<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - February 25, 1997
FLORIDA PANTHERS HOLDINGS, INC.
-------------------------------
(Exact Name of Registrant as Specified in Charter)
Florida 0-21435 65-0676005
------- ------- ----------
(State or Other Jurisdiction (Commission (IRS Employer or
of Incorporation) File Number) Identification No.)
100 Northeast Third Avenue, Second Floor, Fort Lauderdale, FL 33301
- ------------------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) (954) 768-1900
- ---------------------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address; if Changed Since Last Report)
<PAGE> 2
Item 5. Other Events.
On November 13, 1996, Florida Panthers Holdings, Inc. (the "Registrant"
or the "Company") acquired from H. Wayne Huizenga all of the partnership
interests in Decoma Investment, Inc. I ("Decoma I") and Decoma Investment, Inc.
II ("Decoma II"), in exchange for a total of 870,968 shares of the Company's
Class A Common Stock (the "Decoma Acquisition"). Decoma I and Decoma II
(collectively the "Decoma Entities") own approximately 78% of the partnership
interests in Decoma Miami Associates, Ltd., a Florida limited partnership
("DMAL"), which operates the Miami Arena. Reference is made to the Registrant's
Final Prospectus dated November 13, 1996 (Registration No. 333-12191), filed
pursuant to Rule 424(b) of the Securities Act of 1933, as amended, for a
description of the Decoma Acquisition, the financial statements of the Decoma
Entities and the pro forma financial information relating to the Decoma
Acquisition.
As the Decoma Acquisition was among entities under common control, it
has been accounted for on a historical cost basis in a manner similar to a
pooling of interests as of August 6, 1994, the date the Decoma Entities were
acquired by Mr. Huizenga. The Registrant is filing this Current Report on Form
8-K to restate its Consolidated Financial Statements for the fiscal years ended
June 30, 1996, 1995 and 1994. Accordingly, included under Item 7 of this
Current Report on Form 8-K are the restated Consolidated Financial Statements
of the Registrant for the fiscal years ended June 30, 1996, 1995 and 1994,
which give retroactive effect to the Decoma Acquisition.
2
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Florida Panthers Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Florida
Panthers Holdings, Inc. (a Florida corporation) and subsidiaries as of June 30,
1996 and 1995 and the related statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended June 30, 1996. These
consolidated 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Florida Panthers Holdings,
Inc. and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
November 13, 1996
(except with respect to the
matters discussed in Notes 8(a) and 8(b),
as to which the date is
January 16, 1997 and the matters
discussed in Notes 8(c), 8(d) and 8(e),
as to which the date is February 7, 1997).
2
<PAGE> 4
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents...................................... $ 465 $ 1,237
Accounts receivable....................................... 3,119 1,924
Prepaid expenses and other................................ 172 247
-------- --------
Total current assets................................... 3,756 3,408
Property and equipment, net................................. 972 1,114
Franchise cost, net of accumulated amortization of $1,823
and $1,216 in 1996 and 1995, respectively................. 22,489 23,096
Player contract acquisition costs, net of accumulated
amortization of $19,181 and $10,676 in 1996 and 1995,
respectively.............................................. 6,507 15,012
Investment in Miami Arena operating contract................ 8,886 9,271
Capitalized signing bonuses, net of accumulated amortization
of $3,089 and $837 in 1996 and 1995, respectively......... 4,674 1,138
Other assets................................................ 476 548
-------- --------
Total assets........................................... $ 47,760 $ 53,587
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Deferred revenue.......................................... $ 988 $ 3,917
Note payable-related party................................ 40,172 22,226
Related party debt........................................ 20,000 20,000
Accounts payable and accrued expenses..................... 2,313 1,375
Other current liabilities................................. 4,313 2,774
-------- --------
Total current liabilities.............................. 67,786 50,292
Long-term debt.............................................. 25,000 25,000
Other non-current liabilities............................... 3,277 643
Commitments and contingencies (Note 7 and Note 8)
Shareholders' Equity (Deficit):
Class A common stock, $.01 par value, 100,000,000 shares
authorized and 870,968 shares issued and outstanding in
1996 and 1995.......................................... 9 9
Class B common stock, $.01 par value, 10,000,000 shares
authorized and none issued and outstanding............. -- --
Contributed capital....................................... (48,312) (22,357)
-------- --------
Total shareholders' equity (deficit)................... (48,303) (22,348)
-------- --------
Total liabilities and shareholders' equity (deficit)... $ 47,760 $ 53,587
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
3
<PAGE> 5
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Tickets.................................................. $ 23,226 $ 9,559 $ 14,784
Television and radio..................................... 5,141 3,717 3,163
Advertising and promotions............................... 2,192 1,297 1,534
NHL Enterprise rights.................................... 885 846 761
Decoma arena operations.................................. 1,082 1,415 --
Other, primarily arena concessions....................... 1,561 912 1,440
-------- -------- --------
Total revenue.................................... 34,087 17,746 21,682
Cost of revenue:
Team operations.......................................... 32,639 15,652 17,691
Ticketing and arena operations........................... 3,319 1,558 2,498
Selling, general and administrative...................... 8,371 5,569 5,512
-------- -------- --------
Total cost of revenue............................ 44,329 22,779 25,701
Amortization and depreciation.............................. (9,815) (6,266) (6,444)
-------- -------- --------
Operating loss............................................. (20,057) (11,299) (10,463)
Interest and other, net.................................... (5,082) (4,087) (2,463)
-------- -------- --------
Net loss................................................... $(25,139) $(15,386) $(12,926)
======== ======== ========
Pro Forma net loss per share............................... $ (4.76) $ (2.96) $ (2.93)
======== ======== ========
Pro Forma weighted average shares outstanding.............. 5,276 5,203 4,405
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE> 6
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK
------------------ TOTAL
NUMBER OF CONTRIBUTED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EQUITY (DEFICIT)
--------- ------ ----------- ----------------
<S> <C> <C> <C> <C>
Balance, July 1, 1993.............................. -- $-- $ (936) $ (936)
Net loss......................................... -- -- (12,926) (12,926)
------- --- -------- --------
Balance, June 30, 1994............................. -- -- (13,862) (13,862)
Acquisition of Decoma Entities................... 870,968 9 8,193 8,202
Net loss......................................... -- -- (15,386) (15,386)
Dividends-Decoma................................. -- -- (1,302) (1,302)
------- --- -------- --------
Balance, June 30, 1995............................. 870,968 9 (22,357) (22,348)
Net loss......................................... -- -- (25,139) (25,139)
Dividends-Decoma................................. -- -- (816) (816)
------- --- -------- --------
Balance June 30, 1996.............................. 870,968 $ 9 $(48,312) $(48,303)
======= === ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE> 7
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................................. $(25,139) $(15,386) $(12,926)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization.......................... 9,815 6,266 6,444
Deferred compensation.................................. 1,334 363 169
Minority interest...................................... 174 384 --
Changes in operating assets and liabilities --
Accounts receivable.................................... (1,195) 440 (1,322)
Prepaid expenses and other assets...................... (3,425) (604) (1,468)
Accounts payable and accrued expenses.................. 938 448 1,403
Deferred revenue and other liabilities................. 138 (705) (3,905)
-------- -------- --------
Net cash used in operating activities............. (17,360) (8,794) (11,605)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (140) (161) (1,275)
-------- -------- --------
Net cash used in investing activities............. (140) (161) (1,275)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable -- related party................. (3,500) (7,200) (5,500)
Borrowings from note payable -- related party............. 21,446 17,733 10,749
Payment of dividends -- Decoma............................ (816) (1,302) --
Distribution to minority interests -- Decoma.............. (402) (486) --
-------- -------- --------
Net cash provided by financing activities......... 16,728 8,745 5,249
-------- -------- --------
Net decrease in cash and equivalents.............. (772) (210) (7,631)
CASH AND EQUIVALENTS:
Balance, beginning of year................................ 1,237 1,447 9,078
-------- -------- --------
Balance, end of year...................................... $ 465 $ 1,237 $ 1,447
======== ======== ========
Supplemental Cash Flow Information:
Cash paid during the year for interest.................... $ 3,750 $ 3,461 $ 2,510
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
<PAGE> 8
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(1) ORGANIZATION AND BASIS OF PRESENTATION
(a) General
Florida Panthers Holdings, Inc. (the "Company"), through its wholly-owned
subsidiary, Florida Panthers Hockey Club, Ltd. ("Limited" or the "Club"), owns
and operates the Florida Panthers, a professional hockey team (the "Panthers")
of the National Hockey League (the "NHL"). Additionally, the Company owns Arena
Development Company Ltd., a Florida limited partnership formed for the purpose
of developing a new multi-purpose, state-of-the-art sports and entertainment
center (the "Broward County Civic Arena") in Broward County, Florida, and Arena
Operating Company Ltd., a Florida limited partnership formed for the purpose of
managing and operating the Broward County Civic Arena. Through its ownership of
Decoma Investment, Inc. I ("Decoma I") and Decoma Investment, Inc. II ("Decoma
II"), the Company also owns approximately 78% of the partnership interests in
Decoma Miami Associates Ltd., a Florida limited partnership ("DMAL") which
operates the Miami Arena in which the Panthers currently play.
(b) Initial Public Offering and Reorganization
On November 13, 1996, the Company completed an initial public offering of
its Class A common stock. Prior to the completion of the initial public offering
and the concurrent offering (the "Offerings") Mr. H. Wayne Huizenga, the
Company's chairman, contributed the Club's Note Payable -- Related Party to the
partnership. Following this contribution, all of the Club's partnership
interests were exchanged for 4,149,710 shares of the Company's Class A common
stock and 255,000 shares of the Company's Class B common stock (the
"Recapitalization"). In addition, prior to the completion of the Offerings, all
of the partnership interests of Decoma I and Decoma II (collectively, "the
Decoma Entities") were acquired by the Company in exchange for a total of
870,968 shares of its Class A common stock. As this transaction was among
entities under common control, it has been accounted for on a historical cost
basis in a manner similar to a pooling of interests, as of their acquisition
date by Mr. Huizenga, August 6, 1994 and the Financial Statements have been
revised, accordingly.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Hockey Revenue and Expense
Revenue from Tickets, Television and radio broadcasting and Advertising and
promotions revenues generally are recorded at the time the game to which such
proceeds relate is played. Team operations expenses, principally player
compensation and game and playoff expenses (principally arena rentals and
travel) are recorded as expense on the same basis. Accordingly, advance ticket
sales and payments on television and radio broadcasting contracts and payments
for team and game expenses not earned or incurred are recorded as Deferred
revenues, Capitalized signing bonuses are amortized ratably as regular season
games are played.
(b) Arena Management Revenue and Expense
Arena management revenue is recognized as earned and the related costs are
charged to operations as incurred, in accordance with the terms of the Miami
Arena Operating Contract (the "MAC").
(c) Pro Forma Net Loss Per Share
Pro forma net loss per share is calculated assuming that the 4,404,710
shares of the Company's common stock issued in connection with the consummation
of the Recapitalization described in Note 1 were outstanding at the beginning of
all periods presented and that the 870,968 shares issued in connection with the
7
<PAGE> 9
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition of the Decoma Entities were outstanding since August 6, 1994, the
date such entities were acquired by Mr. Huizenga.
(d) Cash and Equivalents
Cash and equivalents consist primarily of cash in banks and highly-liquid
investments with original maturities of 90 days or less.
(e) Note Payable -- Related Party
Note payable-related party represents a short-term borrowing of cash
required for working capital from the Company's chairman. Such note bears
interest at prime (8.25% at June 30, 1996) and is required to be repaid on
demand.
(f) Property and Equipment
Property and equipment is recorded at cost. Depreciation and amortization
have been computed using the straight-line method over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements...................................... 5-20
Furniture, fixtures and equipment........................... 5- 7
</TABLE>
(g) Franchise Cost
The Club was required to pay a $50,000,000 franchise fee to the NHL, of
which $25,688,000 was allocated to the contracts of players selected in the 1993
expansion draft. The allocation was based upon the fair value of the player
contracts acquired as determined by an independent appraisal firm. The portion
allocable to player contracts is being amortized on a straight-line basis over
the estimated useful lives of the contracts which has been determined to be
approximately 6 years. The remaining portion of the franchise fee is classified
as Franchise costs in the accompanying balance sheets and is being amortized on
a straight-line basis over a 40 year life. For the fiscal years ended June 30,
1996, 1995 and 1994, the Club amortized $8,504,800, $5,083,856 and $5,592,189,
respectively, in player contract acquisition costs. The amortization for the
fiscal years ended June 30, 1996, 1995 and 1994 includes $4,899,630, $961,638
and $1,469,971 respectively, related to the write-off of unamortized player
contract costs due to the outright release of certain players and the
write-downs of contracts of active players to reflect reductions in remaining
value.
The Club accounts for trades of player contracts as like-kind exchanges,
whereby the recorded basis of the contract of the acquired player(s) is equal to
the net book value of the contract of the traded player(s) plus or minus any
cash consideration.
The Club continually evaluates whether events and circumstances have
occurred that indicate that the remaining estimated useful life of intangible
assets, such as franchise cost and player contract acquisition costs, may
warrant revision or that the remaining balance of the intangible asset may not
be recoverable. If factors indicate that the franchise cost or player contract
acquisition costs may be impaired, the Club uses an estimate of the remaining
value of the franchise rights or the individual player's contract in measuring
whether the intangible asset is recoverable. Unrecoverable amounts are charged
to operations in the applicable period.
Effective July 1, 1995, the Company implemented the provisions of the
Financial Accounting Standards Board's ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." As the Company
had continually evaluated the realizability of its long-lived assets, adoption
of the statement did not have a material effect on the Company's financial
statements at the date of adoption.
8
<PAGE> 10
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Player Contract Costs
Signing bonuses are amortized over the life of the player contract. Such
signing bonuses expensed totaled approximately $2,251,700, $617,000 and $220,000
in the years ended June 30, 1996, 1995 and 1994, respectively, and have been
included in Team operations in the accompanying consolidated statements of
operations.
Employment contracts with certain players require future compensation under
certain circumstances. Generally, these contracts are executory in nature;
accordingly, related payments are charged to operations over the contract
playing seasons.
The Club has obtained disability insurance policies for several of its
players under multi-year contracts. Benefits would become payable after thirty
consecutive games were missed by the insured player. The policies provide
payment of a portion of the player's salary for the remaining term of the
contract or until the player can resume playing.
(i) Investment in Miami Arena Operating Contract
Amounts invested in the MAC have been reflected as Investment in Miami
Arena operating contract in the accompanying combined balance sheets. Such
amounts are being amortized using the straight-line method over the remaining
term of the MAC.
(j) Deferred Revenue
Deferred revenue as of June 30, 1996, 1995 and 1994 consists primarily of
payments for ticket purchases for the respective upcoming seasons. Ticket
revenue is recognized as the underlying games are played.
(k) Income Taxes
The Company, as of the date of its incorporation, has adopted the
provisions of SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109
requires, among other things, recognition of future tax benefits measured at
enacted rates attributable to the deductible temporary differences between the
financial statement and income tax bases of assets and liabilities and net
operating loss carryforwards to the extent that the realization of said benefits
is "more likely than not". The adoption of SFAS No. 109 did not have a material
impact on the financial position or results of operations of the Company.
Prior to the reorganization discussed above, the Company's subsidiaries
were non-tax paying entities. Accordingly, for all periods presented, no income
tax provision has been provided, nor have any deferred tax assets or liabilities
been established.
(l) Concession Agreement
Certain unrelated third party companies have the rights, at home games, to
sell consumable and non-consumable concessions. The Club is entitled to
effectively receive amounts ranging from 7% to 35% of the hockey net consumable
and non-consumable concessions income. The Club recorded $832,303, $363,401 and
$763,651 for the years ended June 30, 1996, 1995 and 1994, respectively, in
hockey net consumable and non-consumable concessions income. Such amounts have
been included as a component of Other revenue in the accompanying consolidated
statements of operations.
(m) Television and Radio Agreements
In August 1996, the Company entered into a letter of intent with
SportsChannel Florida ("SportsChannel") for the local broadcast of the Panthers'
games. The Company's chairman currently owns 50% of SportsChannel and he holds
an option to purchase an additional 20% ownership interest of SportsChannel.
Under the terms of this letter of intent, the Company shall grant to
SportsChannel broadcast rights (other
9
<PAGE> 11
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
than radio broadcast rights) to all of the Panthers' pre-season, regular season
and certain post-season away games during the 1996-97 season. The letter of
intent may be extended for an additional season upon notice by the Company. The
obligations of the Company and SportsChannel are subject to the negotiation of a
definitive agreement. There can be no assurance that the Company and
SportsChannel will enter into a definitive agreement. Currently, the Company and
SportsChannel have been operating under the terms of this letter of intent.
In addition, the Club entered into a letter of intent with Sunshine
Wireless Company Inc. ("Sunshine") for the local radio broadcast of all of the
Panthers' games. Under the terms of this letter of intent, Sunshine will have
local radio broadcast rights to all of the Panthers' pre-season, regular season
and post-season games during the 1996-97 season. Currently, the Company and
Sunshine have been operating under the terms of this letter of intent.
(n) Advertising Agreements
The Club has entered into multi-year agreements with several sponsors for
advertising and promotional activities. Such agreements expire at various dates
through June 30, 1998. The Club recognizes this revenue on a pro-rata basis over
the term of the underlying agreements.
(o) Fair Value of Financial Instruments
As of June 30, 1996 and 1995, the carrying amount of cash and equivalents,
accounts receivable, note payable-related party, accounts payable and accrued
expenses and long-term debt are reflected in the financial statements at cost
which approximates fair value.
(p) 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. Actual results could differ from those estimates.
(q) Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Certain amounts in the
accompanying financial statements have been reclassified to conform with the
current year presentation.
(r) Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". Under the provisions of SFAS No. 123, companies can either
measure the compensation cost of equity instruments issued under employee
compensation plans using a fair value based method, or can continue to recognize
compensation cost using the intrinsic value method under the provisions of
Accounting Principles Board Opinion ("APB") No. 25. However, if the provisions
of APB No. 25 are continued, pro forma disclosures of net income or loss and
earnings or loss per share must be presented in the financial statements as if
the fair value method had been applied. The Company intends to recognize
compensation costs under the provisions of APB No. 25, and upon adoption of SFAS
No. 123 as of July 1, 1996, will provide the expanded disclosure required by
SFAS No. 123. As of November 13, 1996, a stock option plan had not yet been
formalized.
10
<PAGE> 12
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) THE MIAMI ARENA
The Miami Arena (the "Arena") is owned by the Miami Sports and Exhibition
Authority ("MSEA"), an agency of the City of Miami. Under the terms of the MAC
between MSEA and DMAL, DMAL was engaged to operate the Arena. The MAC is
scheduled to expire on July 8, 2020. Leisure Management Miami, Inc. ("LMMI"),
has been engaged to manage the operations of the Arena, including rental of
space, advertising, promotion, marketing, events management, box office, public
relations and all custodial and support services. During 1994, subsequent to the
execution of the MAC, approximately 50% of LMMI was acquired by the Company's
chairman.
A summary of certain terms of the MAC is presented below:
(a) Operating Income (Loss)
Under the terms of the MAC, the Arena's operating income (as defined by the
MAC) is used to fund certain expenses, and required payments before any
distributions are made to DMAL and MSEA.
(b) Seat Use Fee
In accordance with the terms of the MAC, a $.75 to $1.00 seat use fee is
collected by the Arena as part of the purchase price of all tickets sold. This
charge is remitted quarterly to DMAL and MSEA based on percentages detailed in
the MAC and is recognized by the Decoma Entities in the period during which the
amount of such fees has been estimated and is determined to be collectible.
(c) Operating Payment
Under the terms of the MAC, DMAL is to receive a management fee from the
Arena consisting of a fixed and variable operating payment. The fixed operating
payment is based on an annual amount of $275,000, as adjusted for inflation. The
variable operating payment is calculated as defined in the MAC, based upon the
revenues of the Arena. In accordance with the terms of the MAC, the variable
operating payment is made only after the Arena's operating income (as defined in
the MAC) has been used to fund certain operating expenses and required payments.
Any unpaid management fees are deferred up to a maximum of $1,000,000. DMAL is
not entitled to recover any unpaid management fees in excess of $1,000,000. The
Decoma Entities recognize variable operating payments as revenue in the period
during which the amount of such payments has been determined and the
collectibility is considered to be probable.
(4) RELATED PARTY TRANSACTIONS
During the year ended June 30, 1994, certain private corporate aircraft
owned by Huizenga Holdings, Inc. ("HHI", a corporation whose sole shareholder is
the Company's chairman) and its subsidiaries were leased by the Club. To the
extent that such aircraft were used by Club employees, the actual operating and
overhead costs related to such aircraft was charged back to the Club based on
its pro-rata share of flight hours used during any given month. The Club
incurred $94,613 of such charges in the year ended June 30, 1994. No such
related party charges were incurred during the years ended June 30, 1996 and
1995.
The Club pays a management fee to HHI equal to 1% of total revenue,
excluding all NHL national television revenue and NHL Enterprise rights. Such
fees totaled $293,239, $132,339 and $193,576 for the years ended June 30, 1996,
1995 and 1994, respectively, and are reflected as a component of Selling,
general and administrative expenses in the accompanying consolidated statements
of operations.
During 1996, 1995 and 1994, the Company incurred interest expense of
$3,448,136, $2,306,986 and $1,364,624, respectively, to related parties.
11
<PAGE> 13
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) RELATED PARTY AND LONG-TERM DEBT
In June 1993, the Company entered into a $25,000,000 revolving credit
facility with a bank for the purpose of financing a portion of the $50,000,000
NHL franchise fee and to obtain working capital for use by Limited. The credit
facility was subsequently converted to a $25,000,000 term loan. The Company is
required to make quarterly interest payments through June 30, 1997 and quarterly
principal and interest payments
commencing July 1, 1997 and expiring May 31, 2001. The interest rate is LIBOR
plus .75 percent per annum (6.34% at June 30, 1996). Following the completion of
the Offerings discussed above, this term loan was repaid in full.
In connection with this term loan, the Club is required to maintain
compliance with certain financial and other covenants. Substantially all of the
assets of the Club have been pledged as collateral and the Company's chairman
has provided a guaranty of the obligations related to this term loan.
In June 1993, Limited entered into an agreement with an affiliate, Panthers
Investment Venture ("PIV"), whereby Limited borrowed $20,000,000 bearing
interest at LIBOR plus .75 percent per annum (6.34% at June 30, 1996). This note
was issued contemporaneously with, and with terms similar to, a promissory note
issued by PIV to a bank. PIV was a joint venture between the Company's chairman
and Blockbuster Entertainment Corporation ("BEC"). However, during fiscal 1996,
the terms of the joint venture agreement were modified such that BEC was no
longer a party to the venture. PIV's note payable to the bank is guaranteed by
the Company's chairman. This note is subordinated to the $25,000,000 term loan
discussed above. Following the completion of the Offerings discussed above, this
note was repaid in full.
The Club paid a commitment fee of $225,000 in connection with disbursements
under these long-term debt arrangements. This amount has been capitalized as
Other assets in the accompanying consolidated balance sheets and is being
amortized over the period of the debt.
The Club has entered into a series of interest rate swap agreements which
synthetically fix the interest rates on the long-term debt agreements at 5.19%
and 4.85% for the $25,000,000 term loan and the $20,000,000 PIV note payable,
respectively. Such agreements expire concurrently with the underlying debt
agreements. The Club accounts for these agreements as a hedge against the risk
of future increases in interest rates. For the years ended June 30, 1996 and
1994, the Club recognized interest expense and income of approximately $353,000
and $134,000, respectively, as a result of entering into these interest rate
swap agreements. For the year ended June 30, 1995, the Club recognized interest
income and expense of $329,000 and $63,000, respectively, as a result of
entering into these interest rate swap agreements. Amounts related to these
interest rate swap agreements are reflected as a component of net interest
expense in the accompanying consolidated statements of operations.
(6) EMPLOYEE BENEFIT PLANS
The Club's NHL hockey players are covered under the NHL Club Pension Plan
and Trust (the "Plan") which is administered by the NHL and represents a
multi-employer defined contribution plan. The Club contributions to the Plan
totaled $179,606, $89,379 and $183,564 for the years ended June 30, 1996, 1995
and 1994, respectively. Such contributions are included in Team operations in
the accompanying consolidated statements of operations.
Certain of the Club's employees are participants in a 401(k) Savings and
Retirement Plan (the "401(k)"), a defined contribution plan for non-players. The
401(k) is available to employees over the age of 21 with at least one year of
service who work a minimum of 1,000 hours per year. Game day arena employees are
ineligible to participate in the 401(k). The Club may match a discretionary
percentage of the amount contributed by the participant up to a limit of 6% of
annual compensation. Employees may contribute up to 10% of their annual
compensation. Participants are automatically vested in compensation deferrals.
Vesting in Club matching contributions is at the rate of 20% after one year of
plan participation, 40% after two years, 60%
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FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
after three years, 80% after four years and 100% after five years. The Club did
not make a discretionary contribution in 1996, 1995 or 1994.
Through March 31, 1995, the Club's employees other than players and coaches
were covered under a self-insured group health plan sponsored by HHI. The Club
fully reimbursed the third-party administrator for its actual billed cost,
including the cost of all paid claims for all Club employees other than coaches
and players. Beginning April 1, 1995 the Club obtained commercial insurance
coverage to cover such employees'
health care costs for which employees make partial contributions. Players and
coaches are covered under the NHL Medical and Dental Plan administered by the
NHL, for which the Club pays 100% of the premiums.
(7) COMMITMENTS AND CONTINGENCIES
The Club is a party to a license agreement with LMII for the use of the
Arena, for its home games. In May 1996, the Company entered into an amendment to
the lease for the Miami Arena (the "Lease Agreement"), extending the term of the
lease (which was scheduled to expire at the end of the 1995-96 season) to July
31, 1998, with two one-year options for the 1998-99 season and the 1999-2000
season. The Lease Agreement contained substantially the same economic terms as
the Miami Arena lease and was subject to approval of MSEA. In June 1996, MSEA
rejected the Lease Agreement and demanded that the Panthers vacate the Miami
Arena. Subsequently, the Company sought and obtained a preliminary injunction
enjoining MSEA from taking actions to prevent the Panthers from utilizing the
Miami Arena pursuant to the Lease Agreement. MSEA has indicated that it plans to
appeal the decision rendered by the court. In the event MSEA is ultimately
successful in its appeal, the Company will need to find and enter into a lease
for an alternative playing site (within or outside of Florida) until such time
as the Broward County Civic Arena is completed. There can be no assurance that
the Company will be able to find and enter into a lease for an alternative
playing site.
The terms of the license and the related agreements provide for the Club to
pay minimum rent of $9,000 per home game, a seat use charge of $.75 per ticket
sold and 7.5% of gross ticket sales proceeds over $200,000 per season plus
utilities, staffing and other operating expenses. For the years ended June 30,
1996, 1995 and 1994, rent expense for the lease of the Arena was $1,787,795,
$729,382 and $1,173,181, respectively.
The Club has entered into employment agreements with various player and
non-player employees which expire at various dates through June of 1999. As of
June 30, 1996, the terms of these employment agreements require future payments,
excluding bonuses, as follows:
<TABLE>
<CAPTION>
FISCAL
- ------
<S> <C>
1997........................................................ $17,757,121
1998........................................................ 11,351,083
1999........................................................ 2,013,049
-----------
$31,121,253
===========
</TABLE>
In June 1996, the Company entered into a license agreement for the use of
the Broward County Civic Arena (the "Broward License Agreement"). In connection
therewith, Broward County will receive revenue (the "County Preferred Revenue")
from the operations of the Broward County Civic Arena for an amount to be
determined concurrent with the issuance of the bonds. The Company has provided
Broward County a guaranty pursuant to which the Company will be obligated to pay
Broward County the County Preferred Revenue Obligation. The Company believes
that the revenue generated from the operations of the Broward County Civic Arena
will be sufficient to provide Broward County with the County Preferred Revenue.
The Broward License Agreement commences upon the completion of construction of
the Broward County Civic Arena, which is currently scheduled for October 1,
1998; however, the commencement of the Broward License Agreement may be deferred
by the Club until the following NHL hockey season in the event the
13
<PAGE> 15
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Broward County Civic Arena is completed between March 1 and July 1, 1999. Once
commenced, the Broward License Agreement is for a term of 30 years, which may be
extended for five year periods, subject to certain conditions, pursuant to
options granted to the Club by Broward County.
The Broward License Agreement entitles the Company to exclusive use of the
Broward County Civic Arena during the playing of all its home games, and
provides for nonexclusive use by the Club for practices and other team uses.
Additionally, the License Agreement provides the Company with exclusive use of
certain spaces within the Broward County Civic Arena to be used for a retail
store, offices, a box office, a locker room and a training and weight room. The
Broward License Agreement contains a use covenant which requires the
Company to play all of its home games at the Broward County Civic Arena during
the term of the Broward License Agreement.
Pursuant to the Broward License Agreement, the Company is entitled to
receive all revenues from the sale of (i) general seating ticket sales for its
home games to be played at the Broward County Civic Arena, (ii) non-consumable
concession items at the Broward County Civic Arena during its home games, (iii)
items in the Club's retail store to be located within the Broward County Civic
Arena, (iv) (in conjunction with and subject to the rights of the NHL) the
rights to all television and radio and other media broadcasting rights for
hockey related events at the Broward County Civic Arena, (v) advertising within
or on certain designated locations at the Broward County Civic Arena during
hockey related events and (vi) Panthers' related sponsorships or NHL league-wide
sponsorships. In addition, the Club is entitled to receive the first $14 million
of "net operating income" generated by the Broward County Civic Arena and 80%
with Broward County receiving 20% of all net operating income generated by the
Broward County Civic Arena in excess of $14 million. "Net operating income" is
defined to include revenues from building naming rights fees, food and beverage
concessions, parking, non-hockey related advertising and all other revenues
generated from non-hockey related events offset by certain arena operating and
financing costs.
The Club is obligated to pay rent in the amount of $7,500 per home game
played by the Panthers at the Broward County Civic Arena and to pay certain
utility and event staffing expenses, but the combined amounts payable by the
Club under the Broward License Agreement will not exceed 5% of the gross
receipts from the sale of general seating tickets to the Panthers' home games.
(8) SUBSEQUENT EVENTS
(a) Exchange Agreements
On December 22, 1996, the Company entered into two definitive agreements
(the "Exchange Agreements"), relating to the acquisition by the Company of
direct and indirect ownership interests in each of the Hyatt Regency Pier 66
Resort & Marina and the Radisson Bahia Mar Beach Resort, in exchange for
4,450,000 shares and 3,950,000 shares of the Company's Class A Common Stock,
respectively (together, the "Exchanges").
The consummation of each of the Exchanges is subject to various conditions
as set forth in the respective Exchange Agreements, including obtaining the
approval of the holders of a majority of the shares of the Company's Common
Stock entitled to vote thereon. The consummation of each of the Exchanges is
contingent upon the consummation of the other Exchange.
(b) Broward County Litigation
A lawsuit was filed on January 9, 1997 by Arena Development, seeking a
determination as to the applicability of Broward County's Prevailing Wage
Ordinance to the construction of the Broward County Civic Arena. The suit was
filed in the Seventeenth Judicial Circuit in and for Broward County, Florida.
The complaint filed alleges that the Prevailing Wage Ordinance does not apply to
the construction of the Facility for two reasons: (i) the Prevailing Wage
Ordinance only applies to construction contracts in excess of
14
<PAGE> 16
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$250,000 to which Broward County is a party and Broward County is not a party to
the construction contract between Arena Development and the general contractor,
and (ii) the Development Agreement contains all the obligations and
responsibilities of both parties and does not include a provision mandating that
Arena Development comply with the Prevailing Wage Ordinance. The Prevailing Wage
Ordinance requires that all contracts to which the ordinance applies must
contain such a provision. The complaint further alleges that if the court
determines that the Prevailing Wage Ordinance applies it could cost Arena
Development up to approximately $7,500,000 in additional construction costs. The
lawsuit asks for a declaratory judgement finding the Prevailing Wage Ordinance
does not apply to the construction of the Facility and that Arena Development
may continue without reference to the ordinance. An unfavorable outcome of this
suit may require Panthers Holdings to incur additional costs.
(c) Acquisition of Ice Rink Facility
On January 31, 1997, the Company acquired substantially all of the assets
of Iceland (Coral Springs) Corp. and Iceland Holdings, Inc., including a twin
pad ice rink facility in exchange for the assumption by the Company of a maximum
obligation of approximately $8,100,000 in construction-related obligations, of
which approximately $6,700,000 was repaid upon consummation of the referenced
acquisition. In addition, the Company acquired from an architectural firm and
its principal certain architectural plans and designs relating to the ice rink
facility in exchange for $1,000,000 in cash as well as certain trademarks used
in connection with the operations of the ice rink facility in exchange for
212,766 shares of Company's Class A Common Stock. These acquisitions will be
accounted for as a purchase business combination.
(d) Private Placement Transaction
On January 30, 1997, the Company issued and sold 2,460,000 shares of Class
A Common Stock in a Private Placement at a price of $27.75 per share. The
Private Placement resulted in net proceeds to the Company of $66,976,550 after
deducting placement agency fees and other expenses.
(e) Securities Litigation
On January 28, 1997, a purported class action lawsuit was filed against the
Company and certain of its officers and directors which alleges, among other
things, that the defendants violated the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in connection with sales of the Company's Class A
Common Stock by the plaintiff and others in the purported class between November
13, 1996 and December 22, 1996. The suit generally seeks, among other things,
certification as a class and an award of damages in an amount to be determined
at trial. The Company intends to vigorously defend against this suit.
15
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FLORIDA PANTHERS HOLDINGS, INC.
February 25, 1997
By: /s/ Steven M. Dauria
-------------------------------
Steven M. Dauria
Vice President and Chief Financial Officer
16
