy filing. The Company's plan of reorganization provides for
the satisfaction of the Old Notes through the issuance of a combination of $47.5
million in cash, $60.0 million of PIK Notes and shares of New Class A Common
Stock equivalent to 26.5% ownership of the reorganized company.
Concurrent with the Old Notes offering, the Company replaced its credit
agreement with a $65.0 million multi-currency revolving credit facility and a
$35.0 million LIBOR-based leveraged lease facility for its New York
26
<PAGE>
Times Square Hotel retail unit (the "Credit Facility"). As a result of operating
losses experienced in the third quarter of fiscal 1998, the Company was not in
compliance with certain financial covenants of the Credit Facility
(specifically, EBITDA and Fixed Charge Ratios, as such terms are defined in the
Credit Facility documents). Effective December 8, 1998, the Company amended its
Credit Facility with SunTrust Bank, Central Florida, N.A. and other lenders (as
amended, the "New Credit Facility"). The revolving credit portion of the Old
Credit Facility was terminated and the New Credit Facility provided for a $35.0
million LIBOR-based leveraged lease facility and up to $2.0 million coverage
under an interest rate swap arrangement which provided hedging against interest
rate movements under the leveraged lease facility. Interest rates were variable,
with either prime or LIBOR indexes. The New Credit Facility matured on June 30,
1999. Principal payments under the leveraged lease facility were revised to
require the following payments: (a) $10 million by December 8, 1998 (b) $12.5
million by March 31, 1999 and (c) the balance by June 30, 1999. The Company was
also required to commence marketing both its Orlando, Florida headquarters
property and the New York Times Square Hotel retail unit. During fiscal 1999,
the Company sold its headquarters property and its New York SOUND REPUBLIC site
and applied the sales proceeds as principal payments under the New Credit
Facility. The New Credit Facility was paid in full and terminated during 1999.
The Company's Plan, if and when effective, will provide for resolution of the
liabilities subject to compromise through a combination of cash, PIK Notes, and
new common stock.
The Plan contemplates the infusion of $30.0 million in new equity and $37.0
million in additional notes and credit facilities which, in the opinion of
management, will result in adequate financial resources to sustain operations
and capital expenditures (estimated at $6.0 million in fiscal 2000) beyond
fiscal 2000.
There can be no assurance that the Plan will become effective, or when such
effectiveness will occur. Delays in the timing of the implementation of the Plan
or required modifications of the Plan may impact the Company's ability to
successfully reorganize under Chapter 11. Such failure could ultimately result
in liquidation of the Company.
The Company has never paid, and does not anticipate paying in the foreseeable
future, any dividends on its common stock. The Company intends to retain its
available cash to finance operations, development and growth of the Company.
OTHER INFORMATION
YEAR 2000 COMPLIANCE. The Year 2000 could have a broad impact on the business
environment in which the Company operates due to the possibility that many
computerized systems across all industries could be unable to process
information containing dates beginning in the Year 2000. The Company established
an enterprise-wide program to prepare its computer systems and applications for
the Year 2000 utilizing both internal and external resources to identify,
correct and test the Company's systems for Year 2000 compliance.
As of December 26, 1999, the Company had completed an inventory of all
information technology equipment and addressed the Year 2000 readiness of such
equipment. The Company completed most of its domestic reprogramming in fiscal
1998 and completed the testing of the program modifications during fiscal 1999.
In addition to the reprogramming of existing applications, the Company
implemented a new enterprise information system. The system is Year 2000
compliant. The Company also upgraded the point of sale system for Year 2000
compliance and completed a comprehensive review of non-information technology
equipment for all of its units.
As of December 26, 1999, the Company had spent approximately $4.3 million
implementing its new enterprise information system and addressing the Year 2000
issue. In assessing the risks presented by the Year 2000
27
<PAGE>
compliance issues, the Company identified potential worst case scenarios
involving failure of the information technology and non-information technology
systems. As of March 2000, the Company did not experience material disruption or
other significant problems in its information technology and non-information
technology systems. In addition, as of the same date, the Company is not aware
of any material Year 2000 compliance issues relating to information technology
and non-information technology systems of third party business partners with
which the Company maintains material relationships. The Company continues to
monitor systems and maintains contact with third party businesses with which the
Company has material relationships with respect to Year 2000 compliance and any
Year 2000 issues that may arise at a later date. Contingency plans relating to
ongoing Year 2000 issues will be developed at the time such issues are
identified and such plans are deemed necessary. Based on the upgrades and the
normal functioning to date of the information technology and non-information
technology systems, management does not foresee significant risks associated
with its Year 2000 compliance efforts. However, there can be no assurance that
the Company or any third party business partners will not have ongoing Year 2000
compliance issues that may have an adverse effect on the Company.
IMPACT OF INFLATION AND INTERNATIONAL RISKS. Inflation as measured by consumer
price indices has continued at a low level in most of the countries in which the
Company operates. A portion of the Company's sales comes from its international
operations (See Note 14 to the Consolidated Financial Statements). Although
these operations are geographically dispersed, which partially mitigates the
risks associated with operating in particular countries, the Company is subject
to the usual risks associated with international operations. These risks include
local political and economic environments and relations between foreign and U.S.
governments.
CURRENCY EXCHANGE RISK. The Company's international operations expose it to
fluctuations in exchange rates when translating foreign currency to U.S. dollars
for financial reporting purposes. The Company is not able to project the effect
of future exchange rate fluctuations on its operating results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company purchases certain commodities such as beef, chicken, flour and
cooking oil. These commodities are generally purchased based upon market prices
established with vendors. These purchase arrangements may contain contractual
features that limit the price paid by establishing certain price floors or caps.
The Company does not use financial instruments to hedge commodity prices because
these purchase arrangements help control the ultimate cost paid and any
commodity price aberrations are generally short term in nature. This market risk
discussion contains forward-looking statements. Actual results may differ
materially from this discussion based upon general market conditions and changes
in domestic and global financial markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements of the Company are set forth herein beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
- --------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
28
<PAGE>
Planet Hollywood's Board of Directors is divided into three classes, denoted as
Class I, Class II and Class III, serving staggered three-year terms with one
class elected each year at the annual meeting. At the end of fiscal 1999, and up
to the effective date of the Plan, the Board consists of: Thomas Avallone and
Mark McCormack (Class I Directors); Claudio Gonzalez and Ong Beng Seng (Class II
Directors); and Robert Earl and Michael Tarnopol (Class III Directors). During
fiscal 1999 three vacancies were created on the Board. In April 1999, Isadore
Sharp resigned as a Class I director in order to devote more time to other
business interests. In June 1999, William Baumhauer resigned as an officer and
Class III director in order to pursue other interests. In November 1999, Michael
Montague, then a Class II director, passed away.
In accordance with the terms of the Plan, upon the effective date of the Plan,
the Board shall consist of seven individuals as follows:
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
CLASS I CLASS II CLASS III
(TERM EXPIRING IN 2001) (TERM EXPIRING IN 2002) (TERM EXPIRING IN 2003)
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Robert Earl Claudio Gonzalez Douglas P. Teitelbaum
Thomas Avallone Steven Grapstein Ed Rogers
Mustafa Al Hejailan
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
On the effective date of the Plan, several new documents will govern the
operations of the reorganized Company. Pursuant to the Company's proposed
Amended and Restated Certificate of Incorporation and Bylaws, directors shall be
elected by holders of the Company's New Class B Common Stock, provided that (I)
after the payment in full of all of the Company's obligations under its PIK
Notes due 2005, the holders of the Company's New Class A Common Stock shall be
entitled to elect two directors and (II) at such time when there shall be no
shares of New Class B Common Stock issued and outstanding, the holders of New
Class A Common Stock shall be entitled to elect all members of the Company's
Board. Furthermore, the initial holders of the New Class B Common Stock have
agreed to enter into Voting Agreements whereby they will vote their shares
initially in favor of the seven directors named above. Subsequent to the
effective date of the Plan, and until the Company's obligations under the PIK
Notes have been paid in full, they have agreed to vote their shares in favor of
two directors nominated by holders of at least a majority in principal amount of
the outstanding PIK Notes (any such directors to replace the Class III directors
initially elected). The Voting Agreements also provide that (I) a party holding
more than 750,000 shares of new common stock shall be entitled to nominate a
single candidate for election to the Board and that all parties agree to vote in
favor of any such properly nominated candidate and (II) except as otherwise
provided, the parties agree to vote in accordance with the direction of Robert
Earl on certain items, including the proposal to elect directors or to fill
vacancies on the Board, amending the Company's Certificate of Incorporation or
Bylaws, removing officers or issuing Company securities, provided that Mr. Earl
is serving on the Board or as an executive officer of the Company.
The following table sets forth the name, age and position with the Company of
each person who (1) as of February 29, 2000 and (2) as of the effective date of
the Plan, was, or will be a director or executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Robert Earl 48 Director, Chairman of the Board, Chief Executive
Officer and President
Thomas Avallone 41 Director, Executive Vice President and Chief
Financial Officer
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Claudio Gonzalez 65 Director
Steven Grapstein 42 Director (1)
Mustafa Al Hejailan 49 Director (1)
Mark McCormack 69 Director (2)
Ong Beng Seng 54 Director (2)
Ed Rogers 41 Director (1)
Michael Tarnopol 63 Director (2)
Douglas Teitelbaum 34 Director (1)
John Caparella, Jr. 42 Vice President of Development
Mark S. Helm 29 Vice President, General Counsel and Secretary
John R. McCann 52 Vice President of Development
Tina Samson 44 Vice President of Finance
James T. Stanley 49 Senior Vice President of Operations
</TABLE>
(1) These individuals are not currently directors but will become directors on
the effective date of the Plan.
(2) These individuals are currently directors but will no longer serve as a
director upon the effective date of the Plan.
The business experience and certain other information relating to each of the
directors and executive officers listed above for at least the last five years
is as follows:
ROBERT EARL: Mr. Earl has over 25 years experience in the restaurant industry.
In 1977, Mr. Earl founded President Entertainment, a company that developed
theme restaurants. Under Mr. Earl's leadership, over the next ten years,
President Entertainment grew to a $120 million enterprise. In 1987, Mr. Earl
sold President Entertainment to Pleasurama p.l.c. ("Pleasurama") and joined the
Pleasurama management team, where he assumed responsibility for the management
of another theme restaurant, Hard Rock Cafe p.l.c. ("Hard Rock Cafe"). During
his five years in charge of Hard Rock Cafe, Mr. Earl pioneered its expansion
from seven to twenty-two units while substantially increasing its profitability.
In 1993, Mr. Earl resigned from Hard Rock Cafe to concentrate full time on
running the Company. He has been Chief Executive Officer of the Company since
its inception and a director of the Company since its organization.
Consequently, Mr. Earl served as a director and executive officer of the Company
throughout its bankruptcy proceedings described elsewhere herein. In November
1998, Mr. Earl was elected Chairman of the Board. Pursuant to Mr. Earl's
employment agreement with the Company, Mr. Earl is to serve as Chief Executive
Officer of the Company and each of its significant subsidiaries and the Company
has agreed to nominate Mr. Earl for election to the Board of Directors of the
Company at each annual meeting of stockholders during his employment. In the
event Mr. Earl is not elected or retained as Chief Executive Officer and a
director of the Company, he has the right to terminate his employment agreement
with the Company for cause. See discussion of Employment Contracts below.
30
<PAGE>
THOMAS AVALLONE: Mr. Avallone has been involved in the entertainment theme
restaurant industry for over 17 years. He has been Chief Financial Officer,
Executive Vice President and a director of the Company since 1994. Consequently,
Mr. Avallone served as a director and executive officer of the Company
throughout its bankruptcy proceedings described elsewhere herein. From July 1987
until joining the Company in 1994, Mr. Avallone served as Chief Financial
Officer of Hard Rock Cafe and Rank Leisure USA. Prior to serving in those
positions, Mr. Avallone, a certified public accountant, was a Senior Manager at
Laventhol and Horwath CPAs, a public accounting firm, specializing in that
firm's leisure industry practice. Mr. Avallone is a member of the American
Institute of Certified Public Accountants and the New York State Society of
Certified Public Accountants.
CLAUDIO GONZALEZ: Mr. Gonzalez has been a director of the Company since June
1996. Consequently, Mr. Gonzalez served as a director of the Company throughout
its bankruptcy proceedings described elsewhere herein. Mr. Gonzalez is the
Chairman of the Board, and a principal stockholder, of ECE, S.A. de C.V., a
publicly-traded Mexican company ("ECE") in which the Company is a 20%
stockholder. Mr. Gonzalez has been the Chairman and Chief Executive Officer of
Kimberly Clark de Mexico since 1973. Mr. Gonzalez is also currently a member of
the Board of Directors of Kimberly Clark Corporation, Kellogg Company, General
Electric Company, Banco Nacional de Mexico, Grupo Televisa, Grupo Carso, Grupo
Industrial Alfa, Telefonos de Mexico, Grupo Modelo, Unilever, NV & Plc and of
J.P. Morgan International Advisory Board.
STEVEN GRAPSTEIN: Mr. Grapstein will become a director at the effective date of
the Plan. Since September 1985, Mr. Grapstein has served as Chief Executive
Officer of Kuo Investment Company where he is responsible for all aspects of its
North American operations, including investment management, asset acquisition
and disposition. Since December 1997, he has also served as Chief Executive
Officer of Presidio International DBA A/X Armani Exchange, a fashion retail
company. Since 1985 Mr. Grapstein has served as a director of Tesoro Petroleum,
a publicly held oil and gas corporation, where he presently serves as Vice
Chairman and on the Audit, Executive and Governance committees.
MUSTAFA AL HEJAILAN: Mr. Al-Hejailan will become a director at the effective
date of the Plan. Since 1998, Mr. Al-Hejailan has served as Executive Director,
International Investments of Kingdom Holding Company, an affiliate of Kingdom
Planet Hollywood, Ltd., a significant stockholder of the Company.
MARK MCCORMACK: Mr. McCormack has been a director of the Company since June
1996. Mr. McCormack is the Chairman and Chief Executive Officer of the
Cleveland-based sports and entertainment conglomerate known as International
Management Group, which he founded in 1960. Mr. McCormack has also authored a
number of best-selling business and management books. Mr. McCormack has served
as a director of the Company throughout its bankruptcy proceedings described
elsewhere herein.
ONG BENG SENG: Mr. Ong has been a director of the Company since February 1996.
He is a co-founder and has been a Managing Director since 1980 of Hotel
Properties Limited ("HPL"), and Singapore publicly listed company. HPL had
diversified interests in the hotel, leisure and retail industries, primarily in
Asia. Mr. Ong also has personal diversified interest ranging from the oil, stock
brokering and automotive industries to art and concert promotion. Mr. Ong has
served as a director of the Company throughout its bankruptcy proceedings
described elsewhere herein.
ED ROGERS: Mr. Rogers will become a director at the effective date of the Plan.
He will be elected in accordance with the terms of the Plan and the Voting
Agreements described above, as a nominee of the holders of at least a majority
in principal amount of the outstanding PIK Notes. Mr. Rogers is a founding
partner and vice chairman of the Washington D.C. Government Relations firm of
Barbour Griffith & Rogers, Inc. Mr. Rogers also serves as vice chairman of
International Equity Partners, L.P., a Washington D.C. based private equity
asset management
31
<PAGE>
company and vice chairman of the Alternative Investment Corporation, an offshore
issuer of securities that are sold primarily to institutional investors in the
U.S. From January 1989 until August 1991, Mr. Rogers served as Deputy Assistant
to the President of the United States and Executive Assistant to the White House
Chief of Staff.
MICHAEL TARNOPOL: Mr. Tarnopol has been a director of the Company since June
1996. Mr. Tarnopol has been a Senior Management Director and Chairman of the
Investment Banking Division of Bear, Stearns & Co., Inc. ("Bear Stearns") since
1985. Mr. Tarnopol joined Bear Stearns in 1975 and headed the firms'
International Department from 1975 until 1985, at which time he was appointed
head of the Mergers & Acquisitions Department of Bear Stearns. He is Vice
Chairman of the Board of Directors of Bear Stearns and Chairman of Bear Stearns
International, Ltd. Mr. Tarnopol is currently a director of Avis International,
Inc. and NRT, Inc. He is also a Trustee of the University of Pennsylvania and a
member of the Board of Overseers of the Wharton School of Business. Mr. Tarnopol
has served as a director of the Company throughout its bankruptcy proceedings
described elsewhere herein.
DOUGLAS TEITELBAUM: Mr. Teitelbaum will become a director at the effective date
of the Plan. He will be elected in accordance with the terms of the Plan and the
Voting Agreements described above, as a nominee of the holders of at least a
majority in principal amount of the outstanding PIK Notes. Mr. Teitelbaum has
been a managing principal of Bay Harbour Management, L.C., an investment
management firm, since 1996. From 1994 through 1996, Mr. Teitelbaum was a
managing director in the High Yield and Distressed Securities Group at Bear,
Stearns, Inc. Prior to that time, Mr. Teitelbaum was a partner at
Dabney/Resnick, Inc., an investment banking firm. He also serves on the boards
of directors of Barneys New York, Inc., EZServe/Swifty-Mart Convenience Stores,
Inc. and EBC Holdings, Inc.
JOHN CAPARELLA, JR.: Since November 1998, Mr. Caparella has held the position of
Vice President of Development. Prior to that time and since joining the Company
in 1997, Mr. Caparella served as the Company's Vice President of Lodging.
Consequently, Mr. Caparella has served as an executive officer of the Company
throughout its bankruptcy proceedings described elsewhere herein. Prior to
joining the Company, Mr. Caparella was an executive with ITT Sheraton Hotels and
Resorts for over 16 years progressively managing larger properties for the chain
and was responsible for successfully developing from start-up many Sheraton
properties throughout North America.
MARK S. HELM: Mr. Helm joined the Company in 1995 as part of its in-house legal
team and Assistant Secretary of the Company. In 1999 Mr. Helm was appointed
Associate General Counsel and in early 2000 Mr. Helm was appointed Vice
President , Secretary and General Counsel of the Company. Consequently, Mr. Helm
served as an executive officer of the Company during its bankruptcy proceedings
described elsewhere herein.
JOHN R. MCCANN: Mr. McCann is the Vice President of Development of the Company.
Prior to joining the Company in January 1993, he was President and Principal
Owner of John McCann and Associates, a design/build firm specializing in theme
restaurant design and construction. Prior thereto, Mr. McCann was a Partner and
Principal in Jenkins-McCann, a construction and development company with its
primary market in restaurant and themed entertainment projects. Mr. McCann
graduated with honors from the University of Florida with a degree in Building
Construction and Engineering. Mr. McCann has served as an executive officer of
the Company throughout its bankruptcy proceedings described elsewhere herein
TINA SAMSON: Ms. Samson assumed the responsibilities as Vice President of
Finance in early 1999, after having served as the Vice President of Finance for
Marvel Mania, a former joint venture investment of the Company. Consequently,
Ms. Samson served as an executive officer of the Company throughout its
bankruptcy proceedings described elsewhere herein. In her current position, Ms.
Samson oversees all functional disciplines of finance and management information
systems for the Company. Prior to joining the Company in 1996, Ms. Samson was
the
32
<PAGE>
Vice President, Controller, for the renowned Hotel del Coronado, a spacious
luxury resort in San Diego, California. Prior to that time, Ms Samson spent
eight years with Wells Fargo Alarm Services, Inc., where she was in charge of
various management responsibilities including budgeting, planning, analysis, and
reporting. Ms Samson has nearly 20 years of experience in financial management.
JAMES T. STANLEY: Mr. Stanley has been in the restaurant business for more than
20 years. Prior to joining the Company in 1995 as Senior Vice President of
Operations, Mr. Stanley spent eight years as Vice President of Operations at
Hard Rock Cafe, and while there was responsible for overseeing all phases of the
development and operation of units in 18 countries. Mr. Stanley served as an
executive officer of the Company throughout its bankruptcy proceedings described
elsewhere herein.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under U.S. securities laws, directors, certain executive officers and persons
holding more than 10% of the Company's common stock must report their initial
ownership of the common stock of the Company and any changes in that ownership
to the Securities and Exchange Commission. The SEC has designated specific due
dates for such reports and the Company must identify persons who to its
knowledge did not file such reports when due. Based solely on its review of
copies of the reports filed with the SEC and written representations of its
directors and executive officers, the Company believes all persons subject to
reporting filed the required reports on time in 1999.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded to, earned by or
paid to the Chief Executive Officer, each of the other four most highly
compensated executive officers of the Company serving as executive officers at
the end of the 1999 fiscal year and one additional individual who would have
been included as one of such four individuals but for the fact that he was not
serving as an executive officer of the Company at the end of the 1999 fiscal
year (collectively, the "Named Executive Officers"), for services rendered in
all capacities to the Company during fiscal years 1997, 1998 and 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
---------------------------
Long-Term Compensation
---------------------------------------- -------------------------
Annual Compensation Awards
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
Securities
Underlying
Annual Annual Other Annual Restricted Options/ All Other
Name and Position Fiscal Salary Bonus Compensation Stock SARs Compensation
Year ($) ($) ($) ($) (#) ($)
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Earl, 1997 600,000 -- 4,419 -- -- --
Chief Executive Officer, Chairman 1998 600,000 -- 6,309 -- -- --
of the Board and President 1999 600,000 -- 6,909 -- -- --
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
Thomas Avallone, 1997 300,000 -- 8,854 -- -- --
Executive Vice President and Chief 1998 375,000 75,000 8,228 -- 100,000 --
Financial Officer 1999 375,000 -- 7,168 -- -- --
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
Scott E. Johnson, 1997 200,000 -- 7,506 -- -- --
Executive Vice President, General 1998 250,000 40,385 8,436 -- 70,000 --
Counsel and Secretary (a) 1999 250,000 -- 7,599 -- -- --
==================================== ======= =========== =========== ================ =========== ============= ================
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
John R. McCann, 1997 250,000 -- -- -- --
Vice President of Development 1998 250,000 -- 1,259 -- 22,833 --
1999 250,000 -- 12 -- -- --
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
James T. Stanley, 1997 175,000 -- 4,788 -- -- --
Senior Vice President of 1998 223,462 -- 6,433 -- 100,000 --
Operations 1999 237,019 -- 4,698 -- -- --
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
William H. Baumhauer, President 1997 -- -- -- -- -- --
and Chief Operating Officer (b) 1998 212,591 -- 5,125 -- 750,000 79,439 (c)
1999 312,981 -- 6,248 -- -- 53,494 (d)
- ------------------------------------ ------- ----------- ----------- ---------------- ----------- ------------- ----------------
</TABLE>
a) Mr. Johnson left the employ of the Company in February 2000, however,
based on his position as an executive officer of the Company in fiscal
1999, Mr. Johnson is classified as a Named Executive Officer in this Form
10-K. See discussion of Employment Contracts below.
b) Mr. Baumhauer joined the Company in July 1998 as President and Chief
Operating Officer. Mr. Baumhauer resigned from such positions in June
1999 and therefore did not serve as an executive officer at fiscal year
end 1999; however, based on his position as an executive officer of the
Company in fiscal 1999, Mr. Baumhauer is classified as a Named Executive
Officer in this Form 10-K. Consequently, the compensation figures for
1998 and 1999 do not represent a full year's compensation.
c) All Other Compensation for Mr. Baumhauer in 1998 consisted of certain
relocation expenses ($68,839) and country club dues ($10,600).
d) All Other Compensation for Mr. Baumhauer in 1999 consisted of certain
severance payments ($50,000) and relocation expenses ($3,494).
34
<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND
1999 FISCAL YEAR-END OPTION/SAR VALUE TABLE
There were no grants in fiscal 1999 of any stock options or SARs to the Named
Executive Officers. The following table sets forth information concerning each
exercise of stock options and SARs during fiscal 1999 by each of the Named
Executive Officers, and the aggregated 1999 fiscal year-end value of unexercised
options and SARs held by such individuals.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises and 1999 Fiscal Year-End Option/SAR Value
- -------------------------- --------------- ----------------- --------------------------- -----------------------------
Name Shares Value Number of Securities Value of Unexercised
Acquired on Realized ($) Underlying Unexercised in-the-money Options/SARs
Exercise (#) Options/SARs at 1999 at 1999 Fiscal Year-end ($)
Fiscal Year-end (#)
------------ -------------- ------------ ----------------
exercisable unexercisable exercisable unexercisable
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert Earl 0 0 0 0 0 0
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
Thomas Avallone 0 0 65,999 101,334 0 0
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
Scott E. Johnson 0 0 38,777 77,556 0 0
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
John R. McCann 0 0 7,611 15,222 0 0
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
James T. Stanley 0 0 44,233 88,467 0 0
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
William H. Baumhauer 0 0 0 0 0 0
- -------------------------- --------------- ----------------- ------------ -------------- ------------ ----------------
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are not compensated as officers of the Company are entitled to
$20,000 in annual fees, with an additional $1,000 payment for each Board meeting
attended and a $500 payment for each Committee meeting. While there were 34
Board meetings held in fiscal 1999, in the interest of the Company most
directors waived their fees and only $63,250 was paid to directors in connection
with their service on the Board. Mr. Montague also received a consulting fee of
$25,000 in fiscal 1999 in connection with the sale of the Company's SOUND
REPUBLIC unit in London, England. Directors who are compensated as Company
employees receive no additional compensation for service as a director. The
Company will also reimburse each director for out-of-pocket expenses incurred in
attending meetings of the Board of Directors and its committees. All directors
are eligible to receive stock options, however no stock options were granted to
directors in fiscal 1999.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
Upon the effective date of the Plan, the Company shall be party to an employment
agreement with Mr. Robert Earl providing for his employment as Chief Executive
Officer of the Company and its significant subsidiaries and affiliates, for a
period of five years. The proposed agreement provides for a base salary of
$200,000 per year with review of Mr. Earl's compensation not less than annually
by the Board, an annual cash incentive bonus in the discretion of the Board of
Directors of the Company, participation in the Company's stock-based incentive
compensation plan for executives and employees and all benefits generally made
available to executive officers of the Company. Mr. Earl will also be granted
stock options to purchase 2,000,000 shares of the Company's New Class A Common
Stock at an exercise price of $4.2857 per share, provided that such options
shall not vest (and
35
<PAGE>
therefore are not exerciseable by Mr. Earl) until the average fair market value
of the New Class A Common Stock equals or exceeds $40.00 per share for three
consecutive business days. Such options shall be exerciseable for a period of
five years and the Company has agreed to register with the Securities and
Exchange Commission the resale of the shares underlying said options upon Mr.
Earl's exercise of all of said options. The employment agreement further
provides that Mr. Earl shall be permitted to undertake or conduct other
business, civic or charitable activities during the term of his employment as
long as such activities do not materially interfere with his obligations to the
Company. Mr. Earl may not, however, invest or otherwise participate in other
Hollywood themed restaurant ventures. The Company has the right to terminate the
agreement without any further obligation in the event: (i) Mr. Earl dies or
becomes incapacitated for six consecutive months, (ii) he willfully breaches the
agreement, or (iii) he is convicted, of or pleads guilty to, a felony crime
involving moral turpitude or certain other crimes involving the Company's
property. Mr. Earl is entitled to terminate the agreement in the event he is not
elected or retained as Chief Executive Officer and a director of the Company or
the Company (or any successor company) materially reduces his responsibilities.
In the case of such termination by Mr. Earl, or if the agreement is terminated
by the Company without cause or upon Mr. Earl's death or disability, he will be
entitled to receive an amount equal to his then current base salary for the
remainder of the term of the agreement (or at least twelve months), all
incentive bonuses earned or granted and all stock options awarded to Mr. Earl
shall immediately vest. The agreement also includes certain non-disclosure and
non-interference provisions which continue for a period of one year following
the termination of Mr. Earl's employment with the Company.
Upon the effective date of the Plan, the Company shall be a party to a
Consulting Agreement with OCS Consultants, Inc., a Florida corporation of which
Mr. Earl is the sole shareholder and director, whereby OCS has agreed to provide
services to the Company for a period of five years. The proposed agreement
provides for consulting fees of $400,000 per year. The agreement also provides
for termination and other provisions which are generally consistent with Mr.
Earl's employment agreement described above.
In the event that the Plan is not declared effective by the Bankruptcy Court,
Mr. Earl's employment shall be governed by a single employment agreement, whose
current term expires December 31, 2001, providing for a base salary of $600,000
on substantially the same terms as described above.
The Company is party to an employment agreement with Mr. Thomas Avallone dated
January 1, 1998 providing for his employment as Executive Vice President and
Chief Financial Officer originally through January 1, 2001. This agreement was
amended by the Bankruptcy Court in connection with the Plan to provide that Mr.
Avallone's employment with the Company shall terminate on the later to occur of
(a) March 31, 2000 or (b) 30 days following the effective date of the Plan,
unless such date is extended by mutual agreement of the parties. In exchange for
Mr. Avallone's agreement to the early termination and cancellation of his
employment agreement, the Company agreed to pay Mr. Avallone the sum of
$175,000, plus accrued wages and benefits through his termination date.
Subsequent to his termination Mr. Avallone shall also be entitled to receive
from the Company certain medical and dental insurance benefits for a period of
twelve months and be entitled to receive stock options in an amount no less
than, and at an exercise price no greater than, stock options provided to
directors of the Company on the effective date of the Plan. The Company and Mr.
Avallone have also agreed that he may enter into a consulting agreement for the
non-exclusive provision by Mr. Avallone to the Company of certain financial and
consulting services, subject to appropriate review and approvals.
The Company was party to an employment agreement with Mr. Scott Johnson dated
May 1, 1996, as amended, providing for his employment as Executive Vice
President, General Counsel and Secretary originally through February 28, 2000,
with such term automatically renewing for additional eighteen-month periods
unless either party provided notice to the other of its unwillingness to renew.
That agreement was amended by the Bankruptcy Court in connection with the Plan
to provide that Mr. Johnson's employment with the Company shall terminate on a
date, at Mr. Johnson's discretion, on or between February 1, 2000 and March 1,
2000. Mr. Johnson left the employ of the Company on February 16, 2000. In
exchange for Mr. Johnson's agreement to the early termination
36
<PAGE>
and cancellation of his employment agreement, the Company agreed to pay Mr.
Johnson the sum of $180,000, in twelve monthly installments. Until such sum has
been paid, Mr. Johnson shall provide certain legal and consulting services, up
to 75 hours per month, at no charge. Subsequent to his termination Mr. Johnson
shall also be entitled to receive from the Company certain medical and dental
insurance benefits for a period of twelve months and be entitled to receive
20,000 stock options to purchase shares of the Company's New Class A Common
Stock, at an exercise price no greater than other option grantees on the
effective date of the Plan.
Mr. John McCann does not have an employment agreement with the Company.
The Company is party to an employment agreement with Mr. James Stanley dated
January 1, 1998 providing for his employment as Senior Vice President of
Operations originally through January 1, 2001. This agreement was amended by the
Bankruptcy Court in connection with the Plan to provide that Mr. Stanley's
employment with the Company shall be on a month to month basis until such time
as the Company provides Mr. Stanley with 30 days prior written notice of its
intention to terminate the agreement. Upon such termination, and in exchange for
Mr. Stanley's agreement to the amendment of his employment agreement, the
Company has agreed to pay Mr. Stanley the sum of $75,000, plus accrued wages and
benefits through his termination date.
REPORT ON REPRICING OF OPTIONS/SARS
At no time during fiscal 1999 did the Company adjust or amend the exercise price
of stock options or SARs previously awarded to any of the Named Executive
Officers or any other officers or employees.
INSIDER PARTICIPATION IN COMPENSATION DECISIONS AND BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee during fiscal 1999 was composed of Mr. Earl, the
Company's Chief Executive Officer and President, and two outside independent
directors, Mr. Montague and Mr. Sharp. Mr. Sharp resigned as a director in April
1999 and Mr. Montague passed away in November 1999. The Compensation Committee
held no meetings in fiscal 1999. The functions of the Compensation Committee
include the review, evaluation and approval of the Company's compensation system
for the highest ranking executive officers, including the Chairman of the Board,
the Chief Executive Officer and the President. All other compensation decisions
are proposed by the Company's human resources department and approved by the
Chief Executive Officer.
For purposes of making compensation determinations, the Compensation Committee
uses broad-based industry surveys of what executives with comparable
responsibilities are paid and evaluates individual performance. In addition, the
committee considers the qualifications and experience of the persons concerned,
the size and complexity of operations under that person's control, the financial
condition of the Company, the compensation paid to other persons employed by the
Company and the compensation paid to persons having similar duties and
responsibilities in comparable organizations or industries. The Company strives
to provide a comprehensive executive compensation system that is competitive and
performance-based in order to attract and retain superior executive talent.
The Company's current compensation package includes a mix of base salary,
short-term and long-term incentive opportunities and other common employee
benefits. Changes in compensation are based on an individual's performance, the
Company's performance and the competitive marketplace. Base salaries are
intended to signal the internal value of the position and to track with the
external marketplace. Most executive officers serve pursuant to employment
agreements that provide for a minimum base salary that may not be reduced
without the consent of the executive officer. Base salaries did not increase in
fiscal 1999 due to the poor financial
37
<PAGE>
performance of the Company. The Compensation Committee endorses the position
that stock ownership by management is beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. To that end,
the Company has adopted a Stock Award and Incentive Plan, whereby the Company
may utilize stock options, restricted stock awards and certain other benefits to
provide long-term compensation. Depending on an individual's and the Company's
performance, stock options are normally granted each year as a component of
long-term compensation with the size of the grants generally tied to and
weighted approximately equally based on an officer's responsibility level, base
salary and performance. The number of options held is not considered when
determining the option awards for any particular year. During 1999, no stock
options were granted to any of the Company's officers. The purpose of restricted
stock awards is to attract and retain executive officers whose actions will
impact the Company's long-term operating results and to motivate such executives
by providing them with an immediate ownership stake in the Company. Restricted
stock awards generally have vesting requirements of three years. In addition to
providing a direct relationship between shareholder value and the value of the
benefit to the officer, restricted stock is a powerful retention device as the
shares are forfeitable by the executive until the vesting restrictions have been
satisfied. During 1999, no restricted stock awards were granted to any of the
Company's officers.
Specifically as to Robert Earl, the Company's Chairman of the Board, Chief
Executive Officer and President, Mr. Earl received a base salary of $600,000 in
fiscal 1999 pursuant to his then current employment agreement with the Company.
Mr. Earl waived certain compensation increases in both fiscal 1998 and fiscal
1999 due him pursuant to said employment agreement. Furthermore, no bonuses were
paid, nor were any stock options or restricted stock awards granted to Mr. Earl
based on the Company's performance and a determination by the Compensation
Committee that the base compensation for Mr. Earl coupled with the number of
shares of Class A Common Stock beneficially owned by him provided an adequate
incentive to increase stockholder value. Mr. Earl's overall compensation
reflects the extent of his policy and decision-making authority and his level of
responsibility with respect to the strategic direction and financial and
operational results of the Company.
The Compensation Committee intends to review the performance of certain
executive officers during the current fiscal year, and to reward performance
through cash bonuses or other incentive compensation at the committee's
discretion. In that regard, the qualitative factors that the committee will use
are Company performance, managerial vision, decision-making acumen,
effectiveness, teamwork and the results obtained by senior management.
COMPENSATION COMMITTEE:
ROBERT EARL, Director
COMPARATIVE PERFORMANCE BY THE COMPANY
The following line graph compares the total returns (assuming reinvestment of
dividends) of the Company's Class A Common Stock, the Nasdaq Composite Index,
Standard & Poor's 500 Index, the Russell 2000 Index and the Russell 2000
Consumer Discretionary and Services Index for the period beginning April 19,
1996 (the date of the Company's initial public offering) and ending December 26,
1999 (the close of the Company's 1999 fiscal year). The graph assumes $100
invested on April 19,1996 in the Company's Class A Common Stock (at the initial
public offering price of $18.00 per share) and each of the indices.
38
<PAGE>
[BAR CHART]
<TABLE>
<CAPTION>
- ---------------------------------------- ---------------- --------------- ------------ ------------- --------------------
Planet Russell 2000
Hollywood Nasdaq Standard & Russell Consumer
Class A Common Composite Poor's 500 2000 Discretionary and
Date Stock Index(a) Index (b) Index(c) Services Index(d)
======================================== ================ =============== ============ ============= ====================
<S> <C> <C> <C> <C> <C>
04/19/96 - IPO 100.00 100.00 100.00 100.00 100.00
- ---------------------------------------- ---------------- --------------- ------------ ------------- --------------------
12/29/96 115.80 113.84 116.81 107.61 100.53
- ---------------------------------------- ---------------- --------------- ------------ ------------- --------------------
12/28/97 69.79 132.40 145.62 127.35 119.14
- ---------------------------------------- ---------------- --------------- ------------ ------------- --------------------
12/27/98 14.53 192.56 190.56 124.65 131.72
- ---------------------------------------- ---------------- --------------- ------------ ------------- --------------------
12/26/99 0.48 353.37 226.62 148.28 153.20
- ---------------------------------------- ---------------- --------------- ------------ ------------- --------------------
</TABLE>
(a) The Nasdaq Composite Index is a broad-based capitalization-weighted
index of all Nasdaq stocks. This index is presented because the
Company's Class A Common Stock was traded on the Nasdaq National Market
from April 19, 1996 through Friday, September 19, 1997. Beginning
Monday, September 22, 1997, the Class A Common Stock was traded on the
New York Stock Exchange under the symbol "PHL." On August 20, 1999, the
New York Stock Exchange delisted the Company's Class A Common Stock
because of its anticipated reorganization. Since Monday, August 23,
1999, the Class A Common Stock has been traded on the over-the-counter
market on the Nasdaq Bulletin Board.
(b) The Standard & Poor's 500 Index is a capitalization-weighted index of
500 stocks designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The index was developed with a base level of 10
for the 1941-43 base period.
(c) The Russell 2000 Index is comprised of the smallest 2000 companies in
the Russell 3000 Index, representing approximately 11% of the Russell
3000 total market capitalization.
(d) The Russell 2000 Consumer Discretionary and Services Index is a
capitalization-weighted index of companies that manufacture products and
provide discretionary services directly to consumers.
39
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
the Company's Class A Common Stock on February 29, 2000, by:
1. Each current director;
2. Each of the Named Executive Officers (as defined above in
Item 11 "Executive Compensation");
3. Directors and executive officers of the Company as a group at
such date; and
4. Each person known by the Company to be the beneficial owner
of more than 5% of the outstanding shares of Class A Common
Stock on such date.
40
<PAGE>
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF BENEFICIAL PERCENT OF CLASS
BENEFICIAL OWNER OWNERSHIP OF CLASS A COMMON (%) (A)
STOCK (A)
<S> <C> <C>
Directors and Named Executive Officers
Thomas Avallone (b) (c) 68,010 **
William H. Baumhauer (c) (d) 0 **
Robert Earl (c) (e) 22,876,367 22.7
Claudio Gonzalez (f) 77,778 **
Scott E. Johnson (g) 125 **
John R. McCann (c) 7,611 **
Mark McCormack (h) 33,333 **
Ong Beng Seng / Leisure Ventures Pte, Ltd. (i) 12,050,335 12.0
James T. Stanley (c)(j) 54,400 **
Michael Tarnopol (k) 33,333 **
Directors and executive officers then holding office as a 35,222,191 34.9
group (11 persons) (l)
Other stockholders owning more than 5% N/A N/A
- ------------------------------------------------------------- ---------------------------------- -------------------
</TABLE>
** Represents holdings of less than one percent (1%).
- -----------------------------
(a) Figures do not include or account for 8,314,848 shares of non-voting
Class B Common Stock outstanding on February 29, 2000. Any Class B
shares beneficially owned by any of the listed stockholders are noted
in the respective footnotes. Of the 8,314,848 shares of non-voting
Class B Common Stock outstanding, approximately 2,323,555 were
immediately convertible into an equivalent number of shares of Class A
Common Stock at the election of the holder, with the remainder of such
shares being convertible at certain times subsequent to April 15, 2001.
Figures do include and account for certain options to acquire shares of
the voting Class A Common Stock which were exercisable by the listed
stockholders on or before May 31, 2000. Such options are noted in the
stockholders' respective footnotes.
(b) Of Mr. Avallone's 68,010 shares listed above, 2,011 represent shares
held of record by: (i) Mr. Avallone and his spouse; and (ii) by Mr.
Avallone as custodian for his child. The remaining 65,999 shares listed
represent shares underlying options to acquire such shares which are
exercisable on or before May 31, 2000.
(c) The address for each of these beneficial owners is c/o Planet Hollywood
International, Inc., 8669 Commodity Circle, Orlando, Florida 32819.
(d) Mr. Baumhauer was not employed by the Company at the end of fiscal
1999, however, based on his position as an executive officer of the
Company in fiscal 1999, Mr. Baumhauer is classified as a Named
Executive Officer in this Form 10-K.
(e) Other than 100 shares held individually, all of Mr. Earl's shares were
held of record by Ropat Limited Partnership, a Nevada limited
partnership, in which Ropat, Inc., a Nevada corporation wholly owned by
a Revocable Intervivos Trust for the benefit of Mr. Earl, is the 1%
general partner and such trust is the 99%
41
<PAGE>
limited partner. The number of shares listed above excludes: (1) 38,500
shares held by Shakespeare's Tavern & Playhouse (London) SARP, a United
Kingdom pension plan, and (2) 400,000 shares held by Celebrity
Consultants, Ltd, the trustee of a trust, the beneficiaries of which
are the children of Mr. Earl, as to which Mr. Earl disclaims beneficial
ownership. Ropat Limited Partnership also owned 1,053,793 shares of the
Company's non-registered, non-voting Class B Common Stock, representing
approximately 9.0% of such class. An additional 2,904,426 Class B
shares (34.9% of the class) were owned by Serena Holdings, Ltd., as
Trustee of the All Star Cafe Trust, the beneficiaries of which are Mr.
Earl's children. Mr. Earl disclaims beneficial ownership of the shares
held by Serena Holdings, Ltd. All of the shares held by Ropat Limited
Partnership were transferred to Bank of America, N.A. d/b/a NationsBank
N.A. in connection with an Agreement which was initiated prior to
February 29, 2000, but which was substantially completed in March 2000.
Ropat Limited Partnership had previously granted to NationsBank a
security interest in and lien on all of its shares which were accepted
in satisfaction of certain of the outstanding obligations of Ropat
Limited Partnership.
(f) Of the 77,778 shares listed above, 50,000 shares represent shares
underlying options to acquire such shares which are exercisable on or
before May 31, 2000. The address for Mr. Gonzalez is c/o Kimberly Clark
de Mexico, Jose Luis Lagrange, No. 103, 3rd Floor, Colonia, Los
Morales, 11510 Mexico, D.F.
(g) Mr. Johnson was not employed by the Company on February 29, 2000,
however, based on his position as an executive officer of the Company
in fiscal 1999, Mr. Johnson is classified as a Named Executive Officer
in this Form 10-K. The address for Mr. Johnson is c/o Moran & Shams,
P.A., 111 N. Orange Avenue, Suite 1200, Orlando, Florida 32801.
(h) All 33,333 shares listed above represent options to acquire such shares
which are exercisable on or before May 31, 2000. The address for Mr.
McCormack is c/o International Management Group, IMG Center, 1360 East
9th Street, Suite 100, Cleveland, Ohio 44114. Mr. McCormack, either
directly or indirectly, owns 679,022 shares of the Company's
non-registered, non-voting Class B Common Stock, representing
approximately 8.2% of such class.
(i) The shares listed for Mr. Ong are owned of record by Leisure Ventures
Pte., Ltd. ("LV"). The address for Mr. Ong is c/o Kuo Investments
Company, 767 Third Avenue, 33rd Floor, New York, N.Y. 10017. LV is a
private Singapore company that is controlled by Mr. Ong indirectly and
HPL, a public Singapore company of which Mr. Ong is the largest
stockholder. Mr. Ong disclaims beneficial ownership of the shares owned
of record by LV. The address for LV is c/o Kuo Investments Company, 767
Third Avenue, 33rd Floor, New York, N.Y. 10017.
(j) Of the 54,400 shares listed above, 44,233 shares represent shares
underlying options to acquire such shares which are exercisable on or
before May 31, 2000.
(k) All 33,333 shares listed above represent shares underlying options to
acquire such shares which are exercisable on or before May 31, 2000.
The address for Mr. Tarnopol is c/o Bear, Stearns & Co., Inc., 245 Park
Avenue, New York, NY 10167.
(l) Of the 35,222,191 shares listed above, 255,453 shares represent shares
underlying options to acquire such shares which are exercisable on or
before May 31, 2000.
As of the effective date of the Plan, all of the Company's outstanding
securities, instruments and agreements governing any claims and interests,
including the Class A Common Stock, options to acquire Class A Common Stock and
Class B Common Stock referenced above, will be deemed canceled and terminated,
and the obligations of the Company relating thereto shall be discharged in
accordance with the terms of the Plan. Pursuant to the Plan, holders of at least
5,450 shares of the Company's Class A Common stock will receive their pro rata
share of 200,000 new warrants to purchase shares of the Company's New Class A
Common Stock. Each warrant will be exercisable for the purchase of one share of
New Class A Common Stock at an exercise price of $65.50 per share and will
expire on the third anniversary of the effective date of the Plan.
42
<PAGE>
The following table sets forth information regarding the beneficial ownership of
the Company's New Common Stock as of the effective date of the Plan (based on
approximately 3,000,000 shares of New Class A Common Stock and 7,000,023 shares
of New Class B Common Stock outstanding) by:
1. Each director at such date;
2. Each of the Named Executive Officers for fiscal 1999 (as
defined above in Item 11 "Executive
Compensation");
3. Directors and executive officers of the Company as a group at
such date; and
4. Each person known by the Company to be the beneficial owner
of more than 5% of the outstanding shares of Common Stock on
such date.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF BENEFICIAL PERCENT OF COMMON
BENEFICIAL OWNER OWNERSHIP OF COMMON STOCK (A) STOCK (A)
<S> <C> <C> <C>
Directors and Named Executive Officers
Thomas Avallone (b) 0 **
William H. Baumhauer (b) (c) 0 **
Robert Earl (b)(j) 0 **
Claudio Gonzalez (d) Class B 233,334 2.3
Steven Grapstein (e) 0 **
Mustafa Al Hejailan (f) 0 **
Scott E. Johnson (g) 0 **
John R. McCann (b) 0 **
Ed Rogers (h) 0 **
James T. Stanley (b) 0 **
Douglas P. Teitelbaum (i) 0 **
Directors and executive officers then holding office as a Class B 233,334 2.3
group (12 persons)
Other stockholders owning more than 5% of Common Stock
Bay Harbour Management L.C. (j) Class A 1,309,017 13.1
Holst Trust (k) Class B 2,333,341 23.3
Leisure Ventures Pte, Ltd. (l) Class B 1,166,671 11.7
Kingdom Planet Hollywood, Ltd. (m) Class B 2,333,341 23.3
Magnetic Light Profits Limited (n) Class B 933,336 9.3
- ------------------------------------------------------------- ---------------------------------- -------------------
</TABLE>
** Represents holdings of less than one percent (1%).
- -----------------------------
(a) Figures account for both New Class A and Class B Common Stock
outstanding as of the effective date of the Plan. Figures also include
and account for any options or warrants to acquire shares of New Class
A
43
<PAGE>
or New Class B Common Stock which are exercisable by the listed
stockholders on or before May 31, 2000. Any such options or warrants
are noted in the stockholders' respective footnotes.
(b) The address for each of these beneficial owners is c/o Planet Hollywood
International, Inc., 8669 Commodity Circle, Orlando, Florida 32819.
(c) Mr. Baumhauer was not employed by the Company at the end of fiscal
1999, however, based on his position as an executive officer of the
Company in fiscal 1999, Mr. Baumhauer is classified as a Named
Executive Officer in this Form 10-K.
(d) In accordance with the terms of the Plan, of the 233,334 shares listed
above, 33,333 shares will be withheld by the Company in order to
deliver such shares to certain celebrities and other parties in
consideration for their involvement with the Company. The address for
Mr. Gonzalez is c/o Kimberly Clark de Mexico, Jose Luis Lagrange, No.
103, 3rd Floor, Colonia, Los Morales, 11510 Mexico, D.F.
(e) The address for Mr. Grapstein is c/o Kuo Investment Company, 55 5th
Avenue, 16th Floor, New York, New York, 10003.
(f) The address for Mr. Al-Hejailan is c/o Kingdom Holding Company, P.O.
Box 8653, Riyadh 11492, Kingdom of Saudi Arabia.
(g) Mr. Johnson is no longer employed by the Company, however, based on his
position as an executive officer of the Company in fiscal 1999, Mr.
Johnson is classified as a Named Executive Officer in this Form 10-K.
The address for Mr. Johnson is c/o Moran & Shams, P.A., 111 N. Orange
Avenue, Suite 1200, Orlando, Florida 32801.
(h) The address for Mr. Rogers is c/o Barbour Griffith & Rogers, 1275
Pennsylvania Avenue NW, 10th Floor, Washington, DC 20004.
(i) The address for Mr. Teitelbaum is c/o Bay Harbour Management L.C., 885
Third Avenue, 34th Floor, New York, New York 10022.
(j) The address for Bay Harbour Management, L.C. is 885 Third Avenue, 34th
Floor, New York, New York 10022.
(k) All shares listed above are held of record by Lauren Investments
Holdings Limited, as trustee of the Holst Trust U/A/D 9/10/99, the
beneficiaries of which are the children of Robert Earl. Mr. Earl
disclaims beneficial ownership of the shares held by Lauren Investments
Holdings Limited. In accordance with the terms of the Plan, of the
2,333,341 shares listed above, 333,333 shares will be withheld by the
Company in order to deliver such shares to certain celebrities and
other parties in consideration for their involvement with the Company.
The address for Lauren Investments Holdings Limited is International
Trust Building, Wickhams Cay, Road Town Tortola, British Virgin
Islands.
(l) Leisure Ventures Pte Ltd. ("LV") is a private Singapore company that is
controlled by Mr. Ong Beng Seng (a former director of the Company)
indirectly and HPL, a public Singapore company of which Mr. Ong is the
largest stockholder. Mr. Ong disclaims beneficial ownership of the
shares owned of record by LV. In accordance with the terms of the Plan,
of the 1,166,671 shares listed above, 166,667 shares will be withheld
by the Company in order to deliver such shares to certain celebrities
and other parties in consideration for their involvement with the
Company. The address for LV is 50 Cuscaden Road, #08-01 HPL House,
Singapore 249724.
(m) The address for Kingdom Planet Hollywood, Ltd., a company organized
under the laws of the Cayman Islands ("KPH"), is c/o Kingdom Holding
Company, P.O. Box 8653, Riyadh 11492, Kingdom of Saudi Arabia. KPH is
indirectly controlled by His Royal Highness Prince Alwaleed Bin Talal
Bin Abdulaziz Al Saud, a citizen of the Kingdom of Saudi Arabia. In
accordance with the terms of the Plan, of the 2,333,341 shares listed
above, 333,333 shares will be withheld by the Company in order to
deliver such shares to certain celebrities and other parties in
consideration for their involvement with the Company.
(n) The address for Magnetic Light Profits Limited, a company organized
under the laws of the British Virgin Islands is PO Box 957, Offshore
Incorporation Centre, Road Town, Tortola, British Virgin Islands. In
accordance with the terms of the Plan, of the 933,336 shares listed
above, 133,333 shares will be withheld by the Company in order to
deliver such shares to certain celebrities and other parties in
consideration for their involvement with the Company.
44
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is party to a license agreement with Planet Hollywood (Asia) Pte.
Ltd. ("PH Asia") (a Singapore corporation which is 50% owned by each of the
Company and Leisure Ventures Pte. Ltd., a Singapore corporation 50% owned by
each of the Company's former director Mr. Ong and Hotel Properties Limited, a
Singapore public company of which Mr. Ong is the largest stockholder). Pursuant
to the license agreement, as amended (the "License Agreement"), PH Asia has the
rights to license and develop PLANET HOLLYWOOD units throughout most of Asia and
certain other countries throughout the world and to receive franchise fees and
continuing royalties in respect to the operation of any such units. During
fiscal 1999, PH Asia did not open any units. From time to time Leisure Ventures
Pte. Ltd. or its affiliates purchase merchandise from the Company. No such
purchases were made in fiscal 1999. See Note 6 to the Consolidated Financial
Statements contained herein. In February 2000, PH Asia entered into a binding
letter agreement pursuant to which Star Performance Development Limited, an
affiliate of Magnetic Light Profits Limited, one of the proposed purchasers of
the New Class B Common Stock under the Plan, agreed to purchase one third of PH
Asia's outstanding stock for approximately $4.0 million. It is anticipated that
this transaction will be completed in April, 2000.
The Company is party to a master franchise agreement with ECE, S.A. de C.V., a
publicly-traded Mexican company ("ECE") in which the Company is a 20%
stockholder. Mr. Claudio Gonzalez (a director of the Company) is one of ECE's
principal stockholders and the Chairman of its Board of Directors. ECE is
currently operating, and has rights to open, PLANET HOLLYWOOD and OFFICIAL ALL
STAR CAFE units in certain international markets, including Mexico and South
America. ECE is obligated to pay continuing royalties to the Company pursuant to
such agreement, based on a percentage of the total revenues from its units.
During fiscal 1999 ECE did not open any units. From time to time ECE or its
affiliates purchase merchandise from the Company. No such purchases were made in
fiscal 1999. See Notes 6 and 13 to the Consolidated Financial Statements
contained herein.
The Company is party to master franchise agreements with Kingdom Planet
Hollywood, Ltd. ("Kingdom"), an affiliate of HRH Prince Alwaleed Bin Talal
Abdulaziz Al Saud of Saudi Arabia and a significant stockholder of the Company,
pursuant to which Kingdom may develop numerous PLANET HOLLYWOOD, OFFICIAL ALL
STAR CAFE AND SOUND REPUBLIC units in a total of 23 countries throughout the
Middle East and Europe. Kingdom is obligated to pay continuing royalties to the
Company pursuant to such agreements, based on a percentage of the total revenues
from its units. From time to time Kingdom or its affiliates purchase merchandise
from the Company. No such purchases were made in fiscal 1999. See Note 13 to the
Consolidated Financial Statements contained herein.
45
<PAGE>
PART IV
- ---------
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(A) 1. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants
Consolidated Balance Sheets at December 27, 1998 and December 26, 1999
Consolidated Statements of Operations for the three years ended
December 26, 1999
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
and Comprehensive Income for the three years ended December 26,
1999
Consolidated Statements of Cash Flows for the three years ended
December 26, 1999
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
For the three years ended December 26, 1999 II -
Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
Financial statements of a 50% owned company have been omitted because
the registrant's proportionate share of the income from continuing
operations before income taxes is less than 20% of the respective
consolidated amount, and the investment in and advances to the company
is less than 20% of consolidated total assets.
3. EXHIBITS
Exhibit
Number Description
--------------------
2.1(1) Debtors' First Amended Joint Plan of Reorganization
dated December 13, 1999
2.2(1) First Amended Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code for the First
Amended Joint Plan of Reorganization dated December
13, 1999 of Planet Hollywood International, Inc. and
Certain of its Subsidiaries
2.3(1) Order confirming the Company's First Amended Joint
Plan of Reorganization dated January 21, 2000
3.1(2) Restated Certificate of Incorporation of the
Registrant
3.2(3) Third Amended and Restated Bylaws of the Registrant
4.6(4) Indenture dated as of March 25, 1998, between the
Company and United States Trust Company of New York,
as Trustee, relating to the Company's 12% Senior
Subordinated Notes due 2005
4.7(4) Initial Global Notes, dated March 25, 1998
10.1(2) Form of Master Franchise Agreement
10.2(2) Form of Memorabilia Lease
10.3(2) Form of License Agreement
46
<PAGE>
10.5(2) Ground Lease Agreement between Lake Buena Vista
Communications, Inc. And Planet Hollywood (Orlando),
Inc.
10.6(2) License Agreement dated as of December 4, 1992, by
and between the Registrant and Planet Hollywood
(Asia) Pte. Ltd.
10.7(2) First Amendment to the License Agreement dated as of
July 1, 1995, by and between the Registrant and
Planet Hollywood (Asia) Pte. Ltd.
10.7A(4) Second Amendment to the License Agreement, dated as
of October 1, 1995, by and between the Registrant and
Planet Hollywood (Asia) Pte. Ltd.
10.7B(4) Third Amendment to the License Agreement, dated as of
November 6, 1997, by and between the Registrant and
Planet Hollywood (Asia) Pte. Ltd.
10.8(2) Form of Master Franchise Agreement for All Star Cafe,
Inc.
10.12(5) First Amended and Restated 1995 Celebrity Stock Award
and Incentive Plan
10.13(6) First Amended and Restated 1995 Stock Award and
Incentive Plan
10.14(2) Form of Stock Option Award Agreement for options
granted under the 1995 Celebrity Stock Award and
Incentive Plan
10.15(2) Form of Stock Option Award Agreement for options
granted under the 1995 Stock Award and Incentive Plan
10.16(2) Employment Agreement dated August 8, 1995, between
the Registrant and Robert Earl
10.19(7) Limited Partnership Agreement of Planet Movies
Company, L.P., dated October 17, 1997
10.20(7) Master Agreement, dated as of December 2, 1997,
relating to the Planet Hollywood Hotel joint venture
between Planet Hospitality Holdings, Inc., Times
Square Partners LLC and others
10.21(8) Registration Rights Agreement dated as of October 30,
1998, by and between the Registrant, Leisure Ventures
Pte. Ltd. and Kingdom Planet Hollywood, Ltd.
10.22(9) Letter Agreement, including annexes thereto (which
include the form of the Registration Rights
Agreement), between the Registrant and Keith Barish,
regarding Mr. Barish's resignation as Chairman of the
Board of Directors, as amended on December 14, 1998
10.23(10) Amendments to the Letter Agreement between the
Registrant and Mr. Barish, dated as of January 19,
1999
10.24(11) Amendment to the Registration Rights Agreement dated
November 6, 1998, as amended January 19, 1999 and
February 23, 1999 between the Registrant and Mr.
Barish
10.25(12) Amendment to the Lock-up Letter dated November 6,
1998, as amended December 14, 1998, January 19, 1999
and February 23, 1999 between the Registrant and Mr.
Barish
21.1(13) Subsidiaries
23.1 (13) Consent of PricewaterhouseCoopers LLP
24.1(13) Powers of Attorney (included in signature page)
27.1(13) Financial Data Schedule
- ----------
(1) Incorporated by reference to the exhibits in the Current Report on
Form 8-K dated January 21, 2000, previously filed by the Registrant
on February 4, 2000.
(2) Incorporated by reference to the exhibits with the corresponding
exhibit numbers in the Registration Statement on Form S-1, as
amended, previously filed by the Registrant (file no. 333-01490)
(3) Incorporated by reference to the exhibits with the corresponding
exhibit numbers in the Registration Statement on Form S-3, as
amended, previously filed by the Registrant (file no. 333-67101)
(4) Incorporated by reference to the exhibits with the corresponding
exhibit numbers in the Registration Statement on Form S-4, as
amended, previously filed by the Registrant (file no. 333-51655)
47
<PAGE>
(5) Incorporated by reference to Exhibit 99.1 in the Registration
Statement on Form S-8, as amended, previously filed by the
Registrant (file no. 333-31683)
(6) Incorporated by reference to Exhibit 99.1 in the Registration
Statement on Form S-8, as amended, previously filed by the
Registrant (file no. 333-66659)
(7) Incorporated by reference to the exhibits with the corresponding
exhibit numbers in the Annual Report on Form 10-K for the year
ended December 28, 1997, as amended, previously filed by the
Registrant
(8) Incorporated by reference to Exhibit 10.2 in the Registration
Statement on Form S-3, as amended, previously filed by the
Registrant (file no. 333-67101)
(9) Incorporated by reference to Exhibit 10.1 in the Registration
Statement on Form S-3, as amended, previously filed by the
Registrant (file no. 333-67467)
(10) Incorporated by reference to Exhibit 10.2 in the Registration
Statement on Form S-3, as amended, previously filed by the
Registrant (file no. 333-67467)
(11) Incorporated by reference to Exhibit 99.1 in the Current Report
on Form 8-K dated February 23, 1999, previously filed by the
Registrant on February 23, 1999
(12) Incorporated by reference to Exhibit 99.2 in the Current Report
on Form 8-K dated February 23, 1999, previously filed by the
Registrant on February 23, 1999
(13) Filed herewith
(B) REPORTS ON FORM 8-K.
The Company filed the following Current Reports on Form 8-K
during the fourth quarter of fiscal 1999:
Regarding (see actual
Date of Filing filing for complete
Report Date description)
------ ---- ---------
10/4/99 10/19/99 Announcement of the
Company and twenty five of
its operating subsidiaries
filing voluntary petitions
commencing cases under
Chapter 11 of the United
States Bankruptcy Code with
the United States Bankruptcy
Court for the district of
Delaware on October 12,
1999.
11/8/99 11/15/99 Announcement of the
Company's filing a Joint
Plan of Reorganization, a
proposed Disclosure
Statement and certain other
related documents with the
Bankruptcy Court.
48
<PAGE>
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 on the 11th day of
April, 2000.
PLANET HOLLYWOOD INTERNATIONAL, INC.
By: /s/ ROBERT I. EARL
------------------------------------
Robert I. Earl
Chairman and Chief Executive Officer
By: /s/ THOMAS AVALLONE
------------------------------------
Thomas Avallone
Executive Vice President, Chief
Financial Officer and Chief
Accounting Officer
49
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears on the following page constitutes and appoints Robert I. Earl, Thomas
Avallone and/or Mark Helm to sign any amendments to this Report on Form 10-K,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that the said attorney-in-fact, or his substitute or substitutes,
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 11th day of April, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ THOMAS AVALLONE /s/ ROBERT I. EARL
-------------------------------------------------- --------------------------------------------------
Thomas Avallone Robert I. Earl
EXECUTIVE VICE PRESIDENT CHAIRMAN OF THE BOARD OF DIRECTORS
CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER
DIRECTOR DIRECTOR
/s/ CLAUDIO GONZALEZ
-------------------------------------------------- --------------------------------------------------
Claudio Gonzalez Mark McCormack
DIRECTOR DIRECTOR
/s/ MICHAEL L. TARNOPOL
-------------------------------------------------- --------------------------------------------------
Ong Beng Seng Michael L. Tarnopol
DIRECTOR DIRECTOR
</TABLE>
50
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
- ----------------------------------------------------
Index: Page
- ------ ----
FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants..........................F-2
Consolidated Balance Sheets at December 27, 1998 and December 26, 1999......F-3
Consolidated Statements of Operations for the three years ended
December 26, 1999........................................................F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) and
Comprehensive Income for the three years ended December 26, 1999.........F-5
Consolidated Statements of Cash Flows for the three years ended
December 26, 1999........................................................F-6
Notes to Consolidated Financial Statements..........................F-7 to F-32
FINANCIAL STATEMENT SCHEDULES
For the three years ended December 26, 1999
II - Valuation and Qualifying Accounts
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Planet Hollywood International, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Planet
Hollywood International, Inc. and its subsidiaries at December 27, 1998 and
December 26, 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 26, 1999 in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining on a test basis evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, on October 12, 1999, the Company and
substantially all of its domestic subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code. The
Company's continuing status under Chapter 11 and the absence of an effective
plan of reorganization raises substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
PRICEWATERHOUSECOOPERS LLP
April 3, 2000
Orlando, Florida
F-2
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 26,
1998 1999
ASSETS ------------ ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents.............................................. $ 45,426 $ 14,143
Accounts receivable, net of allowance of $2,122 and $3,760............. 16,740 4,883
Income taxes receivable................................................ 12,308 --
Inventories............................................................ 19,186 13,846
Prepaid expenses and other assets...................................... 6,271 7,642
Assets held for sale................................................... -- 30,000
--------- ------
Total current assets.............................................. 99,931 70,514
Restricted cash and cash equivalents....................................... 16,265 5,403
Property and equipment, net................................................ 281,115 129,639
Goodwill, net.............................................................. 27,057 13,427
Other assets, net.......................................................... 16,417 4,290
Investment in affiliated entities.......................................... 31,842 11,668
--------- ---------
Total assets...................................................... $ 472,627 $ 234,941
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities not subject to compromise:
Accounts payable....................................................... $ 35,111 $ 7,415
Accrued liabilities.................................................... 29,672 21,107
Notes payable - current................................................ 25,326 214
---------- ----------
Total current liabilities not subject to compromise............... 90,109 28,736
Deferred rentals........................................................... 11,618 7,059
Notes payable.............................................................. 254,420 1,648
Capital lease obligation................................................... 3,815 --
Deferred credits........................................................... 6,350 4,660
--------- ---------
Total liabilities not subject to compromise....................... 366,312 42,103
Liabilities subject to compromise (Note 4)................................. -- 304,671
Commitments and contingencies (Note 12)....................................
Minority interest.......................................................... -- 3,212
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 25,000,000 shares
authorized; none issued; preferences, limitations and
rights to be established by the Board of Directors.................. -- --
Common stock - Class A voting, $.01 par value,
250,000,000 shares authorized; 97,325,796 and 100,775,096
issued and outstanding............................................. 974 1,008
Common stock - Class B non-voting, $.01 par value,
25,000,000 shares authorized; 11,764,144 and 8,314,848 issued
and outstanding.................................................... 118 84
Capital in excess of par value......................................... 285,667 286,886
Deferred compensation.................................................. (225) --
Accumulated deficit.................................................... (177,288) (398,358)
Cumulative currency translation adjustments............................ (2,931) (4,665)
---------- -----------
Total stockholders' equity (deficit).............................. 106,315 (115,045)
--------- ---------
Total liabilities and stockholders' equity (deficit).............. $ 472,627 $ 234,941
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(SHARES AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Direct.................................................... $447,310 $367,296 $272,232
Franchise................................................. 16,100 11,600 500
Royalty and other......................................... 11,715 8,078 8,237
-------- ------- ---------
475,125 386,974 280,969
-------- ------- ---------
COST AND EXPENSES:
Cost of sales............................................. 119,449 110,874 76,564
Operating expenses........................................ 208,484 237,930 212,822
General and administrative expenses....................... 54,683 64,548 44,465
Preopening costs.......................................... 18,868 10,384 1,842
Depreciation and amortization............................. 19,957 25,024 19,104
Restructuring and reorganization charges.................. -- 6,925 16,029
Accelerated compensation expense.......................... -- 6,191 --
Impairments of long lived assets.......................... 48,699 125,843 104,684
-------- ------- -------
470,140 587,719 475,510
-------- ------- ---------
Income (loss) from operations................................. 4,985 (200,745) (194,541)
-------- ------- ---------
NON-OPERATING EXPENSE (INCOME):
Interest expense.......................................... -- 25,822 27,628
Interest income before reorganization..................... (1,327) (4,847) (1,499)
Equity in (income) loss of unconsolidated affiliates...... (6,900) 11,022 1,370
Net loss on disposals of assets........................... -- -- 918
-------- ------- ---------
(8,227) 31,997 28,417
-------- ------- ---------
Income (loss) before minority interests....................... 13,212 (232,742) (222,958)
Minority interests............................................ -- -- 1,888
-------- ------- ---------
Income (loss) before provision for income taxes............... 13,212 (232,742) (221,070)
Provision for income taxes.................................... 4,954 5,206 --
-------- ------- ---------
Income (loss) before cumulative effect of change in
accounting principle....................................... 8,258 (237,948) (221,070)
Cumulative effect of change in accounting for preopening
costs (net of income taxes of $3,590)..................... -- 5,984 --
-------- ------- ---------
Net income (loss)............................................. $ 8,258 $(243,932) $(221,070)
======== ========== ==========
EARNINGS PER SHARE:
BASIC AND DILUTED:
Income (loss) before accounting change................. $ .08 $ (2.18) $ (2.03)
Cumulative effect of accounting change................. -- (.06) --
-------- ---------- ----------
Net income (loss)...................................... $ .08 $ (2.24) $ (2.03)
======== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC..................................................... 108,465 109,073 109,091
======= ======= =======
DILUTED................................................... 109,761 109,073 109,091
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
Common Common
Stock Stock
Class A Class B Capital in Compre- Accum-
--------------- --------------- Excess of hensive ulated Deferred
Shares Amount Shares Amount Par Value Income Deficit Compensation
------ ------ ------ ------ --------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996......... 95,973 $960 11,547 $115 $252,695 $58,386 $(525)
Net income................... $8,258 8,258
Other comprehensive income:
Currency translation
adjustment.............. (4,940)
-------
Comprehensive income......... $3,318
======
Celebrity restricted stock
options and awards........ 218 3 5,959 (3,800)
Proceeds from sale of stock.. 1,087 11 19,555
Exercise of stock options.... 108 1 1,163
Employee restricted stock
awards.................... 200
Retirement of employee
restricted stock.......... (40)
------ ---- ---- ---- ----- ----- ---- -----
Balance at
December 28, 1997......... 97,128 972 11,765 118 279,372 66,644 (4,125)
Net loss..................... $(243,932) (243,932)
Other comprehensive income:
Currency translation
adjustment.............. 1,509
----------
Comprehensive income (loss).. $(242,423)
==========
Stock issuance............... 190 2 1,198
Celebrity restricted stock
options and awards........ 5,036 3,700
Exercise of stock options.... 8 61
Employee restricted stock
awards.................... 200
------ ---- ---- ---- ----- ----- ---- -----
Balance at
December 27, 1998......... 97,326 974 11,765 118 285,667 (177,288) (225)
Net loss..................... $(221,070) (221,070)
Other comprehensive income:
Currency translation
adjustment.............. (1,734)
----------
Comprehensive income (loss).. $(222,804)
==========
Conversion of Class B shares
to Class A shares......... 3,449 34 (3,449) (34)
Celebrity restricted stock
options and awards........ 1,219
Employee restricted
stock awards.............. 225
------- ------ ----- --- -------- --------- ------
Balance at
December 26, 1999......... 100,775 $1,008 8,316 $84 $286,886 $(398,358) $ --
======= ====== ===== === ======== ========= ======
<CAPTION>
Cumulative
Currency Total
Translation Stockholders'
Adjustment Equity(Deficit)
---------- ---------------
<S> <C> <C>
Balance at
December 31, 1996......... $500 $312,131
Net income................... 8,258
Other comprehensive income:
Currency translation
adjustment.............. (4,940) (4,940)
Comprehensive income.........
Celebrity restricted stock
options and awards........ 2,162
Proceeds from sale of stock.. 19,566
Exercise of stock options.... 1,164
Employee restricted stock
awards.................... 200
Retirement of employee
restricted stock..........
----- -----
Balance at
December 28, 1997......... (4,440) 338,541
Net loss..................... (243,932)
Other comprehensive income:
Currency translation
adjustment.............. 1,509 1,509
Comprehensive income (loss)..
Stock issuance............... 1,200
Celebrity restricted stock
options and awards........ 8,736
Exercise of stock options.... 61
Employee restricted stock
awards.................... 200
----- -----
Balance at
December 27, 1998......... (2,931) 106,315
Net loss..................... (221,070)
Other comprehensive income:
Currency translation
adjustment.............. (1,734) (1,734)
Comprehensive income (loss)..
Conversion of Class B shares
to Class A shares.........
Celebrity restricted stock
options and awards........ 1,219
Employee restricted
stock awards.............. 225
-------
Balance at
December 26, 1999......... $(4,665) $(115,045)
======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss)...................................................... $ 8,258 $(243,932) $(221,070)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation......................................................... 18,173 22,129 15,792
Amortization......................................................... 20,652 2,895 2,104
Impairments of long lived assets..................................... 48,699 125,843 104,684
Cumulative effect of change in accounting principle.................. -- 5,984 --
Amortization of discount on senior subordinated notes, debt
issue costs and line of credit costs.............................. -- 3,954 1,208
Loss on disposals of assets.......................................... -- -- 918
Amortization of celebrity and employee restricted stock
options and awards................................................ 2,864 8,736 1,444
Minority interests................................................... -- -- (1,888)
Equity in (income) loss of unconsolidated affiliates................. (6,900) 11,022 1,370
Changes in assets and liabilities:
Accounts receivable................................................ (4,959) 9,015 9,881
Income taxes receivable............................................ -- (12,308) 12,308
Inventories........................................................ (22,008) 23,426 5,087
Prepaid expenses and other assets.................................. (3,604) 811 (2,358)
Preopening costs................................................... (19,869) -- --
Deferred income taxes.............................................. (10,125) 20,032 --
Accounts payable and accrued expenses.............................. 4,780 (3,558) 31,327
Deferred rentals................................................... 469 820 (511)
Deferred credits................................................... (1,950) (8,800) (1,690)
Other, net......................................................... (3,207) (4,079) (2,085)
--------- ---------- ---------
Net cash provided by (used in) operating activities.............. 31,273 (38,010) (43,479)
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment.................................. (120,033) (105,819) (22,151)
Proceeds from sale of subsidiary interests........................... -- 2,250 19,404
Purchase of restaurants from franchisees............................. (8,083) (2,521) --
Investment in affiliated entities.................................... (22,721) (2,749) --
Proceeds from sales of assets........................................ -- -- 23,789
Other................................................................ (1,115) (1,240) --
----------- ----------- ----------
Net cash provided by (used in) investing activities.............. (151,952) (110,079) 21,042
----------- --------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in restricted cash and investments............................. -- (16,265) 10,862
Proceeds from issuance of senior subordinated notes................... -- 250,000 --
Proceeds from issuance of common stock................................ 19,137 -- --
Proceeds from exercise of options..................................... 891 61 --
Minority interest contribution........................................ -- -- 5,100
Proceeds from issuance of notes payable............................... 63,028 34,809 1,070
Deferred financing costs.............................................. (1,020) (11,163) --
Repayments of notes payable........................................... (883) (73,003) (25,813)
--------- -------- --------
Net cash provided by (used in) financing activities.............. 81,153 184,439 (8,781)
------ ------- -------
EFFECT OF EXCHANGE RATES ON CASH.......................................... (1,216) (13) (65)
------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................................................... (40,742) 36,337 (31,283)
CASH AND CASH EQUIVALENTS AT BEGINNING PERIOD............................. 49,831 9,089 45,426
------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................ $ 9,089 $45,426 $14,143
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Planet
Hollywood International, Inc. and its wholly and majority owned
subsidiaries (collectively, the "Company"). All material intercompany
transactions and accounts have been eliminated in consolidation. The
Company has filed for reorganization under Chapter 11 of the United
States Bankruptcy Code (see Note 2).
The Company has interests in various entities which are not majority
owned or controlled. The Company uses the equity method to account for
these interests (see Note 6).
The Company's fiscal year is the 52 or 53 weeks ending the Sunday
closest to December 31. The fiscal years ended December 28, 1997 ,
December 27, 1998 and December 26, 1999 are herein referred to as
"fiscal 1997", "fiscal 1998" and "fiscal 1999", respectively. All years
presented herein are 52 week years.
DESCRIPTION OF BUSINESS
The Company's primary business is to operate distinctive
entertainment-oriented restaurants along with merchandise shops. The
Company currently operates under the PLANET HOLLYWOOD, OFFICIAL ALL
STAR CAFE, and COOL PLANET brands. Direct revenues in the accompanying
financial statements include sales of food, beverage and merchandise.
In July 1997, the Company entered into a venture with AMC
Entertainment, Inc. to develop, own and operate "Planet Movies By AMC",
an integrated moviegoing dining and retail concept. The Company funded
approximately $5,700 in fiscal 1999 towards the construction of the
"Planet Movies by AMC" complex in Columbus, Ohio, which opened in July,
1999. The Company owns 51% of the Ohio unit and, therefore, has
consolidated its operations for fiscal 1999. The Company has no
definitive plan for future development under this venture arrangement.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as highly liquid investments with
original maturities of three months or less and consist of amounts held
as bank deposits, certificates of deposit and commercial paper. At
December 26, 1999, the Company had $3,200 of cash restricted as to use
as collateral for letters of credit and $2,200 of cash escrowed for
bank guarantees. At December 27, 1998, the Company had $9,200 of cash
restricted as to use as collateral for letters of credit and $7,000 of
cash escrowed for the construction of the Company's New York Hotel
project.
INVENTORIES
Inventories, consisting primarily of merchandise, are valued at the
lower of cost (determined by the weighted average method) or market.
F-7
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
PREOPENING COSTS
The Company adopted statement of position (SOP) 98-5, "REPORTING ON THE
COSTS OF START-UP ACTIVITIES," in 1998. SOP 98-5 requires expensing as
incurred all pre-opening costs that are not otherwise capitalizable as
long-lived assets. As a result of the Company's adoption of SOP 98-5,
the Company recognized a $6,000 charge for the cumulative effect of the
change in accounting principle, net of related income tax effect of
$3,600. The Company previously capitalized unit pre-opening expenses
and amortized such amounts over the units' first year of operation.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is provided for by using the straight-line
method over the following useful lives:
YEARS
-----
Furniture and equipment 5-10
Memorabilia 20
Leasehold improvements 5-30
Expenditures for additions and improvements which extend the life of
the assets are capitalized. Expenditures for normal repairs and
maintenance are charged to expense as incurred.
GOODWILL
The excess of purchase price over the fair value of net tangible assets
acquired is amortized on a straight-line basis over 20 years.
Accumulated amortization of goodwill at December 27, 1998 and December
26, 1999 was $4,100 and $3,000, respectively.
IMPAIRMENT OF LONG LIVED ASSETS
In the event that facts and circumstances indicate the carrying value
of a long lived asset may be impaired, an evaluation of recoverability
is performed by comparing the future undiscounted cash flows associated
with the asset to the asset's carrying value to determine if a
write-down to market value is required (see Note 3).
DEBT ISSUANCE COSTS
Costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective interest method over the term of
the related debt.
REVENUE RECOGNITION
Food, beverage and merchandise revenues are recognized as the products
are sold to customers. Revenues from the sale of franchises are
deferred until the Company fulfills its obligations under the franchise
agreement, which is generally upon the opening of a franchise
restaurant or merchandise shop. The franchise agreements provide for
continuing royalty fees based on a percentage of gross receipts.
F-8
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
ADVERTISING AND PROMOTIONAL COSTS
All costs associated with advertising and promoting the Company's
brands are expensed in the period incurred. Advertising expense for
fiscal 1997, 1998 and 1999 totaled $6,300, $7,500 and $4,000,
respectively.
INCOME TAXES
Deferred taxes are provided for the tax effects of the differences
between the carrying value of assets and liabilities for tax and
financial reporting purposes. These differences relate primarily to
differences in depreciable lives and amortization periods for property
and equipment, deferred rentals, the timing of franchise revenue
recognition, net operating losses, certain accrued expenses and
reserves. Deferred tax assets and liabilities represent the future tax
consequence of those differences. Deferred tax assets are reduced by a
valuation allowance if it is more likely than not that some portion or
all of the deferred tax asset will not be realized.
No provision is made for United States income taxes applicable to
undistributed earnings of foreign subsidiaries or affiliates that are
indefinitely reinvested in the foreign operations.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into United
States dollars at the year-end rate of exchange. Revenue and expense
accounts are translated at the average rate of exchange. Resulting
translation adjustments are included in the caption "cumulative
currency translation adjustments" as a separate component of
stockholders' equity. Gains and losses from foreign currency
transactions are included in the consolidated statements of operations.
STOCK-BASED COMPENSATION
The Company accounts for compensation costs related to employee stock
options and other forms of employee stock-based compensation plans in
accordance with the requirements of Accounting Principles Board Opinion
25 ("APB 25"). APB 25 requires compensation costs for stock-based
compensation plans to be recognized based on the difference, if any,
between the fair market value of the stock on the date of grant and the
option exercise price. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123
established a fair value-based method of accounting for compensation
costs related to stock options and other forms of stock-based
compensation plans. However, SFAS 123 allows an entity to continue to
measure compensation costs using the principles of APB 25 if certain
pro forma disclosures are made. The Company adopted the provisions for
pro forma disclosure requirements of SFAS 123 in fiscal 1996. Options
granted to non-employees are recorded at their estimated fair value at
the date of grant and the expense recognized over the periods
benefited, generally 5 years.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding plus common stock
equivalents for each period.
F-9
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Common stock equivalents include 1,340 common shares from stock options
and awards for fiscal 1997. Options to purchase 3 million shares of
common stock were not included as common stock equivalents in fiscal
1997 because the option exercise price was greater than the average
market price of the stock. Common stock equivalents have not been
included in fiscal 1998 and 1999 per share calculations since the
effect would be antidilutive.
LEASES
The Company has various non-cancelable operating lease agreements,
primarily unit sites. Unit leases are established using a base amount
and/or a percentage of sales. Certain of these leases provide for
escalating lease payments over the terms of the leases. For financial
statement purposes, the total amount of base rentals over the terms of
the leases is charged to expense on the straight-line method over the
lease terms. Rental expense in excess of lease payments is recorded as
a deferred rental liability.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, cash equivalents, receivables and accounts
payable not subject to compromise approximate the fair value because of
the short maturity of these instruments. The carrying value of notes
payable not subject to compromise approximate fair value as interest
rates vary with market interest rates. See Note 2 regarding the
estimated fair value of liabilities subject to compromise.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Estimates are used in the
determination of allowances for doubtful accounts, impairment of
long-lived assets, depreciation and amortization, and taxes, among
others. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years'
consolidated financial statements to conform with the fiscal 1999
presentation.
2. GOING CONCERN
The Company incurred significant losses in fiscal 1998 and fiscal 1999
and the Company's revolving credit facility was terminated in December
1998. Further, the Company is in default of the payment terms of its
$250 million 12% senior subordinated notes payable for failing to make
scheduled interest payments due on April 1, 1999 and October 1, 1999.
On October 12, 1999 (the "Petition Date"), the Company and twenty-five
of its domestic operating subsidiaries (the "Debtors") filed voluntary
petitions commencing cases under Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). An Official Committee of
Unsecured Creditors (the "Committee"), which represents the interests
of all unsecured creditors of the Debtors, was appointed in the Chapter
11 cases.
F-10
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
In a Chapter 11 filing, substantially all liabilities as of the
Petition Date are subject to compromise or other treatment under a plan
of reorganization. Generally, actions to enforce or otherwise effect
payment of all pre-Chapter 11 liabilities are stayed while the Company
and its subsidiaries continue their business operations as
debtors-in-possession. The Debtors' Chapter 11 cases resulted from a
sequence of events stemming primarily from significant operating losses
experienced in fiscal 1998 and fiscal 1999. These losses were primarily
due to declines in same unit revenues, overall disappointing fiscal
operating results, expenses due to the development of the now
discontinued SOUND REPUBLIC concept, and losses from major concepts
such as OFFICIAL ALL STAR CAFE and COOL PLANET.
The Company attributes the decrease in revenues primarily to a decline
in customer traffic resulting from increased competition in the theme
dining industry and tourism in several retail markets. There has
likewise been a decline of significant promotional and specialty retail
sales by the Company. The restaurant and retail merchandising industry
has been and continues to be affected by (a) intense competition; (b)
changes in consumer tastes; (c) international, national, regional and
local economic conditions; and (d) patterns in tourist travel, among
other factors.
On November 8, 1999, the Debtors filed their Chapter 11 Plan of
Reorganization and Disclosure Statement with the Bankruptcy Court.
Prior to the Petition Date, the Company had negotiated an agreement in
principle with an unofficial creditors' committee representing over
two-thirds of the holders of its $250,000 12% senior subordinated notes
payable. On December 13, 1999, the First Amended Disclosure Statement
and the First Amended Joint Plan of Reorganization as of December 13,
1999 was filed with the Bankruptcy Court. The amended plan, as modified
by the Bankruptcy Court (the "Plan"), was confirmed by the Bankruptcy
Court on January 21, 2000, but is not yet effective. The Plan provides
that as a condition to the occurrence of the effective date of the
Plan, certain actions and agreements necessary to implement the
provisions of the Plan must have been effected, executed or duly
provided for in a manner reasonably satisfactory to the Debtors and the
Creditors' Committee. The Company has been negotiating the terms and
provisions of several agreements required under the Plan. While the
Company currently believes that such agreements are substantially in
final form and that the effective date of the Plan will occur shortly,
there can be no assurance that the Conditions to the occurrence of the
effective date of the Plan will be satisfied or waived, or as to the
timing thereof.
The Plan proposes the satisfaction of the Company's $250,000 12% senior
subordinated notes payable (the "Old Notes") plus accrued interest of
$32,000 through the issuance of a combination of $47,500 in cash,
$60,000 of new secured notes payable (the "PIK Notes"), and shares of
newly issued Class A Common Stock ("New Class A Common Stock")
equivalent to a 26.5% ownership of the reorganized Company. Other
general and unsecured creditors whose claims are deemed impaired by the
Plan receive a combination of cash and PIK Notes with an aggregate
value approximately equal to that received by the holders of the Old
Notes. The Plan also contemplates a $30,000 infusion of new equity by a
group of investors organized by the Company's Chairman and Chief
Executive Officer in exchange for approximately 70% of the equity of
the reorganized Company in the form of Class B common stock ("New Class
B Common Stock"), a debt facility in the form of newly issued Senior
Secured Subordinated Notes (the "Notes") totaling $22,000, and up to a
$15,000 secured working capital facility. The remaining 3.5% of the
equity of the reorganized Company will be reserved for issuance to
holders of the Notes as a loan commitment fee.
The Plan also calls for the cancellation of all existing common stock
interests and options to acquire such interests and all other equity
securities in exchange for 200,000 newly issued warrants in the
reorganized
F-11
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Company to be provided to holders of existing common stock, provided
that no distribution will be made to a holder of less than 5,450
shares. Each warrant will entitle the holder to purchase one share of
the New Class A Common Stock at a price of $65.50 per share,
exercisable within three years.
For tax purposes, the discharge of the liabilities pursuant to a
Chapter 11 proceeding will result in income that is excluded from the
Company's taxable income. However, certain of the Company's tax
attributes, including net operating loss carryforwards and tax credits,
must be reduced by the amount of cancellation of debt income. To the
extent the amount excluded exceeds these tax attributes, the tax basis
in the Company's property must be reduced by the amount of the excluded
cancellation of debt income. It is estimated that after the
reorganization, the Company will have approximately $100 million in net
operating loss carryovers and $12 million of credit carryovers.
In the event of the reorganization, it is anticipated that the Company
will undergo an ownership change within the meaning of Section 382 of
the Code. Consequently, the ability of the Company to use the net
operating losses and credits will be subject to an annual limitation
based on the product of the fair value of the Company immediately after
reorganization multiplied by the federal long-term tax exempt bond
rate.
The Plan does not result in a change in ownership as defined by
Statement of Position 90-7; accordingly, the Company will continue to
recognize its historical basis of accounting. The following unaudited
pro forma consolidated balance sheet as of December 26, 1999 was
prepared to illustrate the estimated effects of the Plan and related
financings as if they have occurred as of December 26, 1999.
F-12
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 26, 1999
---------------------------------------------------------
AS REPORTED ADJUSTMENTS PRO FORMA
----------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets $ 70,514 $ 30,000 (1) $ 67,514
22,000 (2)
(47,500) (3)
(7,500) (4)
Restricted cash and cash equivalents 5,403 5,403
Property and equipment, net 129,639 129,639
Goodwill, net 13,427 13,427
Other assets, net 4,290 1,500 (2) 5,790
Investment in affiliated entities 11,668 11,668
------- --------- -------
Total assets $234,941 $(1,500) $233,441
======== ======== ========
Liabilities not subject to compromise $ 42,103 $ 42,103
Liabilities subject to compromise 304,671 (275,414) (3) --
(29,257) (4)
Notes payable -- 22,000 (2) 84,153
55,000 (3)
5,200 (4)
1,953 (4)
------- --------- -------
Total liabilities 346,774 (220,518) 126,256
------- --------- -------
Minority interest 3,212 3,212
Common stock 1,092 70 (1) 100
3 (2)
27 (3)
(1,092) (5)
Capital in excess of par value 286,886 29,930 (1) 330,734
1,497 (2)
11,330 (3)
1,091 (5)
Warrants 1 (5) 1
Accumulated deficit (398,358) 161,557 (3) (222,197)
14,604 (4)
Cumulative currency translation
adjustments (4,665) (4,665)
------- --------- -------
- -
Stockholders' equity (deficit) (115,045) 219,018 103,973
--------- ---------- --------
Total liabilities and stockholders'
equity (deficit) $234,941 $ (1,500) $233,441
======== ========== ========
</TABLE>
Changes from the historical financial statements in the pro forma consolidated
balance sheet consist of the following adjustments:
F-13
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(1) Cash of $30,000 is generated through the issuance of 7,000,000 shares of
New Class B common stock in exchange for approximately 70% ownership of
the reorganized Company.
(2) Cash of $22,000 is generated through the issuance of the Notes and 350,000
shares of New Class A Common Stock valued at $1,500 as a loan commitment
fee.
(3) The Old Notes plus accrued interest totaling $275,400, net of deferred
financing costs of $6,400, are paid through the issuance of a combination
of $47,500 in cash, $60,000 of PIK Notes, and 2,650,000 shares of New
Class A Common Stock equivalent to a 26.5% ownership of the reorganized
Company, resulting in a gain on the forgiveness of indebtedness of
$168,000. The PIK Notes are recorded at their estimated fair market value
of $55,000.
(4) Remaining liabilities subject to compromise are paid through the issuance
of $7,500 of cash, $2,000 of unsecured notes payable and $5,700 of PIK
Notes, resulting in a gain on the forgiveness of indebtedness of $14,600.
The PIK Notes are recorded at their estimated fair market value of $5,200.
(5) The existing shares of Class A and B Common Stock of the Company are
cancelled in exchange for 200,000 newly issued warrants valued at $1. The
common stock and capital in excess of par balances as of December 26, 1999
are reclassified to reflect the par value of newly issued common stock and
the fair value of the warrants.
The Plan calls for the Company to implement a new business plan, which calls for
a reduction in the number of operating locations worldwide, the sale or other
disposition of secondary business ventures and a renewed concentration on
management and improvement of the core PLANET HOLLYWOOD concepts. In fiscal 1998
and 1999, the Company completed the following steps toward its general
reorganization and the fulfillment of the terms of the Plan:
- Effected a number of lease terminations and settlement agreements for
the resolution of lease termination claims, or the restructuring or
other disposition of lease obligations.
- Closed or sold certain Company owned PLANET HOLLYWOOD, COOL PLANET,
OFFICIAL ALL STAR CAFE, and SOUND REPUBLIC units.
- Franchised or licensed certain Company owned PLANET HOLLYWOOD units.
- Sold and leased back the Company's Orlando, Florida corporate office,
land and warehouse facility.
- Sold the Company's 20% ownership interest in the Hotel Pennsylvania and
cancelled the related OFFICIAL ALL STAR CAFE license agreement.
- Refocused on its core PLANET HOLLYWOOD operations by introducing a new
menu, updating the look and appearance of the restaurants, launching a
new merchandise strategy aimed at providing more fashion-oriented
merchandise through the introduction of seasonal lines, and initiating
a new marketing and public relations strategy aimed at delivering a
fresh, exciting and consistent message to consumers.
F-14
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
3. IMPAIRMENT OF LONG-LIVED ASSETS, RESTRUCTURING AND REORGANIZATION
CHARGES
The Company recorded charges totaling $48,700, $139,000 and $120,700 in
fiscal 1997, 1998 and 1999, respectively, relating to the write-down of
net assets associated with units closed, franchised or sold, the
impairment of long lived assets, restructuring and severance costs,
accelerated celebrity compensation costs and reorganization costs. The
charges are as follows:
<TABLE>
<CAPTION>
Official
Planet All Star Sound Cool
Fiscal 1999 Hollywood Cafe Republic Planet Corporate Total
----------- --------- ---- -------- ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
Write-down of net assets
associated with closed, franchised
or sold units.......................... $54,740 $284 $ -- $138 $32,269 $87,431
Impairment of long lived assets ....... 17,253 -- -- -- -- 17,253
------- ------ ------- ------- ------- -------
71,993 284 -- 138 32,269 104,684
------- ------ ------- ------- ------- -------
Restructuring and
reorganization costs:
Lease termination costs for
units closed or not to be
opened.......................... 6,587 1,157 (505) 136 -- 7,375
Professional fees and other
reorganization costs........... -- -- -- -- 7,207 7,207
Interest income during
reorganization period ......... -- -- -- -- (100) (100)
Other costs associated with
unit closings.................. -- -- -- -- 1,547 1,547
------- ------ ------- ------- ------- -------
Total restructuring and
reorganization costs................. 6,587 1,157 (505) 136 8,654 16,029
------- ------ ------- ------- ------- -------
Total fiscal 1999 charges.............. $78,580 $1,441 $(505) $ 274 $40,923 $120,713
======= ====== ======== ======= ======= ========
FISCAL 1998
Impairment of long lived assets........ $33,492 $47,284 $37,133 $3,748 $4,186 $125,843
Celebrity stock option expense......... -- 4,746 1,445 -- -- 6,191
------- ------ ------- ------- ------- -------
33,492 52,030 38,578 3,748 4,186 132,034
------- ------ ------- ------- ------- -------
Restructuring costs:
Employee severance................ -- -- -- -- 2,940 2,940
Lease termination costs for units
closed or not to be opened........... 700 300 2,480 -- 505 3,985
------- ------ ------- ------- ------- -------
Total restructuring costs.............. 700 300 2,480 -- 3,445 6,925
======= ======= ======= ====== ======= ========
Total fiscal 1998 charges.............. $34,192 $52,330 $41,058 $3,748 $7,631 $138,959
======= ======= ======= ====== ======= ========
FISCAL 1997
Impairment of long lived assets........ $25,200 $21,194 $ -- $ -- $2,305 $48,699
======= ======= ======= ====== ======= ========
</TABLE>
F-15
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
As a result of operating losses and projected future losses for certain
of the Company's restaurant units and the Company's decision to focus
its resources on the PLANET HOLLYWOOD concept, the Company recorded
fiscal 1997, 1998, and 1999 impairment of long lived asset charges of
$48,700, $125,800 and $17,300 respectively, relating to certain
under-performing domestic and foreign PLANET HOLLYWOOD units as well as
certain assets associated with the Company's OFFICIAL ALL STAR CAFE,
COOL PLANET and SOUND REPUBLIC concepts. The Company considers
continued and projected operating losses to be its primary indicators
of potential impairment. An impairment was recognized as the future
undiscounted cash flows or appraised values were estimated to be
insufficient to recover the related carrying value of the long lived
assets. As a result, the carrying values of these assets were written
down to their estimated fair values.
PLANET HOLLYWOOD UNITS. During fiscal 1998, an impairment charge of
$33,500 for PLANET HOLLYWOOD units was recorded as the future
undiscounted cash flows for these units were estimated to be
insufficient to recover the related carrying values of these assets.
Lease termination costs totaling $700 were recorded for two locations.
Also included in this amount was a charge for the Company's PLANET
HOLLYWOOD Boston unit which was sold in 1999. During fiscal 1999, the
Company closed sixteen Company owned PLANET HOLLYWOOD units resulting
in net asset write-offs of $31,400. An additional impairment charge of
$18,100 was recorded in fiscal 1999 for three units expected to be
closed during fiscal 2000. The unit closings resulted in lease
termination costs of $6,600 for fiscal 1999. In addition to the unit
closings, the Company franchised three Company owned units and sold two
Company owned units during 1999 in exchange for a nominal or no
consideration. The franchise and sale transactions resulted in the
Company recording net asset write-offs of $5,200. Subsequent to the end
of fiscal 1999, the Company closed one additional unit.
OFFICIAL ALL STAR CAFE UNITS. The OFFICIAL ALL STAR CAFE units were
deemed impaired during fiscal 1998 due to the future undiscounted cash
flows being insufficient to recover the related carrying values of
these assets. Lease termination costs of $300 were recorded in fiscal
1998 for a site which will not be developed. As a result of the
Company's decision to discontinue the funding of the expansion of this
concept in 1998, the Company also recorded a $500 charge for the
write-down of OFFICIAL ALL STAR CAFE trademark costs and a $4,700
charge was recorded to expense options granted to celebrities
associated with the OFFICIAL ALL STAR CAFE units. During fiscal 1999,
the Company7 closed or licensed certain Company owned units resulting
in a net asset write-off of $300. The unit closings resulted in lease
termination costs of $1,200 for fiscal 1999. Subsequent to the end of
the fiscal 1999, the Company closed one unit and franchised one unit.
The Company intends to sell, franchise, license or joint venture
certain OFFICIAL ALL STAR CAFE units in the future.
SOUND REPUBLIC UNITS. The Company opened its first SOUND REPUBLIC in
the fall of fiscal 1998 in London, England and was constructing a
second unit in New York City. As part of its decision to focus on the
core PLANET HOLLYWOOD concept, the Company stopped the expansion of
this concept. A $27,900 charge was recorded in fiscal 1998 for the
impairment of the London unit based on continued and projected
operating losses for the unit. An impairment charge of $9,000 was
recorded in fiscal 1998 for the New York SOUND REPUBLIC site based on
estimated proceeds from the sale of the assets under construction.
During fiscal 1998, the Company also wrote off the trademark costs of
$200 associated with this brand due to management's decision to exit
the sites associated with this concept and $1,400 was recorded to
expense options granted to celebrities associated with the SOUND
REPUBLIC. During fiscal 1999, the Company sold its London, England
SOUND REPUBLIC unit at a nominal sales price, resulting in a $1,600
gain on the sale. The Company also sold its investment in the New York
City SOUND REPUBLIC
F-16
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
site resulting in a loss on the sale of approximately $2,100. The unit
closing and site sale resulted in the net reversal of $500 of 1998
lease termination accruals in fiscal 1999.
COOL PLANET UNITS. During the summer and fall of 1998, the Company
opened its first three COOL PLANETS units in California. These ice
cream and dessert units feature COOL PLANET ice cream products and a
decor derived from the PLANET HOLLYWOOD units. During fiscal 1998, a
charge of $1,900 was recorded to write-down the assets associated with
these units. Additionally, the Company recorded an impairment of $1,800
for a prepaid celebrity promotional agreement associated with the COOL
PLANET concept. During fiscal 1999, one Company owned COOL PLANET unit
was closed resulting in an additional net asset write-off of $100. The
unit closing resulted in lease termination costs of $100 for fiscal
1999.
CORPORATE. In 1998, the Company's credit facility with SunTrust Bank,
Central Florida, N.A. and other lenders was amended. The amendment
required the Company to commence marketing its headquarters property in
Orlando, Florida and its New York Times Square Hotel property. An
impairment charge of $2,800 was recorded in fiscal 1998 on the
headquarters property for the excess of the carrying value of the
property over its fair value. During fiscal 1999, the Company sold its
headquarters property for approximately $17,000. Immediately following
the sale, the Company entered into a lease arrangement for the
headquarters property with the purchaser for an annual lease payment of
approximately $2,800 through 2014. The Company is currently in the
process of selling its New York Times Square Hotel property. In
conjunction with the Company's decision to postpone any further
development of its concepts, the closing or planned closings of its
units and the expected sale of the New York Times Square Hotel
property, impairment charges of $1,400 and $32,300 were recorded in
fiscal 1998 and 1999, respectively, for impaired goodwill and fixed
assets, costs incurred for sites that will not be developed, and
various memorabilia items.
As part of its reorganization, the Company eliminated 60 and 48
positions in fiscal 1998 and 1999, respectively. Total costs paid to
terminated employees in fiscal 1998 were approximately $1,400.
Approximately $1,500 was accrued at December 27, 1998 for future
severance payments and outplacement services to be provided to these
employees. As a result of the terminations, the Company closed several
satellite offices. Approximately $500 was recorded as a reserve for
lease termination costs associated with these offices in fiscal 1998.
Subsequent to December 26, 1999, the Company eliminated an additional
38 positions.
In fiscal 1999, the Company incurred approximately $7,200 of legal and
professional fees and other reorganization costs in connection with its
restructuring and Chapter 11 filing. In addition, approximately $1,400
of other expenses were incurred related to the closing of the Company's
units in fiscal 1999.
F-17
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
A summary of restructuring cost activity during fiscal 1999 is as follows:
<TABLE>
<CAPTION>
Notes
Accrued at payable Accrued at
December 27, Paid issued Expensed December 26,
1998 1999 in 1999 1999 1999
---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Restructuring Costs:
Employee Severance $1,495 $1,495 $ -- $ -- $ --
Lease termination costs for units
closed or not to be opened 6,118 5,568 980 7,375 6,945
----- ----- --- ----- -----
$7,613 $7,063 $980 $7,375 $6,945
====== ====== ==== ====== ======
</TABLE>
4. LIABILITIES SUBJECT TO COMPROMISE
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All
amounts below may be subject to future adjustment depending on
Bankruptcy Court action, further developments with respect to disputed
claims, determination as to the value of any collateral securing
claims, or other events.
December 26,
1999
----
Accounts payable $ 14,168
Accrued expenses:
Interest 31,804
Taxes 1,003
Lease terminations 6,945
Deferred credits 4,000
Notes payable 253,141
Deferred financing costs (6,390)
----------
$304,671
As a result of the bankruptcy filing, no principal or interest payments
will be made on any pre-petition debt without bankruptcy court approval
or until the effective date of the Plan. Contractual interest expense
not recorded on the Old Notes totaled approximately $6,600 for the
period from October 12, 1999 through December 26, 1999.
Prior to the bankruptcy filing, the Company's debt included $250,000 of
the Old Notes due on April 1, 2005 plus accrued interest of $31,800.
Interest on these notes is payable semi-annually in arrears on April 1
and October 1 of each year. The Company was in default of the terms of
this obligation due to the Company's failure to make both the April 1,
1999 and October 1, 1999 interest payments.
5. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
F-18
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
December 27, December 26,
1998 1999
---- ----
Leasehold improvements $179,309 $105,837
Furniture and equipment 52,940 35,731
Memorabilia 33,062 28,269
Capital lease facility 3,900 --
Construction in progress 2,426 766
Assets held for sale 60,729 --
-------- --------
332,366 170,603
Less - accumulated depreciation (51,251) (40,964)
-------- --------
$281,115 $129,639
======== ========
In May 1999, the Company sold a building and land related to a site
under development for approximately $7,000, which approximated its
carrying value at the time of sale.
In June 1999, the Company sold its Orlando, Florida corporate office,
land and warehouse facility for approximately $17,000, which
approximated its carrying value at the time of sale. Immediately
following the sale, the Company entered into a lease arrangement for
the facilities with the purchaser for an annual lease payment of
approximately $2,800 through 2014.
In August 1999, the Company sold its investment in the New York SOUND
REPUBLIC site resulting in a loss on the sale of approximately $2,100.
In October 1999, the Company sold two PLANET HOLLYWOOD units in Canada
for a nominal sales price resulting in a loss on the sale of
approximately $500.
In October 1999, the Company renegotiated the terms of its capital
lease facility resulting in a lower monthly payment and a conversion of
the lease into an operating lease. The capital lease assets of $3,500,
net of the outstanding capital lease payable of $3,800, were written
off resulting in a gain of $400.
The Company is currently in the process of selling its New York Times
Square Hotel retail unit property and expects to receive proceeds in
fiscal 2000 of approximately $30,000 from the sale. In December 1999,
the Company recorded an impairment charge of approximately $7,200 to
reduce the carrying value of the property to the estimated sales
proceeds.
In October 1999, the Company sold its London, England SOUND REPUBLIC
unit resulting in a gain of approximately $1,600.
6. INVESTMENT IN UNCONSOLIDATED AFFILIATES
The Company's investments in affiliated companies which are not
majority owned or controlled are accounted for using the equity method.
At December 26, 1999 these affiliated companies and the percentage
interest held by the Company consist of PH Asia (50%), ECE (20%) and
New York Hotel (20%).
The Company owns a 50% equity interest in PH Asia, which operates and
franchises PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE units in the
Pacific Rim. The remaining interest in PH Asia is owned by an
F-19
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
entity controlled by a company in which a director and shareholder of
the Company is a major shareholder. In 1999, PH Asia was recapitalized
through the forgiveness of debt by the Company's joint venture partner
and the forgiveness of approximately $5,400 of Company receivables due
from PH Asia. The Company's rights and obligations under the joint
venture agreement were altered as a result of the recapitalization.
The Company owns a 20% equity interest in ECE, a Mexican company, which
operates themed restaurant/retail units in Mexico, South America and
the Caribbean. In January 1997, ECE issued 21,587,145 shares of common
stock. The Company purchased 4,317,429 shares for $6,100 in order to
retain its 20% equity interest in ECE.
In September 1997, the Company entered into a venture to remodel and
renovate the Hotel Pennsylvania in New York City. During 1997, the
Company advanced the venture $9,600. The renovated hotel was originally
expected to be branded the OFFICIAL ALL STAR HOTEL, and the Company was
to receive royalties for the use of its OFFICIAL ALL STAR HOTEL
trademark. In August 1999, the Company cancelled the related royalty
agreement and sold its 20% ownership interest in the Hotel for
approximately $17,400 resulting in a gain of approximately $5,800.
In December 1997, the Company entered into a joint venture to construct
a 50 story, 550 room movie themed hotel in New York City. The Company
has funded $5,000 of its anticipated initial investment of $7,000. In
addition to participation in the hotel's profits through its 20% equity
interest in the joint venture, the Company expected to receive a
license fee for the use of the PLANET HOLLYWOOD name and logo.
In June 1998, the Company entered into a joint venture agreement with a
related party for the sale and operation of the PLANET HOLLYWOOD unit
in Zurich, Switzerland. The Company recorded a gain of $1,000 on the
transaction and retained a 50% interest in the unit. In fiscal 1999,
the unit was sold to a third party for $1,900 resulting in a gain of
approximately $900.
Condensed financial information for affiliated companies accounted for
by the equity method is as follows:
<TABLE>
<CAPTION>
Balance Sheet Data: 1998 1999
------------------- ---- ----
<S> <C> <C>
Current assets $ 44,501 $ 21,428
Non-current assets 147,982 53,267
--------- --------
Total assets $192,483 $74,695
======== ========
Current liabilities $25,986 $ 16,409
Other liabilities 105,239 60,528
Stockholders' equity (deficit) 61,258 (2,242)
-------- ---------
Total liabilities and stockholders' equity (deficit) $192,483 $74,695
======== =======
<CAPTION>
Operating Data: 1997 1998 1999
--------------- ---- ---- ----
<S> <C> <C> <C>
Revenue $115,938 $154,461 $114,467
Operating income (loss) 32,996 21,244 (38,793)
Net income (loss) 21,492 (27,284) (42,740)
Company's interest in net income (loss) 6,900 (11,022) (1,370)
</TABLE>
F-20
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
7. ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
December 27, December 26,
1998 1999
---- ----
<S> <C> <C>
Accrued interest $ 7,690 $31,804
Accrued rent 2,195 799
Accrued payroll and related benefits 3,797 6,470
Accrued restructuring costs (Note 3) 7,613 6,945
Accrued reorganization costs -- 3,600
Accrued insurance 4,845 1,739
Accrued taxes -- 1,807
Other 3,532 7,695
-------- --------
29,672 60,859
Accrued expenses included in
liabilities subject to compromise -- (39,752)
------- --------
$29,672 $ 21,107
======= ========
</TABLE>
See Note 4 for accrued liabilities included in liabilities subject to
compromise at December 26, 1999.
8. NOTES PAYABLE
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
December 27, December 26,
1998 1999
---- ----
<S> <C> <C> <C>
12% senior subordinated
notes due 2005 $250,000 $250,000
Lease facility note 25,000 --
Capital lease payable 3,845 --
Other notes payable 4,907 5,003
-------- --------
283,752 255,003
Less current portion (25,517) (214)
Notes payable included in
liabilities subject to compromise -- (253,141)
-------- ----------
$258,235 $ 1,648
======== ==========
</TABLE>
In September 1997, the Company replaced its existing $50,000 credit
facility with a $155,000 multi-currency long-term credit facility with
a consortium of financial institutions. The facility consisted of a
$100,000 revolving credit facility and a $20,000 long-term loan
facility. In March 1998, this was replaced concurrent with the notes
offering, with a $65,000 multi-currency revolving credit facility and a
$35,000 LIBOR-based leveraged lease facility. Interest rates were
variable, with either prime or LIBOR indexes.
In December 1998, the Company amended the existing $65,000
multi-currency revolving credit facility and $35,000 LIBOR-based
leveraged lease facility with SunTrust Bank, Central Florida, N.A. and
other lenders. The revolving credit portion of the old credit facility
was terminated and the new credit facility provided for a $35,000
LIBOR-based leveraged lease facility and up to $2,000 coverage under an
interest rate swap arrangement, which provided hedging against interest
rate movements under the leveraged lease
F-21
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
facility. All outstanding borrowings under these facilities were paid
in full in fiscal 1999 and the facilities were terminated.
In March 1998, the Company issued $250,000 12% senior subordinated
notes due in 2005. These notes are included in liabilities subject to
compromise at December 26, 1999 (see Note 4).
In October 1999, the Company renegotiated its capital lease facility
resulting in its conversion into an operating lease (see Note 5).
During fiscal 1997, 1998 and 1999, approximately $2,600 and $30,000,
and $27,400 respectively, was charged to interest expense and
approximately $2,600, $4,900 and $800 in fiscal 1997, 1998 and 1999,
respectively, of interest was capitalized.
Aggregate principal amounts not subject to compromise maturing in each
of the five fiscal years subsequent to fiscal 1999 and thereafter are
summarized as follows:
F-22
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Fiscal
------
2000 $214
2001 232
2002 251
2003 273
2004 295
Thereafter 597
9. STOCKHOLDERS' EQUITY
COMMON STOCK
In April 1997, the Company issued 1,087,000 shares of Class A Common
Stock to an investor in conjunction with the consummation of a
franchise agreement with the investor. Approximately $19,600 was
received for the shares issued.
In January 1997, the Company issued 218,438 shares of Restricted Class
B Common Stock to certain celebrities. The shares were valued at their
estimated market value totaling $4,000. Deferred compensation expense
has been reflected as a reduction of stockholders' equity and was being
amortized over the period benefited. The deferred compensation expense
was accelerated in fiscal 1998 for certain celebrities associated with
the OFFICIAL ALL STAR CAFE concept (see Note 3).
In April 1998, the Company issued 190,476 unregistered shares of Class
A Common Stock to consultants retained to assist the Company with
relations and promotions in the entertainment industry. The shares were
valued at their estimated discounted market value totaling $1,200 and
recorded as prepaid promotional services. These prepaid services were
amortized over one year.
STOCK OPTIONS
During 1995, the Board of Directors adopted the 1995 Stock Option Award
and Incentive Plan ("1995 Stock Plan"). The 1995 Stock Plan provided
for up to 4,000,000 shares of Class A common stock to be available for
issuance upon the exercise of options and stock appreciation rights. In
October 1996, the 1995 Stock Plan was amended to provide for 5,000,000
shares of Class A common stock to be available. In May 1997, the 1995
Stock Plan was amended to provide for 6,000,000 shares of Class A
common stock to be available. In October 1998, the 1995 stock Plan was
amended to provide for 7,000,000 shares of Class A common stock to be
available. Under the 1995 Stock Plan, options and/or stock appreciation
rights may be granted to officers and employees of the Company, and
certain of the Company's independent contractors, to purchase Class A
common stock. During 1997 and 1998, options to purchase 839,800 and
8,157,379 shares, respectively, of Class A common stock were granted
under the 1995 Stock Plan at the estimated fair market value at the
date of grant. No options were granted during fiscal 1999. The options
granted vest and are exercisable over a period of four years and expire
five years from the date of grant. In December 1998, the Company
canceled 5,104,694 options with an average exercise price of $11.80 and
granted new options to the same individuals with an exercise price of
$2.50.
During 1995, the Board of Directors adopted the 1995 Celebrity Stock
Option Award and Incentive Plan ("1995 Celebrity Plan"). The 1995
Celebrity Plan provided for up to 4,000,000 shares of the Class A
F-23
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
common stock to be available for issuance upon the exercise of options
and stock appreciation rights. In October 1996, the 1995 Celebrity Plan
was amended to provide for 6,000,000 shares of Class A Common Stock to
be available. During fiscal 1997 and 1998, options to purchase
1,895,000 and 951,166 shares, respectively, of Class A common stock
were granted under the 1995 Celebrity Plan at the estimated fair market
value at the date of grant. No options were granted during fiscal 1999.
In February 1998, the Company reset the exercise price of 400,000
options with an average exercise price of $16.14 to $7.50. In December
1998, the Company cancelled options to purchase 48,333 shares with an
average exercise price of $12.54 and granted new options to the same
celebrities with an exercise price of $2.50. These options vest and are
exercisable over a period of four years and expire five years from the
date of grant. During fiscal 1997, 1998 and 1999 approximately $2,100,
$3,000 and $1,400, respectively, was charged to expense relating to the
grants.
All stock options outstanding will be cancelled as of the effective
date of the Plan (see Note 2). The following disclosure information
reflects stock option information relevant to fiscal 1997 and 1998
prior to the cancellation of the stock options. No options were granted
or exercised during fiscal 1999.
<TABLE>
<CAPTION>
Employee Plan Celebrity Plan
----------------------------- ---------------------
Number Weighted Avg. Number Weighted Avg.
Of Shares Option Price Of Shares Option Price
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Outstanding at December 29, 1996 3,741,315 $16.34 4,095,000 $12.40
Exercisable at December 29, 1996 -- --
Available for grant at December 29, 1996 1,258,685 1,905,000
Granted during 1997 839,800 18.11 180,000 16.28
Cancelled (649,343) 17.00 (796,334) 17.64
Exercised (77,297) 8.40 (30,666) 7.88
------------ ------------
Outstanding at December 28, 1997 3,854,475 16.76 3,448,000 10.55
Exercisable at December 28, 1997 237,801 1,082,655
Granted during 1998 8,157,379 5.33 951,166 8.62
Canceled (7,255,076) 11.00 (48,999) 12.54
Exercised (7,794) 7.86 --
------------- --------------
Outstanding at December 27, 1998 4,748,984 5.73 4,350,167 9.35
Exercisable at December 27, 1998 216,689 2,227,992
Available for grant at December 27, 1998 1,725,346 1,619,167
</TABLE>
F-24
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The following tables summarize the stock options outstanding at
December 27, 1998:
<TABLE>
<CAPTION>
Weighted
Employees Number Weighted-Average Average
Range of Exercise Outstanding at Remaining Exercise
Prices December 27, 1998 Contractual Life Price
--------------------- ----------------- ---------------- --------
<S> <C> <C> <C>
$ 2.50 3,140,920 4.96 $ 2.50
$ 7.50 $ 7.94 939,509 3.15 $ 7.62
$ 14.00 $ 15.00 68,555 2.28 $ 14.73
$ 17.00 160,000 3.20 $ 17.00
$ 19.00 $ 21.63 440,000 1.19 $ 19.25
Weighted
Celebrities Number Weighted-Average Average
Range of Exercise Outstanding at Remaining Exercise
Prices December 27, 1998 Contractual Life Price
--------------------- ----------------- ---------------- --------
$ 2.50 48,333 4.96 $ 2.50
$ 7.50 $ 7.88 2,891,334 2.11 $ 7.79
$ 9.00 502,500 4.13 $ 9.00
$ 14.00 $ 15.00 838,000 2.24 $ 14.23
$ 19.00 $ 24.00 70,000 3.24 $ 22.57
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation expense has been recognized for the 1995
Stock Plan. Had compensation cost for the 1995 Stock Plan been
determined based on the fair value at the date of grant for awards
consistent with the provisions of FAS 123, the Company's net income and
earnings per share would approximate the following pro forma amounts:
<TABLE>
<CAPTION>
Fiscal Fiscal
1997 1998
------- ---------
<S> <C> <C>
Net income (loss) - as reported $8,258 $(243,932)
Net income (loss) - pro forma 4,852 (247,667)
Basic and diluted earnings (loss) per share - as reported .08 (2.24)
Basic and diluted earnings (loss) per share - pro forma .04 (2.27)
</TABLE>
The fair value of each option is estimated on the date of grant using
the Black Scholes option pricing model with the following
weighted-average assumptions: no dividend yield; expected volatility of
35% in fiscal 1997 and 60% in fiscal 1998; risk free interest rates of
5.70% in fiscal 1997 and 5.06% in fiscal 1998; and expected lives of 4
years for fiscal 1997 and 5 years for fiscal 1998. The weighted-average
fair value of options granted during the year was $6.32 for fiscal 1997
and 1.73 for fiscal 1998. No options were granted in fiscal 1999.
F-25
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
10. FRANCHISE REVENUES
The Company has an agreement with PH Asia, whereby PH Asia was granted
the right to license the PLANET HOLLYWOOD name and rights within a
number of countries, primarily in the Pacific Rim. The agreement
provided that PH Asia would pay continuing royalty fees and, for
certain territories, PH Asia and the Company would share initial
franchise fees.
During 1995, the Company entered into a franchise agreement with ECE,
an affiliated company, which allows ECE to develop and operate PLANET
HOLLYWOOD units and OFFICIAL ALL STAR CAFE units in Mexico, South
America, Spain and the Caribbean. ECE pays continuing royalty fees as
defined in the agreement.
In December 1995, the Company terminated a site franchise agreement of
an existing franchisee and purchased the franchise rights to four
undeveloped locations. The Company assumed certain liabilities and
lease obligations relating to the four undeveloped locations. In
consideration for the franchise rights, the Company agreed to pay the
seller an amount equal to a multiple of each unit's first year profits
less the costs to develop and open the site, as defined. The franchisee
forfeited the nonrefundable initial franchise fees of $2,000 each for
the four sites. During 1997, the Company recognized non-refundable
franchise fees for two of the sites as no consideration was required to
be paid to the seller under the terms of the purchase agreement. In
fiscal 1999, the franchisee filed suit against the Company claiming
that it owed significant additional amounts under the purchase
agreement. In January, 2000, the Company entered into a $7,000
settlement arrangement with the franchisee. The balance of this
settlement is subject to compromise under the bankruptcy filing. In
connection with this settlement, the Company has included $4,000 of
deferred credits in liabilities subject to compromise (see Note 4).
In March 1997, the Company entered into a franchise agreement which
provides for the development of up to 34 PLANET HOLLYWOOD
restaurant-merchandise units in 23 countries throughout the Middle East
and Europe. The franchise agreement provided for and the investor made
a payment to the Company of $8,000 for six sites. Additional franchise
fees may be payable to the Company under the terms of the franchise
agreement for the additional sites. In connection with the agreement,
the investor purchased 1% of the Company's total common stock
outstanding directly from the Company for approximately $19,600.
The number of franchised units open in fiscal 1997, 1998 and 1999 were
34, 38 and 36 respectively.
11. INCOME TAXES
The sources of income (loss) before income taxes are presented as
follows:
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
United States $15,529 $(157,929) $(178,178)
Foreign (2,317) (74,813) (42,892)
------- ---------- ----------
Income (loss) before taxes $13,212 $(232,742) $(221,070)
======= ========== ==========
F-26
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 9,927 $(16,153) $ --
State and local 1,777 (432) --
Foreign 3,375 1,759 --
----- ----- ------
$15,079 $(14,826) $ --
------- ========= ========
Deferred:
Federal (7,499) 14,026 --
State and local (337) 127 --
Foreign (2,289) 2,289 --
------- ----- -------
(10,125) 16,442 --
-------- ------ ---------
$ 4,954 $ 1,616 $ --
======== ======= ========
</TABLE>
In 1997, 1998 and 1999, the Company recognized $800, $200 and $32,
respectively, of benefits for deductions from the exercise of employee
stock options and the vesting of certain celebrity restricted stock
awards. The benefits were recorded directly to capital in excess of par
and are not reflected in the provision for income taxes.
Income tax expense included in the financial statements is as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Continuing operations $4,954 $5,206 $ --
Change in accounting principle -- (3,590) --
------ ------ -------
$4,954 $1,616 $ --
====== ====== ======
</TABLE>
Deferred income taxes were recorded to reflect the tax effects of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts for income
tax purposes for December 28, 1997, December 27, 1998 and December 26,
1999.
F-27
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 27, December 26,
1998 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Preopening costs $ 10,752 $ 7,814
Fixed assets 33,889 23,672
Deferred credits 3,186 4,265
Accrued expenses & reserves 6,514 8,387
Inventory 3,500 2,768
Deferred rental expense 4,419 2,424
Deferred compensation 3,088 4,116
Net operating loss carryforwards 11,375 86,687
Capital loss carryforward -- 5,600
Tax credit carryforwards 11,190 12,190
Other 125 799
-------- --------
88,038 158,722
Valuation Allowance (88,038) (158,722)
-------- ---------
Deferred tax liabilities -- --
Net deferred tax assets $ -- $ --
============= =============
</TABLE>
The valuation allowances of $88,000 for 1998 and $159,000 for 1999 were
established for all deferred tax assets due to the uncertainty of
sufficient taxable income in the future to utilize the deductible
temporary differences and carryforwards. SFAS No. 109 requires that
deferred tax assets be reduced by a valuation allowance if it is more
likely than not that some portion or all of the deferred tax asset will
not be realized.
Reconciliation of the income tax provision to the tax provision
computed by applying the federal statutory tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax $4,624 $(81,460) $(77,375)
Nondeductible expenses 252 225 3,026
Tax (benefit) of foreign operations (772) 3,808 2,202
State and local income taxes, net of federal tax benefit 936 (198) 5
Valuation allowance -- 82,831 72,142
Tax credits (857) -- --
Other 771 -- --
------ ------ ---------
Total tax expense $4,954 $5,206 $ --
====== ====== =========
</TABLE>
The amount of domestic net operating loss carryforwards at December 26,
1999 was $185,400. Of this amount, $4,300 was generated by certain
subsidiaries prior to their acquisition and have expiration dates
through the fiscal year 2011. The use of pre-acquisition operating loss
carryforwards is subject to
F-28
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
limitations imposed by the Internal Revenue Code. The remaining net
operating loss of $181,100 will expire in 2018 and 2019.
The amount of foreign tax credit carryforwards at December 26, 1999
total $5,000 which expire between 2001 and 2004. General business tax
credit carryforwards total $5,300 and expire between 2010 and 2019.
Alternative minimum tax credit carryforwards total $1,900 and carry
forward indefinitely.
The domestic net operating loss and tax credit carryforwards will be
subject both to reduction as a result of the cancellation of debt
income and limitations on utilization as a result of the anticipated
change of ownership for tax purposes of the Company (see Note 2).
The amount of foreign net operating loss carryforwards at December 26,
1999 was $57,000, of which $48,000 have no expiration date and $9,000
expire between 2002 and 2009.
Provision has not been made for United States or foreign taxes on the
undistributed earnings of foreign affiliates, as those earnings are
considered to be permanently invested. It is not practicable to
estimate the amount of the tax on such earnings. Such earnings would
become taxable upon the sale or liquidation of the investment in these
foreign affiliates or upon the remittance of dividends. Upon
remittance, certain foreign countries impose withholding taxes that are
then available, subject to certain limitations, for use as credits
against the Company's United States tax liability.
12. COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum lease payments under the terms of operating lease
agreements at December 26, 1999 are as follows (actual dollars):
2000 $32,058
2001 32,406
2002 32,661
2003 32,509
2004 32,234
Thereafter 411,332
Rent expense approximated $44,600, $49,200 and $44,500 for fiscal 1997,
1998 and 1999, respectively. Rent expense for the Company's corporate
headquarters building is offset by $400 of sublease rentals in fiscal
1999. Included in fiscal 1997, 1998 and 1999 rent expense is
approximately $8,600, $7,300 and $3,000, respectively, of contingent
rental payments.
LITIGATION
The Company and its subsidiaries are potential and named defendants in
several lawsuits and claims arising in the ordinary course of business.
While the outcome of such claims, lawsuits or other proceedings against
the Company cannot be predicted with certainty, management expects that
such
F-29
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
liability, to the extend not provided for through insurance or
otherwise, will not have a material adverse effect on the consolidated
financial statements of the Company.
As a result of the Chapter 11 filing, all actions under these
litigation matters have been stayed and jurisdiction over the
resolution of these matters has been transferred to the Bankruptcy
Court. Claimants against the Company in these matters are treated as
unsecured creditors.
13. RELATED PARTY TRANSACTIONS
During 1995, a company that is controlled by a director and stockholder
of the Company bought the franchise rights to develop one PLANET
HOLLYWOOD unit in the Philippines for $2,000. The site opened in 1997
and the franchise fee was recognized by the Company.
In fiscal 1997, the Company paid approximately $1,000 in investment
banking fees for services rendered by a firm which a director of the
Company is also a member of that firm's board of directors.
During fiscal 1998, the Company entered into three arrangements with a
franchisee and Company shareholder relating to the formation and
operation of three corporations to be owned equally by the Company and
franchisee/shareholder. The corporations were to own and operate PLANET
HOLLYWOOD units in Tokyo and Zurich and an OFFICIAL ALL STAR CAFE unit
in London. The Company received $4,300 in cash and a note receivable
for $1,000 from the sale of the Company's 50% interests in the
corporations during fiscal 1998. The Company has suspended any
development of a restaurant in London. The Company and its joint
venture partner sold the Zurich PLANET HOLLYWOOD unit in 1999 (see Note
6). In addition, the Company wrote off $1,500 of franchisee receivables
from this franchisee.
During fiscal 1999, the Company wrote off $2,300 of franchise
receivables due from ECE, a Mexican company in which the Company has a
20% interest. A director of the Company is a significant shareholder in
ECE..
F-30
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
14. OTHER FINANCIAL DATA
GEOGRAPHIC SEGMENT DATA
Condensed financial information, summarized by geographic area, is as
follows:
<TABLE>
<CAPTION>
United Other
States Europe Areas Corporate(1) Total
------ ------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Revenues 1999 $199,588 $72,231 $9,150 $ -- $280,969
1998 280,325 92,459 14,190 -- 386,974
1997 355,641 103,083 16,401 -- 475,125
Operating Income (Loss) 1999 $(190,100) $(24,017) $(6,953) $ -- $(221,070)
1998 (150,551) (44,110) (6,084) -- (200,745)
1997 11,272 (6,834) 547 -- 4,985
Identifiable Assets 1999 $186,869 $42,794 $ -- $11,668 $241,331
1998 340,606 92,344 7,835 31,842 472,627
1997 363,682 90,851 10,622 40,404 505,559
</TABLE>
(1) Corporate assets include investment in unconsolidated affiliates.
DIRECT REVENUES AND COST OF SALES
Direct revenues and cost of sales are summarized as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Direct revenues
Food and beverage $273,345 $259,644 $203,568
Merchandise 173,965 107,652 64,799
Movies -- -- 3,865
-------- -------- --------
$447,310 $367,296 $272,232
======== ======== ========
Cost of sales:
Food and beverage $ 61,930 $ 61,474 $ 51,932
Merchandise 57,519 49,400 22,589
Movies -- -- 2,043
-------- -------- -------
$119,449 $110,874 $76,564
======== ======== =======
</TABLE>
F-31
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
15. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
AND INVESTING ACTIVITIES:
Reduction of property and equipment and
accounts payable for landlord construction
allowances $ -- $ -- $ 1,785
Reclassification of liabilities subject to compromise -- -- 304,671
Accounts payable relieved in asset disposal
transactions -- -- 5,178
Additions to property and equipment,
construction in process and other assets
included in accounts payable and accrued
expenses 9,459 1,314 --
Capital lease -- -- 3,815
Receivable exchanged for stock in an affiliate 770 329 --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest,
net of amount capitalized -- 18,464 1,038
Cash paid for income taxes 14,848 1,903 --
</TABLE>
16. QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
Fiscal 1998 - Quarters Ended
----------------------------------------------------------------
Mar. 29 June 28 Sep. 27 Dec. 27 Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Revenues $96,532 $105,112 $110,261 $75,069 $386,974
Income (loss) from operations 2,390 3,478 (10,422) (196,191) (200,745)
Income (loss) before provision
for income taxes 2,608 (1,978) (16,152) (217,220) (232,742)
Income (loss) before
cumulative effect 1,630 (1,236) (10,095) (228,247) (237,948)
Net loss (4,354) (1,236) (10,095) (228,247) (243,932)
Basic and diluted EPS - net income
(loss) before cumulative effect $ 0.02 $(0.01) $(0.09) $(2.09) $(2.18)
Basic and diluted EPS-net loss $(0.04) $(0.01) $(0.09) $(2.09) $(2.24)
</TABLE>
F-32
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
In the fourth quarter of 1998, the Company recorded charges totaling
$139,000 for asset impairments, restructuring and severance costs, and
accelerated celebrity options expense (see Note 3). In addition to
these charges, the Company recorded a $3,800 reserve for franchisee
receivables due to continued financial difficulties of certain of the
Company's franchisees. The Company also recorded a $6,000 reserve for
discontinued and obsolete inventory items as a result of the Company's
launch of a new merchandising strategy. The Company also recorded
losses of $8,600 from its equity investment in unconsolidated
affiliates in the fourth quarter of fiscal 1998 as a result of asset
impairments and operating losses recorded by these entities in the
fourth quarter.
<TABLE>
<CAPTION>
Fiscal 1999 - Quarters Ended
----------------------------------------------------------------
Mar. 28 June 27 Sept. 26 Dec. 26 Total
------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Revenues $75,028 $76,647 $80,441 $48,853 $280,969
Loss from operations (25,999) (18,914) (91,314) (58,314) (194,541)
Net loss (34,722) (28,166) (96,028) (62,154) (221,070)
Basic and diluted EPS-net loss $ (0.32) $(0.26) $(0.88) $(0.57) $(2.03)
</TABLE>
In the fourth quarter of fiscal 1999, the Company recorded charges
totaling approximately $24,400. The charges consist of approximately
$12,900 for asset impairments (see Note 3), $7,200 for the write-down
of the New York Times Square Hotel retail unit property (see Note 5),
$3,700 for the write-down of memorabilia installation costs associated
with closed units (see Note 3) and approximately $600 of other
write-offs related to closed, franchised or sold units. The Company
also recorded fourth quarter charges totaling approximately $2,400
against the Company's investment in ECE as a result of losses incurred
by ECE in the fourth quarter of fiscal 1999 (see Note 6). Additionally,
charges of approximately $4,800 related to the accrual of closed unit
lease rejection claims were recorded in the fourth quarter of 1999 (see
Note 3).
F-33
<PAGE>
Planet Hollywood International, Inc.
Financial Statement Schedule II -- Valuation and qualifying accounts
<TABLE>
<CAPTION>
ADDITIONS
BALANCE BEGINNING OF CHARGED TO CHARGED TO
PERIOD COSTS AND EXPENSES OTHER ACCOUNTS
ALLOWANCE FOR UNCOLLECTIBLE RECEIVABLES
<S> <C> <C> <C>
Fiscal 1997 $ -- $1,500,000 $ --
Fiscal 1998 $1,500,000 $3,756,000 $ --
Fiscal 1999 $2,122,000 $8,075,000 $ --
- ------------------------------------------------- ---------------------- ------------------------- -------------------------
<CAPTION>
BALANCE
DEDUCTIONS END OF PERIOD
<S> <C> <C>
$ -- $1,500,000
$3,134,000 (1) $2,122,000
$6,437,000(1) $3,760,000
-------------------------- -----------------------
</TABLE>
(1) Represents the write-off of specific accounts receivable in 1998 and 1999.
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 21.1
Subsidiaries
------------
Name and Address Jurisdiction of
- ---------------- Organization
---------------
308 Aviation, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
308-III Aviation, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
All Star Cafe (Region V), Inc. Texas
8669 Commodity Circle
Orlando, FL 32819
All Star Cafe International, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
All Star Cafe (LP), Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
All Star Cafe (New York), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
All Star Cafe (Region VII), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Coast Licensing, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Cool Planet, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Cool Planet I, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Cool Planet II, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
EBCO Management, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
<PAGE>
Name and Address Jurisdiction of
- ---------------- Organization
---------------
Karmalanne, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Meant 2 Be, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Movie Restaurant GmbH Germany
& Co., K.G.
8669 Commodity Circle
Orlando, FL 32819
Movie Restaurant Verwaltungs, GmbH Germany
8669 Commodity Circle
Orlando, FL 32819
Official All Star Cafe (U.K.), Ltd. United Kingdom
8669 Commodity Circle
Orlando, FL 32819
Official All Star Cafe, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
PH Amsterdam B.V. Netherlands
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Aspen), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Chefs), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Atlantic City), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood Czech, A.S. Czech
8669 Commodity Circle Republic
Orlando, FL 32819
Planet Hollywood (Europe), Limited United Kingdom
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Chicago), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Costa Mesa), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Mail Order), Inc. Florida
<PAGE>
Name and Address Jurisdiction of
- ---------------- Organization
---------------
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Gaming), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Honolulu), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (London), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (LP), Inc. Nevada
8669 Commodity Circle,
Orlando, FL 32819
Planet Hollywood (New York City), Inc. Florida
8669 Commodity Circle,
Orlando, FL 32819
Planet Hollywood (Orlando), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Orlando Florida
Distribution), Inc.
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Paris), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Phoenix), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Puerto Rico), Inc. Puerto Rico
8660 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Region I), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Region II), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Region III), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Region IV), Inc. Minnesota
8669 Commodity Circle
<PAGE>
Name and Address Jurisdiction of
- ---------------- Organization
---------------
Orlando, FL 32819
Planet Hollywood (Region V), Inc. Texas
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Region VI), Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Region VII), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood Restaurant OY Finland
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood Restaurant Betriebsgesellschaft Austria
Gmbh
8669 Commodity Circle
Orlando, FL 32819
Planet Hospitality Holdings, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Tel Aviv), Inc. Florida
8669 Commodity Circle,
Orlando, FL 32819
Planet Hollywood (Theatres), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood Transportation, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Warehouse), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood New York, Ltd. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Texas), Ltd. Texas
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (Israel), L.C. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood (France), L.C. Florida
8669 Commodity Circle
Orlando, FL 32819
<PAGE>
Name and Address Jurisdiction of
- ---------------- Organization
---------------
Planet Hollywood (Trocadero), L.C. Florida
8669 Commodity Circle
Orlando, FL 32819
Rivermist Limited Ireland
8669 Commodity Circle
Orlando, FL 32819
RM 46 Restaurant Vermogensverwaltungs GmbH Germany
8669 Commodity Circle
Orlando, FL 32819
Rocky Pit, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Silver Bracelets, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Sound Republic, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Sound Republic I, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Ten Alps Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
Planet Hollywood Memorabilia, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
Planet Movies Company, L.P. Delaware
8669 Commodity Circle
Orlando, FL 32819
PMBA Unit (PH), L.P. Delaware
8669 Commodity Circle
Orlando, FL 32819
PMC Management, Inc. Georgia
8669 Commodity Circle
Orlando, FL 32819
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-31683, No. 333-31685 and No. 333-66659) and on
Form S-3 (No. 333-67101 and No. 333-67467) of Planet Hollywood International,
Inc. of our report dated April 3, 2000 which is incorporated in this Annual
Report on Form 10-K.
PricewaterhouseCoopers LLP
Orlando, Florida
April 3, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 27.1
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PLANET HOLLYWOOD INTERNATIONAL, INC. FOR THE FISCAL YEAR
ENDED DECEMBER 26, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-26-1999
<CASH> 14,143
<SECURITIES> 0
<RECEIVABLES> 8,643
<ALLOWANCES> (3,760)
<INVENTORY> 13,846
<CURRENT-ASSETS> 70,514
<PP&E> 170,603
<DEPRECIATION> (40,964)
<TOTAL-ASSETS> 234,941
<CURRENT-LIABILITIES> 28,736
<BONDS> 1,862
0
0
<COMMON> 1,008
<OTHER-SE> (116,053)
<TOTAL-LIABILITY-AND-EQUITY> 234,941
<SALES> 272,232
<TOTAL-REVENUES> 280,969
<CGS> 76,564
<TOTAL-COSTS> 475,510
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,628
<INCOME-PRETAX> (221,070)
<INCOME-TAX> 0
<INCOME-CONTINUING> (221,070)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (221,070)
<EPS-BASIC> (2.03)
<EPS-DILUTED> (2.03)
</TABLE>
