SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended June 30,
1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period
from ____________ to ____________
Commission file number: 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 of Incorporation) (I.R.S. Employer Identification No.)
450 East Las Olas Boulevard 33301
Fort Lauderdale, Florida
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(Address of Principal ExecutiveOffices) (Zip Code)
Registrant's telephone number, including area code: (954) 712-1300
Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of each exchange on which registered
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Class A Common New York Stock Exchange
Stock, par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of August 10, 1998, the registrant had 34,890,358 shares of Class A
common stock, $ .01 par value, outstanding and, at such date, the aggregate
market value of the shares of Class A Common Stock held by non-affiliates of the
registrant was approximately $368.2 million. As of August 10, 1998 the
registrant had 255,000 shares of Class B common stock $ .01 par value,
outstanding, none of which was held by a non-affiliate of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part III Portions of the Registrant's Proxy Statement relating to the 1998
Annual Meeting of Stockholders.
Part IV Portions of previously filed reports and registration statements.
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INDEX
TO FORM 10-K
Page
Number
PART I
Item 1. Business............................................ 4
Item 2. Properties.......................................... 17
Item 3. Legal Proceedings................................... 18
Item 4. Submission of Matters to a Vote of Security-Holders. 19
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................. 20
Item 6. Selected Financial Data............................. 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk................................................ 28
Item 8. Financial Statements and Supplementary Data......... 29
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 49
PART III
Item 10. Directors and Executive Officers of the Registrant.. 50
Item 11. Executive Compensation.............................. 50
Item 12. Security Ownership of Certain Beneficial Owners and
Management.......................................... 50
Item 13. Certain Relationships and Related Transactions...... 50
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K......................................... 51
<PAGE>
PART I
Item 1. Business
Introduction
Florida Panthers Holdings, Inc. (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 Company's current focus is
on expanding the Leisure and Recreation Business primarily through (i) capital
projects at existing facilities, (ii) increased marketing directed to the core
upscale clientele of the Leisure and Recreation Business and (iii) acquisitions
of additional luxury resorts compatible with the Company's market focus.
Although the Company's current focus is on expanding the Leisure and Recreation
Business, the Company continuously evaluates ownership, acquisition and
divestiture alternatives relating to its two business segments with the
intention of maximizing shareholder value.
The Company was formed in July 1996 for the purpose of acquiring the
operations of the Florida Panthers Hockey Club (the "Panthers" or the "Club"), a
professional hockey team which has been a member of the National Hockey League
("NHL") since 1993. After its initial public offering (the "IPO") in November
1996, the Company expanded into the Leisure and Recreation Business, through the
acquisition, ownership and operation of high-end destination luxury resorts, and
diversified the Entertainment and Sports Business to include ice skating rink
operations. See Note 16 to the Consolidated Financial Statements for certain
industry segment financial information.
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 Registry Hotel at Pelican Bay
("Registry Resort"), the Edgewater Beach Hotel ("Edgewater Resort"), the Hyatt
Regency Pier 66 Hotel and Marina ("Pier 66"), the Radisson Bahia Mar Resort and
Yachting Center ("Bahia Mar") and the Rolling Hills Golf Club ("Rolling Hills").
These properties are collectively referred to as the "Resort Facilities. "
The Company's Entertainment and Sports Business presently consists of the
Panthers, arena development, arena management and ice skating rink operations.
The Company's arena development and management operations will be unveiling a
new multi-purpose state-of-the-art entertainment and sports center (the
"National Car Rental Center" or the "National Center") in October 1998 where the
Panthers will begin playing their 1998-1999 NHL season home games.
The Company was incorporated in Florida on July 3, 1996 and subsequently
reincorporated in Delaware on November 17, 1997. In connection with the IPO, the
Company's Class A common stock, par value $.01 per share (the "Class A Common
Stock") began trading on The Nasdaq National Market on November 13, 1996 under
the symbol "PUCK." On July 11, 1997, the Class A Common Stock began trading on
the New York Stock Exchange ("NYSE") under the symbol "PAW."
Business Strategy
The Company's current business strategy is to focus on expanding the Leisure
and Recreation Business. The primary elements of such business strategy include:
(i) the development of capital projects (additional unit construction,
recreational amenities and conference space) at the Resort Facilities, (ii) the
expansion of the core upscale clientele of the Leisure and Recreation Business,
which will increase the Company's ability to cross-market other services to this
customer base and (iii) the acquisition of other luxury resorts compatible with
the Company's business strategy. In executing its business strategy, the Company
continuously evaluates opportunities in other industries and businesses for
potential strategic acquisitions where the Company believes it can leverage its
competitive strengths and increase shareholder value. The Company also
continuously evaluates ownership, acquisition and divestiture alternatives
relating to its two business segments with the intention of maximizing
shareholder value. For certain risks involved with the Company's business
strategy, see "Risk Factors."
Management believes that the Resort Facilities will allow for significant
internal growth. At the time of acquisition, each of the Resort Facilities
either had (i) ongoing expansion and/or improvements programs, which had been
funded from internal and external sources of capital or (ii) recently completed
expansion and/or improvement programs. Furthermore, the Company has identified
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additional opportunities at certain of its resorts and in their respective
geographic markets where further expansion is feasible. While no assurances can
be given, such expansion may include additional room inventory, conference
facilities and additional resort amenities.
In addition to current or future expansion projects at the Resort
Facilities, the Company is pursuing other internal growth opportunities.
Specifically, the Company believes that the Premier Club concept, which was
introduced in 1991 at Boca Resort, will serve as a model for expansion at its
current and potential future resort facilities. The Boca Resort Premier Club
currently requires an initial membership fee of $40,000 and annual social dues
starting at $2,300. Membership in the Boca Resort Premier Club allows Premier
Club members unlimited access to the Boca Resort grounds and recreational
facilities which are otherwise restricted to resort guests. The Boca Resort
Premier Club represents a significant source of cash flow at Boca Resort.
The Company believes that the Premier Club concept, when applied to the
other Resort Facilities will increase value and potential cash flow of the other
Resort Facilities. The Company expects that the Premier Club concept will allow
the Company to market resort properties, restaurants, pools, and, where
available, tennis, golf, spa and other leisure and recreation amenities to
residents in local communities in a country club/social club setting. In
addition, the Company's management believes that the cash flow from additional
Premier Clubs may help reduce the impact of seasonality on the Company's luxury
resort business.
The Company also believes that it can generate additional revenue by
extending the Boca Resort model of non-room based revenue to the other Resort
Facilities. Boca Resort derives approximately 40% of its total revenue from room
rental, approximately 30% of its total revenue from the sale of food and
beverage and approximately 30% of its total revenue from the operation of
marinas, retail sales, rental income from the lease of retail space within the
resort complex, Premier Club annual social dues and other non-room based
revenue.
In expanding the Leisure and Recreation Business, the Company is seeking to
increase its core upscale clientele, such as corporate and other group
customers, affluent local residents, individual business travelers and upscale
leisure travelers, and to cross-market other Company resorts and services to
this customer base. The Company views an upscale customer base as desirable for
a number of reasons. First, the Company believes the market potential of the
upscale customer base to be significant. Second, the Company believes the
customer base in the luxury resort segment of the market is more
recession-resistant than the customer base in the general hotel and lodging
market and, as a result, the Company would be less effected by an economic
downturn. Third, the Company believes such a customer base will allow it to
experience more stable growth than the general hotel and lodging market, while
offering opportunities to expand into other industries and businesses which may
serve the same customer base.
The Company believes that conditions in the luxury resort market favor such
cross-marketing to its upscale customer base. According to the 1998 Bear Stearns
U.S. Lodging Almanac, at the end of 1997, there were just 16,623 rooms under
construction in the deluxe, luxury and upscale brand segments, and these
segments accounted for 2.7% of the total existing U.S. hotel inventory of
608,594 rooms. Moreover, the Company believes that destination luxury resorts
will continue to benefit from trends and developments, which favorably impact
the North American resort industry. The factors include: demographic shifts
among the U.S. population which have created a greater percentage of Americans
with both increased leisure time and higher disposable income, a greater focus
on active vacations, the increased popularity of golf and a growing interest in
luxury resorts among upscale leisure travelers.
The Company expects that it will continue to evaluate acquisition targets,
which may include destination luxury resorts with internal growth potential,
mid-range resorts in highly desirable locations that can be upgraded and which
have sufficient land for expansion or other unique properties in urban
locations. Resorts that are most likely to be acquisition targets are those that
(i) have a large room inventory in a popular tourism and convention geographic
location, (ii) offer or could offer quality leisure and recreational amenities
and (iii) provide the opportunity to cross-market such amenities to the
Company's upscale clientele. While the Company believes that the states of
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Florida and Arizona continue to be popular destinations for pleasure travel in
the United States, it is currently considering possible acquisitions in other
key regional locations throughout the United States. Also, unlike some
participants in the industry that only manage resorts, the Company intends to
pursue, where feasible, a policy of both ownership and operation. The Company
believes that ownership gives it sufficient control to implement its business
strategy and allows it to fully benefit from any increase in the value of its
luxury resort portfolio.
The Company believes that the potential acquisition of additional
destination resorts and their integration into the Company's Leisure and
Recreation Business will provide the Company with favorable cross-marketing
opportunities. For example, corporate and other group customers that hold
conferences on a regular basis prefer to rotate their conference locations among
various regions of the United States, including the east and west coasts. By
offering a significant number of affiliated luxury resort alternatives, the
Company believes that it will be able to encourage its customers to utilize the
Company's resort facilities on a regular basis. The Company believes that its
superior facilities and emphasis on guest service greatly enhance opportunities
for repeat business.
Along with expansion into the Leisure and Recreation Business, the Company
believes that the Entertainment and Sports Business is poised to experience
further growth by capitalizing on the increasing popularity of hockey.
Additionally, the Company believes that the completion of the National Center,
which is currently scheduled for October 1998, will significantly enhance the
Company's cash flow and its ability to market the Panthers, as well as its
ability to provide other forms of entertainment. The Company also believes that
the increasing popularity of hockey should bolster the success of the Company's
ice rink operations.
Leisure and Recreation Business
Management Team
The Company has assembled a management team with significant business
experience in the resort and hotel industry to implement the Company's business
strategy as it relates to the Leisure and Recreation Business. The members of
the Company's Leisure and Recreation Business management team include:
Dennis J. Callaghan. Mr. Callaghan is one of the Company's Managing
Directors -- Resort Division and has been a director of the Company since July
1997. Since 1990, Mr. Callaghan has been President of Callaghan & Partners,
Ltd., an entity founded by Mr. Callaghan to acquire, develop, finance, renovate
and manage resorts, hotels and residential and commercial properties in the
United States and abroad. Mr. Callaghan was an affiliate of Boca Resort and was
appointed to the Company's Board of Directors in connection with the acquisition
of Boca Resort.
Michael Glennie. Mr. Glennie currently serves as the President of Boca
Resort. Prior to his 10-year tenure with Boca Resort, Mr. Glennie was Manager of
the Waldorf Astoria Hotel in New York and worked in various capacities at Rock
Resorts, including as its Chief Executive Officer, from 1989 to 1993.
Gary Chensoff. Mr. Chensoff is one of the Company's Managing Directors --
Resort Division and was previously a partner in a partnership which owned
Registry Resort. Mr. Chensoff joined the Company in connection with the
acquisition of Registry Resort. Mr. Chensoff has 20 years experience in the
resort and real estate industries. Since 1992, Mr. Chensoff has been the
President of Indian Hill Partners, Inc., which manages resorts, land development
projects and commercial office properties. Prior to 1992, Mr. Chensoff held
various positions, including Vice President and Managing Director, during his
11-year tenure with JMB Realty Corporation.
James Applegate. Mr. Applegate joined the Company in October 1997 as Vice
President- Golf Development. Mr. Applegate has 20 years experience in land
acquisitions, golf course design and development and club operations. From 1986
through 1997, Mr. Applegate designed and built over 35 golf courses as a sole
proprietor. From 1981 through 1985, he was Vice President of Operations for
LaBonte Diversified Development ("LaBonte"). During his tenure at LaBonte, he
was responsible for, among other things, land acquisitions and golf course
development.
The Resort Facilities
The Company's Leisure and Recreation Business currently consists of seven
Resort Facilities: Boca Resort, Arizona Biltmore, Registry Resort, Edgewater
Resort, Pier 66, Bahia Mar and Rolling Hills.
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More than one-half of the Resort Facilities' cash flow is derived from
non-room sources, such as conference center services, marina services, annual
dues associated with club memberships, food and beverages, retail and other
amenities of the resort. Revenue derived from these sources is generally paid by
customers in advance, or within 30 days of their stay at the resort.
Boca Resort. Boca Resort is a destination luxury resort and private club
located on over 298 acres of land fronting both the Atlantic Ocean and
Intracoastal Waterway in Boca Raton, Florida. Boca Resort offers luxury
accommodations and amenities to group conference customers, leisure travelers
and the members of its exclusive and private country and social club known as
The Premier Club. Boca Resort consists of the Cloister, the Tower, Boca Beach
Club, the Golf Villas, Boca Country Club, 963 luxury guestrooms, a 50,000 square
foot conference center, a 25 slip marina, two 18 hole championship golf courses,
a 30 court tennis facility, 5 swimming pools, an indoor basketball court, two
indoor racquetball courts and a half mile of private beach with various water
sports facilities. Other amenities of Boca Resort include 15 food and beverage
sites, ranging from 5-star cuisine to beach-side grills, and a new fitness
center. Additionally, Boca Resort recently completed a $46.5 million expansion
and renovation project which includes: (i) a new 140,000 square foot conference
center; (ii) a state-of-the-art tennis and fitness center complex; (iii) an
expanded 650-space parking facility and (iv) a new Bates-designed 18-hole golf
course, replacing its previous 18-hole golf course. The completion of the
conference center allows Boca Resort to accommodate more than one large group at
a time, resulting in better utilization of its luxury guest rooms. Furthermore,
Boca Resort has received local zoning approval to build 92 additional rooms at
its marina, 57 luxury two-bedroom suites, and to build a luxury spa complex.
Boca Resort has consistently been awarded the Readers' Award as one of the "Top
25 Hotels in North America" by Travel & Leisure magazine.
Arizona Biltmore. Arizona Biltmore is a luxury resort located on 39 acres in
Phoenix, Arizona. The resort includes 620 luxury guest rooms, three restaurants,
privileges to play at two 18-hole golf courses, an 18-hole putting course, 8
tennis courts, 6 swimming pools, a full-service conference center capable of
accommodating up to 1,200 people, a state-of-the-art meeting facility capable of
accommodating up to 1,400 people, and a 20,000 sq. ft. spa complex. Among other
distinctions, the property was featured in Architectural Digest in 1996 and was
awarded the 1997 Heritage Award of Excellence by the Urban Land Institute.
Arizona Biltmore completed a $50.0 million property-wide renovation and
expansion program in 1996 and added the spa complex in 1997. A $12.0 million
expansion is currently underway which will include 122 additional luxury guest
rooms and an Olympic size swimming pool. The expansion is expected to be
completed in the first quarter of 1999.
Registry Resort. Registry Resort is a luxury resort located on 15 acres of
land fronting the Gulf of Mexico in Naples, Florida. As of June 30, 1998 the
Company owned approximately 99% of Registry Resort and acquired the remaining 1%
in July 1998. Registry Resort consists of 474 luxury guest rooms, a conference
center, recreational areas, restaurant and retail outlets, a 15 court tennis
facility and a nature reserve boardwalk as well as water sports and beach
amenities. Registry Resort has consistently received the Mobile Travel Guide's
Four Star Award, as well as the AAA's Four Diamond Award, and has been cited by
Conde Nast Traveler magazine as one of the best resorts in the United States.
Edgewater Resort. Edgewater Resort is the only all-suite beach resort
located in Naples, Florida. Edgewater Resort includes 126 luxury suites situated
on a two-acre site surrounding a tropical courtyard and fronting the Gulf of
Mexico. Amenities at Edgewater Resort include a pool, a fitness center, water
sports and other beach amenities, three meeting rooms and a penthouse gourmet
restaurant. In 1997, Edgewater Resort completed a four-year, $2.2 million
renovation of its 126 luxury suites, along with improvements to amenities.
Edgewater Resort was recently featured in Resorts and Great Hotels, Conde Nast
Gold List and has consistently received the Mobile Travel Guide's Four Star
Award and the AAA's Four Diamond Award.
Pier 66. Pier 66 is a luxury resort and marina complex located on 23 acres
of land fronting the Intracoastal Waterway in Fort Lauderdale, Florida. Pier 66
consists of 380 luxury guest rooms, a 142 slip marina, three swimming pools,
22,000 square feet of meeting space and 6 restaurants and lounges. Pier 66 has
received the Mobil Travel Guide's Four Star Award and AAA's Four Diamond Award.
Pier 66 has recently begun an $8.4 million renovation of its guest rooms, which
is expected to be completed by December 31, 1998.
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Bahia Mar. Bahia Mar is a luxury resort and marina complex located on 40
acres of land fronting the Atlantic Ocean and the Intracoastal Waterway in Fort
Lauderdale, Florida. Bahia Mar consists of 300 rooms, a 350-slip marina, four
tennis courts, 20,000 square feet of flexible meeting space, restaurants and
retail space. Bahia Mar completed an extensive $8.1 million renovation project
in 1995 relating primarily to its guest rooms and the relocation of its meeting
space and restaurants. Bahia Mar has received the Mobile Travel Guide's Three
Star Award and the AAA's Three Diamond Award, as well as the 1995 Radisson
President's Award and a City of Fort Lauderdale Community Appearance Award. The
Bahia Mar marina is host to the International Boat Show, an annual six-day
boating and marine event, which is billed as the world's largest in-water boat
show.
Rolling Hills. Rolling Hills, located in Davie, Florida, was the site for
filming of the hit comedy "Caddyshack". The property is currently undergoing an
approximate $12.0 million renovation and, upon completion, will feature a
redesigned 18-hole championship golf course and a par three golf course and new
practice facility and state-of-the-art clubhouse.
Franchise, Owner and License Agreements
Franchise Agreement. Upon the acquisition of Pier 66, the Company assumed
the rights under a 20-year franchise agreement (the "Hyatt Franchise Agreement")
with Hyatt Franchise Corporation ("Hyatt"). The agreement terminates on November
14, 2014, contains various early termination provisions and provides for
liquidated damages upon such early termination. The Hyatt Franchise Agreement
provides for the payment of monthly royalty fees equal to 5% of gross room
revenue.
The Hyatt Franchise Agreement provides for the payment to Hyatt of certain
Hyatt "allocable chain expenses" based on the total number of guest rooms at
Pier 66 compared to the average number of guest rooms in all Hyatt hotels in the
United States. A fee for the use of the Hyatt reservation system is also charged
to Pier 66.
The Hyatt Franchise Agreement also requires that a reserve, equal to 4% of
gross room revenue, is maintained by Pier 66 for replacement of furniture,
fixtures and equipment and for those repairs and maintenance costs which are
capitalizable under generally accepted accounting principles. The franchise
agreement requires significant renovations of guest rooms, corridors and other
public areas to be performed every five to six years. The replacement of other
furniture, fixtures and equipment, as defined in the agreement, is to occur
every 10 to 12 years.
Owner Agreement. Upon the acquisition of Pier 66, the Company assumed the
rights under the Hyatt Hotel Franchise Owner Agreement (the "Owner Agreement"),
pursuant to which the parties agree that Hyatt shall notify the Company upon a
voluntary surrender, a default or a breach by the Pier 66 management company
("Pier 66 Management") under the Hyatt Franchise Agreement and the Company shall
have an opportunity to cure any such breach or default. In addition, upon any
termination of Pier 66 Management under the Pier 66 Management Agreement, the
Hyatt Franchise Agreement shall terminate unless the Company employs a
substitute manager that Hyatt approves, provided such manager is qualified under
the terms of the Owner Agreement. The substitute manager will assume the duties
and responsibilities as franchisee under the Hyatt Franchise Agreement. The
Owner Agreement contains requirements that Hyatt consent to any financing
transactions, sales or other transfers involving Pier 66, which consent shall
not be unreasonably withheld or delayed by Hyatt. The Owner Agreement also
obligates the Company to observe and be bound by certain terms, conditions and
restrictions contained in the Hyatt Franchise Agreement.
License Agreement. Upon the acquisition of Bahia Mar, the Company assumed
the rights under the Radisson License Agreement with Radisson Hotels
International, Inc. ("Radisson"), expiring in July 2004. The terms of the
Radisson License Agreement allow the Company to operate the hotel using
Radisson's proprietary hotel management system. Annual fees payable to Radisson
pursuant to the Radisson License Agreement are 5% of gross room sales.
Management Agreements
The Company is a party to a hotel management agreement (the "Pier 66
Management Agreement") with Pier 66 Management pursuant to which Pier 66
Management operates Pier 66. Pier 66 Management has managed Pier 66 since June
29, 1993. The Pier 66 Management Agreement expires in March 2000 and it provides
for an annual management fee of $500,000, payable in monthly installments, and
it requires Pier 66 Management to administer the reserve requirement under the
Hyatt Franchise Agreement to set aside 4% of Pier 66's gross room revenue each
month for the purchase, replacement and renewal of furniture, fixtures and
equipment and for non-routine repairs and maintenance to the building.
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The Company is a party to a separate hotel management agreement (the "Bahia
Mar Management Agreement") with Bahia Mar management company ("Bahia Mar
Management") pursuant to which Bahia Mar Management operates Bahia Mar. Bahia
Mar Management has managed Bahia Mar since June 30, 1994. The Bahia Mar
Management Agreement expires in March 2000. The Bahia Mar Management Agreement
requires the payment of an annual fee equal to 2% of total revenue, payable in
monthly installments, and it requires Bahia Mar Management to administer the
capital reserve program under which Bahia Mar is to set aside 4% of Bahia Mar's
gross revenue each month for the purchase, replacement and renewal of furniture,
fixtures and equipment and for non-routine repairs and maintenance.
The Company is also a party to management agreements for Edgewater Beach
Resort (the "Edgewater Resort Management Agreement") and Arizona Biltmore (the
"Arizona Biltmore Management Agreement"). The Edgewater Management Agreement
expires in October 1999 and requires annual fees equal to 2% of total revenue.
The Arizona Biltmore Management Agreement expires in April 2008 and provides for
an annual management fee of $1.0 million through April 2001 and $500,000
thereafter.
Entertainment and Sports Business
The Company's Entertainment and Sports Business currently consists of the
Company's hockey, arena development, arena management and ice skating rink
operations. The Company's hockey operations consist of the ownership and
operation of the Panthers. The Company's arena development and management
operations involve the National Car Rental Center, a new multi-purpose,
state-of-the-art entertainment and sports center in Broward County, Florida,
which is expected to open in October 1998. Pursuant to an operating agreement
between the Company and Broward County, upon completion of the National Center,
the Company will manage and operate the National Center, where the Panthers will
play their home games beginning in the 1998-1999 NHL Season. The Company also
owns approximately 78% of Decoma Miami Associates, Ltd. ("Decoma"), the entity
which operates the Miami Arena, where the Miami Heat of the National Basketball
Association ("NBA") currently plays its home games and where the Panthers played
its home games through the 1997-1998 NHL season. The Company's ice skating rink
activities consist of the operation of Incredible Ice, a twin-pad ice skating
rink facility in Coral Springs, Florida and Gold Coast Ice Arena ("Gold Coast"),
an ice skating rink facility in Pompano Beach, Florida.
Management Team
The Company has assembled a management team with significant business
experience in entertainment and sports to implement the Company's business
strategy as it relates to the Entertainment and Sports Business. The members of
the Company's Entertainment and Sports management team include:
William Torrey. Mr. Torrey has been the President and Governor of the
Florida Panthers Hockey Club, Inc., the corporate general partner of the
Panthers, since September 1993. Prior to joining the Company, Mr. Torrey was
associated with the New York Islanders Hockey Club (the "Islanders") for
twenty-one years in various capacities. From June 1989 to August 1992, Mr.
Torrey served as Chairman of the Board of the Islanders. From September 1978 to
August 1992, Mr. Torrey served as the President of the Islanders, and from
February 1972 to August 1992 he served as the General Manager of the Islanders.
Mr. Torrey is a member of the Hockey Hall of Fame, in recognition of his
accomplishments as an executive.
Alex Muxo. Mr. Muxo has been the President of Arena Development Company,
Ltd. and Arena Operating Company Ltd. or since September 1996. From January 1995
to July 1996, Mr. Muxo served as a Vice President of Huizenga Holdings. Prior to
joining Huizenga Holdings, Mr. Muxo served as a Vice President of Blockbuster
and Blockbuster Park from May 1994 to January 1995. Prior thereto, Mr. Muxo was
the City Manager of the City of Homestead, Florida. During his tenure with the
City of Homestead, Mr. Muxo directed and managed the development of Homestead
Baseball Stadium, the development of Miami MotorSports Race Track and the
substantial redevelopment and reconstruction work required as a result of
Hurricane Andrew.
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Hockey Operations.
The Company's hockey operations consist of the ownership and operation of
the Panthers. The Company derives its hockey revenue principally from the sale
of tickets to the Panthers' home games and national and local broadcasting of
Panthers games. The Panthers home games were sold out during the 1996-1997 and
1997-1998 seasons. The Panthers will be playing their 1998-1999 season in the
National Center. Season ticket sales for the 1998-1999 season are approaching
16,000, which represents one of the largest season ticket bases in the NHL. The
Panthers' new arena will provide seating for over 19,000 hockey fans, including
2,400 premium club seats. The new arena will also offer 72 luxury suites, which
are nearly all pre-sold. The Panthers share equally with the other member clubs
in the NHL broadcasting contracts with Fox Broadcasting Co., ESPN, Inc. and
Molson Breweries of Canada Limited and also have in place a local broadcasting
contract with SportsChannel Florida Associates, a Florida limited partnership,
70.0% of which is owned by H. Wayne Huizenga ("Mr. Huizenga"), the Chairman of
the Company's Board of Directors. At the Miami Arena, the Company generated
revenue from the sale of advertising in certain limited locations. In contrast,
the Panthers will share in all arena advertising, parking and concessions at the
National Center.
The National Hockey League Governance. The NHL is generally responsible for
regulating the conduct of its members. The NHL establishes the regular season
and playoff schedules of the teams. It also negotiates, on behalf of its
members, the league's national over-the-air and cable television contracts and
the collective bargaining agreement with the NHL Players' Association. Each of
the members of the NHL is, in general, jointly and severally liable for the
league's liabilities and obligations and shares in its profits. Under the terms
of the NHL constitution and bylaws ("NHL Constitution and Bylaws"), league
approval is required under certain circumstances, including in connection with
the sale or relocation of a member.
The NHL and the NHL Players' Association entered into the NHL Collective
Bargaining Agreement on August 11, 1995, which took retroactive effect as of
September 16, 1993. The NHL Collective Bargaining Agreement, as amended, expires
in September 2004.
Restrictions on Ownership. The NHL Constitution and Bylaws contain
provisions which may in some circumstances operate to prohibit a person from
acquiring the Company's Class A Common Stock, thereby affecting its value. In
general, any acquisition of shares of Class A Common Stock which will result in
a person or a group of persons holding a 5.0% or more interest in the Company,
and each acquisition of shares of Class A Common Stock which will result in a
person or a group of persons holding any multiple of a 5.0% interest, will
require the prior approval of the NHL, which may be granted or withheld in the
sole discretion of the NHL. In addition, no person who directly or indirectly
owns any interest in a privately-held NHL team, or a 5.0% or more interest in
any other publicly-held NHL team, may own, directly or indirectly, a 5.0% or
more interest in the Company, without the prior approval of the NHL.
Furthermore, the grant of a security interest in any of the assets of the
Panthers, or any direct or indirect ownership interest in the Company, of 5.0%
or more, shall require the prior approval of the NHL, which may be withheld in
the NHL's sole discretion and, in that connection, the NHL will require a
consent agreement satisfactory to the NHL. See "Risk Factors -- NHL Membership
- -- Potential Liabilities and Ownership Restrictions."
Control Requirement. Unless otherwise permitted by the NHL, Mr. Huizenga is
required to maintain voting control of the Company at all times. The Company
issued to Mr. Huizenga shares of Class B common stock , par value $.01 per share
(the "Class B Common Stock") to satisfy the control requirements of the NHL. See
"Risk Factors -- Control by H. Wayne Huizenga; Voting Rights."
Arena Development and Operations
Development of the National Center. In June 1996, the Company entered into
an agreement with Broward County to develop the National Center, which will be
owned by Broward County. The costs incurred in connection with the construction
of the National Center are paid primarily through tourist "bed tax" collections.
The Company will bear all costs relating to the development of the National
Center in excess of $184.7 million, including additional construction costs in
excess of the $184.7 million resulting from certain litigation. See "Legal
Proceedings". However, the Company may require Broward County to advance an
additional $18.5 million, which the Company will repay as supplemental rent.
<PAGE>
Operation of the National Center. In June 1996, the Company entered into a
30-year license agreement (the "License Agreement") and co-terminus operating
agreement (the "Operating Agreement") pursuant to which the Company has rights
to manage and operate the National Center. The Company has contracted with
Leisure Management International, Inc. ("LMI"), an arena operating company owned
50% by Mr. Huizenga, to manage and operate the National Center. Pursuant to the
terms of the Operating Agreement, the Company is entitled to retain (i) 95% of
all revenue derived from the sale of general seating tickets to the Panthers'
home games and all of certain other hockey-related advertising and merchandising
revenue and (ii) the first $14.0 million of "net operating income" generated by
the National Center and 80% of all net operating income in excess of $14.0
million generated by the National Center, with Broward County receiving the
remaining 20%. Net operating income is defined to include revenue from building
naming rights, food and beverage concessions, parking, non-hockey related
advertising and all other revenue generated from non-hockey events, offset by
certain arena operating and financing costs.
The License Agreement commencement date will occur upon 30 days notice of
the completion of construction of the National Center, which is currently
scheduled for October 1, 1998. Once commenced, the License Agreement is for a
term of 30 years, which term may be extended for five year periods, subject to
certain conditions, pursuant to options granted to the Company by Broward
County.
Miami Arena. The Company owns approximately 78% of the partnership interests
in Decoma, which derives all of its revenue from Miami Arena operations. Income
is derived from seat use charges imposed on tickets sold at the Miami Arena, net
of fixed and variable operating payments. The Miami Arena has a seating capacity
of 14,703 and is where the Panthers played its home games through the 1997-1998
NHL season and where the Miami Heat will play its home games through the
1999-2000 basketball season. The size of the Miami Arena has limited the
Company's ability to generate revenue from concessions and additional ticket
sales, and unfavorable Panther lease terms have precluded the Company from
sharing in suite and certain building and advertising revenue at the Miami
Arena. With the scheduled completion of the National Center for October 1998,
the Company anticipates the 1997-1998 season to have been the Panthers' final
season at the Miami Arena. Although its revenue from the operation of the Miami
Arena will decrease upon moving to the National Center, the Company believes its
ability to generate additional revenue will be enhanced upon the Panthers' move
to the National Center.
Ice Rinks
As part of its strategy to capitalize on the popularity of hockey, the
Company currently operates Incredible Ice and Gold Coast. Incredible Ice and
Gold Coast are open to the general public and derive their revenue from, among
other things, fees charged to the public for use of the facilities for various
hockey and skating programs, open skating sessions, food and beverage sales and
retail merchandise sales.
Environmental Matters
Under various federal, state, and local environmental laws and regulations,
an owner or operator of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on such property. In
connection with the ownership and operation of its properties, the Company may
be potentially liable for any such costs. Phase I environmental site assessments
(the "Phase I Assessments") have been obtained for the real property on which
each of the Resort Facilities is located. In addition, Phase II environmental
assessments (the "Phase II Assessments") have been conducted at several
properties. Phase I Assessments are intended to identify existing, potential and
suspected environmental contamination and regulatory compliance concerns, and
generally include historical reviews of the property, reviews of certain public
records, preliminary investigations of the site and surrounding properties and
the preparation and issuance of written reports. Phase II Assessments involve
the sampling of environmental media, such as subsurface soil and groundwater, to
confirm whether contamination is present at areas of concern identified during
the course of a Phase I Assessment.
<PAGE>
The Phase I and Phase II Assessments have not revealed any environmental
liability or compliance concerns that the Company believes would have a material
adverse effect on the Company's business, assets, results of operations or
liquidity of its Leisure and Recreation Business, nor is the Company aware of
any such material liability or concern. However, the environmental assessments
have revealed the presence of limited areas of contamination on the properties,
some of which will require remediation. The environmental assessments have also
identified operations that are not strictly in compliance with applicable
environmental laws or that will need to be upgraded to remain in compliance with
applicable environmental laws (including underground storage tanks at a few of
the properties). The most significant area of contamination identified by the
Phase I and Phase II Assessment involves an area within the maintenance area of
Rolling Hills used when mixing pesticides and herbicides. Pursuant to an
agreement with the former owner of Rolling Hills, the Company has the benefit of
an indemnity that the Company believes will defray the costs associated with the
investigation and remediation at this location. Phase I and Phase II Assessments
cannot provide full and complete knowledge of environmental conditions and
compliance matters. Therefore, no assurances can be given that material
environmental liabilities or compliance concerns do not exist, that identified
matter that do not appear reasonably likely to be material will result in
significantly greater expenditures than is currently anticipated; or that there
are no material environmental liabilities or compliance concerns of which the
Company is unaware.
Competition
Competition in Leisure and Recreation Business. The resort and hotel
industry is highly competitive. Competitive factors within the resort and hotel
industry include room rates, quality of accommodations, service levels,
convenience of location, reputation, reservation systems, name recognition, and
availability of alternative resort and hotel operations in local markets. Each
of the Resort Facilities has a number of competitors. An increase in the number
of competitive resort and hotel facilities in each of the Resort Facilities'
respective markets could have a material adverse effect on the levels of
occupancy and average room rates of each of the Resort Facilities. Further,
there can be no assurance that new or existing competitors will not
significantly reduce their rates or offer greater convenience, services or
amenities or significantly expand, improve or develop facilities in the markets
in which the Resort Facilities compete, thereby adversely affecting the
Company's resort and hotel operations.
Competition in Entertainment and Sports Business. The Panthers compete for
entertainment and sports dollars not only with other major league sports, but
also with college athletics and other sports-related entertainment. During
portions of its season, the Panthers experience competition from professional
basketball (the Miami Heat), professional football (the Miami Dolphins) and
professional baseball (the Florida Marlins). Mr. Huizenga currently controls the
Miami Dolphins and the Florida Marlins. In addition, minor league sports
franchises (including minor league hockey), colleges and universities, as well
as public and private secondary schools in South Florida, offer a full schedule
of athletic events throughout the year. The Panthers also compete for attendance
and advertising revenue with a wide range of other entertainment and
recreational activities available in South Florida. Additionally, subject to the
terms of the NHL Collective Bargaining Agreement and other agreements between
the NHL and other entities, the Panthers compete with other NHL and non-NHL
teams, professional and otherwise, for available players.
Employees
At June 30, 1998, the Company employed approximately 3,105 full-time and
approximately 482 part-time employees in connection with its Leisure and
Recreation Business. Not included in these figures are approximately 815 persons
working as employees of the respective management companies for Pier 66, Bahia
Mar and Arizona Biltmore. The Company employs approximately 100 full-time
employees and 90 part-time employees in connection with its Entertainment and
Sports Business. In addition, the Company employs 20 corporate administrative
personnel. None of these employees, other than the Panthers hockey players, are
subject to any collective bargaining agreement and the Company and management
companies believe that their relationship with employees is good.
<PAGE>
Insurance
The Company maintains comprehensive insurance on the Resort Facilities,
including liability, fire and extended coverage, in the types and amounts
customarily obtained by an owner and operator in the resort and hotel industry.
Nonetheless, there are certain types of losses, generally of a catastrophic
nature, that may be uninsurable or not economically feasible to insure. The
Company uses its discretion in determining amounts, coverage limits and
deductibility provisions of insurance, with a view to obtaining appropriate
insurance on the Resort Facilities at a reasonable cost and on suitable terms.
This may result in insurance coverage that, in the event of loss, would not be
sufficient to pay the full current market value or current replacement value of
the Company's lost investment and the insurance proceeds received by the Company
might not be adequate to restore its economic position with respect to the
Resort Facilities.
The Panthers maintain disability insurance for certain highly compensated
players, which insurance provides for up to 80% salary reimbursement after the
player misses 30 consecutive regular season games due to injury. In the event an
injured player is not insured or disability insurance does not cover the entire
amount of the injured player's salary, the Company may be obligated to pay all
or a portion of the injured player's salary. The Company maintains comprehensive
insurance on the Incredible Ice and Gold Coast facilities, including liability,
fire and extended coverage, in the types and amounts customarily obtained by an
owner and operator in such industry.
Customers and Marketing
Leisure and Recreation Business. The core customer base for the Company's
Leisure and Recreation Business consists of corporate and other group customers,
affluent local residents, individual business travelers and upscale leisure
travelers. The Company believes that such a customer base will allow it to
experience more stable growth and mitigate the adverse effects of economic
downturns better than the hotel and lodging market in general. The Company's
marketing efforts focus on increasing business with existing customers as well
as increasing its upscale clientele. The Company's marketing efforts involve (i)
the Company's use of its sales force to develop national corporate and other
group business for its Resort Facilities by focusing on identifying, obtaining
and maintaining corporate and other group accounts whose employees conduct
business nationwide and (ii) the Company's use of advertisements that target
individual business travelers and upscale leisure travelers in magazines such as
Conde Nast Traveler, Travel and Leisure, Travel Weekly and Meetings and
Conventions as well as newspapers such as The New York Times.
Entertainment and Sports Business. The Company intends to capitalize on the
increasing popularity of hockey by continuing to advertise and market the
Panthers, as well as continuing to enhance the service and entertainment
provided at games. The Company also plans to promote and book a variety of
additional sports and entertainment events at the National Center.
Regulations
Both of the Company's business segments are subject to numerous federal,
state and local government regulations, including those relating to the
preparation and sale of food and beverages (such as health and liquor laws) and
building and zoning requirements. The Company is also subject to laws governing
its relationship with employees, including minimum wage requirements, overtime
working conditions and work permit requirements. The Company believes that it
has the necessary permits and approvals to operate the Resort Facilities and
their respective businesses and the facilities associated with its Entertainment
and Sports Business.
<PAGE>
The Resort Facilities and other properties are subject to the requirements
of the Americans with Disabilities Act of 1990 (the "ADA"), which generally
requires that public accommodations, including office buildings, be made
accessible to disabled persons. The Company believes that the Resort Facilities
and other properties are in substantial compliance with the ADA and that it will
not be required to make material capital expenditures to address additional
requirements of the ADA. However, compliance with the ADA could require removal
of access barriers and noncompliance could result in imposition of fines by the
federal government or the award of damages to private litigants.
Seasonality
The business of the Resort Facilities is generally seasonal. The Resort
Facilities have historically experienced higher revenue and operating income
during the months of January through April due to increased rates of occupancy
and room rental rates during the winter months. This seasonality also results in
higher operating costs during these quarters. In addition, the state of Florida
is subject to tropical weather and storms (typically in the summer months)
which, if severe, can interrupt the normal operations of the Resort Facilities
located in that state and adversely affect tourism.
The NHL regular season begins during the fall and ends in late spring. As a
result, the Company realizes a majority of its hockey revenue and hockey expense
during that period.
Trademarks
The Company utilizes a brand name strategy depending on a Resort Facility's
market environment and a Resort Facility's unique characteristics. The Company
presently uses two national trade names for two of the Resort Facilities
pursuant to licensing arrangements with national franchisors. The Company owns
and utilizes certain trademarks in connection with its Entertainment and Sports
Business. These trademarks relate primarily to the Panthers and the hockey
operations.
Risk Factors
The business, financial condition, results of operations and future
prospects of the Company, and the prevailing market price and performance of the
Company's Class A Common Stock, may be adversely affected by a number of
factors, including the matters discussed below. Such factors include, among
other items:
Need for Additional Capital. The Company's business may require substantial
capital infusions on a continuing basis to finance operations, including meeting
debt service obligations, and for expansion. The Company's capital resources are
used to meet operating expenses, satisfy the Company's debt and other
obligations, expand the Company's existing resorts and acquire additional
resorts. The Company believes that it has or can obtain sources of capital from
additional borrowings or the sale of debt or equity securities, or some
combination thereof to satisfy its capital requirements. In the event the
Company cannot generate sufficient cash flow from its operations, or is unable
to borrow or otherwise obtain additional funds to finance its operations, the
Company's financial condition or results of operations could be materially
adversely affected.
Challenges of Integrating the Operations of the Resort Facilities. The full
benefits of the Company's acquisitions of the Resort Facilities will require the
integration of each entity's administrative, finance and marketing organizations
and the implementation of appropriate operational, financial and management
systems and controls. There can be no assurance that the Company will be able to
continue to successfully integrate the operations of the Resort Facilities.
<PAGE>
Capital Expenditures Relating to the Resort Facilities. The Company may, as
part of its growth strategy, expand the infrastructure at its Resort Facilities
or expand within their respective geographic markets. The Resort Facilities also
have an ongoing need for routine renovations and other capital improvements,
including periodic replacement of furniture, fixtures and equipment. The cost of
capital improvements could have a material adverse effect on the Company's
financial condition or results of operations. Such capital expenditures could
involve certain risks, including the possibility of environmental problems, the
possibility that the Company will not have available cash to fund renovations or
that financing for renovations will not be available on favorable terms,
uncertainties as to market demand or deterioration in market demand after
commencement of renovations and the emergence of unanticipated zoning and
regulatory requirements and competition from other resorts, hotels and
alternative lodging facilities.
Risks Relating to Expansion. The Company may, as part of its growth
strategy, consider making additional acquisitions of certain resort-related,
sports-related or other types of businesses. The Company may make such
acquisitions with cash or with stock or a combination thereof. If the Company
does make any such acquisitions, various associated risks may be encountered,
including potential dilution to the shares of Class A Common Stock then
outstanding due to the issuance of additional shares of Class A Common Stock,
additional shares of Class B Common Stock or the issuance of the Company's
preferred stock in connection with such acquisitions, incurrence or assumption
of debt, goodwill amortization or additional depreciation on acquired property
and equipment, diversion of management's attention, environmental and other
regulatory costs and unanticipated problems or liabilities, some or all of which
could have a material adverse effect on the Company's financial condition or
results of operations.
Operating Risks Relating to the Resort Facilities. The Resort Facilities are
subject to operating risks common to the resort and hotel industry. These risks
include, among other things, over-building in the resort and hotel industry
which may adversely affect rates charged by the Resort Facilities; increases in
operating costs due to inflation and other factors; dependence on tourism and
weather conditions; increases in energy costs; other increases in travel costs
and adverse effects of general and local economic conditions. Any of these
factors could have a material adverse effect on the Company's financial
condition or results of operations.
Seasonality of the Resort Business. The business of the Resort Facilities is
generally seasonal. The Resort Facilities, six of which are located in South
Florida and one of which is located in Arizona, have historically experienced
higher revenue, operating costs and operating profits in the first and fourth
quarters of each calendar year due to increased rates of occupancy and room
rental rates during the winter months.
<PAGE>
Competition. The resort and hotel industry is highly competitive.
Competitive factors within the resort and hotel industry include room rates,
quality of accommodations, service levels, convenience of location, reputation,
reservation systems, name recognition and availability of alternative resort and
hotel operations in local markets. Each of the Resort Facilities has a number of
competitors. An increase in the number of competitive resort and hotel
facilities in each of the Resort Facilities' respective markets could have a
material adverse effect on the levels of occupancy and average room rates of
each of the Resort Facilities. Further, there can be no assurance that new or
existing competitors will not significantly reduce their rates or offer greater
convenience, services or amenities or significantly expand, improve or develop
facilities in the markets in which the Resort Facilities compete, thereby
adversely affecting the Company's resort and hotel operations.
The Panthers compete for entertainment and sports dollars not only with
other major league sports, but also with college athletics and other
sports-related entertainment. During portions of its season, the Panthers
experience competition from professional basketball (the Miami Heat),
professional football (the Miami Dolphins) and professional baseball (the
Florida Marlins). Mr. Huizenga currently controls the Miami Dolphins and the
Florida Marlins. In addition, minor league sports franchises (including minor
league hockey), colleges and universities, as well as public and private
secondary schools in South Florida, offer a full schedule of athletic events
throughout the year. The Panthers also compete for attendance and advertising
revenue with a wide range of other entertainment and recreational activities
available in South Florida. Additionally, subject to the terms of the NHL
Collective Bargaining Agreement and other agreements between the NHL and other
entities, the Panthers compete with other NHL and non-NHL teams, professional
and otherwise, for available players.
History of Losses of the Panthers and Uncertainty of Future Results. For the
year ended June 30, 1998, the Company had net income of $1.3 million. However,
in previous years and periods, the Company did not generate any earnings,
incurring net losses of $10.3 million, $25.1 million, $15.4 million, $12.9
million and $937,000 the years ended June 30, 1997, 1996, 1995 and 1994 and the
seven months ended June 30, 1993, respectively. These losses were due primarily
to the operations of the Panthers. Although the Company has moved into the
high-end luxury resort business, which is generally more profitable than
professional sports franchises, and the Panthers will be sharing in the net
profits of the National Center, there can be no assurance that the Company can
sustain earnings in the future.
Control by H. Wayne Huizenga; Voting Rights. The Company has two classes of
common stock, Class A Common Stock and Class B Common Stock. The Company has
issued shares of Class B Common Stock, which assures voting control of the
Company, solely to Mr. Huizenga to satisfy certain control requirements of the
NHL. In accordance with the NHL Constitution and Bylaws, a change in the
controlling shareholder of the Company must be approved by the NHL. As such, Mr.
Huizenga is required to maintain control of the Company unless the NHL approves
the transfer of his controlling interests. See "Business -- Operations --
Entertainment and Sports Business -- Control Requirement." The Class A Common
Stock and Class B Common Stock generally vote together on each matter submitted
to the shareholders for approval. Each share of Class A Common Stock is entitled
to one vote, and each share of Class B Common Stock is entitled to 10,000 votes.
Consequently, Mr. Huizenga, as the sole owner of the 255,000 issued and
outstanding shares of Class B Common Stock, will be able to control the
management and policies of the Company and the outcome of substantially all
matters submitted to the shareholders for approval, including the election of
directors.
Neither the Company's charter nor its bylaws restricts the transfer of Class
B Common Stock. Accordingly, subject to the requirements of federal and state
securities laws and the approval of the NHL, persons other than Mr. Huizenga may
own shares of Class B Common Stock. As a result, control of the Company may be
transferred by Mr. Huizenga to other persons without the approval of the holders
of Class A Common Stock, and Mr. Huizenga may receive a control premium, which
may be significant, in connection with such sale.
<PAGE>
Dependence on Key Personnel. For the foreseeable future, the Company will
be materially dependent upon the services of Mr. Huizenga. The loss of his
services could have a material adverse effect on the Company. The Company does
not carry key man life insurance on any of its officers.
Shares of Class A Common Stock Eligible for Future Sale. As of the date
hereof, the Company has registered under the Securities Act: (i) an aggregate of
18,609,491 shares of Class A Common Stock for resale, from time to time on a
continuous basis, by certain selling stockholders, (ii) an aggregate of
9,515,589 shares of Class A Common Stock of which 918,174 shares have been
issued and 8,597,415 shares have been reserved for issuance to holders of
certain outstanding rights and warrants to acquire shares of Class A Common
Stock in connection with certain completed acquisitions, (iii) 5,000,000 shares
of Class A Common Stock which have been reserved for issuance under the Amended
and Restated 1996 Stock Option Plan and (iv) 6,000,000 shares of Class A Common
Stock which may be issued from time to time in connection with future
acquisitions. No predictions can be made as to the effect, if any, that market
sales of shares of Class A Common Stock or the availability of the shares of
Class A Common Stock for sale will have on the market price for shares of Class
A Common Stock prevailing from time to time. Sales of substantial amounts of
shares of Class A Common Stock in the public market could adversely affect the
market price of the Class A Common Stock, could impair the Company's ability to
raise capital through an offering of equity securities, or could impair the
Company's ability to consummate acquisitions using shares of Class A Common
Stock.
Possible Volatility of Stock Price. The trading price of the Company's Class
A Common Stock could fluctuate significantly in response to variations in the
public markets, quarterly results and other factors.
Absence of Dividends. The Company has not paid and does not intend to pay
any cash or stock dividends with respect to the Common Stock in the foreseeable
future. Furthermore, the Company's ability to declare or pay dividends on its
Common Stock is limited by the provisions of the NHL Constitution and Bylaws and
may also be limited by the terms of the Company's future credit facilities and
other debt financings.
Americans with Disabilities Act. The cost of complying with the ADA could
adversely affect the Company's cash flow. The Resort Facilities and other
Company-owned properties are subject to the requirements of the ADA, which
generally requires that public accommodations be made accessible to disabled
persons. The Company believes that the Resort Facilities and other properties
are in substantial compliance with the ADA and that it will not be required to
make substantial capital expenditures to address the requirements of the ADA.
However, compliance with the ADA could require removal of access barriers and
noncompliance could result in the imposition of fines by the federal government
or the award of damages to private litigants. If, pursuant to the ADA, the
Company were required to make substantial alterations in one or more of the
Resort Facilities or other Company-owned properties, the Company's financial
condition and results of operations could be adversely affected.
Environmental Matters. The Company's operating costs may be affected by the
obligation to pay for the cost of complying with existing environmental laws,
ordinances and regulations, as well as the cost of complying with future
legislation. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances, as well as contamination from such hazardous or toxic
substances, on, under or in such property. Such laws and regulations often
impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. Liability
also extends to those persons arranging for the disposal of hazardous or toxic
<PAGE>
substances. Environmental laws and regulations also impose restrictions on the
manner in which property may be used or transferred or in which businesses may
be operated thereon, and these restrictions may require certain expenditures. In
connection with the ownership of its properties, the Company may be liable for
such costs. In connection with the acquisition of its properties, the Company
has obtained Phase I (and in some instances Phase II) environmental site
assessments in order to assess potential environmental liabilities at the
properties. Although these assessments have identified certain matters that will
require the Company to incur costs to remedy, none of these matters appears
reasonably likely to have a material adverse effect on the Company's business,
assets, results of operations or liquidity. However, because these assessments
cannot give full and complete knowledge of environmental liability and
compliance matters, no assurance can be given that the costs of complying with
environmental laws and of defending against claims of liability arising
therefrom will not have a material adverse effect on the Company's financial
condition and results of operations. See "Business -- Environmental Matters".
Losses in Excess of Resort Facilities' Insurance Coverage; Limitations of
Insurance for the Panthers. The Company maintains comprehensive insurance on the
Resort Facilities, including liability, fire and extended coverage, in the types
and amounts customarily obtained by an owner and operator in the resort and
hotel industry. Nevertheless, there are certain types of losses, generally of a
catastrophic nature, that may be uninsurable or not economically insurable. The
Company will use its discretion in determining amounts, coverage limits and
deductibility provisions of insurance, with a view to obtaining appropriate
insurance on the Resort Facilities at a reasonable cost and on suitable terms.
This may result in insurance coverage that, in the event of a loss, would not be
sufficient to pay the full current market value or current replacement value of
the Company's lost investment, and the insurance proceeds received by the
Company might not be adequate to restore its economic position with respect to
the Resort Facilities.
Panthers maintain disability insurance for certain highly compensated
players, which insurance provides for up to 80% salary reimbursement after a
player misses 30 consecutive regular season games due to injury. In the event an
injured player is not insured, or disability insurance does not cover the entire
amount of the injured player's salary, the Company may be obligated to pay all
or a portion of the injured player's salary.
Uncertainties of Increases in the Panthers' Players' Salaries. Players'
salaries in the NHL have increased significantly over the last three seasons.
Further increases in players' salaries could have a material adverse effect on
the Company's financial condition or results of operations.
NHL Membership -- Potential Liabilities and Ownership Restrictions. The
Panthers and other members of the NHL are generally jointly and severally liable
for the debts and obligations of the NHL. The failure of another member of the
NHL to pay its pro rata share of any such debt or obligation could adversely
affect the Panthers. In addition, the Panthers and its personnel are bound by a
number of rules, regulations and agreements, including, but not limited to, the
NHL Constitution and Bylaws, national television contracts and the NHL
Collective Bargaining Agreement.
The NHL Constitution and Bylaws contain provisions which requires a person
or a group of persons holding a 5% or more interest in the Company to obtain the
prior approval of the NHL, which may be granted or withheld in the sole
discretion of the NHL.
Development and Operation of the National Center. In June 1996, the Company
entered into an agreement with Broward County to develop the National Center.
See "Business -- Operations -- Entertainment and Sports Business -- Arena
Development and Operations -- Development of the National Center." Construction
projects, such as the development of a new arena, entail significant risks,
including regulatory and licensing requirements, shortages of materials or
skilled labor, unforeseen engineering, environmental or geological problems,
work stoppages, weather interference, unanticipated cost increases and
challenges from local residents. Under the agreement with Broward County, the
<PAGE>
Company will be responsible for all costs relating to the development of
the National Center in excess of $184.7 million, including the additional
construction costs in excess of the $184.7 million resulting from certain
related litigation. See "Legal Proceedings" under Item 3. Although the Company
anticipates that the National Center will be completed in time for the 1998-1999
season, there can be no assurance that the National Center will be completed
within the contemplated time frame. The Company's first Panthers hockey game is
scheduled for September 27, 1998.
Year 2000 Compliance. The Year 2000 issue relates to whether computer
systems will properly recognize and process information related to dates in and
after the year 2000. These systems could fail or produce erroneous results if
they cannot adequately process dates beyond the year 1999 and are not corrected.
Significant uncertainty exists in the software industry concerning the potential
consequences that may result from the failure of software to adequately address
the Year 2000 issue. The Company has reviewed all software and hardware used
internally in its support systems to determine whether such software and
hardware is Year 2000 compliant. Most of the Company's software has already been
upgraded by the manufacturer or was recently purchased and is Year 2000
compliant. The Company expects to have its remaining Year 2000 compliant systems
in place by December 1998. The Company also intends to implement and test these
solutions prior to any anticipated impact of the Year 2000 issue on its systems.
The Company has incurred costs of less than $100,000 to date and does not
believe that the aggregate cost for the Year 2000 issue will be material. The
Company, however, cannot predict the effect of the Year 2000 issue on entities
with which the Company transacts business, and there can be no assurance that
the effect of the Year 2000 issue on such entities will not have a material
adverse effect on the Company's business, financial condition or results of
operations. The Company will be formulating a contingency plan with respect to
such entities with which it does business.
Because the Company is currently assessing the expense and related potential
effect of Year 2000 compliance on the Company's results of operations, financial
condition and business, it cannot provide any assurance that the effect will not
be material.
Litigation. The Company is currently a party to certain litigation, which
if concluded adversely to the Company could have a material adverse effect on
the Company's financial condition or results of operations. See "Legal
Proceedings" under Item 3.
<PAGE>
Item 2. Properties
Introduction
The Company's corporate headquarters are located in Fort Lauderdale, Florida
in leased premises. Certain of the property of the Company and its subsidiaries
are subject to liens securing payment of portions of the Company's and its
subsidiaries' indebtedness. The Company believes that all of its facilities are
sufficient for its needs.
Leisure and Recreation Business
The following table sets forth as of June 30, 1998, certain information with
respect to the Resort Facilities owned by the Company:
Resort Facilities
Own/ # Guest # Marina Franchise
Name Location Lease Rooms Boat Slips Affiliation
- ---- -------- ----- ------ ---------- -----------
Boca Resort...... Boca Raton, FL Own(1) 963 25 None
Arizona Biltmore. Phoenix, AZ Own(2) 620 0 None
Registry Resort.. Naples, FL Own(3) 474 0 None
Egewater Resort.. Naples, FL Own 126 0 None
Pier 66 Resort... Fort Lauderdale, FL Own(4) 380 142 Hyatt
Bahia Mar........ Fort Lauderdale, FL Own(5) 300 350 Radisson
- ----------
(1) The Company has a senior bank note payable in the principal amount of
$110.0 million due on August 22, 2001. The note is secured by a first
mortgage and lien on the assets of Boca Resort.
(2) The Company has a note payable in the principal amount of $62.7 million
due on July 1, 2016. The note is secured by a first mortgage and lien on
the assets of Arizona Biltmore.
(3) The Company owned approximately 99% of Registry Resort as of June 30, 1998
and acquired the remaining 1% in July 1998. (4) The Company has a mortgage
note payable in the principal amount of $26.0 million due on June 28,
2000. The note is collateralized by substantially all of the property and
equipment of Pier 66.
(5) The site of the resort is subject to a land lease which expires in 2062.
<PAGE>
Entertainment and Sports Business
The Company utilized the Miami Arena for the games of the Panthers pursuant
to a license agreement during the 1997-1998 hockey season. It is anticipated
that the Panthers, along with certain operating and management related
personnel, will utilize the National Center, beginning with the Panthers'
1998-1999 hockey season, pursuant to a license agreement between the Company and
Broward County.
The Company owns and operates Incredible Ice and operates Gold Coast
pursuant to a lease.
Item 3. Legal Proceedings
On April 9, 1997, Allied Minority Contractors Association, Inc., South
Florida Chapter of NAMC, Overnight Success Construction, Inc., Reed Jr.
Plumbing, Inc. and Christopher Mallard (collectively, the "Broward County
Plaintiffs") filed a suit against Broward County and Arena Development Company
Ltd. in the Seventeenth Judicial Circuit in and for Broward County, Florida.
This suit alleges that Broward County entered into the agreement with the
Company to develop the National Center in violation of Florida law and Broward
County ordinances. The Broward County Plaintiffs seek, among other things, to
nullify the agreement between Broward County and the Company to develop the
National Center. The Company believes that this suit is without merit and
intends to vigorously defend against this suit. On July 10, 1997, the trial
court denied the Broward County Plaintiffs' motion for a temporary restraining
order and on November 17, 1997 the trial court also denied plaintiff's motion
for summary judgement. Plaintiffs have appealed both of those orders. On May 19,
1998, the trial court granted the Joint Motion of Broward County and Arena
Development Company Ltd. to Disqualify Plaintiffs and Their Counsel and to
Dismiss. Plaintiffs motion for rehearing was denied, and plaintiffs have filed a
notice of appeal. An unfavorable outcome of the suit may have a material adverse
effect on the Company's financial condition or results of operations.
On January 28, 1997, February 4, 1997 and March 18, 1997, purported class
action lawsuits were filed against the Company and Messrs. Huizenga, Johnson,
Rochon, Berrard, Hudson, Dauria and Evans in the United States District Court
for the Southern District of Florida. On May 7, 1998, a consolidated and amended
class action complaint was filed combining these claims into one action. The
suits allege, among other things, that the defendants violated Section 10(b) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
10b-5 thereunder, by making untrue statements or omitting to state material
facts, 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 believes that this suit is without merit and intends to defend
vigorously against this suit. An unfavorable outcome of the suit may have a
material adverse effect on the Company's financial condition or results of
operations.
On October 9, 1997, Bernard Kalishman filed a purported shareholder
derivative and class action lawsuit on behalf of the Company, as nominal
defendant, against Messrs. Huizenga, Berrard, Johnson, Rochon, Hudson and Egan,
each as director of the Company and Richard Evans and William Torrey, both
former directors of the Company, in the Seventeenth Judicial Circuit in and for
Broward County, Florida. The suit alleges, among other things, that each of the
defendants (other than Mr. Egan) breached contractual and fiduciary obligations
owed to the Company and its stockholders by engaging in self-dealing
transactions in connection with the Company's purchase of Pier 66 and Bahia Mar.
The suit seeks to impose a constructive trust on alleged excessive compensation
paid to the prior owners of Pier 66 and Bahia Mar or to have damages assessed
against the defendants or to rescind the transaction. The amended complaint also
added claims similar to those alleged in the class action lawsuit described in
the paragraph above and dropped Mr. Egan as a defendent. The Company believes
that this suit is without merit and intends to defend vigorously against this
suit. An unfavorable outcome of the suit may have a material adverse effect on
the Company's financial condition or results of operations.
<PAGE>
A lawsuit was filed on January 9, 1997 by Arena Development Company Ltd.
seeking a determination as to the applicability of Broward County Ordinance
83-72 (the "Prevailing Wage Ordinance") to the construction of the National
Center. The suit was filed in the Seventeenth Judicial Circuit in and for
Broward County, Florida. The complaint filed alleged that the Prevailing Wage
Ordinance did not apply to the construction of the National Center for two
reasons: (i) the Prevailing Wage Ordinance only applies to construction
contracts in excess of $250,000 to which Broward County is a party and Broward
County is not a party to the construction contract between Arena Development
Company Ltd. 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 Company Ltd. 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
lawsuit asked for a declaratory judgment finding that the Prevailing Wage
Ordinance did not apply to the construction of the National Center and that
Arena Development Company Ltd. could continue without reference to the
ordinance. On February 21, 1997, the Seventeenth Judicial Circuit Court ruled
against the Company's complaint, 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 decided not to pursue
further appeals. The Company estimates it will be liable for additional
construction costs of up to $6.5 million.
The Company is not presently involved in any other material legal
proceedings. However, the Company may from time to time become a party to legal
proceedings arising in the ordinary course of business, which are incidental to
the business.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Class A Common Stock began trading on The Nasdaq National Market on
November 13, 1996 under the symbol "PUCK." On July 11, 1997, the Class A Common
Stock began trading on the NYSE under the symbol "PAW." The following table sets
forth, for the periods indicated, the range of the high and low sales prices per
share for the Class A Common .
Price Range
of Class A
Common
Stock
High Low
Fiscal year Ended June 30, 1998:
First Quarter........................ $ 24 5/8 $ 17 7/8
Second Quarter ...................... 24 3/4 16 5/8
Third Quarter........................ 22 1/2 15 15/16
Fourth Quarter....................... 22 3/8 17 1/2
Fiscal year Ended June 30, 1997:
Second Quarter (from November 13,
1996)................................ $ 19 $ 10
Third Quarter........................ 32 1/8 16 5/8
Fourth Quarter....................... 26 1/4 21 3/8
On August 10, 1998, the last reported sales price of the Class A Common
Stock on the New York Stock Exchange was $14 9/16. As of the same date, there
were approximately 8,800 holders of record of the Class A Common Stock.
Since its inception, the Company has not paid any cash dividends on the
Class A Common Stock or the Class B Common Stock. The Company does not intend to
pay any cash dividends with respect to its Common Stock in the foreseeable
future. Certain of the Company's credit facilities restrict the ability of the
Company to pay dividends. In addition, the NHL Constitution and Bylaws prohibit
the Company from paying cash dividends, unless paying such cash dividends will
not impair the Company's ability to (i) meet its projected expenses for the
ensuing 12 month period without the use of borrowed funds, other than short-term
borrowings and (ii) maintain adequate reserves to fund the future payment of all
deferred player compensation and other deferred obligations for past services.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
<PAGE>
Item 6. Selected Financial Data
The financial data set forth below should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto contained in Part
II, Item 8 of this Annual Report on Form 10-K. See also "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Year Ended June 30,
----------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- --------- --------- ---------
Statement of Operations Data:
Revenue.......................$296,189 $ 54,262 $ 34,087 $ 17,746 $ 21,682
Gross profit (loss)........... 140,186 12,469 ( 1,871) 536 1,493
Selling, general and
administrative expense..... 91,579 15,150 8,371 5,569 5,512
Amortization and
depreciation.............. 23,155 5,698 9,815 6,266 6,444
Operating income (loss)....... 25,452 ( 8,379) (20,057) (11,299) (10,463)
Interest and other income..... 2,307 1,923 122 38 65
Interest expense..............( 24,673) ( 3,364) ( 5,030) ( 3,741) ( 2,528)
Minority interest.............( 1,813) ( 440) ( 174) ( 384) -
Net income (loss)............ 1,273 ( 10,260) (25,139) ( 15,386) (12,926)
Net income (loss) per share -
diluted.................... 0.04 ( 0.74) ( 4.76) ( 2.96) (2.93)
Shares used to compute diluted
income (loss) per share.... 34,888 13,829 5,276 5,203 4,405
Other Data:
EBITDA (1)....................$ 50,914 $( 758) $(10,120) $ ( 4,995) $(3,954)
Adjusted EBITDA (2)........... 56,728 ( 758) (10,120) ( 4,995) 3,954)
Capital expenditures.......... 47,806 1,494 140 161 1,275
Gross margin.................. 47% 23% ( 5)% 3% 7%
EBITDA margin................ 17% ( 1)% ( 30)% ( 28)% ( 18)%
Adusted EBITDA margin........ 19% ( 1)% ( 30)% ( 28)% ( 18)%
At June 30,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- -------- --------
Balance Sheet Data:
Cash and cash equivalents...$ 37,228 $ 13,709 $ 465 $ 1,237 $ 1,447
Total current assets......... 111,182 70,590 3,756 3,408 2,996
Total assets.................1,128,207 600,392 47,760 53,587 49,019
Total current liabilities.... 403,096 46,375 67,786 50,292 17,712
Total debt................... 540,626 186,056 85,172 67,226 50,249
Non-current obligations...... 292,708 251,003 28,277 25,643 45,169
Shareholders' equity (deficit) 430,511 301,153 (48,303) (22,348) (13,862)
- ----------
(1) EBITDA represents earnings before interest expense, taxes, depreciation,
amortization and minority interest. EBITDA is used by management and
certain investors as an indicator of a company's historical ability to
service debt. Management believes that an increase in EBITDA is an
indicator of the Company's improved ability to service existing debt, to
sustain potential future increases in debt and to satisfy capital
requirements. However, EBITDA is not intended to represent cash flows for
the period, nor has it been presented as an alternative to either (i)
operating income (as determined by GAAP) as an indicator of operating
performance or (ii) cash flows from operating, investing and financing
activities (as determined by GAAP) and is thus susceptible to varying
calculations. EBITDA as presented may not be comparable to other similarly
titled measures of other companies.
(2) Adjusted EBITDA represents EBITDA plus the annual change in Premier Club
net deferred income. See Note 2 - "Revenue Recognition" to the Consolidated
Financial Statements under Part II, Item 8.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto of the Company which are included
elsewhere herein.
Acquisitions
The Company makes its decisions to acquire or invest in businesses based on
financial and strategic considerations. Each of the acquisitions discussed
below, with the exception of the Decoma acquisition which took place prior to
the IPO, have been accounted for under the purchase method of accounting.
Acquisitions Made During the Year Ended June 30, 1998
In April 1998, the Company acquired Edgewater Resort for $41.2 million.
Approximately $20.7 million of the purchase price was paid in cash at closing
and the remainder bears interest at a rate of 5.0% per annum and is payable, at
the election of the seller, in either cash on October 22, 1999 or shares of
Class A Common Stock at a per share price of $24.50 at any time through October
22, 1999.
In March 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 $500,000 in cash, (iii) payment in the future of $99.8 million
either in cash or shares of Class A Common Stock, (iv) warrants to purchase
500,000 shares of Class A Common Stock exercisable at $24.00 per share at any
time, in whole or part, through March 2003 and (v) the assumption of $63.1
million of debt. The $500,000 bears interest at a rate of 2.5% per annum and is
payable in April 2001. The $99.8 million bears interest at a rate of 5.0% 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 through March 2, 2000. If
an election for cash is made, the Company will be required to 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 through March 2, 2008. Subject to implementing certain developmental
strategies or meeting certain profit levels over a 36 month period ending on
March 31, 2001, up to an additional $50 million may be payable at the election
of the seller, either in cash or shares of Class A Common Stock at a per share
price of not less than $19.00.
In November 1997, the Company acquired certain assets associated with
Rolling Hills in exchange for $8.0 million in cash. The assets acquired consist
of an 18-hole golf course and a separate 9-hole golf course (both of which are
currently being redesigned), a parking lot and 79 acres of undeveloped land
adjacent to the golf courses.
In August 1997, the Company acquired its initial 68% ownership interest
(325 of the 474 units) in Registry Resort for (i) 918,174 shares of Class A
Common Stock, (ii) 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 (iii) $75.5 million in cash. The warrants
vest ratably on a quarterly basis and become fully exercisable on December 31,
1999. The warrants expire in October 2003. As of June 30, 1998, the Company had
acquired all but one of the remaining units of Registry Resort for additional
payments of $30.6 million (net of the payoff of certain mortgage notes
receivable to the Company associated with additional units). The Company
acquired the last unit in July 1998.
Acquisitions Made During the Year Ended June 30, 1997
In June 1997, the Company acquired substantially all of the net assets of
Boca Resort in exchange for (i) 272,303 shares of Class A Common Stock, (ii)
rights to acquire 4,242,586 shares of Class A Common Stock for no additional
consideration and (iii) warrants to purchase 869,810 shares of Class A Common
Stock at a purchase price of $29.01 per share. The warrants are currently
exercisable with 50% expiring in December 1998 and the remainder expiring in
December 1999.
In May 1997, the Company acquired the rights to operate Gold Coast in
exchange for 34,760 shares of Class A Common Stock. Gold Coast is the current
practice facility of the Panthers and provides open skating, ice hockey leagues
and other programs to the public.
<PAGE>
In March 1997, the Company acquired all of the ownership interests,
comprised of capital stock and partnership interests, of each of the entities
which own, directly or indirectly, all of the general and limited partnership
interests in Pier 66 for 4,450,000 shares of Class A Common Stock.
In March 1997, the Company acquired all of the ownership interests,
comprised of capital stock and partnership interests, of each of the entities
which own, directly or indirectly, all of the general and limited partnership
interests in the Bahia Mar in exchange for 3,950,000 shares of Class A Common
Stock.
In January 1997, the Company acquired certain assets relating to
Incredible Ice in exchange for (i) $1.0 million in cash, (ii) 212,766 shares of
Class A Common Stock and (iii) the assumption by the Company of a maximum of
$8.1 million in construction-related obligations. Incredible Ice provides open
skating, ice hockey leagues and other ice programs.
Prior to the completion of the IPO, the Company acquired from Mr. Huizenga
approximately 78% of the partnership interest in Decoma in exchange for 870,968
shares of Class A Common Stock. Decoma derives revenue from the operations of
the Miami Arena. As this transaction was among entities under common control, it
was accounted for on a historical cost basis in a manner similar to a pooling of
interests as of the date of the acquisition by Mr. Huizenga.
Business Segment Information
The table set forth below outlines business segment operating data along
with costs and expenses expressed as a percentage of the related business
segment revenue (in 000's).
Fiscal Year Ended June 30,
------------------------------------------------
1998 % 1997 % 1996 %
------- ---- ------- ---- ------- ----
Revenue:
Leisure and recreation........ $252,603 85% $ 17,567 32% $ -- --
Entertainment and sports...... 43,586 15% 36,695 68% 34,087 100%
------- ------ ------
Total revenue........ 296,189 100% 54,262 100% 34,087 100%
Operating Expenses:
Cost of services:
Leisure and recreation...... 110,084 44% 6,658 38% -- --
Entertainment and sports.... 45,919 105% 35,135 96% 35,958 105%
Selling, general and
administrative expenses:
Leisure and recreation...... 71,800 28% 5,397 31% -- --
Entertainment and sports.... 10,002 23% 7,854 21% 8,371 25%
Corporate................... 9,777 -- 1,899 -- -- --
Amortization and Depreciation:
Leisure and recreation....... 17,950 7% 1,459 8% -- --
Entertainment and sports.... 5,168 12% 4,239 12% 9,815 29%
Corporate................... 37 -- -- --
--------- -------- ---------
Total operating expenses..... 270,737 91% 62,641 115% 54,144 159%
--------- -------- ---------
Operating income(loss)....... $ 25,452 $ (8,379) $ (20,057)
========= ======== =========
EBITDA:
Leisure and recreation...... $ 72,478 $ 5,512 $ --
Entertainment and sports.... (12,092) ( 6,040) (10,120)
Corporate................... ( 9,472) ( 230) --
-------- --------- -----------
Total....................... $ 50,914 $ ( 758) $ (10,120)
======== ========= ===========
Adjusted EBITDA:
Leisure and recreation...... $ 78,292 $ 5,512 $ --
Entertainment and sports.... (12,092) ( 6,040) (10,120)
Corporate................... ( 9,472) ( 230) --
-------- --------- ---------
Total....................... $ 56,728 $( 758) $ (10,120)
======== ========= =========
Seasonality
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.
<PAGE>
Impact of Inflation
Inflation and changing prices have not had a material impact on the
Company's revenue and results of operations. Based on the current economic
climate, the Company does not expect that inflation and changing prices will
have a material impact on the Company's revenue or earnings during fiscal 1999.
Many of the costs of operating the hotels can be fixed for certain periods of
time, reducing the short-term effects of changes in the rate of inflation. Room
rates, which are set on a daily basis, can be rapidly changed to meet changes in
inflation rates (as well as other changing market conditions). To the extent
inflationary trends affect short-term interest rates, a portion of the Company's
debt service costs may be adversely affected.
Consolidated Results of Operations
Net income totaled $1.3 million for the year ended June 30, 1998. Net
losses totaled $10.3 million and $25.1 million for the years ended June 30, 1997
and 1996, respectively. The improvement in operating results from 1996 to 1998
was the result of the Company's diversification into the Leisure and Recreation
Business in 1997, followed by an increase in the number of resort properties
under ownership in 1998 (due to business acquisitions). The improved results for
the Leisure and Recreation Business during 1998 were 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 six
properties at June 30, 1998 from three properties at June 30, 1997, variations
in operating results between 1998 and 1997 resulted primarily from the Company's
business acquisitions. Because the Company began acquiring resort properties in
1997, a comparison of 1996 and 1997 annual resort data has been excluded, as it
is not meaningful.
Revenue
Leisure and Recreation Business revenue increased to $252.6 million for
the year ended June 30, 1998 from $17.6 million for the year ended June 30,
1997. More than 50% of leisure and recreation revenue for the year ended June
30, 1998 was derived from full- year activities of Boca Resort. In addition,
over 50% of consolidated resort revenue for the year ended June 30, 1998 was
generated from non-room sources such as food and beverage sales, marina, retail
sales and other amenities.
Operating Expenses
Cost of services for the Leisure and Recreation Business totaled $110.1
million and $6.7 million for the years ended June 30, 1998 and 1997,
respectively. Cost of services as a percentage of revenue was 44% and 38% for
the years ended June 30, 1998 and 1997, respectively. Cost of leisure and
recreation services consist primarily of labor and other direct costs incurred
in connection with servicing the Resort Facilities' rooms, marinas, food and
beverage operations, retail establishments and other facility amenities. In the
future, 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") for the Leisure and
Recreation Business totaled $71.8 million and $5.4 million for the years ended
June 30, 1998 and 1997, respectively. S,G&A as a percentage of revenue was 28%
and 31% for the years ended June 30, 1998 and 1997, respectively. S,G&A for the
Leisure and Recreation Business consists 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 for the Leisure and Recreation
Business was $18.0 million and $1.5 million for the years ended June 30, 1998
and 1997, respectively. As discussed above, increases were due to additional
depreciation for property and equipment acquired in connection with the
Company's business combinations.
<PAGE>
Entertainment and Sports
Revenue
Entertainment and Sports Business revenue was $43.6 million, $36.7 million
and $34.1 million for the years ended June 30, 1998, 1997 and 1996,
respectively. The primary component of the Entertainment and Sports Business is
the Panthers. Revenue and direct expenses associated with the team are recorded
over the regular hockey season. The increase in revenue during year ended June
30, 1998 compared to 1997 was partially due to the receipt of the Panthers share
of an expansion fee, which resulted from a new hockey franchise being admitted
into the NHL. In addition, revenue from arena operations increased. The increase
in revenue for the year ended June 30, 1997 compared to the year ended June 30,
1996 was the result of higher Panthers ticket sales due to all home games being
sold out during the 1996-1997 season. In addition, more revenue from
broadcasting and advertising/promotion contracts was recognized during 1997,
offset by fewer playoff games played in the 1996-1997 season as compared to the
1995-1996 season.
Operating Expenses
Entertainment and sports operating expenses, which include among other
items Panthers' player salaries and arena and ticketing costs were $61.1
million, $47.2 million and $54.1 million for the years ended June 30, 1998, 1997
and 1996, respectively. The increase of $13.9 million, or approximately 29%,
during the 1998 period was primarily the result of higher Panthers' player
salaries, along with increased costs associated with the operation of the
Company's ice skating rink facilities. During fiscal 1996, amortization of
players' contracts was higher than during fiscal 1998 and 1997, to reflect the
then current value of the remaining contracts of players selected in the 1993
draft.
Corporate General and Administrative Expenses
Corporate general and administrative expenses totaled $9.8 million and
$1.9 million for the years ended June 30, 1998 and 1997, respectively. There
were no corporate general and administrative expenses for the year ended June
30, 1996. The increase was substantially the result of additional legal,
accounting, treasury and other corporate general and administrative expenses
associated with the Company's (i) increase in total revenue and assets, (ii)
diversification into the resort hospitality business and (iii) public company
compliance and reporting activities.
Interest and Other Income
Interest and other income totaled $2.3 million, $1.9 million and $122,000
for the years ended June 30, 1998, 1997 and 1996, respectively. The increase in
interest income in 1998 compared to 1997 and 1996 was the result of maintaining
a higher average cash balance due to sales of common stock and cash flow from
the added Resort Facilities. The Company raised $108.5 million and $131.9
million during the year ended June 30, 1998 and 1997, respectively, through the
sale of common stock.
Interest Expense
Interest expense totaled $24.7 million, $3.4 million and $5.0 million for
the years ended June 30, 1998, 1997 and 1996, respectively. The increase in
interest expense during the 1998 period was attributable to additional debt
assumed or incurred in connection with certain resort acquisitions. The average
outstanding indebtedness during 1997 and 1996 related primarily 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.
Minority Interest
Minority interest totaled $1.8 million, $440,000 and $174,000 for the
years ended June 30, 1998, 1997 and 1996, respectively. The increase was
primarily the result of an initial 32% minority interest in Registry Resort
(resulting from the Company's acquisition of a 68% interest in Registry Resort
in August 1997). By June 30, 1998, the Company had increased its interest in
Registry to 99% and acquired the remaining 1% in July 1998.
<PAGE>
EBITDA
EBITDA represents earnings before interest expense, taxes, depreciation,
amortization and minority interest. EBITDA is used by management and certain
investors as an indicator of a company's historical ability to service debt.
Management believes that an increase in EBITDA is an indicator of the Company's
improved ability to service existing debt, to sustain potential future increases
in debt and to satisfy capital requirements. However, EBITDA is not intended to
represent cash flows for the period, nor has it been presented as an alternative
to either (i) operating income (as determined by GAAP) as an indicator of
operating performance or (ii) cash flows from operating, investing and financing
activities (as determined by GAAP) and is thus susceptible to varying
calculations. EBITDA as presented may not be comparable to other similarly
titled measures of other companies. As a result of the Company's acquisition of
the Resort Facilities, EBITDA increased to $50.9 million for the year ended June
30, 1998 from $(758,000) for the year ended June 30, 1997. EBITDA totaled
$(10.1) million for the year ended June 30, 1996.
Adjusted EBITDA
Adjusted EBITDA represents EBITDA plus the annual change in Premier Club
net deferred income. Adjusted EBITDA increased to $56.7 million for the year
ended June 30, 1998 from $(758,000) for the year ended June 30, 1997 and $(10.1)
million for the year ended June 30, 1996.
Liquidity and Capital Resources
Cash and cash equivalents increased $23.5 million, to $37.2 million at June
30, 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 $37.7 million and $2.9
million for the years ended June 30, 1998 and 1997, respectively. Net cash used
in operating activities totaled $17.4 million for the year ended June 30, 1996.
The increase in cash flow from operations for the year ended June 30, 1998 was
the result of receiving more cash flow from the Resort Facilities. Registry
Resort, Arizona Biltmore and Edgewater Resort, were acquired subsequent to June
30, 1997, and accordingly, the related cash flow is not included in the
Company's 1997 and 1996 financial statements. Cash flow from the newly acquired
resort facilities was 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 $293.4 million, $515,000
and $140,000 for the years ended June 30, 1998, 1997 and 1996, respectively.
Cash used in business acquisitions and to acquire additional interests in
a consolidated subsidiary of the Company increased to $260.8 million for the
year ended June 30, 1998 from $1.1 million for the year ended June 30, 1997.
During the year ended June 30, 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 additional units of Registry Resort of
which $30.6 million of the purchase price was paid in cash, (iii) acquired
Rolling Hills for $8.0 million, (iv) acquired Arizona Biltmore of which $126.0
million of the purchase price was paid in cash and (v) acquired Edgewater Resort
of which $20.7 million of the purchase price was paid in cash. During the year
ended June 30, 1997, the Company used cash to acquire certain assets relating to
the business of owning and operating a twin-pad ice facility located in Coral
Springs, Florida. All resort acquisitions during the year ended June 30, 1997
involved the issuance of common stock or the assumption of debt in lieu of
payment in cash.
Capital expenditures increased by $46.3 million during the year ended June
30, 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 year ended June
30, 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. 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 $279.2 million,
$10.9 million and $16.7 million for the years ended June 30, 1998, 1997 and
1996, respectively. During the year ended June 30, 1998, the Company received
$108.5 million of net proceeds from the sale of shares of Class A Common Stock
and $170.7 million in borrowings, net of repayments, under debt facilities.
During the year ended June 30, 1997, the Company completed its IPO 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 the net proceeds from the IPO was used
to retire $45.0 million of debt. The Company also sold 2,460,000 shares of Class
A Common Stock in a private placement transaction, which yielded $65.6 million
in net proceeds during the year ended June 30, 1997 and retired $111.3 million
of indebtedness assumed in connection the acquisition of Boca Resort. Through
the date of the IPO, all operating losses of the Panthers were financed
primarily through loans from Mr. Huizenga. As a result, net cash flow from
financing activities for the year ended June 30, 1996 consisted entirely of
borrowings and repayments of the loans from Mr. Huizenga.
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. See "Risk
Factors" included under Part I, Item 1.
The primary external sources of liquidity have been the issuance of equity
securities and borrowing under term loans and lines-of-credit. Since the IPO,
the Company has raised $240.4 million from the issuance of its Class A Common
Stock. At June 30, 1998, the Company had $540.6 million outstanding under
secured term loans or acquisition related notes payable, of which $322.8 million
matures over the next twelve months. The Company is in the process of
negotiating a long-term secured credit facility in the amount of $450.0 million,
with a portion of such borrowing capacity expected to be used to retire
approximately $335.0 million of currently outstanding indebtedness.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The Year 2000 issue
relates to whether computer systems will properly recognize and process
information relating to dates in and after the year 2000. These systems could
fail or produce erroneous results if they cannot adequately process dates beyond
the year 1999 and are not corrected. Significant uncertainty exists in the
software industry concerning the potential consequences that may result from the
failure of software to adequately address the Year 2000 issue. The Company has
reviewed all software and hardware used internally by the Company in all support
systems to determine whether they are Year 2000 compliant. Most of the Company's
software has already been upgraded by the manufacturer or was recently purchased
and is Year 2000 compliant. The Company expects to have its remaining Year 2000
compliant systems in place by December 1998. The Company also intends to
implement and test these solutions prior to any anticipated impact of the Year
2000 issue on its systems. The Company has incurred costs of less than $100,000
to date and does not believe that the aggregate cost for the Year 2000 issue
will be material. The Company, however, cannot predict the effect of the Year
2000 issue on entities with which the Company transacts business, and there can
be no assurance that the effect of the Year 2000 issue on such entities will not
have a material adverse effect on the Company's business, financial condition or
results of operations. The Company will be formulating a contingency plan with
respect to such entities with which is does business.
<PAGE>
Any new software, hardware or support systems implemented in the future
will be Year 2000 compliant or will have updates or upgrades or replacements
available before the Year 2000 to enable the system to be Year 2000 compliant.
Management is currently assessing the Year 2000 compliance expense and related
potential effect on the Company's earnings.
Recently Issued Accounting Standards
The adoption of recently issued accounting standards is not expected to
have a material impact on the Company's financial condition or results of
operations. See Note 2 - "Recently Issued Accounting Standards" to the
Consolidated Financial Statements included under Item 8.
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 and for the Company to operate within the limitations imposed by
financing arrangements; the Company's limited history of operations in the
Leisure and Recreation Business segment; dependence on key personnel and the
ability to properly assess and capitalize on future business opportunities.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants........................ 30
Consolidated Balance Sheets as of June 30, 1998 and 1997.................. 31
Consolidated Statements of Operations for the Years Ended
June 30, 1998, 1997 and 1996............................................. 32
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended June 30, 1998, 1997 and 1996......................... 33
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1998, 1997 and 1996............................................. 34
Notes to Consolidated Financial Statements................................ 35
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To 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, 1998 and
1997, and the related consolidated statements of operations, shareholders'
equity (deficit) and cash flows for each of the three years in the period ended
June 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
August 3, 1998.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30,
(In thousands, except share data)
1998 1997
---- ----
ASSETS
Current assets:
Cash and cash equivalents............................... $ 37,228 $ 13,709
Restricted cash......................................... 29,296 30,110
Accounts receivable, net................................ 28,574 13,087
Inventory............................................... 6,499 5,763
Current portion of Premier Club notes receivable........ 4,089 3,778
Other current assets................................. .. 5,496 4,143
--------- ---------
Total current assets............................ 111,182 70,590
Property and equipment, net............................... 959,214 475,391
Intangible assets, net.................................... 36,926 40,987
Long-term portion of Premier Club notes receivable, net .. 7,828 8,240
Other assets.............................................. 13,057 5,184
---------- ---------
Total assets..................................... $1,128,207 $ 600,392
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................... $ 41,326 $ 26,867
Current portion of deferred revenue..................... 35,114 17,738
Short-term debt......................................... 318,250 --
Current portion of long-term debt....................... 4,540 --
Other current liabilities............................... 3,866 1,770
--------- ---------
Total current liabilities....................... 403,096 46,375
Long-term debt............................................ 217,836 186,056
Premier Club refundable membership fees................... 65,046 63,499
Other non-current liabilities............................. 9,826 1,448
Minority interest......................................... 1,892 1,861
Commitments and contingencies (Note 12)
Shareholders'equity:
Class A Common Stock, $.01 par value, 100,000,000 shares
authorized and 34,888,358 and 27,929,570 shares issued
and outstanding at June 30, 1998 and 1997, respectively. 349 279
Class B Common Stock, $.01 par value, 10,000,000 shares
authorized and 255,000 shares issued and outstanding at
June 30, 1998 and 1997.................................. 3 3
Contributed capital ...................................... 432,110 304,095
Accumulated deficit....................................... ( 1,951) (3,224)
---------- ---------
Total shareholders' equity ..................... 430,511 301,153
---------- ---------
Total liabilities and shareholders' equity...... $1,128,207 $ 600,392
========== =========
See accompanying notes to consolidated financial statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended June 30,
(In thousands, except per share data)
1998 1997 1996
--------- --------- ---------
Revenue:
Leisure and recreation....................... $ 252,603 $ 17,567 $ --
Entertainment and sports..................... 43,586 36,695 34,087
--------- --------- ---------
Total revenue........................ 296,189 54,262 34,087
Operating expenses:
Cost of leisure and recreation services...... 110,084 6,658 --
Cost of entertainment and sports services.... 45,919 35,135 35,958
Selling, general and administrative expenses. 91,579 15,150 8,371
Amortization and depreciation................ 23,155 5,698 9,815
--------- --------- ---------
Total operating expenses............. 270,737 62,641 54,144
--------- --------- ---------
Operating income (loss)........................ 25,452 ( 8,379) ( 20,057)
Interest and other income...................... 2,307 1,923 122
Interest and other expense..................... ( 24,673) ( 3,364) ( 5,030)
Minority interest.............................. ( 1,813) ( 440) ( 174)
--------- --------- ---------
Net income (loss).............................. $ 1,273 $ (10,260) $ (25,139)
========= ========= =========
Net income (loss) per share - basic and diluted.$ 0.04 $( 0.74)$( 4.76)
========= ========== ==========
Shares used in computing net income (loss)
per share - basic........................ 34,334 13,829 5,276
========= ========= =========
Shares used in computing net income (loss)
per share - diluted..... 34,888 13,829 5,276
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<S>
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands)
<C> <C> <C> <C> <C> <C> <C>
Class A Class B
Common Stock Common Stock
------------------- ---------------- Total
Number Number Contributed Shareholders'
of of Capital Accumulated Equity
Shares Amount Shares Amount (Deficit) Deficit (Deficit)
--------- ------ ------ ------ ---------- ----------- ------------
Balance, June 30, 1995. 871 $ 9 -- $ -- $ ( 22,357) $ -- $( 22,348)
Net loss............... -- -- -- -- ( 25,139) -- ( 25,139)
Dividends-- Decoma
Entities............ -- -- -- -- ( 816) -- ( 816)
-------- ----- ----- ---- -------- ------- ---------
Balance, June 30, 1996. 871 9 -- -- ( 48,312) -- ( 48,303)
Recapitalization....... 4,150 41 255 3 40,919 -- 40,963
Sales of common stock.. 9,760 98 -- -- 131,780 -- 131,878
Stock issued in
acquisitions........ 13,149 131 -- -- 181,884 -- 182,015
Warrants issued in
acquisition......... -- -- -- -- 5,000 -- 5,000
Net loss............... -- -- -- -- ( 7,036) ( 3,224) ( 10,260)
Dividends-- Decoma
Entities............ -- -- -- -- ( 140) -- ( 140)
-------- ----- ----- ---- ---------- ------- ----------
Balance, June 30, 1997. 27,930 279 255 3 304,095 ( 3,224) 301,153
Sales of common stock.. 6,000 60 -- -- 108,456 -- 108,516
Stock issued in
acquisitions........ 918 9 -- -- 16,778 -- 16,787
Warrants issued in
acquisition......... -- -- -- -- 2,375 -- 2,375
Net income............. -- -- -- -- -- 1,273 1,273
Exercise of stock
options............. 40 1 -- -- 406 -- 407
--------- -------- -------- ------- --------- ---------- ----------
Balance, June 30, 1998. 34,888 $ 349 255 $ 3 $432,110 $( 1,951) $ 430,511
========= ======== ======== ======= ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30,
(In thousands)
1998 1997 1996
--------- --------- ---------
Operating activities:
Net income (loss)...........................$ 1,273 $( 10,260) $ (25,139)
Adjustments to reconcile net income (loss)
to netcash provided by (used in)
operating activities:
Amortization and depreciation............ 23,155 5,698 9,815
Deferred compensation.................... 373 100 1,334
Income applicable to minority interest... 1,813 440 174
Changes in operating assets and liabilities
(excluding the effects of business
acquisitions):
Accounts receivable...................... ( 489) 1,876 ( 1,195)
Other assets............................. ( 4,059) ( 512) ( 3,425)
Accounts payable and accrued expenses.... ( 20,091) 2,205 938
Deferred revenue and other liabilities... 35,713 3,323 138
--------- ---------- ---------
Net cash provided by (used in) operating
activities................................. 37,688 2,870 (17,360)
--------- ---------- ---------
Investing activities:
Cash acquired in business acquisitions...... 16,548 2,055 --
Cash used in business acquisitions.......... (230,219) ( 1,076) --
Acquisition of additional interest in
consolidated subsidiary.................. ( 30,613) -- --
Capitalization of interest.................. ( 1,300) -- --
Capital expenditures........................ ( 47,806) ( 1,494) ( 140)
---------- --------- ---------
Net cash used in investing activities...... (293,390) ( 515) ( 140)
---------- --------- ---------
Financing activities:
Net proceeds from the sale of common stock.. 108,516 131,878 --
Payments of related party indebtedness...... -- ( 20,340) ( 3,500)
Borrowings under related party loan
agreements................................. -- -- 19,040
Increase in interest payable on related party
indebtedness............................... -- 1,131 2,406
Borrowings under credit facilities.......... 251,200 35,000 --
Payments under long-term debt and credit
facilities................................. ( 80,509) ( 135,915) --
Proceeds from exercise of stock options..... 407 -- --
Payment of dividends - Decoma Entities...... -- ( 140) ( 816)
Distribution to minority interests - Decoma
Entities................................... ( 393) ( 725) ( 402)
--------- ---------- ---------
Net cash provided by financing activities. 279,221 10,889 16,728
--------- ---------- ---------
Increase (decrease) in cash and cash
equivalents............................. 23,519 13,244 ( 772)
Cash and cash equivalents,
at beginning of period..................... 13,709 465 1,237
--------- ---------- ---------
Cash and cash equivalents,
at end of period........................... $ 37,228 $ 13,709 $ 465
========= ========== =========
See accompanying notes to consolidated financial statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(1) Organization
Florida Panthers Holdings, Inc. (the "Company") currently conducts
substantially all of its business through its subsidiaries, which include
Panthers BRHC Limited ("Boca Resort"), AZB Limited Partnership ("Arizona
Biltmore"), Panthers RPN Limited ("Edgewater Resort"), 2301 SE 17th St. Ltd.
("Pier 66") and Rahn Bahia, Ltd. ("Bahia Mar"), each a limited partnership
formed for the purpose of owning and operating Boca Raton Resort and Club, the
Arizona Biltmore Hotel, the Edgewater Beach Hotel, the Hyatt Regency Pier 66
Hotel and the Radisson Bahia Mar Resort and Yachting Center, respectively, and
FPH/RHI Merger Corp, Inc. ("Registry Resort") formed for the purpose of owning
and operating the Registry Hotel at Pelican Bay and Rolling Hills Golf Course
("Rolling Hills"). The Company also owns the Florida Panthers Hockey Club, Ltd.
("Panthers" or the "Club"), a professional hockey team of the National Hockey
League (the "NHL"), Arena Development Company, Ltd. ("Arena Development"), a
limited partnership formed for the purpose of developing a new multi-purpose
sports and entertainment center in Broward County, Florida recently named
National Car Rental Center (the "National Center"), Arena Operating Company, a
limited partnership formed for the purpose of managing and operating the
National Center, and Florida Panthers Ice Ventures, Inc., a corporation formed
for the purpose of developing ice rink facilities. In addition, the Company owns
approximately 78% of the partnership interests in Decoma Miami Associates, Ltd.
("Decoma"), a Florida limited partnership, which operates the Miami Arena.
In November 1996, the Company sold 7.3 million shares of Class A Common
Stock, par value $.01, (the "Class A Common Stock") in connection with its
initial public offering ("IPO"). An additional 2.5 million shares of Class A
Common Stock were sold in connection with a private placement in January 1997
and 6.0 million shares of Class A Common Stock were sold in connection with an
underwritten public offering in August 1997.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of
the Company and all majority-owned subsidiaries after the elimination of all
significant intercompany accounts and transactions. Minority interest represents
minority shareholders' proportionate share of the equity in Decoma and Registry
Resort.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the Consolidated Financial
Statements and accompanying Notes. Actual results may differ from those
estimates.
Cash and Cash Equivalents/Restricted Cash
Cash and cash equivalents consist primarily of cash in banks and highly
liquid investments with original maturities of 90 days or less. Restricted cash
consists principally of escrow accounts maintained in accordance with the terms
of various mortgage-notes payable agreements and cash collected by the Company
in its capacity as operator of the National Center. See Note 12. Concentration
of credit risk and market risk associated with cash, cash equivalents and
restricted cash are considered low due to the credit quality of the issuers of
the financial instruments held by the Company and due to their short term
nature.
Accounts Receivable
Accounts receivable are primarily from major credit card companies and other
large corporations. The Company performs ongoing credit evaluations of its
significant customers and generally does not require collateral or a significant
allowance for uncollectible balances.
<PAGE>
Inventory
Inventory is stated at the lower of cost or market value and primarily
consists of food, beverages, marina fuel, retail merchandise and operating
supplies. Cost is determined using the first-in, first-out method.
Premier Club Notes Receivable
Premier Club notes receivable are carried at amortized cost. Interest
income is suspended on all notes receivable when principal or interest payments
are more than three months contractually past due and is not resumed until such
loans become contractually current. The Company performs credit evaluations of
customers who finance their Premier Club membership and generally does not
require collateral or a significant allowance for uncollectible balances.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and
amortization. Expenditures for maintenance, repairs and renewals of relatively
minor items are charged to expense as incurred. Renewals of significant items
are capitalized along with interest during the construction period for
significant additions to the Company's resorts. Interest is capitalized using
rates associated with direct borrowings for such construction, if applicable, or
the equivalent to the average borrowing rate of the Company. Interest
capitalized for the year ended June 30, 1998 totaled $1.3 million. No interest
was capitalized during the years ended June 30, 1997 and 1996. Depreciation and
amortization has been computed using the straight-line method over the following
estimated useful lives:
Years
-----
Building and improvements.... 40
Land improvements............ 15
Leasehold improvements....... 5-20
Furniture, fixtures and
equipment................... 3-7
Intangible Assets
The components of unamortized intangible assets as of June 30 were as
follows (in 000's):
1998 1997
------- --------
Franchise cost........................... $21,273 $ 21,881
Player contract acquisition costs........ 995 3,916
Investment in Miami Arena Contract....... 8,146 8,516
Goodwill................................. 6,512 6,674
------- --------
$36,926 $ 40,987
======= ========
The Club paid a $50.0 million franchise fee to the NHL when joining the
league, of which approximately $25.7 million was allocated to the contracts of
players selected in the 1993 expansion draft. The allocation was based upon an
independent appraisal of the fair value of the player contracts and is being
amortized on a straight-line basis over the estimated useful lives of the
contracts. The remaining portion of the franchise fee is being amortized on a
straight-line basis over 40 years.
The Miami Arena is owned by the Miami Sports and Exhibition Authority
("MSEA"), an agency of the City of Miami. Under the terms of the Miami Arena
Contract ("MAC") between MSEA and Decoma, Decoma operates the Arena. The MAC is
scheduled to expire on July 8, 2020. Amounts invested in the MAC are being
amortized using the straight-line method over the remaining term of the MAC.
Goodwill represents the excess of the cost over the fair value of net assets
of the acquired business. Goodwill is stated at amortized cost and is amortized
on a straight-line basis over 40 years.
Accounting for Impairment of Long-Lived Assets
The Company continually evaluates whether events and circumstances have
occurred indicating the remaining estimated useful life of long-lived assets may
warrant revision, or long-lived asset balances may not be recoverable. If
factors indicate long-lived assets have been impaired, the Company uses an
estimate of the remaining value of the long-lived assets in measuring
recoverability. Unrecoverable amounts are charged to operations in the
applicable period.
<PAGE>
Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about
Fair Value of Financial Instruments" requires disclosure of the fair value of
financial instruments held by the Company. SFAS No. 107 defines the fair value
of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties. Fair value estimates
are made at a specific point in time, based on relevant market information about
the financial instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment, and therefore can not be
determined with precision. The assumptions used have a significant effect on the
estimated amounts reported. The following methods and assumptions are used to
estimate fair value:
-The carrying amounts of cash and cash equivalents, restricted cash,
accounts receivable, accounts payable and short-term debt approximate fair
value due to their short-term nature.
-The carrying amounts of Premier Club notes receivable and long-term debt
approximates fair value based on discounted future cash flows using current
rates at which similar loans with similar maturities would be made to
borrowers with similar credit risk.
-The fair value of Premier Club refundable membership fees can not be
reasonably estimated based on the uncertainty of the maturity.
Revenue Recognition
Revenue associated with room rentals, food and beverage sales and other
recreational amenity use at the Company's resort properties is recognized when
services are rendered. Boca Resort's club membership annual dues revenue is
recognized ratably over the membership year commencing October 1. Initiation
fees relating to memberships originating prior to December 31, 1997 are fully
refundable and, accordingly, are reflected as a liability captioned Premier Club
refundable membership fees on the accompanying Consolidated Balance Sheets. See
Note 10. Initiation fees associated with Premier Club memberships originating
after December 31, 1997 are non-refundable and are recorded as deferred revenue
and recognized as revenue over the estimated life of the membership.
Receipts from tickets, broadcasting, advertising and promotions associated
with the Panthers are recorded as revenue on a per game basis over the NHL
regular season.
Player Contract Costs
Player salaries are recorded on a per game basis during the regular season.
Player signing bonuses are amortized over the life of the player contract. The
Company 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.
Employment contracts with certain players require future compensation under
certain circumstances. These contracts are generally performance in nature and,
accordingly, related payments are charged to operations over the contract
playing seasons.
The Company 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 for
payment of a portion of the player's salary for the remaining term of the
contract or until the player can resume playing.
Advertising Expense
The Company expenses advertising costs the first time the advertising takes
place. Advertising expense was $5.3 million and $672,000 for the years ended
June 30, 1998 and 1997, respectively. Prepaid advertising for each the periods
presented and advertising expense for 1996 was not considered material by
management.
<PAGE>
Income Taxes
The Company accounts for income taxes under the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes". See Note 18.
Stock-Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company has elected to account for stock option grants in accordance
with APB No. 25 "Accounting for Stock Issued to Employees" and, accordingly,
recognizes no compensation expense in connection with stock option grants made
to employees. See Note 11.
Earnings (Loss) Per Common Share
The Company adopted SFAS No. 128, "Earnings Per Share" during fiscal 1998.
This statement supersedes APB No. 15 and replaces primary and fully diluted
earnings per share with a dual presentation of basic and diluted earnings per
share. Basic earnings per share equals net income (loss) divided by the number
of weighted average common shares outstanding. Diluted earnings per share
includes the effects of common stock equivalents to the extent they are
dilutive. Such options were antidilutive in 1997 and 1996 and, thus, have been
excluded. Additionally, approximately 1.4 million weighted average shares
issuable pursuant to convertible debt obligations have been excluded from 1998
since such shares were antidilutive. The following table sets forth weighted
average shares used to compute basic and diluted earnings per share (in 000's):
1998 1997 1996
-------- -------- -------
Basic weighted average shares outstanding... 34,334 13,829 5,276
Stock options............................... 554 -- --
------- -------- --------
Diluted weighted average shares outstanding. 34,888 13,829 5,276
======= ======== ========
Recently Issued Accounting Standards
In 1997, the Financial Accounting Standard Board (the "FASB") issued SFAS
No. 130, "Reporting Comprehensive Income". This Statement requires all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement displayed with the
same prominence as other financial statements. The Company adopted SFAS No.
130 on July 1, 1998.
In 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement establishes standards for
the way public business enterprises report information about operating segments
in annual financial statements and requires those enterprises report selected
information about operating segments in interim financial reports. SFAS No. 131
also establishes standards for related disclosures about products and services,
geographic areas of operations and major customers. The Company adopted SFAS No.
131 on July 1, 1998. In the opinion of management, adoption of this standard
will not have a material impact on the Company's existing segment reporting
disclosures.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5 ("SOP 98-5"). SOP 98-5 requires all
non-governmental entities to expense costs of start-up activities, including
pre-operating, pre-opening and organization activities, as those costs are
incurred. Adoption of this statement is not expected to have a material effect
on the Company's results of operations.
In 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Post Retirement Benefits". This Statement revises employers'
disclosures about pension and other post retirement benefit plans. In the
opinion of management, adoption of this standard will not have a material impact
on the Company's existing reporting.
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In the opinion of
management, adoption of this standard will not have a material impact on the
Company's existing reporting.
<PAGE>
Reclassifications
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year's presentation.
(3) Supplemental Cash Flow Information
Interest paid during the years ended June 30, 1998, 1997 and 1996 was
approximately $22.3 million, $1.2 million and $3.8 million, respectively. In
addition, the Company issued 918,174 and 13,148,893 shares of Class A Common
Stock in connection with business acquisitions during the years ended June 30,
1998 and 1997, respectively. During the year ended June 30, 1997, in conjunction
with the IPO, a note payable of approximately $41.0 million to the Company's
Chairman, Mr. Huizenga, was exchanged for 4,149,710 shares of Class A Common
Stock and 255,000 shares of Class B Common Stock.
(4) Business Combinations
Prior to the completion of the IPO, the Company acquired from Mr. Huizenga
approximately 78% of the partnership interest in Decoma in exchange for 870,968
shares of Class A Common Stock. Decoma derives revenue from the operations of
the Miami Arena. As this transaction was among entities under common control, it
was accounted for on a historical cost basis in a manner similar to a pooling of
interests as of the date of the acquisition by Mr. Huizenga.
The acquisitions of the businesses discussed below have been accounted for
under the purchase method of accounting and are included in the historical
financial statements from the date of acquisition.
Acquisitions Made During the Year Ended June 30, 1998
In April 1998, the Company acquired Edgewater Resort for $41.2 million.
Approximately $20.7 million of the purchase price was paid in cash at closing
and the remainder bears interest at a rate of 5.0% per annum and is payable, at
the election of the seller, in either cash on October 22, 1999 or shares of
Class A Common Stock at a per share price of $24.50 at any time up through
October 22, 1999.
In March 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 $500,000 in cash, (iii) payment in the future of $99.8 million
either in cash or shares of Class A Common Stock, (iv) warrants to purchase
500,000 shares of Class A Common Stock exercisable at $24.00 per share at any
time, in whole or in part, through March 2003 and (v) the assumption of $63.1
million of debt. The $500,000 bears interest at a rate of 2.5% per annum and is
payable in April 2001. The $99.8 million bears interest at a rate of 5.0% 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 through March 2, 2000. If
an election for cash is made, the Company will be required to 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 through March 2, 2008. Subject to implementing certain developmental
strategies or meeting certain profit levels over a 36 month period ending on
March 31, 2001, up to an additional $50 million may be payable at the election
of the seller, either in cash or shares of Class A Common Stock at a per share
price of not less than $19.00.
In November 1997, the Company acquired certain assets associated with
Rolling Hills in exchange for $8.0 million in cash. The assets acquired consist
of an 18-hole golf course and a separate 9-hole golf course (both of which are
currently being redesigned), a parking lot and 79 acres of undeveloped land
adjacent to the golf courses.
In August 1997, the Company acquired its initial 68% ownership interest
(325 of the 474 units) in Registry Resort for (i) 918,174 shares of Class A
Common Stock, (ii) 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 (iii) $75.5 million in cash. The warrants
vest ratably on a quarterly basis and become fully exercisable on December 31,
1999. The warrants expire in October 2003. As of June 30, 1998 the Company had
acquired all but one of the remaining units of Registry Resort for additional
payments of $30.6 million (net of the payoff of certain mortgage notes
receivable to the Company associated with additional units). The Company
acquired the last unit in July 1998.
<PAGE>
Acquisitions Made During the Year Ended June 30, 1997
In June 1997, the Company acquired substantially all of the net assets of
Boca Resort in exchange for (i) 272,303 shares of Class A Common Stock, (ii)
rights to acquire 4,242,586 shares of Class A Common Stock for no additional
consideration and (iii) warrants to purchase 869,810 shares of Class A Common
Stock at a purchase price of $29.01 per share. The warrants are currently
exercisable with 50% expiring in December 1998 and the remainder expiring in
December 1999.
In May 1997, the Company acquired the rights to operate Gold Coast Ice Arena
("Gold Coast") in exchange for 34,760 shares of Class A Common Stock. Gold Coast
is the current practice facility of the Panthers and provides open skating, ice
hockey leagues and other programs to the public.
In March 1997, the Company acquired all of the ownership interests,
comprised of capital stock and partnership interests, of each of the entities
which own, directly or indirectly, all of the general and limited partnership
interests in Pier 66 for 4,450,000 shares of Class A Common Stock.
In March 1997, the Company acquired all of the ownership interests,
comprised of capital stock and partnership interests, of each of the entities
which own, directly or indirectly, all of the general and limited partnership
interests in the Bahia Mar in exchange for 3,950,000 shares of Class A Common
Stock.
In January 1997, the Company acquired certain assets relating to Incredible
Ice in exchange for (i) $1.0 million in cash, (ii) 212,766 shares of Class A
Common Stock and (iii) the assumption by the Company of a maximum of $8.1
million in construction-related obligations. Incredible Ice provides open
skating, ice hockey leagues and other ice programs to the public.
The Company's unaudited pro forma consolidated results of operations
assuming the above acquisitions had been consummated as of the beginning of the
period are as follows for the years indicated (in 000's, except per share
amounts):
1998 1997
--------- ---------
Revenue................................................. $ 346,947 $ 308,174
Net operating income ................................... $ 37,067 $ 39,304
Net loss................................................ $ ( 2,732) $( 914)
Pro forma net loss per common share - basic and
diluted ............................................... $ ( 0.08) $( 0.03)
The preliminary purchase price allocation for business combinations
accounted for under the purchase method of accounting, including the subsequent
acquisition of additional units of Registry Resort, during the years ended June
30, 1998 and 1997 are as follows (in 000's):
1998 1997
---------- ----------
Cash acquired in business acquisitions....... $ 16,548 $ 2,055
Current assets, excluding cash............... 19,850 55,195
Property and equipment....................... 455,851 474,577
Other assets................................. 39 9,152
Intangible assets............................ -- 6,743
Current liabilities.......................... ( 28,355) ( 34,161)
Debt......................................... (183,879) (261,971)
Minority interest............................ ( 60) --
Other non-current liabilities................ -- ( 63,499)
Common stock issued or reserved for issuance. ( 19,162) (187,015)
---------- ----------
Cash used in business acquisitions........... $ 260,832 $ 1,076
========== ==========
(5) Premier Club Notes Receivable
The Company offers internal financing to qualified purchasers of Premier
Club memberships at Boca Resort. Based on the terms of the agreements, the gross
membership notes will be collected as follows (in 000's):
<PAGE>
1999.................. $ 4,089
2000.................. 3,129
2001.................. 1,981
2002.................. 1,748
2003.................. 1,009
Thereafter............ 206
---------
$ 12,162
=========
(6) Property and Equipment, net
A summary of property and equipment at June 30 is as follows (in 000's):
1998 1997
--------- ---------
Land and land improvements................ $ 244,243 $ 134,815
Buildings and improvements................ 675,175 297,061
Furniture, fixtures and equipment......... 52,147 30,556
Construction in progress.................. 8,196 15,517
--------- ---------
979,761 477,949
Less: accumulated depreciation and
amortization............................. ( 20,547) ( 2,558)
--------- ---------
$ 959,214 $ 475,391
========= =========
Depreciation and amortization expense on property and equipment included in
the Consolidated Statements of Operations was approximately $19.0 million, $1.9
million and $280,000 for the years ended June 30, 1998, 1997 and 1996,
respectively.
(7) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of June 30 consists of the following
(in 000's):
1998 1997
-------- ---------
Other accrued liabilities................ $ 19,298 $ 13,000
Accounts payable......................... 8,406 6,401
Accrued taxes............................ 6,367 2,379
Accrued payroll and related costs........ 5,872 4,454
Accrued interest payable................. 1,383 633
-------- --------
$ 41,326 $ 26,867
======== ========
(8) Short-Term Debt
In connection with the Company's acquisition of Edgewater Resort, a portion
of the purchase price ($20.5 million) was financed by the seller. The
indebtedness bears interest at a rate of 5.0% per annum and is payable, at the
election of the seller, in either cash on October 22, 1999 or shares of Class A
Common Stock at a per share price of $24.50 at any time through October 22,
1999.
In connection with the Company's acquisition of an ownership interest in
Arizona Biltmore, a portion of the purchase price ($100.3 million) was financed
by the seller. The note payable for $500,000 is payable in April 2001 and,
therefore, is classified as long-term debt on the Consolidated Balance Sheet.
See Note 9. The note payable for $99.8 million bears interest at a rate of 5.0%
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 through March 2,
2000. If an election for cash is made, the Company will be required to 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 through March 2, 2008.
The Company has a bridge loan from a bank in the principal amount of $220.0
million (the "Bridge Loan"), of which $198.0 million was outstanding at June 30,
1998. The proceeds from the Bridge Loan were used to acquire the Company's
interests in Arizona Biltmore, to acquire remaining units of Registry Resort, to
repay certain outstanding indebtedness and for working capital purposes. The
Bridge Loan carries a variable interest rate, which was 8.4% at June 30, 1998.
The Bridge Loan matures on September 15, 1998. The Company is in the process of
refinancing a portion of its short-term debt.
<PAGE>
The weighted average interest rate on the Company's aggregate short-term
debt at June 30, 1998 was 7.1%.
(9) Long-Term Debt
Long-term debt at June 30 is as follows (in 000's):
1998 1997
-------- --------
Mortgage note payable, collateralized
by substantially all Pier 66 property
and equipment, variable interest rate
(8.8% at June 30, 1998), due June 28, 2000......... $ 25,951 $ 25,951
Mortgage note payable, collateralized by
substantially all Arizona Biltmore
property and equipment, fixed
interest rate of 8.25%, due July 1, 2016........... 62,725 --
Note payable to bank, collateralized by
substantially all Bahia Mar property
and equipment, repaid in March 1998................ -- 15,105
Senior note payable to bank, secured by a first
mortgage and lien on all Boca Resort assets,
variable interest rate(9.0% at June 30, 1998),
due on August 22, 2001............................ 110,000 110,000
Revolving credit facility with bank, collateralized
by all assets of the Panthers, variable interest
rate (7.2% at June 30,1998), due on
April 30, 2000..................................... 23,200 35,000
Note payable to seller, fixed interest rate of 2.5%
due April 2001..................................... 500 --
-------- ---------
Total debt outstanding including current portion.....$ 222,376 $186,056
========= ========
At June 30, 1998, $11.8 million was available under the revolving credit
facility outlined above. The Company's loan agreements require the maintenance
of customary capital expenditure reserves for the replacement of assets and
restricts the Company's ability to pay dividends in certain circumstances. In
addition, the Company is required to comply with certain covenants under several
of its debt agreements discussed above, including without limitation,
requirements to (i) maintain net worth of $15.0 million and (ii) maintain
certain leverage ratios. The Company was in compliance with these covenants at
June 30, 1998. Minimum principal payments required on the Company's long-term
debt for each of the five fiscal years subsequent to fiscal 1998 and thereafter
are as follows (in 000's):
1999.................. $ 4,540
2000.................. 55,811
2001.................. 9,302
2002.................. 96,957
2003.................. 2,124
Thereafter............ 53,642
---------
$ 222,376
=========
(10) Premier Club Refundable Membership Fees
Fully paid initiation fees associated with Premier Club memberships at Boca
Resort executed prior to December 31, 1997 are refundable upon the death of a
member or a member's spouse and upon the expiration of the 30-year membership
term (subject to renewal at the member's option). The fee is also refundable
upon a member's resignation from the Premier Club, but only out of the proceeds
of the membership fee of the fifth new member to join the Premier Club following
refund of all previously resigned members' fees. If any member paying over time
suspends payment, amounts paid to date are forfeited and recognized as income.
Amounts forfeited to date have not been material. Such Premier Club refundable
membership fees of approximately $65.0 million and $63.5 million at June 30,
1998 and 1997, respectively, have been reflected as a non-current liability on
the Company's Consolidated Balance Sheets.
<PAGE>
(11) Stock Options
The Company has a stock option plan under which options to purchase shares
of common stock may be granted to key employees and directors of the Company.
Options granted under the plan are non-qualified and are granted at a price
equal to the fair market value of the common stock at the date of grant.
Generally, options granted will have a term of ten years from the date of grant,
and will vest in increments of 25% per year over a four-year period on the
annual anniversary of the date of grant. A summary of stock option transactions
for the three years ended June 30, 1998 is as follows:
<TABLE>
<S>
<C> <C> <C> <C>
Number of Number of
Shares Range in Options
Reserved Options Option Prices Exercisable
--------- --------- ------------- -----------
Balance at June 30, 1996............ -- -- -- --
Shares reserved under plan.......... 2,600,000 -- --
Granted............................. (2,049,747) 2,049,747 $10.00 - $27.30
Forfeited........................... 21,605 ( 21,605) $10.00
----------- ----------
Balance at June 30, 1997............ 571,858 2,028,142 $10.00 - $27.30 --
Additional shares reserved under 2,400,000 -- --
plan................................
Granted............................. (1,402,414) 1,402,414 $17.25 - $23.25
Exercised........................... -- ( 40,614) $10.00
Forfeited........................... 93,748 ( 93,748) $10.00 - $26.38
----------- ------------
Balance at June 30, 1998............ 1,663,192 3,296,194 $10.00 - $27.30 466,422
=========== ===========
</TABLE>
The weighted average exercise price and weighted average remaining
contractual life of the Company's outstanding options at June 30, 1998 is set
forth below.
<TABLE>
<S>
<C> <C> <C> <C> <C> <C>
Weighted (Vested Only)
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Options Exercise
Range of Exercise Prices Options Life Price Exercisable Price
------------------------ ---------- ---------- --------- ----------- ----------
$10.00 900,702 8.4 years $10.00 200,533 $10.00
$16.63 - $19.13 1,364,132 9.4 years $17.26 4,500 $17.01
$21.13 - $27.30 1,031,360 8.9 years $25.47 261,389 $25.48
---------- -------
3,296,194 466,422
========== =======
</TABLE>
The weighted average exercise price of all options at June 30, 1998 and 1997
was $17.93. Pro forma information relating to net income and earnings per share
is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions for
the year ended June 30:
<PAGE>
1998 1997
------------ -------------
Pro forma net loss................................ $ (4,924,000) $(11,271,000)
Pro forma net loss per share..................... $ (.14) $ (.82)
Pro forma weighted average fair value of options
granted.......................................... $ 8.91 $ 8.74
Risk free interest rate........................... 6.35% 6.35%
Expected lives.................................... 5-7 years 5-7 years
Expected volatility............................... 42% 42%
(12) Commitments and Contingencies
Leases
The Company leases the Bahia Mar resort site from the City of Fort
Lauderdale under an operating lease, which has a term through August 31, 2062.
Under the lease agreement, the Company is required to pay annual rent equal to
the greater of a percentage (4.0% through September 30, 2012 and 4.25%
thereafter) of annual gross operating revenue, as defined, or a $300,000 minimum
annual rent (escalating on a formula percentage after September 2037). Rent
expense under this lease totaled $775,000 for the year ended June 30, 1998 and
$247,000 for the period from the date of the Bahia Mar acquisition (March 4,
1997) to June 30, 1997. The lease agreement also requires the Company to
annually set aside 3% of Bahia Mar's revenue, as defined in the lease agreement,
for the purchase, replacement and upgrade of furniture, fixtures and equipment.
All such restricted funds have been spent on their required purpose through June
30, 1998.
Future minimum lease obligations under various noncancellable operating
leases with initial terms in excess of one year at June 30, 1998 are as follows
(in 000's):
1999................................ $ 3,114
2000................................ 1,781
2001................................ 1,088
2002................................ 887
2003................................ 668
Thereafter.......................... 17,700
-------
$25,238
=======
As of June 30, 1998, the Company has two letters of credit which secure two
operating leases. The letters of credit are collateralized by certificates of
deposit totaling $500,000, which mature in August 1998 and are included in
restricted cash.
Employment Agreements
The Company has entered into employment agreements with various player and
non-player employees which expire at various dates through June of 2002. The
terms of these employment agreements require future payments, excluding bonuses,
at June 30, 1998 as follows (in 000's):
1999............................. $27,119
2000............................. 18,647
2001............................. 8,604
2002............................. 150
-------
$54,520
=======
<PAGE>
National Car Rental Center ("National Center")
In June 1996, the Company entered into an agreement with Broward County to
develop the National Center, which will be owned by Broward County. The Company
will bear all costs relating to the development of the National Center in excess
of $184.7 million, including additional construction costs in excess of the
$184.7 million resulting from certain litigation. See Litigation. In June 1996,
the Company also entered into a 30-year license agreement (the "Broward License
Agreement") for the use of the National Center. In connection therewith, Broward
County will receive revenue from the operations of the National Center. The
Company has provided Broward County a guaranty pursuant to which the Company
will be obligated to pay Broward County its contracted share of the county's
annual debt service obligation (the "County Preferred Revenue Allocation"). The
Company believes that the revenue generated from the operations of the National
Center will be sufficient to cover the County Preferred Revenue Allocation. The
Broward License Agreement commences upon the completion of construction of the
National Center, which is currently scheduled for October 1, 1998. The Broward
License Agreement is for a term of 30 years, which may be extended for
additional five-year periods, subject to certain conditions.
Pursuant to the Broward License Agreement, the Company is entitled to
receive all (a) revenue from the sale of (i) general seating ticket sales for
its home games to be played at the National Center, (ii) non-consumable
concession items at the National Center during its home games, (iii) items in
the Club's retail store to be located within the National Center, (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 National Center, (v) advertising within or on certain designated
locations at the National Center during hockey related events and (vi) Panthers'
related sponsorships or NHL league-wide sponsorships; and (b) the first $14.0
million of "net operating income" generated by the National Center and 80% of
all net operating income generated by the National Center in excess of $14.0
million with Broward County receiving 20%. "Net operating income" is defined to
include revenue from building naming rights fees, food and beverage concessions,
parking, non-hockey related advertising and all other revenue generated from
non-hockey related events offset by certain arena operating and financing costs
including the County Preferred Revenue Allocation.
The Company will be obligated to pay rent in the amount of approximately
$7,500 per home game played by the Panthers at the National Center and to pay
certain utility and event staffing expenses, but the combined amounts payable by
the Panthers under the Broward License Agreement will not exceed 5% of the gross
receipts from the sale of general seating tickets to Panthers' home games.
Litigation
On April 9, 1997, Allied Minority Contractors Association, Inc., South
Florida Chapter of NAMC, Overnight Success Construction, Inc., Reed Jr.
Plumbing, Inc. and Christopher Mallard (collectively, the "Broward County
Plaintiffs") filed a suit against Broward County and Arena Development in the
Seventeenth Judicial Circuit in and for Broward County, Florida. This suit
alleges that Broward County entered into the agreement with the Company to
develop the National Center in violation of Florida law and Broward County
ordinances. The Broward County Plaintiffs seek, among other things, to nullify
the agreement between Broward County and the Company to develop the National
Center. The Company believes that this suit is without merit and intends to
vigorously defend against this suit. On July 10, 1997, the trial court denied
the Broward County Plaintiffs' motion for a temporary restraining order and on
November 17, 1997 the trial court also denied plaintiff's motion for summary
judgement. Plaintiffs have appealed both of those orders. On May 19, 1998, the
trial court granted the Joint Motion of Broward County and Arena Development to
Disqualify Plaintiffs and Their Counsel and to Dismiss. Plaintiffs motion for
rehearing was denied, and plaintiffs have filed a notice of appeal. An
unfavorable outcome of the suit may have a material adverse effect on the
Company's financial condition or results of operations.
<PAGE>
On January 28, 1997, February 4, 1997 and March 18, 1997, purported class
action lawsuits were filed against the Company and Messrs. Huizenga, Johnson,
Rochon, Berrard, Hudson, Dauria and Evans in the United States District Court
for the Southern District of Florida. On May 7, 1998, a consolidated and amended
class action complaint was filed combining these claims into one action. The
suits allege, among other things, that the defendants violated Section 10(b) of
the Exchange Act and Rule 10b-5 thereunder, by making untrue statements or
omitting material facts, 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 believes that this suit is without merit and intends to
defend vigorously against this suit. An unfavorable outcome of the suit may have
a material adverse effect on the Company's financial condition or results of
operations.
On October 9, 1997, Bernard Kalishman filed a purported shareholder
derivative and class action lawsuit on behalf of the Company, as nominal
defendant, against Messrs. Huizenga, Berrard, Johnson, Rochon, Hudson and Egan,
each as director of the Company and Richard Evans and William Torrey, both
former directors of the Company, in the Seventeenth Judicial Circuit in and for
Broward County, Florida. The suit alleges, among other things, that each of the
defendants (other than Mr. Egan) breached contractual and fiduciary obligations
owed to the Company and its stockholders by engaging in self-dealing
transactions in connection with the Company's purchase of Pier 66 and Bahia Mar.
The suit seeks to impose a constructive trust on alleged excessive compensation
paid to the prior owners of Pier 66 and Bahia Mar or to have damages assessed
against the defendants or to rescind the transaction. The amended complaint also
added claims similar to those alleged in the class action lawsuit described in
the paragraph above and dropped Mr. Egan as a defendent. The Company believes
that this suit is without merit and intends to defend vigorously against this
suit. An unfavorable outcome of the suit may have a material adverse effect on
the Company's financial condition or results of operations.
A lawsuit was filed on January 9, 1997 by Arena Development seeking a
determination as to the applicability of the Prevailing Wage Ordinance to the
construction of National Center. The suit was filed in the Seventeenth Judicial
Circuit in and for Broward County, Florida. The complaint filed alleged that the
Prevailing Wage Ordinance did not apply to the construction of the National
Center for two reasons: (i) the Prevailing Wage Ordinance only applies to
construction contracts in excess of $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 Company Ltd. 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
lawsuit asked for a declaratory judgment finding that the Prevailing Wage
Ordinance did not apply to the construction of the National Center and that
Arena Development Company Ltd. could continue without reference to the
ordinance. On February 21, 1997, the Seventeenth Judicial Circuit Court ruled
against the Company's complaint, 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 decided not to pursue
any further appeals. The Company estimates it will be liable for additional
construction costs of up to $6.5 million.
The Company is not presently involved in any other material legal
proceedings. However, the Company may from time to time become a party to legal
proceedings arising in the ordinary course of business, which are incidental to
the business. While the results of the legal proceedings described above and
other proceedings which arose in the normal course of business cannot be
predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's consolidated results of operations, consolidated cash
flows or consolidated financial position. However, unfavorable resolution of
each matter individually or in the aggregate could have a material affect on the
consolidated results of operations or cash flows for the periods in which they
are resolved.
<PAGE>
Environmental Matters
Under various federal, state, and local environmental laws and regulations,
an owner or operator of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on such property. In
connection with the ownership and operation of its properties, the Company may
be potentially liable for any such costs. Phase I environmental site assessments
(the "Phase I Assessments") have been obtained for the real property on which
each of the Resort Facilities is located. In addition, Phase II environmental
assessments (the "Phase II Assessments") have been conducted at several
properties. Phase I Assessments are intended to identify existing, potential and
suspected environmental contamination and regulatory compliance concerns, and
generally include historical reviews of the property, reviews of certain public
records, preliminary investigations of the site and surrounding properties and
the preparation and issuance of written reports. Phase II Assessments involve
the sampling of environmental media, such as subsurface soil and groundwater, to
confirm whether contamination is present at areas of concern identified during
the course of a Phase I Assessment.
The Phase I and Phase II Assessments have not revealed any environmental
liability or compliance concerns that the Company believes would have a material
adverse effect on the Company's business, assets, results of operations or
liquidity of its Leisure and Recreation Business, nor is the Company aware of
any such material liability or concern. However, the environmental assessments
have revealed the presence of limited areas of contamination on the properties,
some of which will require remediation. The environmental assessments have also
identified operations that are not strictly in compliance with applicable
environmental laws or that will need to be upgraded to remain in compliance with
applicable environmental laws (including underground storage tanks at a few of
the properties). The most significant area of contamination identified by the
Phase I and Phase II Assessment involves an area within the maintenance area of
Rolling Hills used when mixing pesticides and herbicides. Pursuant to an
agreement with the former owner of Rolling Hills, the Company has the benefit of
an indemnity that the Company believes will defray the costs associated with the
investigation and remediation at this location.
(13) License and Franchise Agreements
Upon the acquisition of Pier 66, the Company assumed the rights of the
franchise agreement with Hyatt Franchise Corporation. The franchise agreement
expires in November 2014 with various early termination provisions and
liquidated damages for early termination. The franchise agreement provides a
reimbursement of not more than $15,000 for out-of-pocket expenses incurred
relating to the granting of the franchise and monthly royalty fees equal to 5.0%
of gross room revenue. The franchise agreement also provides for the pro-rata
allocation of certain Hyatt "allocable chain expenses". Aggregate Hyatt fees and
expenses amounted to $1.3 million for the year ended June 30, 1998 and $398,000
for the period from the Pier 66 acquisition (March 4, 1997) to June 30, 1997.
The franchise agreement also requires maintenance of a customary reserve for
replacement of furniture, fixtures and equipment equal to 4.0% of gross room
revenue. All such cash has been utilized for its required purpose through June
30, 1998.
Upon the acquisition of Bahia Mar, the Company assumed the rights of a
ten-year license agreement with Radisson Hotels International, Inc.
("Radisson"). The terms of the agreement allow the Company to operate Bahia Mar
using the Radisson system. Annual fees payable to Radisson pursuant to the
agreement equal 5.0% of gross room sales. Fees paid to Radisson pursuant to the
license agreement totaled $422,000 for the year ended June 30, 1998 and $134,000
from the date of Bahia Mar's acquisition (March 4, 1997) to June 30, 1997.
(14) Management Agreements
The Company is a party to the Pier 66 Management Agreement with Pier 66
Management pursuant to which Pier 66 Management operates Pier 66. The Pier 66
Management Agreement expires in March 2000 and provides for an annual management
fee of $500,000.
<PAGE>
The Company is a party to the Bahia Mar Management Agreement with Bahia Mar
Management pursuant to which Bahia Mar Management operates Bahia Mar. The Bahia
Mar Management Agreement expires in March 2000 and requires annual fees equal to
2.0% of total revenue. Management fees under the Bahia Mar Management Agreement
totaled $394,000 and $127,000 for the years ended June 30, 1998 and 1997,
respectively, and are included as a component of Selling, general and
administrative expenses.
The Company is also a party to the Edgewater Resort Management Agreement and
Arizona Biltmore Management Agreement. The Edgewater Management Agreement
expires in October 1999 and requires annual fees equal to 2.0% of total revenue.
Management fees under the Edgewater Resort Management Agreement were not
material for the period from the date of acquisition through June 30, 1998. The
Arizona Biltmore Management Agreement expires in April 2008 and provides for an
annual management fee of $1.0 million through April 2001 and $500,000
thereafter.
(15) Related Party Transactions
It is the Company's policy to enter into transactions with related parties
on terms that, on the whole, are no less favorable than those which would be
available from unaffiliated parties.
The Company pays a management fee to Huizenga Holdings, Inc., a corporation
whose sole shareholder is the Company's Chairman, equal to 1% of total revenue,
excluding all NHL national television revenue, enterprise rights and expansion
fees. Such fees totaled approximately $2.9 million, $498,000 and $293,000 for
the years ended June 30, 1998, 1997 and 1996, respectively, and are reflected as
a component of Selling, general and administrative expenses in the accompanying
Consolidated Statements of Operations.
In August 1994, the Company's Chairman purchased a 50% interest in Leisure
Management International, Inc., ("LMI") which manages the Miami Arena pursuant
to a management agreement (the "Management Agreement") with Decoma. Under the
terms of the Management Agreement, LMI received from Decoma a management fee of
$137,000, $120,000 and $109,000 for the years ended June 30, 1998, 1997 and
1996, respectively. The Company has also entered into an agreement with LMI to
manage the National Center, which is scheduled to open in October 1998.
In June 1993, the Company, along with an affiliate, Panthers Investment
Venture borrowed $20.0 million bearing interest at LIBOR plus .75% per annum for
the purpose of financing a portion of the NHL franchise fee. Following the
completion of the IPO, this note was repaid in full. In conjunction with the
IPO, the Chairman received in exchange for this note 4,149,710 shares of Class A
Common Stock and 255,000 shares of Class B Common Stock. Prior to the IPO, the
Company incurred related party interest expense of $1.6 million and $3.4 million
for the years ended June 30, 1997 and 1996, respectively.
On March 4, 1997, the Company acquired all of the ownership interests,
comprised of capital stock and partnership interests, of each of the entities
which own, directly or indirectly, all of the general and limited partnership
interests in Pier 66 and Bahia Mar for 8,400,000 shares of Class A Common Stock.
Four of the Company's directors collectively received 2,395,205 shares of the
Company's Class A Common Stock in connection with the acquisitions.
(16) Operations by Business Segment
The Company is a holding company, operating in the United States, with major
business operations in the leisure and recreation and entertainment and sports
industries. The following table presents financial information relating to the
Company's business segments as of and for the years ended June 30 (in 000's):
<PAGE>
1998 1997 1996
--------- --------- ---------
Revenue:
Leisure and recreation......... $ 252,603 $ 17,567 $ --
Entertainment and sports....... 43,586 36,695 34,087
--------- --------- ---------
$ 296,189 $ 54,262 $ 34,087
========= ========= =========
Amortization and depreciation:
Leisure and recreation......... $ 17,950 $ 1,459 $ --
Entertainment and sports....... 5,168 4,239 9,815
Corporate...................... 37 -- --
--------- --------- ---------
$ 23,155 $ 5,698 $ 9,815
========= ========= =========
Operating income (loss):
Leisure and recreation........ $ 52,769 $ 4,053 $ --
Entertainment and sports...... ( 17,503) ( 10,533) (20,057)
Corporate..................... ( 9,814) ( 1,899) --
--------- --------- ---------
$ 25,452 $( 8,379) $ (20,057)
========= ========= =========
Capital expenditures:
Leisure and recreation........ $ 46,892 $ 419 $ --
Entertainment and sports...... 530 1,058 140
Corporate..................... 384 17 --
--------- --------- ---------
$ 47,806 $ 1,494 $ 140
========= ========= =========
Assets:
Leisure and recreation........ $1,046,074 $ 533,493 $ --
Entertainment and sports...... 76,441 65,338 47,760
Corporate..................... 5,692 1,561 --
--------- --------- ---------
$1,128,207 $ 600,392 $ 47,760
========== ========= =========
(17) Quarterly Financial Information (Unaudited) (in thousands except per share
data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- --------- -------- ---------
Revenue......................... 1998 $ 32,949 $ 76,580 $105,752 $ 80,908
1997 $ 1,167 $ 14,216 $ 21,754 $ 17,125
Operating income (loss)......... 1998 $( 9,246) $ 4,451 $ 22,306 $ 7,941
1997 $( 3,904) $ (2,556) $ 782 $ (2,701)
Net income (loss)............... 1998 $(12,157) $ 1,161 $ 13,919 $( 1,650)
1997 $( 5,274) $ (3,525) $ 1,277 $( 2,738)
Basic and diluted income (loss) 1998 $( 0.38) $ 0.03 $ 0.39 $ ( 0.05)
per share...................... 1997 $( 1.00) $ ( 0.37) $ 0.07 $ ( 0.10)
<PAGE>
(18) Income Taxes
There is no current or deferred tax expense for the years ended June 30,
1998, 1997 and 1996. The Company utilized net operating loss carryforwards in
1998 and was in a loss position in 1997 and 1996. The benefits of timing
differences have not previously been recorded.
The deferred tax consequences of temporary differences in reporting items
for financial statement and income tax purposes are recognized, if appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes. The income tax effect of temporary
differences comprising the deferred tax assets and deferred tax liabilities on
the accompanying Consolidated Balance Sheets is set forth below (in 000's):
1998 1997
---------- ----------
Deferred tax assets:
Federal tax operating loss and
general tax credit carryforwards.. $ 5,160 $ 6,193
Deferred revenue................... 2,297 --
Depreciation and other............. -- 81
Deferred tax liabilities:
Depreciation and other............. ( 361) --
Valuation allowance................ ( 6,564) ( 6,274)
----------- ----------
Net deferred tax assets.............. $ 532 $ --
=========== ==========
A reconciliation between the statutory federal income tax expense and the
income tax expense at the Company's effective rate for the period ended June 30,
1998 and 1997 is set forth below (in 000's). No reconciliation is necessary for
the year ended June 30, 1996 as the Company was organized as a partnership.
1998 1997
--------- ----------
Computed expected income tax
expense (benefit) based on
statutory federal
income tax rate............... $ 433 $( 3,488)
State income taxes, net of
federal benefit............... ( 114) ( 873)
Non-deductible amortization.... 507 165
Adjustments relating to business
acquisitions................. ( 1,906) ( 2,521)
Other.......................... 259 444
Increase in net operating loss
carryforwards............... 821 6,273
--------- ---------
Provision for income taxes $ -- $ --
========= =========
<PAGE>
The Company has available net operating loss carryforwards of approximately
$13.1 million for tax purposes to offset future taxable income. The net
operating loss carryforwards, if not fully utilized, begin to expire in 2012.
(19) Employee Benefits
Certain of the Company'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. The Company 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 Company matching contributions is at the rate of 20% each
year, after one year of plan participation, reaching 100% after five years. The
Company did not make any matching contributions during the years ended June 30,
1998, 1997 or 1996.
Boca Resort has in place a 401(a) Plan (the "Boca Plan") for which
substantially all of Boca Resort's employees are eligible to participate. The
Boca Plan allows participants to contribute up to 16% of their total
compensation. The Company is required to contribute 50% of the first 6% of the
employee's earnings. The Company has until December 31, 1998 to bring the Boca
Plan into compliance with IRS coverage regulations.
The Club's NHL hockey players are covered under the NHL Club Pension Plan
and Trust (the "Pension Plan") which is administered by the NHL and represents a
multi-employer defined contribution plan. The Club's contributions to the
Pension Plan totaled $148,000, $157,000 and $180,000 for the years ended June
30, 1998, 1997 and 1996, respectively.
The Company has commercial insurance coverage to cover employees' (other
than players and coaches) 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 Company pays 100% of the premiums.
(20) Subsequent Event
In August 1998, the Company closed in escrow, subject to receiving certain
zoning approvals, on approximately 200 acres of undeveloped land located in
Collier County, Florida for $19.7 million.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
The information required by Items 10, 11, 12 and 13 of Part III of Form 10-K
will be set forth in the Proxy Statement of the Company relating to the
Company's 1998 Annual Meeting of Stockholders and is incorporated herein by
reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1)Financial Statements of the Company are set forth in Part II, Item
8.
(2)All Financial Statement Schedules are omitted because they are not
applicable, are not present in amounts sufficient to require
submission of the schedules or the required information is presented
in the Consolidated Financial Statements or related notes.
(3)Exhibits -- (See Index to Exhibits included elsewhere herein.)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K/A on May 15, 1998 relating
to the acquisition of Arizona Biltmore and reporting certain financial
information related thereto and Current Report on Form 8-K on April 23,
1998 relating to the acquisition of Edgewater Resort and reporting certain
factual information related thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
FLORIDA PANTHERS HOLDINGS, INC.
August 14, 1998 By: /s/ WILLIAM M.PIERCE
William M. Pierce
Senior Vice President,
Treasurer and Chief
Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William M. Pierce and Richard L. Handley as his
or her true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments to this
Annual Report on Form 10-K and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board August 14, 1998
/s/___________________ (Principal Executive
H. Wayne Huizenga Officer)
/s/___________________ Vice Chairman and August 14, 1998
Richard C. Rochon President
/s/___________________ Chief Financial August 14, 1998
William M. Pierce Officer,Treasurer
and Senior Vice
President
(Principal Financial
Officer)
/s/___________________ Vice President and August 14, 1998
Steven M. Dauria Corporate Controller
(Principal
Accounting Officer)
/s/___________________ Director August 14, 1998
Steven R. Berrard
/s/___________________ Director August 14, 1998
Dennis J. Callaghan
/s/___________________ Director August 14, 1998
Michael S. Egan
/s/___________________ Director August 14, 1998
Chris Evert
/s/___________________ Director August 14, 1998
Harris W. Hudson
/s/___________________ Director August 14, 1998
George D. Johnson, Jr.
/s/___________________ Director August 14, 1998
Henry Latimer
<PAGE>
EXHIBIT INDEX
Exhibits Description Of Exhibit
-------- ----------------------
2.1 -- Exchange Agreement dated October 25,
1996 by and between the
Company and H. Wayne Huizenga. (1)
2.2 -- Purchase Agreement dated October
25, 1996 by and between Decoma Investment,
Inc. II and Decoma Investment, Inc.
III.(1)
2.3 -- Partnership Exchange Agreement dated
October 25, 1996 by and between
Florida Panthers Hockey Club, Ltd. and
H. Wayne Huizenga. (1)
2.9 -- Amended and Restated Contribution
and Exchange Agreement, dated as of
March 20, 1997, by and among Florida
Panthers Holdings, Inc., Panthers BRHC
Limited, Boca Raton Hotel and Club
Limited Partnership, BRMC, L.P. and
BRMC Corporation (4)
2.10 -- Merger Agreement, dated July 8,
1997, by and among the Company,
FPH/RHI Merger Corp., Inc.,
ResortHill, Inc. and Gary V. Chensoff. (5)
2.11 -- Agreement and Plan of Merger dated
as of November 17, 1997 by and among
the Company and Florida Panthers
Holdings, Inc.,a Delaware corporation. (4)
2.12 -- Contribution and Exchange Agreement
dated as of 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 Carlisle,
W. Matthew Crow, AZ Biltmore Hotel Limited
Partnership, Southwest Associates, El
Camino Associates and the Crow
Irrevocable Trust. (6)
4.1 -- Amended and Restated Loan
Agreement, dated June 25, 1997, among
Panthers BRHC Limited, the banks
listed on the signature page thereto
and the Bank of Nova Scotia. (5)
10.1 -- Broward County Arena License
Agreement, dated as of June 4, 1996,
by and between Florida Panthers Hockey
Club, Ltd., Arena Operating Company,
Ltd., and Broward County, Florida.
(1)
10.2 -- Broward County Arena Operating Agreement,
dated as of June 4, 1996, by and between
Arena Operating Company, Ltd. and
Broward County, Florida. (1)
10.3 -- Amendment and Clarification to Operating
Agreement and License Agreement, dated
as of June 4, 1996, by and between
Florida Panthers Hockey Club, Ltd.,
Arena Operating Company, Ltd. and Broward
County, Florida. (1)
10.4 -- Broward County Arena Development
Agreement, dated as of June 4, 1996,
by and between Arena Development
Company, Ltd. and Broward County,
Florida. (1)
10.5 -- Employment Agreement by and between
William A. Torrey and the Company. (1)
10.6 -- Management Agreement by and between
the Company and Huizenga Holdings,
Inc. (1)
<PAGE>
10.7 -- Miami Arena Contract, dated as of
October 10, 1986, as amended, by and
between Miami Sports and Exhibition
Authority and Decoma Miami Associates,
Ltd. (1)
10.8 -- First Amendment to Miami Arena
Contract and Agreement, dated as of
December 13, 1990, by and between
Miami Sports and Exhibition Authority
and Decoma Miami Associates, Ltd. (1)
10.9 -- Arena Management Agreement, dated
as of October 10, 1986, by and between
Decoma Venture and Facility Management
and Marketing (predecessor to Leisure
Management International). (1)
10.10 -- 1996 Stock Option Plan. (1)
10.11 -- Concession Agreement, dated as of
April 4, 1995, as amended, by and
between City of Coral Springs, Florida
and Can Am Investment Group, Inc. (2)
10.12 -- Assignment of Concession Agreement,
dated as of January 31, 1997, by and
between Coral Springs Ice, Ltd. and
Florida Panthers Holdings, Inc. (2)
10.13 -- Hotel Management Agreement(Pier 66),
by and between 2301 SE 17th St., Ltd.
and Rahn Pier Mgt., Inc. (3)
10.14 -- Hotel Management Agreement (Bahia Mar),
by and between 2301 Rahn Bahia Mar, Ltd.
and Rahn Bahia Mar Mgmt., Inc. (4)
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Arthur Andersen LLP
24.1 -- Powers of Attorney (included as part
of the signature page of this Annual Report
on Form 10-K.
27.1 -- 1998 Financial Data Schedule (for SEC use only)
- ----------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 -- SEC File No. 333-12191
(2) Incorporated by reference to the Company's Current Report on Form 8-K
filed on February 18, 1997 -- SEC File No. 0-21435
(3) Incorporated by reference to the Company's Definitive Consent
Solicitation Statement filed on March 4, 1997 -- SEC File No.
0-21435
(4) Incorporated by reference to the Company's Registration Statement on
Form S-4 -- SEC File 333-28951
(5) Incorporated by reference to the Company's Registration Statement on
Form S-1 -- SEC File No. 333-30925
(6) Incorporated by reference to the Company's Current Report on Form 8-K
Filed on March 5, 1998, as amended by the Company's Current Report on
Form 8-K/A filed on May 15, 1998 - SEC File No. 1-13173
(7) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 -- SEC File No. 1-13173
EXHIBIT 21.1
STATE OF INCORPORATION OR
SUBSIDIARIES ORGANIZATION
------------ --------------------------
Florida Panthers Hockey Club, Ltd. Florida
Arena Development Company, Ltd. Florida
Arena Operating Company, Ltd. Florida
Decoma Miami Associates, Ltd. Florida
2301 SE 17th St. Ltd. Florida
Rahn Bahia Mar, Ltd. Florida
Panthers BRHC Limited Florida
Florida Panthers Ice Ventures, Inc. Florida
FPH/RHI Merger Corp., Inc. Florida
ResortHill, Inc. Illinois
Florida Golf Management, Inc. Florida
Wright-Bilt Corp. Delaware
Coyote Holdings, Inc. Delaware
Panthers Edgewater Resort, Inc. Delaware
Panthers RPN, Ltd. Delaware
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the previously
filed Registration Statement of Florida Panthers Holdings, Inc. on Form S-8 File
No. 333-22689.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
August 14, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 66,524
<SECURITIES> 0
<RECEIVABLES> 40,491
<ALLOWANCES> 0
<INVENTORY> 6,499
<CURRENT-ASSETS> 111,182
<PP&E> 959,214
<DEPRECIATION> 20,547
<TOTAL-ASSETS> 1,128,207
<CURRENT-LIABILITIES> 403,096
<BONDS> 0
0
0
<COMMON> 352
<OTHER-SE> 430,159
<TOTAL-LIABILITY-AND-EQUITY> 1,128,207
<SALES> 296,189
<TOTAL-REVENUES> 298,496
<CGS> 156,003
<TOTAL-COSTS> 156,003
<OTHER-EXPENSES> 114,734
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,673
<INCOME-PRETAX> 1,273
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,273
<EPS-PRIMARY> .04
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