SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 May 13, 1999, there were 40,551,370 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>
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<C> <C>
March 31, June 30,
1999 1998
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents............................. $ 14,336 $ 37,228
Restricted cash....................................... 29,559 29,296
Accounts receivable, net.............................. 47,054 28,574
Inventory............................................. 7,916 6,499
Current portion of Premier Club notes receivable...... 3,870 4,089
Other current assets.................................. 10,357 5,496
Total current assets.......................... 113,092 111,182
Property and equipment, net............................. 1,013,799 959,214
Intangible assets, net.................................. 80,383 36,926
Long-term portion of Premier Club notes receivable, net. 7,181 7,828
Other assets............................................ 19,676 13,057
---------- ----------
Total assets...................................$1,234,131 $1,128,207
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................. $ 57,948 $ 41,326
Current portion of deferred revenue................... 34,313 35,114
Short-term debt....................................... 348,555 318,250
Current portion of long-term debt..................... 5,850 4,540
Other current liabilities............................. 4,131 3,866
--------- ---------
Total current liabilities..................... 450,797 403,096
Long-term debt.......................................... 219,614 217,836
Premier Club refundable membership fees................. 63,413 65,046
Other non-current liabilities........................... 12,602 9,826
Minority interest....................................... 2,070 1,892
Shareholders' equity:
Class A Common Stock, $.01 par value, 100,000,000
shares authorized and 38,912,919 and 34,888,358
shares issued and outstanding at March 31, 1999 and
June 30, 1998, respectively.......................... 389 349
Class B Common Stock, $.01 par value, 10,000,000 shares
authorized and 255,000 shares issued and outstanding
at March 31, 1999 and June 30, 1998................. 3 3
Contributed capital ................................... 472,226 432,110
Retained earnings (accumulated deficit)................ 13,017 ( 1,951)
---------- ----------
Total shareholders' equity .................. 485,635 430,511
---------- ----------
Total liabilities and shareholders' equity... $1,234,131 $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 March 31,
(In thousands, except per share data)
<TABLE>
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<C> <C>
1999 1998
--------- --------
Revenue:
Leisure and recreation................................ $ 113,426 $ 92,281
Entertainment and sports.............................. 28,862 13,471
--------- --------
Total revenue................................. 142,288 105,752
Operating expenses:
Cost of leisure and recreation services................ 40,720 32,831
Cost of entertainment and sports services.............. 22,133 18,218
Selling, general and administrative expenses........... 28,024 25,859
Amortization and depreciation.......................... 8,156 6,538
-------- -------
Total operating expenses...................... 99,033 83,446
Operating income......................................... 43,255 22,306
Interest and other income................................ 286 366
Interest and other expense............................... (17,399) (7,865)
Minority interest........................................ ( 114) ( 887)
--------- --------
Net income............................................... $ 26,028 $ 13,920
========= ========
Net income per share - basic ............................ $ 0.70 $ 0.40
========= ========
Net income per share - diluted........................... $ 0.70 $ 0.39
========= ========
Shares used in computing net income per share - basic.... 37,022 35,118
========= ========
Shares used in computing net income per share - diluted.. 37,061 35,788
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended March 31,
(In thousands, except per share data)
<TABLE>
<S>
<C> <C>
1999 1998
--------- --------
Revenue:
Leisure and recreation................................. $ 242,298 $180,661
Entertainment and sports............................... 57,317 34,620
--------- --------
Total revenue.................................. 299,615 215,281
Operating expenses:
Cost of leisure and recreation services................ 103,762 76,299
Cost of entertainment and sports services.............. 44,294 39,795
Selling, general and administrative expenses........... 74,250 66,223
Amortization and depreciation.......................... 23,187 15,453
--------- --------
Total operating expenses....................... 245,493 197,770
Operating income ........................................ 54,122 17,511
Interest and other income................................ 1,756 1,683
Interest and other expense............................... (40,616) (14,528)
Minority interest........................................ ( 294) ( 1,743)
--------- -------
Net income............................................... $ 14,968 $ 2,923
========= =======
Net income per share - basic ............................ $ 0.42 $ 0.09
========= =======
Net income per share - diluted.............. ............ $ 0.42 $ 0.08
========= =======
Shares used in computing net income per share - basic.... 35,762 34,067
========= =======
Shares used in computing net income per share - diluted.. 35,924 34,474
========= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31,
(In thousands)
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1999 1998
---------- ---------
Operating activities:
Net income ....................................... $ 14,968 $ 2,923
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation.................. 23,187 15,453
Income applicable to minority interests........ 294 1,743
Changes in operating assets and liabilities
(excluding the effects of business acquisitions):
Accounts receivable............................ ( 18,480) ( 9,730)
Other assets................................... 1,219 ( 658)
Accounts payable and accrued expenses.......... 16,622 ( 1,603)
Deferred revenue and other liabilities......... 607 6,862
--------- ---------
Net cash provided by operating activities. 38,417 14,990
Investing activities:
Cash acquired in business acquisitions............ - 12,999
Cash used in business acquisitions................ - (201,535)
Acquisition of additional interest in
consolidated subsidiary.......................... - ( 27,423)
Restricted cash................................... ( 263) 9,922
Capital expenditures.............................. ( 75,634) ( 46,430)
--------- ---------
Net cash used in investing activities..... ( 75,897) (252,467)
Financing activities:
Net proceeds from the sale of common stock........ 40,136 108,764
Borrowings under credit facilities, net of
financing costs paid............................. 152,802 221,216
Payments on long-term debt and other credit
facilities....................................... (178,255) ( 76,205)
Proceeds from exercise of stock options........... 20 360
Distribution to minority interests................ ( 115) ( 96)
--------- ---------
Net cash provided by financing activities. 14,588 254,039
--------- ---------
Increase (decrease) in cash and cash
equivalents............................. ( 22,892) 16,562
Cash and cash equivalents, at beginning of period... 37,228 13,709
--------- ---------
Cash and cash equivalents, at end of period......... $ 14,336 $ 30,271
========= =========
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............................ $ - $ 4,190
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<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 nine-month period ended March 31, 1999 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 the 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 management and ice skating rink operations. The
Company's arena management operations oversee 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 Per Common Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" during the fiscal year ended June 30, 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 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. The following table sets
forth weighted average shares used to compute basic and diluted earnings per
share (in 000's):
<TABLE>
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<C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
Basic weighted average shares outstanding.... 37,022 35,118 35,762 34,067
Stock options................................ 39 670 162 407
------ ------ ------ ------
Diluted weighted average shares outstanding.. 37,061 35,788 35,924 34,474
====== ====== ====== ======
</TABLE>
<PAGE>
FLORIDA PANTHERS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
4. Business Combinations
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 note has no
stated interest rate and, accordingly, is presented net of an unamortized
discount of $4.7 million on the Consolidated Balance Sheet. The effective
interest rate on the note is 8.8%. The first installment on the note in the
amount of $16.7 million was paid in March 1999. The balance is payable in two
equal annual installments commencing in April 2000 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, (the "Class A Common Stock").
5. Income Taxes
There is no income tax expense for the three and nine-month periods presented
because the Company utilized net operating loss carryforwards. The tax benefit
related to net operating loss carryforwards has been fully reserved through a
valuation allowance. Realization of the future tax benefits related to 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.
6. Common Stock Offering
On February 18, 1999, the Company completed a private placement of 4,022,561
shares of Class A Common Stock at $10.25 per share which raised net proceeds of
approximately $40.1 million. A portion of the net proceeds were used to repay
short-term indebtedness.
7. Subsequent Events
On April 6, 1999, the Company consummated the sale of 1,575,621 shares of Class
A Common Stock at a price of $10.25 per share, pursuant to a rights offering
which expired on March 31, 1999. The rights offering resulted in net proceeds of
approximately $15.7 million. A portion of the net proceeds were used to repay
short-term indebtedness.
On April 21, 1999, the Company issued $340.0 million in aggregate principal
amount of 9 7/8% senior subordinated notes, due 2009, in a private placement
offering pursuant to Rule 144A under the Securities Act of 1933. The net
proceeds from the offering of approximately $328.3 million, after payment of
selling commissions and discounts, and other expenses of the offering, were used
to repay short-term and long-term indebtedness.
On April 21, 1999, the Company also closed on a new three-year $146.0 million
secured revolving line-of-credit with a syndicate of financial institutions. The
initial borrowing under the credit facility totaled $41.8 million. Borrowings
under the facility will bear interest at a variable rate, currently equal to
LIBOR plus 3.0%.
<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).
<TABLE>
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For the Three Months Ended March 31, For the Nine Months Ended March 31,
----------------------------------------- ----------------------------------------
1999 % 1998 % 1999 % 1998 %
--------- ------ -------- ---- -------- ---- -------- -----
Revenue:
Leisure and recreation......... $113,426 80% $ 92,281 87% $242,298 81% $180,661 84%
Entertainment and sports....... 28,862 20% 13,471 13% 57,317 19% 34,620 16%
-------- -------- -------- --------
Total revenue........ 142,288 100% 105,752 100% 299,615 100% 215,281 100%
Operating Expenses:
Cost of services:
Leisure and recreation....... 40,720 36% 32,831 36% 103,762 43% 76,299 42%
Entertainment and sports..... 22,133 77% 18,218 135% 44,294 77% 39,795 115%
Selling, general and
administrative expenses:
Leisure and recreation....... 22,607 20% 19,954 22% 59,816 25% 51,037 28%
Entertainment and sports..... 2,697 9% 2,755 20% 7,609 13% 7,629 22%
Corporate.................... 2,720 3,150 6,825 7,557
Amortization and depreciation:
Leisure and recreation....... 7,420 7% 5,365 6% 20,787 9% 12,258 7%
Entertainment and sports..... 708 2% 1,156 9% 2,312 4% 3,178 9%
Corporate 28 17 88 17
Total operating expenses....... 99,033 70% 83,446 79% 245,493 82% 197,770 92%
-------- -------- -------- --------
Operating income .... $ 43,255 30% $ 22,306 21% $ 54,122 18% $ 17,511 8%
======== ======== ======== ========
EBITDA:
Leisure and recreation....... $ 50,306 $ 39,758 $ 80,227 $ 54,555
Entertainment and sports..... 4,057 ( 7,457) 5,528 (12,618)
Corporate.................... ( 2,666) ( 3,091) 6,690) ( 7,291)
-------- -------- -------- --------
Total........................ $ 51,697 $ 29,210 $ 79,065 $ 34,646
======== ======== ======== ========
Adjusted EBITDA:
Leisure and recreation....... $ 50,918 $ 39,758 $ 84,562 $ 54,555
Entertainment and sports..... 4,057 ( 7,457) 5,528 (12,618)
Corporate.................... ( 2,666) ( 3,091) ( 6,690) ( 7,291)
-------- -------- -------- --------
Total........................ $ 52,309 $ 29,210 $ 83,400 $ 34,646
======== ======== ======== ========
</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 have historically been recognized during the second and third fiscal
quarters.
Consolidated Results of Operations
Operating income amounted to $43.3 million and $22.3 million for the three
months ended March 31, 1999 and 1998, respectively. Operating income totaled
$54.1 million and $17.5 million for the nine months ended March 31, 1999 and
1998, respectively. Higher revenue during the three and nine months ended March
31, 1999, 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 the three and
nine months ended March 31, 1999 and March 31,1998 were partly 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. In addition, the average daily rate ("ADR") and
revenue per available room ("REVPAR") for the Company's resort portfolio
increased during the three and nine months ended March 31, 1999 over the prior
year periods. Non-room revenue also increased during the 1999 periods from 1998.
Revenue
Leisure and recreation revenue totaled $113.4 million and $92.3 million for the
three months ended March 31, 1999 and 1998, respectively, and $242.3 million and
$180.7 million for the nine months ended March 31, 1999 and 1998, respectively.
The ADR for the Company's resort portfolio increased to $279 for the three
months ended March 31, 1999, from $263 for the three months ended March 31,
1998. The ADR for the Company's resort portfolio increased to $206 for the nine
months ended March 31, 1999, from $193 for the nine months ended March 31, 1998.
The improvement in ADR was partially offset by a decrease in the average
occupancy rate for the three and nine months ended March 31, 1999. Accordingly,
REVPAR increased to $219 for the three months ended March 31, 1999, from $208
for the three months ended March 31, 1998. REVPAR increased to $137 for the nine
months ended March 31, 1999, from $132 for the nine months ended March 31, 1998.
More than 50% of three and nine month revenue for each year was derived from
non-room sources such as food and beverage sales, yachting and marina revenue,
club memberships, retail and other resort amenities. Non-room revenue for the
three and nine months ended March 31, 1999 increased to $57.4 million and $192.7
million, respectively, compared to $48.5 million and $102.0 million,
respectively, for the three and nine months ended March 31, 1998. The increase
was primarily due to acquisitions.
Operating Expenses
Cost of leisure and recreation services totaled $40.7 million or 36% of revenue
for the three months ended March 31, 1999, compared to $32.8 million or 36% of
revenue for the three months ended March 31, 1998. Cost of leisure and
recreation services totaled $103.8 million or 43% of revenue for the nine months
ended March 31, 1999, compared to $76.3 million or 42% of revenue for the nine
months ended March 31, 1998. Cost of leisure and recreation services, which was
relatively proportionate with revenue for each period, 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 $22.6 million or 20% of revenue for the three months
ended March 31, 1999, compared to $20.0 million or 22% of revenue for the three
months ended March 31, 1998. S,G&A of the leisure and recreation business
totaled $59.8 million or 25% of revenue for the nine months ended March 31,
1999, compared to $51.0 million or 28% of revenue for the nine months ended
March 31, 1998. S,G&A as a percent of revenue improved for the 1999 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 $7.4 million for the three months ended March 31, 1999,
compared to $5.4 million for the three months ended March 31, 1998. Amortization
and depreciation expense amounted to $20.8 million and $12.3 million for the
nine months ended March 31, 1999 and 1998, respectively. The increase was
primarily due to full 1999 periods of depreciation for the Registry Hotel at
Pelican Bay, Arizona Biltmore Hotel and Edgewater Beach Hotel which were
acquired during the prior fiscal year.
<PAGE>
Entertainment and Sports
Improvements in entertainment and sports operating results for the three and
nine months ended March 31, 1999 versus March 31, 1998 were primarily
attributable to the Panthers move from the Miami 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
$8.2 million and $14.8 million during the three and nine months ended March 31,
1999, respectively, over the three and nine months ended March 31, 1998.
Revenue
Entertainment and sports business revenue amounted to $28.9 million and $13.5
million for the three months ended March 31, 1999 and 1998, respectively, and
$57.3 million and $34.6 million for the nine months ended March 31, 1999 and
1998, 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. The increase in revenue during the three and nine
months ended March 31, 1999 was derived primarily from the National Car Rental
Center where the Panthers serve as primary tenants.
Operating Expenses
Cost of entertainment and sports services totaled $22.1 million or 77% of
revenue for the three months ended March 31, 1999, compared to $18.2 million or
135% of revenue for the three months ended March 31, 1998. Cost of entertainment
and sports services totaled $44.3 million or 77% of revenue for the nine months
ended March 31, 1999, compared to $39.8 million or 115% of revenue for the nine
months ended March 31, 1998. S,G&A of the entertainment and sports business
totaled $2.7 million or 9% of revenue for the three months ended March 31, 1999,
compared to $2.8 million or 20% of revenue for the three months ended March 31,
1998. S,G&A of the entertainment and sports business totaled $7.6 million or 13%
of revenue for the nine months ended March 31, 1999, compared to $7.6 million or
22% of revenue for the nine months ended March 31, 1998. Cost of services and
S,G&A 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 $708,000 and $1.2 million for the three months ended
March 31, 1999 and 1998, respectively, and $2.3 million and $3.2 million for the
nine months ended March 31, 1999 and 1998, 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 Panthers' player salaries have been fully amortized and,
accordingly, amortization expense decreased for the 1999 periods.
Corporate General and Administrative Expenses
Corporate general and administrative expenses totaled $2.7 million and $3.2
million for the three months ended March 31, 1999 and 1998, respectively, and
$6.8 million and $7.6 million for the nine months ended March 31, 1999 and 1998,
respectively. Certain non-recurring professional fees were incurred during the
prior year.
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 $286,000 and $366,000 for the three months ended March 31, 1999 and
1998, respectively, and $1.8 million and $1.7 million for the nine months ended
March 31, 1999 and 1998, respectively.
<PAGE>
Interest Expense
Interest expense totaled $17.4 million and $7.9 million for the three months
ended March 31, 1999 and 1998, respectively, and $40.6 million and $14.5 million
for the nine months ended March 31, 1999 and 1998, 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 average debt increased to $568.0 million for the nine
months ended March 31, 1999, from $201.0 million for the nine months ended March
31, 1998.
Minority Interest
Minority interest totaled $114,000 and $887,000 during the three months ended
March 31, 1999 and 1998, respectively, and $294,000 and $1.7 million during the
nine months ended March 31, 1999 and 1998, respectively. The decrease in
minority interest expense is primarily the result of the Company owning all
units of the Registry Hotel at Pelican Bay during the 1999 periods.
EBITDA
EBITDA represents earnings before interest expense, income taxes, depreciation,
amortization and minority interest. EBITDA improved to $51.7 million for the
three months ended March 31, 1999, from $29.2 million for the three months ended
March 31, 1998. EBITDA amounted to $79.1 million and $34.6 million for the nine
months ended March 31, 1999 and 1998, respectively. The improvement in EBITDA
was the result of an increase in resort revenue due to acquisitions and a higher
ADR, an increase in arena operations revenue and better profit margins for both
business segments during 1999 periods versus the 1998 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 $52.3 million for the three months
ended March 31, 1999, from $29.2 million for the three months ended March 31,
1998. Adjusted EBITDA amounted to $83.4 million and $34.6 million for the nine
months ended March 31, 1999 and 1998, respectively. The improvement in Adjusted
EBITDA was the result of an increase in resort revenue due to acquisitions and a
higher ADR, an increase in arena revenue and better profit margins for both
business segments during 1999 periods versus the 1998 periods.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $14.3 million at March 31, 1999, 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 $38.4 million and $15.0 million
during the nine months ended March 31, 1999 and 1998, respectively. The increase
in cash provided by operating activities during the nine months ended March 31,
1999 was partially the result of receiving more cash from the entertainment and
sports business because of the favorable management agreement for the National
Car Rental Center. In addition, more cash was received during the 1999 period
from the leisure and recreation business due partly to acquisitions and partly
to a higher ADR on the Company's resort portfolio.
Cash Used in Investing Activities
Cash used in investing activities amounted to $75.9 million and $252.5
million during the nine months ended March 31, 1999 and 1998, respectively.
The Company did not acquire any businesses during the nine months ended March
31, 1999. During the nine months ended March 31, 1998, the Company spent $125.5
million (net of cash acquired) on the acquisition of the Arizona Biltmore Hotel,
$63.0 million (net of cash acquired) on the acquisition of the initial 68%
ownership interest in the Registry Hotel at Pelican Bay and $27.4 million on the
acquisition of additional units of the Registry Hotel at Pelican Bay.
Capital expenditures increased by $46.4 million, to $75.6 million during the
nine months ended March 31, 1999, from $29.2 million during the nine months
ended March 31, 1998. The Company spent $31.0 million on the acquisition of land
in Naples and Plantation, Florida during the nine months ended March 31, 1999.
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 nine months ended March 31, 1999
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 improvements at the
resorts. During the nine months ended March 31, 1998, an expansion program was
completed 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. In addition, during the nine months ended March 31,
1998, the Company spent approximately $8.0 million on the acquisition of Grande
Oaks Golf Club.
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.
Cash Provided By Financing Activities
Cash provided by financing activities amounted to $14.6 million and $254.0
million during the nine months ended March 31, 1999 and 1998, respectively.
During the nine months ended March 31, 1999, the Company raised approximately
$40.1 million in net proceeds from the private placement sale of 4,022,561
shares of Class A Common Stock. See Note 6. However, the Company made $25.5
million in repayments, net of borrowings, under credit facilities during the
nine months ended March 31, 1999. During the nine months ended March 31, 1998,
the Company received $108.8 million of net proceeds from the underwritten public
offering of Class A Common Stock plus $145.0 million in borrowings, net of
repayments, under credit facilities.
<PAGE>
Capital Resources
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 (3) ticket, broadcasting, sponsorship, arena
operations and other revenue derived from ownership of the Panthers. The primary
external sources of liquidity have been the issuance of equity and debt
securities and borrowing under term loans and lines-of-credit.
The Company recently completed several transactions, which resulted in the
retirement of short-term debt and an increase in capital available under credit
facilities.
-On February 18, 1999, the Company completed a private placement of
4,022,561 shares of Class A Common Stock at $10.25 per share which raised
net proceeds of approximately $40.1 million. A portion of the net proceeds
were used to repay short-term indebtedness.
-On April 6, 1999, the Company consummated the sale of 1,575,621 shares of
Class A Common Stock at a price of $10.25 per share, pursuant to a rights
offering which expired on March 31, 1999. The rights offering resulted in
net proceeds of approximately $15.7 million. A portion of the net proceeds
were used to repay short-term indebtedness.
-On April 21, 1999, the Company issued $340.0 million in aggregate
principal amount of 9 7/8% senior subordinated notes, due 2009, in a
private placement offering pursuant to Rule 144A under the Securities Act
of 1933. The net proceeds from the offering of approximately $328.3
million, after payment of selling commissions and discounts, and other
expenses of the offering, were used to repay short-term and long-term
indebtedness.
-On April 21, 1999, the Company also closed on a new three-year $146.0
million secured revolving line-of-credit with a syndicate of financial
institutions. The initial borrowing under the credit facility totaled $41.8
million. Borrowings under the facility will bear interest at a variable
rate, currently equal to LIBOR plus 3.0%.
The Company had $139.1 million available to borrow under lines-of-credit as of
April 30, 1999. As a result of this availability and expected cash from
operations, management believes the Company has sufficient funds to make its
planned capital expenditures and support on-going operations, including meeting
debt service obligations.
Financial Condition
Significant changes in balance sheet data from June 30, 1998 to March 31, 1999
are discussed below.
Accounts Receivable
Accounts receivable increased to $47.1 million at March 31, 1999, from $28.6
million at June 30, 1998. Approximately $14.9 million of the increase relates to
the leisure and recreation business where it is customary for trade receivables
to be highest during the third fiscal quarter because it represents peak season.
The remaining increase relates to the hockey team where receivables tend to be
higher during the regular playing season, which extends from October to April.
Other Current Assets
Other current assets increased to $10.4 million at March 31, 1999, from $5.5
million at June 30, 1998. The increase in other current assets at March 31, 1999
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.
<PAGE>
Property and Equipment
Property and equipment increased to $1.0 billion at March 31, 1999, from $959.2
million at June 30, 1998. The Company spent $31.0 million on the acquisition of
land in Naples and Plantation, Florida. Other capital spending during the nine
months ended March 31, 1999 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
improvements at the resorts.
Intangible Assets
Intangible assets increased to $80.4 million at March 31, 1999, from $36.9
million at June 30, 1998. Most of the increase relates to the Arizona Biltmore
Hotel. In connection with its acquisition 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 "Arizona Biltmore Earnout"). 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. This increase was partially
offset by amortization expense.
Other Assets
Other assets increased to $19.7 million at March 31, 1999, 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 $3.6 million
in certain fees in connection with the construction of the National Car Rental
Center.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses increased to $57.9 million at March 31,
1999, from $41.3 million at June 30, 1998. Like trade receivables, the Company's
trade payables tend to be highest during the peak season of its businesses.
Debt
Total debt increased to $574.0 million at March 31, 1999, from $540.6 million at
June 30, 1998. Repayments under credit facilities and on mortgage note payables
partially offset borrowings under lines-of-credit and the origination of debt in
connection with the Arizona Biltmore Earnout.
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 April 30, 1999 the Company had
spent approximately $300,000 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
<PAGE>
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.
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 the
Company's Securities and Exchange Commission filings. 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 except as set forth below.
On January 20, 1999, Eric Seiden (represented by the same law firm that
represents Bernard Kalishman in the previously disclosed Kalishman
litigation) filed a purported shareholder derivative and purported
class-action lawsuit on behalf of the Company, as nominal defendant,
against Messrs. Huizenga, Berrard, Johnson, Rochon, Hudson, Evans and
Torrey in the Seventeenth Judicial Circuit in and for Broward County,
Florida. The complaint alleges, among other things, that each of the
defendants breached contractual and fiduciary obligations owed to the
Company and it shareholders by engaging in self-dealing transactions in
connection with the Company's purchase of the the Hyatt Regency Pier 66
Hotel and Marina and the Radisson Bahia Mar Resort and Yachting Center.
The suit seeks to impose a constructive trust on alleged excessive
compensation paid to the prior owners of these resorts or to have
damages assessed against the defendants. The allegations in the Seiden
complaint are almost identical to the allegations in the complaint in
Kalishman shareholder derivative and purported class-action lawsuit,
except that the plaintiff does not seek rescission of the hotel
transactions.
On February 3, 1999, Eric Seiden moved to consolidate his lawsuit with
the Kalishman lawsuit, and to amend the complaint to add Mr. Dauria as
a defendant. The defendents have tentatively agreed to allow Mr. Seiden
to intervene in the Kalishman lawsuit, rendering moot the motion to
consolidate. The court has deferred ruling on the motion to amend the
complaint until after ruling on Defendants' Motion to Dismiss in the
Kalishman lawsuit, which was argued on April 12, 13 and 15, 1999.
On April 15, 1999, an evidentiary hearing on the defendants' motion to
dismiss the derivative claims was concluded in connection with the
Kalishman shareholder derivative and purported class-action lawsuit.
Although there can be no assurance, we anticipate a decision of the
court by mid June 1999.
In January, February and March 1997 three purported class action
lawsuits were filed against the Company and Messrs. Huizenga, Johnson,
Rochon, Berrard, Hudson, Dauria and Evans in the United State District
Court for the Southern District of Florida. On May 7, 1998 these
lawsuits were consolidated into one action and an amended complaint was
filed under the name of Paul Susser. The Susser suit alleges, among
other things, that the defendants violated Section 10(b) of the
Securities Exchange Act of 1934 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. On July
17, 1998, Defendants filed a Motion to Dismiss the Susser action. This
motion was argued on May 5, 1999. At the conclusion of the argument the
court did not indicate when it would make its ruling on Defendants'
motion.
We intend to vigorously defend against these suits. An unfavorable
outcome of the suit may have a material adverse effect on the Company's
financial condition or results of operations.
Item 2. Changes in Securities
On February 18, 1999, the Company completed a private placement of
4,022,561 shares of Class A Common Stock at $10.25 per share to certain
accredited investors which raised net proceeds of approximately $40.1
million. The private placement was exempt from registration pursuant to
Section 4 (2) of the Securities Act of 1933, as amended.
<PAGE>
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
4.3* Indenture dated April 21, 1999 between Florida Panthers
Holdings, Inc., The Guarantors and The Bank of New York as
Trustee
4.5* Credit Agreement dated April 21, 1999 between Florida Panthers
Hotel Corporation, the Initial Lenders named therein, Bear,
Stearns & Co. Inc. as Syndication Agent and Bankers Trust
Company as Administrative Agent
27.1 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on Form S-4
SEC File No. 333-77945.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on February 16, 1999
relating to the private placement of 4,022,561 shares of Class A Common
Stock and reporting certain factual information thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
FLORIDA PANTHERS HOLDINGS, INC.
Date: May 14, 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)
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