SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 1-13173
FLORIDA PANTHERS HOLDINGS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 65-0676005
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
450 East Las Olas Boulevard, Fort Lauderdale, Florida 33301
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(Address of Principal Executive Offices) (Zip Code)
(954) 712-1300
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(Registrants Telephone Number, Including Area Code)
Not Applicable
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
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 the number of shares outstanding of each of the issuers' classes
of common stock, as of the latest practicable date.
As of May 12, 1998, there were 34,887,858 shares of Class A Common Stock,
$.01 par value per share, and 255,000 shares of Class B Common Stock, $.01 par
value per share, outstanding.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
Index to Quarterly Report on Form 10-Q
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1998 and June 30, 1997 3
Unaudited Consolidated Statements of Operations - Three Months Ended
March 31, 1998 and 1997 4
Unaudited Consolidated Statements of Operations - Nine Months Ended
March 31, 1998 and 1997 5
Unaudited Consolidated Statements of Cash Flows - Nine Months Ended
March 31, 1998 and 1997 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II - Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 19
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, June 30,
1998 1997
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 30,271 $ 13,709
Restricted cash 21,474 30,110
Accounts receivable 38,717 13,087
Inventory 7,096 5,763
Current portion of Premier Club notes receivable 3,900 3,778
Other current assets 5,874 4,143
Total current assets 107,332 70,590
Property and equipment, net 912,703 475,391
Intangible assets, net 38,370 40,987
Premier Club notes receivable, net of current portion 7,685 8,240
Other assets 11,837 5,184
---------- --------
Total assets $1,077,927 $600,392
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 55,195 $ 34,590
Deferred revenue 17,588 10,015
Short-term debt 182,216 -
Convertible note payable 100,250 -
Other current liabilities 4,856 3,631
Total current liabilities 360,105 48,236
Long-term debt 211,980 186,056
Premier Club membership fees 65,441 63,499
Other non-current liabilities 2,453 1,448
Minority interest in consolidated entities 859 -
Commitments and contingencies (Note 4 and 5)
Shareholders' Equity:
Preferred Stock, $ .01 par value, 5,000,000 shares
authorized, none issued - -
Class A Common Stock, $ .01 par value, 100,000,000
shares authorized and 35,138,763 and 27,929,570
shares outstanding at March 31, 1998 and
June 30, 1997, respectively 351 279
Class B Common Stock, $ .01 par value, 10,000,000
shares authorized and 255,000 shares issued
and outstanding at March 31, 1998 and
June 30, 1997 3 3
Contributed capital 437,036 304,095
Accumulated deficit ( 301) ( 3,224)
---------- --------
Total shareholders' equity 437,089 301,153
---------- --------
Total liabilities and shareholders' equity $1,077,927 $600,392
========== ========
The accompanying notes are an integral part of these statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31
(In thousands, except per share data)
1998 1997
---- ----
Revenue:
Leisure and recreation $ 92,281 $ 4,952
Entertainment and sports 13,471 16,802
-------- ---------
Total revenue 105,752 21,754
Operating Expenses:
Cost of leisure and recreation services 32,831 1,639
Cost of entertainment and sports services 18,218 14,396
Selling, general and administrative expenses 25,859 3,146
Amortization and depreciation expense 6,538 1,791
-------- --------
Total operating expenses 83,446 20,972
Operating income 22,306 782
Interest and other income 366 863
Interest and other expense (7,865) ( 241)
Minority interest ( 887) ( 127)
--------- ----------
Net income $ 13,920 $ 1,277
========= ==========
Net income per share - basic $ 0.40 $ 0.08
========= ==========
Net income per share - diluted $ 0.39 $ 0.07
========= ==========
Shares used in computing net income per share - basic 35,118 16,875
========= ==========
Shares used in computing net income per share - diluted 35,788 17,510
========= ==========
The accompanying notes are an integral part of these statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended March 31
(In thousands, except per share data)
1998 1997
---- ----
Revenue:
Leisure and recreation $180,661 $ 4,952
Entertainment and sports 34,620 32,185
-------- ----------
Total revenue 215,281 37,137
Operating Expenses:
Cost of leisure and recreation services 76,299 1,639
Cost of entertainment and sports services 39,795 30,347
Selling, general and administrative expenses 66,223 7,243
Amortization and depreciation expense 15,453 3,586
-------- ----------
Total operating expenses 197,770 42,815
Operating income (loss) 17,511 ( 5,678)
Interest and other income 1,683 1,014
Interest and other expense (14,528) ( 2,442)
Minority interest ( 1,743) ( 416)
-------- ----------
Net income (loss) $ 2,923 $( 7,522)
======== ==========
Net income (loss) per share - basic $ 0.09 $( 0.72)
======== ==========
Net income (loss) per share - diluted $ 0.08 $( 0.72)
======== ==========
Shares used in computing net income (loss)
per share - basic 34,067 10,498
========= ==========
Shares used in computing net income (loss)
per share - diluted 34,474 10,498
========= ==========
The accompanying notes are an integral part of these statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31
(In thousands)
1998 1997
---- ----
Operating Activities:
Net income (loss) $ 2,923 $ ( 7,522)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Amortization and depreciation expense 15,453 3,586
Deferred compensation - ( 321)
Income applicable to minority interests 1,743 416
Change in operating assets and liabilities
(excluding the effects of business
acquisitions):
Accounts receivable ( 9,730) ( 3,811)
Other assets ( 658) 112
Accounts payable and accrued expenses ( 1,603) 542
Deferred revenue and other liabilities 6,862 3,013
----------- ---------
Net cash provided by (used in)
operating activities 14,990 ( 3,985)
Investing Activities:
Cash acquired in business acquisitions 12,999 -
Cash used in business acquisitions ( 209,561) ( 7,286)
Acquisition of additional interest in
consolidated subsidiary ( 27,423) -
Capital expenditures ( 28,482) ( 953)
----------- ---------
Net cash used in investing activities ( 252,467) ( 8,239)
Financing Activities:
Net proceeds from issuance of common stock 108,764 131,938
Borrowings under short-term debt agreement 182,216 -
Payments under note payable to related party - (20,340)
Payments under long term debt and credit line
agreements ( 76,205) (25,130)
Borrowings under revolving credit line 39,000 1,131
Other 264 ( 711)
---------- ----------
Net cash provided by financing activities 254,039 86,888
Increase in cash and cash equivalents 16,562 74,664
Cash and cash equivalents, at beginning of period 13,709 465
---------- ----------
Cash and cash equivalents, at end of period $ 30,271 $ 75,129
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Florida Panthers
Holdings, Inc. and subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The financial information furnished herein reflects all adjustments consisting
of normal recurring accruals that, in the opinion of management, are necessary
for a fair presentation of the results for the interim period. The results of
operations for the three and nine months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year
primarily due to seasonal variations. All significant intercompany accounts have
been eliminated. A tax provision has been excluded from the presentation based
on the fact that the Company has adequate net operating loss carryforwards to
offset earnings presented.
2. Organization
The Company is a holding company with subsidiaries currently operating in two
business segments: (i) leisure and recreation (the "Leisure and Recreation
Business") and (ii) entertainment and sports (the "Entertainment and Sports
Business").
The Leisure and Recreation Business presently consists of the Company's
ownership of the Boca Raton Resort and Club ("Boca Resort"), the Arizona
Biltmore Hotel ("Arizona Biltmore"), the Hyatt Regency Pier 66 Hotel and Marina
("Pier 66"), the Radisson Bahia Mar Beach Resort and Yachting Center ("Bahia
Mar") and the Rolling Hills Golf Club ("Rolling Hills"). The Company also
maintains a 97% ownership interest in the Registry Hotel at Pelican Bay
("Registry Resort"). Boca Resort, Arizona Biltmore, Pier 66, Bahia Mar and
Registry Resort are collectively referred to as the "Resort Facilities". See
also Note 5 for the discussion of a subsequent event.
The Entertainment and Sports Business consists of the Florida Panthers Hockey
Club (the "Panthers"), the operations of two ice skating rinks, the development
and operation of the Broward County Arena, which is currently under construction
and an interest in the operations of the Miami Arena.
3. Sale of Common Stock
On August 11, 1997, the Company received $108.8 million in net proceeds from the
underwritten public offering of 6,000,000 shares of Class A Common Stock, par
value $ .01 ("Class A Common Stock"). A portion of the proceeds was used to
acquire Registry Resort. See Note 4.
4. Business Combinations
On August 13, 1997, the Company acquired its initial 68% ownership interest (325
of the 474 units) in Registry Resort for 918,174 shares of Class A Common Stock,
warrants to purchase 325,000 shares of Class A Common Stock (300,000 of which
are exercisable at $25.85 per share and 25,000 of which are exercisable at
$23.50 per share) and $75.5 million in cash. As of March 31, 1998, the Company
acquired 133 additional units for $27.4 million payable in cash (net of the
payoff of certain mortgage notes receivable to the Company associated with the
additional units) increasing its ownership interest to approximately 97%. The
Company currently has outstanding offers to acquire the remaining units of
Registry Resort.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On November 26, 1997, the Company acquired certain assets associated with
Rolling Hills in exchange for $8.0 million in cash. The assets acquired consist
of a 27-hole golf course located in Davie, Florida, a parking lot and
approximately 79 acres of undeveloped land adjacent to Rolling Hills.
On March 2, 1998, the Company acquired an ownership interest in Arizona
Biltmore in exchange for: (i) payment of $126.0 million in cash, (ii) payment in
the future of $100.3 million either in cash or shares of Class A Common Stock,
(iii) warrants to purchase 500,000 shares of the Company's Class A Common Stock
exercisable at $24.00 per share and (iv) the assumption of $63.1 million of
debt. The $100.3 million payment, which is classified as Convertible Note
Payable on the Consolidated Balance Sheet, bears interest at a rate of 5% per
annum and, at the election of the seller, shall be paid in either cash or shares
of Class A Common Stock. If the seller elects to receive cash, it must make such
election during specified election periods occurring between May 25, 1998 and
March 2, 2000. Once a cash election is made, the Company shall make payment
within 120 days after such election. Alternatively, the seller may elect to
receive shares of Class A Common Stock at a per share price of $26.00 at any
time from March 2, 1998 through March 2, 2008.
The initial acquisition of a 68% interest in Registry Resort, the acquisition of
Rolling Hills and the acquisition of Arizona Biltmore have been accounted for
under the purchase method of accounting. The preliminary purchase price
allocation for each is set forth below in thousands.
<TABLE>
<S>
<C> <C> <C> <C>
Arizona
Registry Rolling Hills Biltmore Total
-------- ------------- -------- -----
Cash acquired in connection with business acquisition $ 12,476 $ - $ 523 $ 12,999
Other current assets 7,347 150 16,265 23,762
Property and equipment 86,499 7,876 289,851 384,226
Other non-current assets 2,319 - - 2,319
Current liabilities ( 12,300) - ( 115,108) ( 127,408)
Long-term debt - - ( 63,129) ( 63,129)
Minority interest ( 4,046) - - ( 4,046)
Class A Common Stock issued or reserved for issuance ( 16,787) - ( 2,375) ( 19,162)
----------- ---------- ---------- ----------
Cash used in business acquisition $ 75,508 $ 8,026 $ 126,027 $ 209,561
=========== ========== ========== ==========
</TABLE>
The purchase price allocation for the subsequent acquisition of units in
Registry Resort in thousands is set forth below.
<TABLE>
<S>
<C>
Property and equipment $ 31,613
Reduction in other assets (mortgage notes receivable) resulting from
acquisition of additional interest in units of consolidated subsidiary ( 4,190)
-----------
Cash used to acquire additional interest in consolidated entity $ 27,423
===========
</TABLE>
The Company's consolidated results of operations on an unaudited pro forma
basis, assuming that the Registry Resort and Arizona Biltmore acquisitions and
sale of 6,000,000 shares of Class A Common Stock occurred at the beginning of
the periods presented, are set forth below in thousands, except for per share
data. See also Note 3.
<TABLE>
<S> <C> <C>
Nine Months Ended March 31
--------------------------
1998 1997
---- ----
Revenue $266,424 $108,699
Operating income $ 30,029 $ 10,418
Net income (loss) $ 296 $ (6,379)
Pro forma basic and diluted net income (loss) per common share $ 0.01 $( 0.61)
Number of shares used to compute net income (loss) per share - basic 35,109 10,498
Number of shares used to compute net income (loss) per share - diluted 35,516 10,498
</TABLE>
<PAGE>
5. Subsequent Event
On April 22, 1998, the Company acquired the Edgewater Beach Hotel ("Edgewater
Resort") located in Naples, Florida for $41.2 million. Approximately $20.7
million of the purchase price was paid in cash at closing and payment of the
remaining $20.5 million bears interest at a rate of 5% per annum and is payable
in either cash or shares of Class A Common Stock, at the election of the seller,
on or about October 22, 1999.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANACIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related Notes thereto included in the Company's Annual
Report on Form 10-K.
Results of Operations
The Company currently operates through two business segments (i) the Leisure and
Recreation Business and (ii) the Entertainment and Sports Business. The Leisure
and Recreation Business presently consists of the Company's ownership of Boca
Resort, Arizona Biltmore, Pier 66, Bahia Mar and Rolling Hills and an ownership
interest in Registry Resort. Following the financial reporting period covered by
this report, the Company expanded its Leisure and Recreation Business through
the acquisition of the Edgewater Beach Hotel on April 22, 1998. See Note 5. The
Entertainment and Sports Business consists of the Panthers, the Company's ice
skating rink operations and the arena development and management activities.
The Company has historically experienced, and expects to continue to experience,
seasonal fluctuations in its gross revenue and net earnings. Peak season at the
Resort Facilities extends from January through April, while regular season for
the Panthers commences in October and ends in April. Accordingly, the operating
results for the three and nine month periods ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year.
Business Segment Information
The table to follow sets forth business segment operating data, with costs and
expenses expressed as a percent of the related business segment revenue for the
period indicated in thousands.
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended March 31 Nine Months Ended March 31
----------------------------------------- -------------------------------------
1998 % 1997 % 1998 % 1997 %
---- ---- ---- ----
Revenue:
Leisure and recreation $ 92,281 87% $ 4,952 23% $180,661 84% $ 4,952 13%
Entertainment and sports 13,471 13% 16,802 77% 34,620 16% 32,185 87%
Total revenue 105,752 100% 21,754 100% $215,281 100% 37,137 100%
Operating Expenses:
Cost of Services
Leisure and recreation 32,831 36% 1,639 33% 76,299 42% 1,639 33%
Entertainment and sports 18,218 135% 14,396 86% 39,795 115% 30,347 94%
Selling, General and Administrative
Expenses
Leisure and recreation 19,954 22% 1,174 24% 51,037 28% 1,174 24%
Entertainment and sports 2,755 20% 1,468 9% 7,629 22% 5,411 17%
Corporate 3,150 - 504 - 7,557 - 658 -
Amortization and Depreciation
Leisure and recreation 5,365 6% 309 6% 12,258 7% 309 6%
Entertainment and sports 1,156 9% 1,482 9% 3,178 9% 3,277 10%
Corporate 17 - - - 17 - - -
Total operating expenses 83,446 79% 20,972 96% 197,770 92% 42,815 115%
Operating income - leisure and
recreation $ 34,131 $ 1,830 $ 41,067 $ 1,830
Operating loss - entertainment and
sports $ ( 8,658) $ ( 544) $( 15,982) $ (6,850)
Corporate general and administrative $ ( 3,167) $ ( 504) $ (7,574) $ ( 658)
Total operating income (loss) $ 22,306 $ 782 $ 17,511 $ (5,678)
</TABLE>
<PAGE>
Consolidated Results of Operations
Operating income for the three months ended March 31, 1998 and 1997 amounted to
$22.3 million and $782,000, respectively. The Company's operating income was
$17.5 million for the nine months ended March 31, 1998 compared to an operating
loss of $5.7 million for the nine months ended March 31, 1997. The improvement
in operating income during the 1998 periods was the result of strong results
from the Resort Facilities, partially offset by higher corporate general and
administrative expenses and higher losses from the Entertainment and Sports
Business. Additional information relating to the operating results for each
business segment is set forth below.
Leisure and Recreation
- ----------------------
Because the size of the Company's resort portfolio has increased to five
properties at March 31, 1998 from two properties at March 31, 1997, variations
in operating results between 1998 and 1997 resulted primarily from the Company's
business acquisitions. Each of the five Resort Facilities described in Note 2 to
the Consolidated Financial Statements was owned by the Company during the entire
nine months ended March 31, 1998, except for Registry Resort and the Arizona
Biltmore which were acquired on August 13, 1997 and March 2, 1998, respectively.
During the prior year, the Company acquired Pier 66 and Bahia Mar on March 4,
1997 and their results of operations are included in the consolidated results
for only a 27-day period. Accordingly, a comparison of certain nine-month data
has been excluded, as it is not meaningful.
Revenue
Leisure and Recreation Business revenue increased to $92.3 million for the
three months ended March 31, 1998 from $5.0 million for the three months ended
March 31, 1997, primarily due to business acquisitions. The Resort Facilities
experience the highest revenue and operating income during the third fiscal
quarter. Therefore, management expects leisure and recreation revenue for the
fourth fiscal quarter ending June 30, 1998 to be significantly lower than the
recently concluded quarterly period, as the peak season ends. More than 50% of
leisure and recreation revenue for the three and nine months ended March 31,
1998 were derived from activities of Boca Resort. In addition, over 50% of
consolidated resort revenue for the three and nine months ended March 31, 1998
was generated from non-room sources such as food and beverage sales, marina and
other amenity use and retail sales.
Operating Expenses
Cost of services totaled $32.8 million and $1.6 million for the three
months ended March 31, 1998 and 1997, respectively. Cost of services as a
percent of revenue, which is generally lowest in the third fiscal quarter (peak
season), was 36% and 42% for the three and nine months ended March 31, 1998,
respectively. Cost of leisure and recreation services consist primarily of
personnel and other direct costs incurred in connection with servicing the
Resort Facilities' rooms, marinas, food and beverage operations, retail
establishments and other facility amenities. Going forward, the Company
anticipates improving gross operating margins for each of its resorts by taking
advantage of consolidated purchasing opportunities.
Selling, general and administrative expenses ("S,G&A") totaled $20.0 million and
$1.2 million for the three months ended March 31, 1998 and 1997, respectively.
S,G&A as a percent of revenue was 22% and 28% for the three and nine months
ended March 31, 1998, respectively. As with cost of services, S,G&A as a percent
of revenue tends to be lowest in the third fiscal quarter and higher during the
non-peak seasons. S,G&A for the Leisure and Recreation Business consist
primarily of various fixed, indirect costs, including utility and property
costs, real estate taxes, insurance, management and franchise agreement fees and
administrative salaries. Management believes the Company will benefit from
additional economies in S,G&A as its resort portfolio grows. These savings
opportunities include the consolidation of reservation systems, coordinated
sales and marketing efforts and reduced costs for insurance and management
overhead.
Amortization and depreciation expense was $5.4 million and $309,000 for the
three months ended March 31, 1998 and 1997, respectively, and $12.3 million and
$309,000 for the nine months ended March 31, 1998 and 1997, respectively.
Increases were due to property and equipment acquired in connection with the
Company's business combinations.
<PAGE>
Entertainment and Sports
- ------------------------
Revenue
Entertainment and Sports Business revenue was $13.5 million and $16.8 million
for the three months ended March 31, 1998 and 1997, respectively, and $34.6
million and $32.2 million for the nine months ended March 31, 1998 and 1997,
respectively. The primary component of the Entertainment and Sports Business is
the Panthers hockey club. Revenue and direct expenses associated with the team
are recorded over the regular hockey season. Therefore, the majority of revenue
is reported during the three-month periods ended December 31 and March 31. The
decrease in revenue during the three months ended March 31, 1998 compared to the
three months ended March 31, 1997 was the primarily the result of nine fewer
home games played during the current period. The increase in revenue during the
nine months ended March 31, 1998 compared to the nine months ended March 31,
1997 was partially due to higher Panther ticket revenue, along with increased
revenue from the Company's ice skating rink operations.
Operating Expenses
Entertainment and sports operating expenses, which includes among other items
Panthers' player salaries and arena and ticketing costs, increased $4.8 million,
to $22.1 million for the three months ended March 31, 1998, compared to $17.3
million for the same period in 1997. Total entertainment and sports operating
expenses were $50.6 million and $39.0 million for the nine months ended March
31, 1998 and 1997, respectively. The increases during the 1998 periods were
primarily the result of higher Panthers' player salaries, along with increased
costs associated with the operation of the Company's ice skating rink
facilities.
Corporate General and Administrative Expenses
- ---------------------------------------------
Corporate general and administrative expenses totaled $3.2 million and
$504,000 for the three months ended March 31, 1998 and 1997, respectively, and
$7.6 million and $658,000 for the nine months ended March 31, 1998 and 1997,
respectively. The increase was substantially the result of additional legal,
accounting, treasury and other corporate general and administrative expenses.
These expenses are associated with the Company's (i) increase in total revenue
and assets, (ii) the diversification into the resort hospitality business and
(iii) public company compliance and reporting activities.
Interest and Other Income
- -------------------------
Interest and other income totaled $366,000 and $863,000 for the three months
ended March 31, 1998 and 1997, respectively, and $1.7 million and $1.0 million
for the nine months ended March 31, 1998 and 1997, respectively. Interest income
was higher during the three months ended March 31, 1997 because the Company
maintained a higher average cash balance, which resulted from the private
placement of Class A Common Stock that yielded $65.6 million in net proceeds.
The increase in interest income for the nine months ended March 31, 1998
compared to the nine months ended March 31, 1997 was the result of maintaining a
higher average cash balance attributable to the acquisition of additional
resorts, which yielded significant cash flow.
Interest Expense and Minority Interest
- --------------------------------------
Interest expense totaled $7.9 million and $241,000 for the three months ended
March 31, 1998 and 1997, respectively, and $14.5 million and $2.4 million for
the nine months ended March 31, 1998 and 1997, respectively. The increase in
interest expense during the 1998 periods was attributable to additional debt
assumed or incurred in connection with acquisitions of the Company's Resort
Facilities. In the comparable periods of the prior year, the outstanding
indebtedness related to the purchase of the Panthers, along with borrowing
needed to fund hockey operations. Such indebtedness was repaid with a portion of
the proceeds from the Company's initial public offering in November 1996.
<PAGE>
Minority interest associated with Registry Resort (applicable for the 1998
periods only) and the Miami Arena totaled $887,000 and $127,000 for the three
months ended March 31, 1998 and 1997, respectively. Minority interest totaled
$1.7 million and $416,000 for the nine months ended March 31, 1998 and 1997,
respectively.
EBITDA
Earnings before interest expense, income taxes, depreciation, amortization and
minority interest ("EBITDA"), although not a standard measure under generally
accepted accounting principles, is a widely accepted financial indicator used by
certain investors and analysts to compare companies on the basis of operating
performance. As a result of the Company's resort acquisitions, EBITDA increased
to $29.2 million for the three months ended March 31, 1998 from $3.4 million for
the three months ended March 31, 1997 and increased to $34.6 million for the
nine months ended March 31, 1998 from $(1.1) million for the nine months ended
March 31, 1997.
Liquidity and Capital Resources
Cash and cash equivalents increased $16.6 million, to $30.3 million at March 31,
1998 from $13.7 million at June 30, 1997. The major components of the change are
discussed below.
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities totaled $15.0 million for the nine
months ended March 31, 1998 compared to $4.0 million used in operating
activities for the nine months ended March 31, 1997. The increase for the nine
months ended March 31, 1998 was the result of receiving more cash flow from the
Resort Facilities. Each of the properties, except for Pier 66 and Bahia Mar, was
acquired subsequent to March 31, 1997, and accordingly, the related cash flows
are not included in the Company's prior year financial statements. Cash flows
from the newly acquired resort facilities were partially offset by increased
costs for corporate general and administrative expense and less cash flow from
the Entertainment and Sports Business.
Net Cash Used in Investing Activities
Net cash used in investing activities amounted to $252.5 million and $8.2
million for the nine months ended March 31, 1998 and 1997, respectively.
Cash used in business acquisitions and to acquire additional interests in a
consolidated subsidiary of the Company increased to $237.0 million for the nine
months ended March 31, 1998 from $7.3 million for the nine months ended March
31, 1997. During the nine months ended March 31, 1998, the Company (i) acquired
its initial 68% ownership interest in Registry Resort of which $75.5 million of
the purchase price was paid in cash, (ii) closed on an additional 133 units of
the remaining 149 units of Registry Resort of which $27.4 million of the
purchase price was paid in cash, (iii) acquired Rolling Hills for $8.0 million
and (iv) acquired Arizona Biltmore of which $126.0 million of the purchase price
was paid in cash. During the nine months ended March 31, 1997, the Company
acquired certain assets relating to the business of owning and operating a
twin-pad ice facility located in Coral Springs, Florida.
Capital expenditures increased by $27.5 million during the nine months ended
March 31, 1998, primarily associated with the Boca Resort expansion program that
was recently completed. The expansion included an 18 court tennis club (which
adds to the existing 12 courts located in a separate complex), a new Bates
designed championship golf course and a new 140,000 square foot conference
center. In addition, because the Company owned more resorts for a longer
duration during fiscal 1998, recurring capital expenditures increased during the
nine months ended March 31, 1998.
<PAGE>
Under covenants to a senior note payable secured by Boca Resort, the Company is
required to deposit excess operating cash into reserve accounts which are
accumulated and restricted to support future debt service, facility expansion,
furniture, fixture and equipment replacement and real estate tax payments.
Additionally, the Company's loan and/or management agreements for Arizona
Biltmore, Pier 66 and Bahia Mar also require the maintenance of customary
capital expenditure reserve funds for the replacement of assets and each such
resort has completed a renovation program within the last four years. These
reserve funds are classified as restricted cash on the Consolidated Balance
Sheets.
Cash Provided By Financing Activities
Net cash provided by financing activities amounted to $254.0 million and $86.9
million for the nine months ended March 31, 1998 and 1997, respectively. During
the nine months ended March 31, 1998, the Company received $108.8 million of net
proceeds from the sale of shares of Class A Common Stock and $145.0 million in
borrowings, net of repayments, under debt facilities. During the nine months
ended March 31, 1997, the Company completed its initial public offering and
concurrent private offering for an aggregate of 7,300,000 shares of Class A
Common Stock, which resulted in net proceeds of $66.3 million. A portion of such
net proceeds was used to retire $45.0 million of debt. In addition, during the
nine months ended March 31, 1997 the Company sold 2,460,000 shares of Class A
Common Stock in a private placement transaction, which yielded $65.6 million in
net proceeds.
Capital Resources
The Company believes that it has, or can obtain, sufficient financial resources
to support ongoing operations, finance the growth of its businesses and take
advantage of acquisition opportunities.
The Company's capital resources are provided from both internal and
external sources. The primary capital resources from internal operations include
revenue from (i) room rentals, food and beverage sales, retail sales, golf,
tennis and marina services and conference services at the Resort Facilities (ii)
Premier Club memberships at Boca Resort and (iii) ticket, broadcasting,
sponsorship and other revenue derived from ownership of the Panthers.
The primary external sources of liquidity have been the issuance of equity
securities and borrowings under term loans and lines-of-credit. Since its
initial public offering in November 1996, the Company has raised $240.7 million
from the issuance of its Class A Common Stock. At March 31, 1998, the Company
had $299.2 million outstanding under secured term loans or acquisition related
notes payable and $195.2 million outstanding under other credit facilities.
Financial Condition
Significant changes in balance sheet data from June 30, 1997 to March 31, 1998
are discussed below.
Restricted Cash
Restricted cash decreased to $21.5 million at March 31, 1998 from $30.1 million
at June 30, 1997. The decrease was primarily the result of expending previously
restricted cash for the Boca Resort expansion program.
Accounts Receivable
Accounts receivable increased to $38.7 million at March 31, 1998 from $13.1
million at June 30, 1997. The increase was partially the result of assuming
trade receivables in connection with the acquisition of Registry Resort and
Arizona Biltmore, which totaled $15.8 million at March 31, 1998. In addition,
other resorts' accounts receivable increased $6.4 million, due to higher
occupancy rates and average daily rates from corporate guests. The remaining
increase substantially relates to the hockey team operations where it is
customary for receivables to be higher during the regular playing season, which
extends from October to April.
<PAGE>
Property and Equipment
Property and equipment increased $437.3 million to $912.7 million at March 31,
1998 from $475.4 million at June 30, 1997. Approximately $118.1 million of the
increase related to initial and subsequent acquisitions in Registry Resort,
which has brought the Company's interest to approximately 97% at March 31, 1998.
Additionally, $289.9 million of the increase was attributable to the acquisition
of Arizona Biltmore and $7.9 million was attributable to the acquisition of
Rolling Hills. The remaining increase represents capital development and
purchases at Boca Resort and the other resort properties, offset by depreciation
expense.
Other Assets
Other assets increased $6.6 million to $11.8 million at March 31, 1998 from $5.2
million at June 30, 1997. The increase was primarily due to the assumption of
certain other assets in connection with the acquisition of Registry Resort and
Arizona Biltmore along with an increase in hockey player signing bonuses, which
will be amortized over the life of the relevant player contracts.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses increased to $55.2 million at March 31,
1998 from $34.6 million at June 30, 1997. The increase was substantially
attributable to the addition of trade payables and other accrued liabilities
associated with Registry Resort and Arizona Biltmore together with the accrual
of acquisition related expenses.
Deferred Revenue
Deferred revenue increased to $17.6 million at March 31, 1998 from $10.0 million
at June 30, 1997. The increase was primarily the result of two factors.
Approximately $4.7 million of the increase related to receipts for annual club
membership dues of Boca Resort. Such amounts are recognized as revenue ratably
over the membership year, which commenced on October 1. The remaining increase
relates to deposits for advance suite and seat sales at the Broward County
Arena. The Broward County Arena is currently under construction and is scheduled
to open in the fall of 1998.
Short-Term Debt
In February 1998 the Company completed a bridge loan facility in the amount of
$200.0 million. At March 31, 1998, $182.2 million was outstanding under the
facility. A portion of the proceeds from the bridge loan was used in connection
with the acquisitions of Arizona Biltmore and additional units at Registry
Resort as well as to reduce other indebtedness. The indebtedness matures in July
1998 and the Company is in the process of establishing permanent financing.
Convertible Note Payable
Convertible note payable amounted to $100.3 million at March 31, 1998 and
relates to the acquisition of Arizona Biltmore as discussed in Note 4 to the
Unaudited Consolidated Financial Statements.
Long-Term Debt
Long-term debt increased to $212.0 million at March 31, 1998 from $186.1 million
at June 30, 1997. The increase was the result assuming $63.1 million of
indebtedness in connection with the acquisition of the Arizona Biltmore. This
increase was partially offset by the retirement of $16.0 million under a
mortgage note payable along with net repayments under lines-of-credit.
Minority Interest
The Company has a minority interest in Registry Resort and the Miami Arena
operations.
<PAGE>
Shareholders' Equity
Shareholders' equity increased to $437.1 million at March 31, 1998 from $301.2
million at June 30, 1997. The increase was attributable to the sale of 6,000,000
shares of Class A Common Stock, together with the issuance of 918,174 shares of
Class A Common Stock and warrants to purchase 325,000 shares of Class A Common
Stock in connection with the acquisition of an ownership interest in Registry
Resort. In addition, the Company issued warrants to purchase 500,000 shares of
Class A Common Stock in connection with the acquisition of the Arizona Biltmore.
The Company also received $360,000 in proceeds from the exercise of employee
stock options, and was positively impacted by net income for the nine months
ended March 31, 1998.
Forward Looking Statements
Certain statements and information included herein may constitute
forward-looking statements within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from those expressed or implied by such forward-looking statements. Such factors
include, among others, the ability to develop and implement operational and
financial systems to manage rapidly growing operations; competition in the
Company's principal businesses; the ability to integrate and successfully
operate acquired businesses and the risks associated with such businesses; the
ability to obtain financing on terms acceptable to the Company to finance its
growth strategy; the Company's limited history of operations in the Leisure and
Recreation Business; dependence on key personnel and the ability to properly
assess and capitalize on future business opportunities.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
There has been no material change in the status of legal proceedings as
described under Item 3., Part I to the Company's Annual Report on Form
10-K for the year ended June 30, 1997 or described under Item 1., Part
II to the Company's Quarterly Report on Form 10-Q for the period ended
December 31, 1997, except as set forth below.
As disclosed in the Annual Report on Form 10-K, on February 21, 1997
the Seventeenth Judicial Circuit Court ruled against the Company's
complaint with respect to the construction of the Broward County Arena
and the Prevailing Wage Ordinance, finding that the Prevailing Wage
Ordinance was applicable. On March 18, 1998, in a 2-1 decision, the
Fourth District Court of Appeals affirmed the trial court's finding.
On May 8, 1998, the Court of Appeals denied the Company's motion for
rehearing and the Company is considering whether to further appeal and
whether to seek to further extend the stay. An unfavorable outcome of
this suit may require the Company to incur additional construction
costs up to $6.0 million.
Item 2. Changes in Securities
On March 2, 1998, the Company acquired an ownership interest in
Arizona Biltmore in exchange for: (i) payment of $126.0 million in
cash, (ii) payment of $100.3 million either in cash or shares of Class
A Common Stock (iii) warrants to purchase 500,000 shares of the
Company's Class A Common Stock exercisable at $24.00 per share and (iv)
the assumption of $63.1 million of debt. The $100.3 million payment,
which is classified as Convertible Note Payable on the Consolidated
Balance Sheet, bears interest at a rate of 5% per annum and, at the
election of the seller, shall be paid in either cash or shares of Class
A Common Stock. The seller may elect to receive cash during specified
election periods occurring between May 25, 1998 and March 2, 2000 or
may elect to receive shares of Class A Common Stock at a per share
price of $26.00 at any time from March 2, 1998 through March 2, 2008.
On April 22, 1998, the Company acquired the Edgewater Resort for $41.2
million. Approximately $20.7 million of the purchase price was paid in
cash at closing and payment of the remaining $20.5 million bears
interest at a rate of 5% per annum and is payable in either cash or
shares of Class A Common Stock, at the election of the seller, on or
about October 22, 1999.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
------ -----------------------------------------------------
11 Computation of Earnings Per Share
27 Financial Data Schedule
99 Contribution and Exchange Agreement dated December
19, 1997 by and among Florida Panthers Holdings,
Inc., Wright-Bilt Corp., Biltmore Hotel Partners, AZB
Limited Partnership, W&S Realty Investment Group
L.L.C., Samuel Grossman, Charles Carlise, W. Matthew
Crow, AZ Biltmore Hotel Limited Partnership,
Southwest Associates, El Camino Associates, Grossman
Investment Corp., and The Crow Irrevocable Trust.
(Incorporated by reference into Form 8-K filed
on March 5, 1998.)
(b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K during the
three months ended March 31, 1998: Current Report on Form 8-K filed on
March 5, 1998, relating to the acquisition of an ownership interest in
Arizona Biltmore and reported certain factual information thereto and
Current Report on Form 8-K filed on March 11, 1998 relating to the
resignation of Richard H. Evans as President of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
FLORIDA PANTHERS HOLDINGS, INC.
Date: May 14, 1998 By: /s/William M. Pierce
Senior Vice President,
Treasurer and Chief Financial
Officer
(Principal Financial Officer)
By: /s/Steven M. Dauria
Vice President and Corporate
Controller
(Principal Accounting Officer)
<TABLE>
<S> <C> <C> <C> <C>
COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Data)
DILUTED Three Months Ended Nine Months Ended
------- ---------------------------------- -----------------------------------
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
-------------- -------------- -------------- --------------
Average shares outstanding 35,118 16,875 34,067 10,498
Net effect of dilutive stock options (1) 670 635 407 -
------- ------- ------- ---------
Totals 35,788 17,510 34,474 10,498
======= ======= ======= =========
Net income (loss) $13,920 $ 1,277 $ 2,923 $( 7,522)
======= ======= ======= =========
Net income (loss) per share - diluted $ 0.39 $ 0.07 $ 0.08 $( 0.72)
======= ======= ======= =========
BASIC Three Months Ended Nine Months Ended
----- ---------------------------------- -----------------------------------
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
-------------- -------------- -------------- --------------
Average shares outstanding 35,118 16,875 34,067 10,498
======= ======= ======= =========
Net income (loss) $13,920 $ 1,277 $ 2,923 $( 7,522)
======= ======= ======= =========
Net income (loss) per share - basic $ 0.40 $ 0.08 $ 0.09 $( 0.72)
======= ======= ======= =========
</TABLE>
(1) Computed based on the treasury stock method using the average market price
for each applicable period. Amounts excluded from the 1997 nine-month
computation, since impact is antidilutive.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 51,745
<SECURITIES> 0
<RECEIVABLES> 50,302
<ALLOWANCES> 0
<INVENTORY> 7,096
<CURRENT-ASSETS> 107,332
<PP&E> 912,703
<DEPRECIATION> 16,308
<TOTAL-ASSETS> 1,077,927
<CURRENT-LIABILITIES> 360,105
<BONDS> 0
0
0
<COMMON> 354
<OTHER-SE> 436,735
<TOTAL-LIABILITY-AND-EQUITY> 1,077,927
<SALES> 215,281
<TOTAL-REVENUES> 216,964
<CGS> 116,094
<TOTAL-COSTS> 116,094
<OTHER-EXPENSES> 83,419
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,528
<INCOME-PRETAX> 2,923
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,923
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.08
</TABLE>
