SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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.
(Exact Name of Registrant as Specified in its Charter)
Delaware 65-0676005
(State of Incorporation) (I.R.S. Employer
Identification No.)
450 East Las Olas Boulevard 33301
Fort Lauderdale, Florida (Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code: (954) 712-1300
Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report: Not Applicable
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of February 12, 1999, there were 34,890,358 shares of Class A Common
Stock, $.01 par value per share, and 255,000 shares of Class B Common Stock,
$.01 par value per share, outstanding.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<S>
<C> <C>
December 31, June 30,
1998 1998
------------- ----------
ASSETS
Current assets:
Cash and cash equivalents............................ $ 12,884 $ 37,228
Restricted cash...................................... 24,790 29,296
Accounts receivable, net............................. 31,821 28,574
Inventory............................................ 7,812 6,499
Current portion of Premier Club notes receivable..... 3,986 4,089
Other current assets................................. 14,760 5,496
---------- ----------
Total current assets......................... 96,053 111,182
Property and equipment, net............................ 1,008,288 959,214
Intangible assets, net................................. 81,027 36,926
Long-term portion of Premier Club notes receivable,net. 7,714 7,828
Other assets........................................... 21,545 13,057
---------- ----------
Total assets.................................. $1,214,627 $1,128,207
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................ $ 45,387 $ 41,326
Current portion of deferred revenue.................. 58,955 35,114
Short-term debt...................................... 329,690 318,250
Current portion of long-term debt.................... 21,998 4,540
Other current liabilities............................ 6,406 3,866
--------- ---------
Total current liabilities.................... 462,436 403,096
Long-term debt......................................... 255,338 217,836
Premier Club refundable membership fees................ 63,864 65,046
Other non-current liabilities.......................... 11,561 9,826
Minority interest...................................... 1,957 1,892
Shareholders' equity:
Class A Common Stock, $.01 par value, 100,000,000
shares authorized and 34,890,358 and 34,888,358
shares issued and outstanding at December 31, 1998 and
June 30, 1998,respectively......................... 349 349
Class B Common Stock, $.01 par value, 10,000,000 shares
authorized and 255,000 shares issued and outstanding at
December 31, 1998 and June 30, 1998................ 3 3
Contributed capital ................................. 432,130 432,110
Accumulated deficit..................................( 13,011) ( 1,951)
---------- ----------
Total shareholders' equity .................. 419,471 430,511
---------- ----------
Total liabilities and shareholders' equity... $1,214,627 $1,128,207
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31,
(In thousands, except per share data)
<TABLE>
<S>
<C> <C>
1998 1997
--------- ----------
Revenue:
Leisure and recreation................................. $ 80,233 $ 58,093
Entertainment and sports............................... 24,816 18,487
--------- ---------
Total revenue.................................. 105,049 76,580
Operating expenses:
Cost of leisure and recreation services................ 35,485 25,900
Cost of entertainment and sports services.............. 18,736 18,239
Selling, general and administrative expenses........... 22,824 22,922
Amortization and depreciation.......................... 7,552 5,068
--------- ---------
Total operating expenses....................... 84,597 72,129
--------- ---------
Operating income......................................... 20,452 4,451
Interest and other income................................ 1,033 853
Interest and other expense............................... (12,554) ( 3,375)
Minority interest........................................ 55 ( 768)
--------- ---------
Net income............................................... $ 8,986 $ 1,161
========= =========
Net income per share - basic and diluted................. $ 0.26 $ 0.03
========= =========
Shares used in computing net income per share - basic.... 35,145 35,104
========= =========
Shares used in computing net income per share - diluted.. 35,145 35,602
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended December 31,
(In thousands, except per share data)
<TABLE>
<S>
<C> <C>
1998 1997
--------- ---------
Revenue:
Leisure and recreation................................. $ 128,872 $ 88,380
Entertainment and sports............................... 28,455 21,149
--------- ---------
Total revenue.................................. 157,327 109,529
Operating expenses:
Cost of leisure and recreation services................ 63,042 43,468
Cost of entertainment and sports services.............. 22,161 21,577
Selling, general and administrative expenses........... 46,226 40,364
Amortization and depreciation.......................... 15,031 8,915
--------- ---------
Total operating expenses....................... 146,460 114,324
--------- ---------
Operating income (loss).................................. 10,867 ( 4,795)
Interest and other income................................ 1,470 1,318
Interest and other expense............................... (23,217) ( 6,663)
Minority interest........................................ ( 180) ( 856)
---------- ---------
Net loss................................................. $ (11,060) $( 10,996)
========== =========
Net loss per share - basic and diluted................... $ ( 0.31) $( 0.33)
========= =========
Shares used in computing net loss per
share - basic and diluted.............................. 35,145 33,552
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31,
(In thousands)
<TABLE>
<S>
<C> <C>
1998 1997
----------- -----------
Operating activities:
Net loss ......................................... $( 11,060) $( 10,996)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization and depreciation.................. 15,031 8,915
Income applicable to minority interests........ 180 856
Changes in operating assets and liabilities
(excluding the effects of business acquisitions):
Accounts receivable............................ ( 3,247) ( 9,892)
Other assets................................... ( 8,333) 20,243
Accounts payable and accrued expenses.......... 4,061 ( 5,346)
Deferred revenue and other liabilities......... 26,934 22,509
---------- ----------
Net cash provided by operating activities. 23,566 26,289
---------- ----------
Investing activities:
Cash acquired in business acquisitions............ - 12,476
Cash used in business acquisitions................ - ( 83,534)
Acquisition of additional interest in
consolidated subsidiary......................... - ( 12,082)
Restricted cash................................... 4,506 ( 9,901)
Capital expenditures.............................. ( 61,781) ( 30,518)
----------- ----------
Net cash used in investing activities..... ( 57,275) (123,559)
----------- ----------
Financing activities:
Net proceeds from the sale of common stock........ - 108,760
Borrowings under credit facilities, net of
financing costs paid............................ 131,838 22,800
Payments on long-term debt and other credit
facilities...................................... ( 122,378) ( 35,000)
Proceeds from exercise of stock options........... 20 74
Distribution to minority interests................ ( 115) ( 206)
----------- -----------
Net cash provided by financing activities. 9,365 96,428
----------- -----------
Decrease in cash and cash equivalents..... ( 24,344) ( 842)
Cash and cash equivalents, at beginning of period... 37,228 13,709
---------- -----------
Cash and cash equivalents, at end of period......... $ 12,884 $ 12,867
=========== ===========
Supplemental schedule of non-cash operating,
investing and financing activities:
Issuance of note payable in connection with
acquisition......................................... $ 45,287 $ -
=========== ===========
Reduction in other assets in connection with
acquisition of additional interest in units of
consolidated subsidiary............................. $ - $ 1,474
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Florida Panthers
Holdings, Inc. and subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the financial information furnished in this report
reflects all adjustments (including normal recurring accruals) necessary for a
fair presentation of the results for the interim period. The results of
operations for the six-month period ended December 31, 1998 are not necessarily
indicative of the results to be expected for the entire year primarily due to
seasonal variations. All significant intercompany accounts have been eliminated.
2. Organization
The Company is a holding company with subsidiaries currently operating in two
business segments: (1) leisure and recreation and (2) entertainment and sports.
The leisure and recreation business consists of the ownership of the Boca Raton
Resort and Club, the Arizona Biltmore Hotel, the Registry Hotel at Pelican Bay,
the Edgewater Beach Hotel, the Hyatt Regency Pier 66 Hotel and Marina, the
Radisson Bahia Mar Resort and Yachting Center and newly redesigned Grande Oaks
Golf Club (formerly known as Rolling Hills Golf Club).
The entertainment and sports business consists of the Florida Panthers Hockey
Club (the "Panthers"), arena development, arena management and ice skating rink
operations. The Company's arena development operations recently completed
construction of the National Car Rental Center, a new multi-purpose
state-of-the-art entertainment and sports complex. In addition to serving as
home to the Panthers during the 1998-99 season, the National Car Rental Center
showcases other spectator entertainment and sports events, and provides a
centrally located site for meetings and conferences.
3. Earnings (Loss) Per Common Share
The Company adopted Statement of Financial Accounting Standards 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. Options were antidilutive during
the 1998 periods and during the six months ended December 31, 1997 and,
therefore, have been excluded. The following table sets forth weighted average
shares used to compute basic and diluted earnings per share (in 000's):
<TABLE>
<S>
<C> <C> <C> <C>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
1998 1997 1998 1997
------ ------ ------ ------
Basic weighted average shares
outstanding.................. 35,145 35,104 35,145 33,552
Stock options................. -- 498 -- --
------ ------ ------ ------
Diluted weighted average shares
outstanding.................. 35,145 35,602 35,145 33,552
====== ====== ====== ======
</TABLE>
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
4. Recent Developments
In connection with the acquisition of the Arizona Biltmore Hotel in March 1998,
the Company agreed to pay up to $50.0 million to the sellers conditioned upon
their satisfactory execution of certain developmental plans. The plans were
delivered to the Company in acceptable form in December 1998. The $50.0 million
note has no stated interest rate and, accordingly, is presented net of an
unamortized discount of $4.7 million on the Consolidated Balance Sheet. A
corresponding increase of $45.3 million is also reflected as a component of
intangible assets. The effective interest rate on the note is 8.8%. The $50.0
million is payable at the election of the seller, either in cash or in shares of
the Company's Class A Common Stock, par value $.01 per share, ("Class A
Common Stock") in three equal annual installments commencing in April 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report may not contain all the information that is important to you. This
section should be read together with the Annual Report on Form 10-K because the
Form 10-K provides substantially greater detail.
Results of Operations
Business Segment Information
Business segment operating data, along with costs and expenses expressed as a
percentage of the related business segment revenue, is set forth below (in
000's). Certain reclassifications of prior period amounts have been made to
conform to the current year presentation.
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
For the Three Months Ended December 31, For the Six Months Ended December 31,
---------------------------------------- --------------------------------------
1998 % 1997 % 1998 % 1997 %
-------- ---- -------- ---- -------- ---- -------- ----
Revenue:
Leisure and recreation......... $ 80,233 76% $ 58,093 76% $128,872 82% $ 88,380 81%
Entertainment and sports....... 24,816 24% 18,487 24% 28,455 18% 21,149 19%
-------- ---- -------- ---- -------- ---- -------
Total revenue........ 105,049 100% 76,580 100% 157,327 100% 109,529 100%
Operating Expenses:
Cost of services:
Leisure and recreation....... 35,485 44% 25,900 45% 63,042 49% 43,468 49%
Entertainment and sports..... 18,736 76% 18,239 99% 22,161 78% 21,577 102%
Selling, general and
administrative expenses:
Leisure and recreation....... 18,040 22% 17,966 31% 37,209 29% 31,698 36%
Entertainment and sports..... 2,490 10% 2,781 15% 4,912 17% 4,874 23%
Corporate.................... 2,294 2,175 4,105 3,792
Amortization and depreciation:
Leisure and recreation....... 6,833 9% 4,026 7% 13,367 10% 6,893 8%
Entertainment and sports..... 691 3% 1,042 6% 1,604 6% 2,022 10%
Corporate 28 -- 60 --
------- ---- -------- ---- -------- ---- -------- ----
84,597 81% 72,129 94% 146,460 93% 114,324 104%
------- ---- -------- ---- -------- ---- -------- ----
$20,452 19% 4,451 6% 10,867 7% ( 4,795) (4)%
======= ==== ======== ==== ======== ==== ======== ====
EBITDA:
Leisure and recreation....... $ 27,687 $ 14,994 $ 29,921 $ 14,185
Entertainment and sports..... 3,613 ( 2,473) 1,471 ( 5,161)
Corporate.................... ( 2,264) ( 2,150) ( 4,025) ( 3,585)
-------- -------- --------- ---------
Total........................ $ 29,036 $ 10,371 $ 27,367 $ 5,439
======== ======== ========= =========
Adjusted EBITDA:
Leisure and recreation....... $ 30,235 $ 14,994 $ 33,644 $ 14,185
Entertainment and sports..... 3,613 ( 2,473) 1,471 ( 5,161)
Corporate.................... ( 2,264) ( 2,150) ( 4,025) ( 3,585)
-------- -------- --------- ----------
Total........................ $ 31,584 $ 10,371 $ 31,090 $ 5,439
======== ======== ========= ==========
</TABLE>
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
resorts extends from January through April, while the regular hockey season for
the Panthers commences in October and ends in April. Approximately 70% of annual
revenue has historically been earned during the second and third fiscal
quarters.
Consolidated Results of Operations
Operating income amounted to $20.5 million and $4.5 million for the three months
ended December 31, 1998 and 1997, respectively. Operating income totaled $10.9
million for the six months ended December 31, 1998,compared to an operating loss
of $4.8 million for the six months ended December 31, 1997. Higher revenue
during the three and six months ended December 31, 1998, together with better
profit margins, led to the improvement in operating results. Additional
information relating to the operating results for each business segment is set
forth below.
<PAGE>
Leisure and Recreation
Improvements in leisure and recreation operating results between December 31,
1998 and 1997 were largely due to acquisitions. The Company purchased (1) a 68%
ownership interest in the Registry Hotel at Pelican Bay in August 1997 (and
acquired the remaining interests by July 1998), (2) the Arizona Biltmore Hotel
in March 1998 and (3) the Edgewater Beach Hotel in April 1998.
Revenue
Leisure and recreation revenue totaled $80.2 million and $58.1 million for the
three months ended December 31, 1998 and 1997, respectively, and $128.9 million
and $88.4 million for the six months ended December 31, 1998 and 1997,
respectively. As indicated above, the increase in revenue for the 1998 periods
was largely due to acquisitions. In addition, the average daily rate ("ADR") for
the Company's resort portfolio increased to $158 for the six months ended
December 31, 1998,from $137 for the six months ended December 31, 1997. Similar
improvements in ADR were experienced during the three months ended December 31,
1998,compared to the three months ended December 31, 1997. The improvement in
ADR was partially offset by a decrease in the average occupancy rate for the
three and six months ended December 31, 1998. Accordingly, revenue per available
room increased to $97 for the six months ended December 31, 1998, from $89 for
the six months ended December 31, 1997.
Approximately 60% of 1998 and 1997 revenue were derived from non-room sources
such as food and beverage sales, yachting and marina revenue, club memberships,
retail and other resort amenities. Management expects leisure and recreation
revenue for the three months ended March 31, 1999 to be higher than the just
concluded quarter because the properties will be entering their peak season of
operations.
Operating Expenses
Cost of leisure and recreation services totaled $35.5 million or 44% of revenue
for the three months ended December 31, 1998, compared to $25.9 million or 45%
of revenue for the three months ended December 31, 1997. Cost of leisure and
recreation services totaled $63.0 million or 49% of revenue for the six months
ended December 31, 1998, compared to $43.5 million or 49% of revenue for the six
months ended December 31, 1997. Cost of leisure and recreation services
primarily consisted of direct costs to service rooms, marinas, food and beverage
operations, retail establishments and other amenities at the resorts.
Selling, general and administrative expenses ("S,G&A") of the leisure and
recreation business totaled $18.0 million or 22% of revenue for the three months
ended December 31, 1998, compared to $18.0 million or 31% of revenue for the
three months ended December 31, 1997. S,G&A of the leisure and recreation
business totaled $37.2 million or 29% of revenue for the six months ended
December 31, 1998, compared to $31.7 million or 36% of revenue for the six
months ended December 31, 1997. S,G&A as a percent of revenue improved for the
1998 periods primarily because of certain cost efficiencies associated with
consolidated marketing efforts as well as reduced overhead for such items as
insurance and professional fees. S,G&A primarily consisted of various fixed,
indirect costs, including utility and property costs, real estate taxes,
insurance, management and franchise agreement fees and administrative salaries
and expenses.
Amortization and depreciation expense associated with the leisure and recreation
business totaled $6.8 million for the three months ended December 31, 1998,
compared to $4.0 million for the three months ended December 31, 1997.
Amortization and depreciation expense amounted to $13.4 million and $6.9 million
for the six months ended December 31, 1998 and 1997, respectively. The increase
was primarily due to full 1998 periods of depreciation for the Registry Hotel at
Pelican Bay as well as depreciation for the recently acquired Arizona Biltmore
Hotel and Edgewater Beach Hotel.
Entertainment and Sports
Improvements in entertainment and sports operating results between December 31,
1998 and 1997 were primarily attributable to the Panthers move from the Miami
<PAGE>
Arena to the newly constructed National Car Rental Center. Additional revenue
sources available at the National Car Rental Center accounted for an increase in
operating income of approximately $6.5 million during the six months ended
December 31, 1998, compared to the six months ended December 31, 1997.
Revenue
Entertainment and sports business revenue amounted to $24.8 million and $18.5
million for the three months ended December 31, 1998 and 1997, respectively, and
$28.5 million and $21.1 million for the six months ended December 31, 1998 and
1997, respectively. The primary components of the entertainment and sports
business are the Panthers and arena operations. Revenue and direct expenses
associated with the team are recorded over the regular hockey season. Therefore,
the majority of revenue is reported during the three-month periods ended
December 31 and March 31. Should the Panthers participate in the playoffs,
additional revenue and expenses will be recorded during the three-month period
ended June 30. The increase in revenue during the three and six months ended
December 31, 1998 was derived primarily from the National Car Rental Center
where the Panthers serve as primary tenants. Management expects arena revenue
for the ensuing quarter ending March 31, 1999 to be higher than the comparable
quarter of the prior year due to its favorable tenant and management agreement
with the National Car Rental Center.
Operating Expenses
Cost of entertainment and sports services totaled $18.7 million or 76% of
revenue for the three months ended December 31, 1998, compared to $18.2 million
or 99% of revenue for the three months ended December 31, 1997. Cost of
entertainment and sports services totaled $22.2 million or 78% of revenue for
the six months ended December 31, 1998, compared to $21.6 million or 102% of
revenue for the six months ended December 31, 1997. S,G&A of the entertainment
and sports business totaled $2.5 million or 10% of revenue for the three months
ended December 31, 1998, compared to $2.7 million or 15% of revenue for the
three months ended December 31, 1997. S,G&A of the entertainment and sports
business totaled $4.9 million or 17% of revenue for the six months ended
December 31, 1998, compared to $4.9 million or 23% of revenue for the six months
ended December 31, 1997. While cost of services and S,G&A remained relatively
flat in amounts, these expenses decreased as a percent of revenue because of an
increase in revenue derived from the Company's ownership interests in arena
operations.
Amortization and depreciation expense associated with the entertainment and
sports business totaled $691,000 and $1.0 million for the three months ended
December 31, 1998 and 1997, respectively, and $1.6 million and $2.0 million for
the six months ended December 31, 1998 and 1997, respectively. These expenses
include amortization of Panthers' player's salaries and a National Hockey League
franchise fee that was paid in 1993 when the expansion franchise was granted. A
portion of the National Hockey League franchise fee has been fully amortized
and, accordingly, amortization expense decreased for the 1998 periods.
Corporate General and Administrative Expenses
Corporate general and administrative expenses totaled $2.3 million and $2.2
million for the three months ended December 31, 1998 and 1997, respectively, and
$4.1 million and $3.8 million for the six months ended December 31, 1998 and
1997, respectively.
Interest and Other Income
Interest and other income primarily include interest earned on cash and cash
equivalents and on Premier Club notes receivable. Interest and other income
totaled $1.0 million and $853,000 for the three months ended December 31, 1998
and 1997, respectively, and $1.5 million and $1.3 million for the six months
ended December 31, 1998 and 1997, respectively.
<PAGE>
Interest Expense
Interest expense totaled $12.6 million and $3.4 million for the three months
ended December 31, 1998 and 1997, respectively, and $23.2 million and $6.7
million for the six months ended December 31, 1998 and 1997, respectively. The
increase was the result of higher debt levels assumed or originated in
connection with the acquisitions of resorts coupled with higher weighted average
borrowing costs. The Company's debt increased to $607.0 million at December 31,
1998, from $173.9 million at December 31, 1997.
Minority Interest
Minority interest totaled $(55,000) and $768,000 during the three months ended
December 31, 1998 and 1997, respectively, and $180,000 and 856,000 during the
six months ended December 31, 1998 and 1997, respectively. The decrease in
minority interest expense is primarily the result of the Company owning all
units of Registry Resort during the 1998 periods.
EBITDA
EBITDA represents earnings before interest expense, income taxes, depreciation,
amortization and minority interest. EBITDA improved to $29.0 million for the
three months ended December 31, 1998,from $10.4 million for the three months
ended December 31, 1997. EBITDA amounted to $27.4 million and $5.4 million for
the six months ended December 31, 1998 and 1997, respectively. The improvement
in EBITDA was the result of an increase in revenue, partly due to acquisitions,
and better profit margins during 1998 periods versus the 1997 periods.
Management and certain investors use EBITDA and Adjusted EBITDA (see below) as
indicators of the Company's historical ability to service debt, to sustain
potential future increases in debt and to satisfy capital requirements. However,
neither EBITDA nor Adjusted EBITDA is intended to represent cash flows for the
period. In addition, they have not been presented as alternatives to either (1)
operating income (as determined by generally accepted accounting principles) as
an indicator of operating performance or (2) cash flows from operating,
investing and financing activities (as determined by GAAP) and is susceptible to
varying calculations. See Consolidated Statements of Cash Flows included under
Part I, Item 1. EBITDA and Adjusted EBITDA as presented may not be comparable to
other similarly titled measures of other companies.
Adjusted EBITDA
Adjusted EBITDA represents EBITDA plus the annual change in net deferred income
from the Premier Club at the Boca Raton Resort and Club. The Premier Club
currently requires a non-refundable initial membership fee of $45,000 and annual
social dues starting at $2,300. Members of the Premier Club have unlimited
access to the Boca Raton Resort and Club grounds and recreational facilities,
which are otherwise restricted to resort guests. Initial membership fees are
recorded as revenue over the estimated life of the membership. Unrecognized
Premier Club amounts are reflected as deferred revenue on the Consolidated
Balance Sheets. Adjusted EBITDA improved to $31.6 million for the three months
ended December 31, 1998,from $10.4 million for the three months ended December
31, 1997. Adjusted EBITDA amounted to $31.1 million and $5.4 million for the six
months ended December 31, 1998 and 1997, respectively. The improvement in
adjusted EBITDA was the result of an increase in revenue (including deferred
Premier Club revenue) and better profit margins during 1998 periods versus the
1997 periods.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $12.9 million at December 31, 1998,
from $37.2 million at June 30, 1998. The major components of the change are
discussed below.
<PAGE>
Cash Provided By Operating Activities
Cash provided by operating activities totaled $23.6 million and $26.3 million
during the six months ended December 31, 1998 and 1997, respectively. The
decrease in cash provided by operating activities during the six months ended
December 31,1998 was primarily the result of the payment of certain amounts in
connection with the construction of the National Car Rental Center.
Cash Used in Investing Activities
Cash used in investing activities amounted to $57.3 million and $123.6
million during the six months ended December 31, 1998 and 1997, respectively.
The Company did not acquire any businesses during the six months ended December
31, 1998. During the six months ended December 31, 1997, the Company spent $63.0
million (net of cash acquired) on the acquisition of its initial 68% ownership
interest in the Registry Hotel at Pelican Bay, $12.1 million on the acquisition
of additional units of Registry Resort and $8.0 million on the acquisition of
Grande Oaks Golf Club.
Capital expenditures increased by $31.3 million, to $61.8 million during the six
months ended December 31, 1998,from $30.5 million during the six months ended
December 31, 1997. The Company spent about $31.0 million on the acquisition of
land in Naples and Plantation, Florida during the six months ended December 31,
1998. The Company plans to use the parcels to construct additional recreational
amenities that would be available to guests of its Naples' and Fort Lauderdale
resorts. Other capital spending during the six months ended December 31, 1998
related to continued development and construction at Grande Oaks Golf Club,
continued construction of the 122 guest room addition at the Arizona Biltmore
Hotel and other recurring furniture, fixture and equipment maintenance at the
resorts. During the six months ended December 31, 1997, an expansion program was
nearing completion at the Boca Raton Resort and Club. This expansion included an
18 court tennis club (that added 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.
Under covenants contained in a senior note secured by the Boca Raton Resort and
Club, the Company is required to deposit excess operating cash generated by the
resort 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, loan and/or management
agreements for certain other resorts 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.
Restricted cash decreased by $4.5 million during the six months ended December
31, 1998, compared to an increase of $9.9 million during the six months ended
December 31, 1997. During the six months ended December 31, 1998, the decrease
in restricted cash was primarily the result of the release of funds pursuant to
the terms of the senior note secured by the Boca Raton Resort and Club. No funds
were available for distribution during the six months ended December 31, 1997
because the Boca Raton Resort and Club was undergoing an expansion program.
Cash Provided By Financing Activities
Cash provided by financing activities amounted to $9.4 million and $96.4 million
during the six months ended December 31, 1998 and 1997, respectively. The
Company received $9.5 million in borrowings, net of repayments and net of
financing costs paid, under credit facilities during the six months ended
December 31, 1998. During the six months ended December 31, 1997, the Company
received $108.8 million of net proceeds from the underwritten public offering of
Class A Common Stock, partially offset by net repayments on indebtedness of
$12.2 million.
<PAGE>
Capital Resources
Management believes the Company can continue to obtain sufficient financial
resources to support ongoing operations.
The Company's capital resources are provided from both internal and external
sources. The primary capital resources from internal operations include revenue
from (1) room rentals, food and beverage sales, retail sales and golf, tennis,
marina and conference services at the resorts, (2) Premier Club memberships at
the Boca Raton Resort and Club and (2) ticket, broadcasting, sponsorship and
other revenue derived from ownership of the Panthers. The primary external
sources of liquidity have been the issuance of equity securities and borrowing
under term loans and lines-of-credit.
Management is currently reviewing long-term financing alternatives, including
issuing private debt securities, encumbering certain of the resort and sports
assets, issuing equity securities or divestiture of certain assets to raise
capital and retire its currently outstanding short-term indebtedness. No
assurances can be given that such financing can obtained on terms acceptable to
the Company, if at all.
Financial Condition
Significant changes in balance sheet data from June 30, 1998 to December 31,
1998 are discussed below.
Restricted Cash
Restricted cash decreased to $24.8 million at December 31, 1998,from $29.3
million at June 30, 1998. Restricted cash decreased at December 31, 1998
primarily because funds were released from restricted accounts pursuant to the
terms of the senior note secured by the Boca Raton Resort and Club.
Other Current Assets
Other current assets increased to $14.8 million at December 31, 1998,from $5.5
million at June 30, 1998. The increase in other current assets at December 31,
1998 primarily represents financing costs paid in connection with the
origination and extension of credit facilities. Such amounts are being amortized
over the estimated life of the related indebtedness using the straight-line
method, which approximates the interest method.
Property and Equipment
Property and equipment increased to $1.0 billion at December 31, 1998,from
$959.2 million at June 30, 1998. The Company spent about $31.0 million on the
acquisition of land in Naples and Plantation, Florida. Other capital spending
during the six months ended December 31, 1998 related to continued development
and construction at Grande Oaks Golf Club, continued construction of the 122
guest room addition at the Arizona Biltmore Hotel and other recurring furniture,
fixture and equipment maintenance at the resorts.
Other Assets
Other assets increased to $21.5 million at December 31, 1998,from $13.1 million
at June 30, 1998. A portion of the increase relates to payment of signing
bonuses to Panther players. Signing bonuses are capitalized and amortized over
the life of a player's contract. In addition, the Company paid approximately
$3.9 million in connection with the construction of the National Car Rental
Center.
Intangible Assets
In connection with the acquisition of the Arizona Biltmore Hotel in March 1998,
the Company agreed to pay up to $50.0 million to the sellers conditioned upon
their satisfactory execution of certain developmental plans. The plans were
delivered to the Company in acceptable form in December 1998. The $50.0 million
note has no stated interest rate and, accordingly, is presented net of an
<PAGE>
unamortized discount of $4.7 million on the Consolidated Balance Sheet. A
corresponding increase of $45.3 million is also reflected as a component of
intangible assets. The effective interest rate on the note is 8.8%. The $50.0
million is payable at the election of the seller, either in cash or in shares of
the Company's Class A Common Stock in three equal annual installments commencing
in April 1999.
Current Portion of Deferred Revenue
Current portion of deferred revenue increased to $59.0 million at December 31,
1998,from $35.1 million at June 30, 1998. Approximately $13.4 million of the
increase related to deposits for advance suite and seat sales at the National
Car Rental Center. Additionally, approximately $6.8 million of the increase
related to receipts of advance deposits on room rentals and membership fees and
annual dues of the Premier Club at the Boca Raton Resort and Club.
Short-Term Debt
Short-term debt increased to $329.7 million at December 31, 1998,from $318.3
million at June 30, 1998. Most of the increase related to fully borrowing under
a new $10 million unsecured credit facility, which matures in June 1999. The
interest rate charged under the facility is LIBOR plus .50%. Certain of the
Company's short-term debt instruments are guaranteed by the Company's Chairman
of the Board.
Long-Term Debt
Long-term debt increased to $255.3 million at December 31, 1998,from $217.8
million at June 30, 1998. The increase occurred partially because the Company
borrowed the remaining available balance under its $35.0 million credit
facility. These borrowings were partially offset by principal repayments on
indebtedness secured by the Boca Raton Resort and Club and the Arizona Biltmore
Hotel. In addition, a note payable to the sellers of the Arizona Biltmore was
originated. See Note 4 to the Consolidated Financial Statements included under
Part I, Item 1.
Year 2000
The Company has completed an assessment relative to the modification or
replacement of portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
Company is also in the process of identifying and reviewing its non-information
technology systems with respect to Year 2000 ("Y2K") issues. In addition,
communication with third parties has been initiated to determine the extent to
which the Company's interface systems are vulnerable to those third parties'
failure to remediate their own Y2K issues. As of December 31, 1998 the Company
had spent approximately $100,000 on Y2K issues. The Y2K project is scheduled to
be completed by June 30, 1999 and the total cost is expected not to exceed
$500,000. Management believes that modifications to existing software and
conversions to new software will not pose significant operational problems for
computer systems.
Management also believes, that upon remediation of the Company's business
software applications, as well as other equipment with embedded technology, the
Y2K issue will not present a materially adverse risk to the Company's future
consolidated results of operations, liquidity and capital resources. However, if
such remediation is not completed in a timely manner or the level of timely
compliance by key suppliers or vendors is not sufficient, the Y2K issue could
have a material adverse impact on the Company's operations including, but not
limited to, delays in delivery of products from third party vendors,
increased operating costs, loss of customers or suppliers, or other significant
disruptions to the business. The Company has initiated comprehensive contingency
and business continuation plans which are expected to be in place in early 1999
in order to ensure enough time for implementation of such plans, if necessary
and thus possibly avoid such risks.
<PAGE>
Forward Looking Statements
Some of the information in this report may contain forward-looking statements.
Such statements can be identified by the use of forward-looking terminology such
as "may", "will", "expect", "anticipate", "estimate", "continue" or other
similar words. These statements discuss future expectations, contain projections
of results of operations or of financial condition or state other
"forward-looking" information. When considering such forward-looking statements,
you should keep in mind the risk factors and other cautionary statements in this
report. The risk factors include certain known and unknown risks and
uncertainties, and could cause the Company's actual results to differ materially
from those contained in any forward looking statement.
These risk factors include, among others, the Company's ability to obtain
financing on acceptable terms to meet operating expenses and finance its growth,
competition in the Company's principal businesses, the Company's ability to
integrate and successfully operate acquired businesses and the risks associated
with these businesses, the Company's ability to develop and implement
operational and financial systems to manage rapidly growing operations, the
Company's limited history of operations in the leisure and recreation business,
the Company's dependence on key personnel and the Company's ability to properly
assess and capitalize on future business opportunities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
There has been no material change in the status of legal proceedings as
described under Part I, Item 3 to the Company's Annual Report on Form
10-K for the year ended June 30, 1998.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on November 17, 1998, the
shareholders voted to elect the directors named in the proxy materials
dated September 28, 1998. The results of the voting were as follows:
<TABLE>
<S>
<C> <C> <C> <C>
Withheld/
For Abstain Non-Vote Total (1)
------------- ---------- --------- -------------
Steven R. Berrard 2,573,331,597 125,831 9,176,629 2,582,634,057
Dennis J. Callaghan 2,573,349,578 107,850 9,176,629 2,582,634,057
Michael S. Egan 2,573,351,447 105,981 9,176,629 2,582,634,057
Chris Evert 2,572,239,386 1,218,042 9,176,629 2,582,634,057
Harris W. Hudson 2,573,350,962 106,466 9,176,629 2,582,634,057
H. Wayne Huizenga 2,573,350,640 106,788 9,176,629 2,582,634,057
George D. Johnson, Jr.2,573,351,594 105,834 9,176,629 2,582,634,057
Henry Latimer 2,573,373,857 83,571 9,176,629 2,582,634,057
Richard C. Rochon 2,573,351,497 105,931 9,176,629 2,582,634,057
</TABLE>
(1) 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.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
FLORIDA PANTHERS HOLDINGS, INC.
Date: February 12, 1999 By:WILLIAM M PIERCE
William M. Pierce
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
By:STEVEN M. DAURIA
Steven M. Dauria
Vice President and Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 37,674
<SECURITIES> 0
<RECEIVABLES> 43,521
<ALLOWANCES> 0
<INVENTORY> 7,812
<CURRENT-ASSETS> 96,053
<PP&E> 1,008,288
<DEPRECIATION> 34,279
<TOTAL-ASSETS> 1,214,627
<CURRENT-LIABILITIES> 462,436
<BONDS> 0
0
0
<COMMON> 352
<OTHER-SE> 419,119
<TOTAL-LIABILITY-AND-EQUITY> 1,214,627
<SALES> 157,327
<TOTAL-REVENUES> 158,797
<CGS> 85,203
<TOTAL-COSTS> 85,203
<OTHER-EXPENSES> 61,437
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,217
<INCOME-PRETAX> (11,060)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,060)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,060)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
