FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended
June 30, 1998
-------------------
Commission Registrant; State of Organization; IRS Employer
File No. Address and Telephone Number Identification No.
- ---------- ---------------------------------- ------------------
1-14507 Boston Celtics Limited Partnership 04-3416346
(a Delaware limited partnership)
151 Merrimac Street,
Boston, Massachusetts 02114
(617) 523-6050
1-9324 Boston Celtics Limited Partnership II 04-2936516
(formerly known as Boston Celtics
Limited Partnership)
(a Delaware limited partnership)
151 Merrimac Street,
Boston, Massachusetts 02114
(617) 523-6050
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Registrant Title of Each Class On Which Registered
- ---------- ------------------- -------------------
Boston Celtics Units Representing Limited New York Stock Exchange
Limited Partnership Partnership Interests Boston Stock Exchange
Boston Celtics 6% Subordinated Debentures New York Stock Exchange
Limited Partnership II due 2038
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the registrants (1) have 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) have been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K ___.
The aggregate market value of the 2,703,364 Units held by non-affiliates of
Boston Celtics Limited Partnership as of September 18, 1998 was approximately
$22,303,000, based on the closing price of the Units on the New York Stock
Exchange on that date of $8.25 per Unit, and the aggregate market value of the
2,703,364 Subordinated Debentures held by non-affiliates of Boston Celtics
Limited Partnership II as of September 18, 1998 was approximately $32,238,000,
based on the closing price of the Subordinated Debentures on the New York Stock
Exchange on that date of $11.925 per Debenture.
As of September 18, 1998, there were 2,703,664 Units outstanding of
Boston Celtics Limited Partnership, and 2,703,664 units representing limited
partnership interests outstanding of Boston Celtics Limited Partnership II.
BOSTON CELTICS LIMITED PARTNERSHIP
1998 FORM 10-K ANNUAL REPORT
INDEX
PART I
Page
----
Items 1.
and 2. Business and Properties 1
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Security Holder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 17
PART III
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 20
Item 12. Security Ownership of Beneficial Owners and Management 23
Item 13. Certain Relationships and Related Transactions 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 25
Signatures 64
This document contains the Annual Reports on Form 10-K for the fiscal
year ended June 30, 1998 for each of Boston Celtics Limited Partnership and
Boston Celtics Limited Partnership II (formerly known as "Boston Celtics
Limited Partnership"). Information contained herein relating to an
individual registrant is filed by such registrant on its own behalf.
Accordingly, except for its subsidiaries, Boston Celtics Limited Partnership
II makes no representation as to information relating to Boston Celtics
Limited Partnership or to any other entities affiliated with Boston Celtics
Limited Partnership.
PART I
Items 1 and 2. Business and Properties
General
Boston Celtics Limited Partnership ("BCLP" or the "Partnership") is a
Delaware limited partnership that was formed on April 13, 1998 in connection
with the Reorganization (defined below) of Boston Celtics Limited Partnership
II ("BCLP II", formerly known as "Boston Celtics Limited Partnership"), also a
Delaware limited partnership. BCLP owns a 99% limited partnership interest in
BCLP II.
References in this Form 10-K to "Units" with respect to Pre-
Reorganization time periods means units representing limited partnership
interests in BCLP II and, with respect to post-Reorganization time periods,
means units representing limited partnership interests in BCLP.
Overview of the Reorganization
At the time of BCLP II's organization in 1986, publicly traded limited
partnerships ("PTPs" or "Master Limited Partnerships") such as BCLP II were
not subject to federal income tax at the partnership level. In December
1987, however, Congress passed the Revenue Act of 1987. Among other things,
the Revenue Act of 1987 provided that PTPs generally would be taxed as
corporations for federal income tax purposes (the "Tax Change"), except that
PTPs existing on December 17, 1987 would be "grandfathered" until their
first taxable year beginning after December 31, 1997. Accordingly, BCLP II
would have become taxable as a corporation during its taxable year beginning
July 1, 1998 if it remained a PTP, unless it elected to pay the Toll Tax (as
defined below).
In August 1997, Congress passed the Taxpayer Relief Act of 1997, which
permitted PTPs to elect, as an alternative to taxation as a corporation, to
pay a federal tax at a rate of 3.5% of gross income from the active conduct
of trades or businesses (the "Toll Tax") in taxable years beginning after
December 31, 1997.
After evaluating the Tax Change and alternatives to minimize the
adverse impact of the Tax Change, including payment of the Toll Tax, the
Reorganization was consummated in which BCLP II:
- distributed (the "Distribution") to holders of BCLP II Units, at each
holder's option, either (i) $20 in principal amount of Subordinated
Debentures and $1 in cash for each BCLP II Unit held of record, or
(ii) one Castle Creek Interest (defined below) for each 100 BCLP II
Units held of record; and
- effected a merger (the "Merger") in which (i) BCLP II became a
subsidiary partnership of BCLP, a publicly held entity taxed as a
corporation, (ii) holders of BCLP II Units that received Subordinated
Debentures and cash in the Distribution received one BCLP Unit for
each BCLP II Unit held of record upon which Subordinated Debentures
and cash were distributed and (iii) holders of BCLP II Units who
received Castle Creek Interests in the Distribution retained their
Castle Creek Interests, but the BCLP II Units with respect to which
Castle Creek Interests were distributed were canceled.
"Castle Creek Interests" represent units of limited partnership
interest in Castle Creek Partners, L.P. ("Castle Creek"), a privately held
partnership with significant restrictions as to the transferability of its
units of limited partnership interest.
The Distribution and the Merger are collectively referred to as the
"Reorganization." Immediately prior to the Reorganization, there were
5,596,164 BCLP II Units. Immediately following the Reorganization, based on
the unitholder elections made in connection with the Reorganization, former
holders of 2,703,664 BCLP II Units owned BCLP Units and Subordinated
Debentures, and former holders of 2,892,500 BCLP II Units owned Castle Creek
Interests. BCLP and Castle Creek each indirectly own a proportionate
interest in BCLP II's pre-Reorganization net assets based on unitholder
elections in the Reorganization.
Pre-Reorganization Ownership Structure
Prior to the Reorganization, BCLP II, through its subsidiaries, owned and
operated the Boston Celtics professional basketball team (the "Boston Celtics")
of the National Basketball Association (the "NBA") and held investment assets.
BCLP II owned 99% of Celtics Limited Partnership ("CLP"), which owned the
Boston Celtics. BCLP II also wholly owned BCCLP Holding Corporation
("Holdings"), which in turn wholly owned Celtics Capital Corporation ("CCC").
CCC holds investments of funds derived from the sale by Boston Celtics
Broadcasting Limited Partnership ("BCBLP") of Television Station WXFT - Channel
25 ("WFXT") of Boston, Massachusetts in July 1995 and the sale by Boston
Celtics Communications Limited Partnership ("BCCLP") of Radio Station WEEI -
590 AM of Boston, Massachusetts ("WEEI") in June 1994. BCBLP was indirectly
owned by BCLP II and Celtics Investments, Inc. ("CII"), BCLP's wholly owned
subsidiary. BCCLP is owned by BCLP II, CII and Celtics Communications, Inc.
("CCI").
The 1% general partner of BCLP II was Celtics, Inc., and the 1% general
partner of CLP was Boston Celtics Corporation ("BCC"). Each of Celtics, Inc.
and BCC is a Delaware corporation whose sole stockholders are Paul Gaston, Don
Gaston (father of Paul Gaston) and Walcott Partners, L.P. ("Walcott"), an
affiliate of the Gaston family.
Prior to the Reorganization, BCLP II's consolidated financial statements
included the accounts of all of its majority-owned and controlled subsidiaries.
In connection with the Reorganization, former Boston Celtics Limited
Partnership changed its name to BCLP II.
Post-Reorganization Ownership Structure
After the Reorganization, BCLP owns a 99% limited partnership interest in
BCLP II, which owns a 99% limited partnership interest in CLP. In addition,
BCLP II wholly owns CII and Holdings, which wholly owns CCC. Together, CCC and
CLP wholly own Celtics Pride GP. Celtics Pride GP owns a 48.3123% limited
partnership interest in Celtics Basketball Holdings, L.P. ("Celtics Basketball
Holdings"), which owns a 99.999% limited partnership interest in Celtics
Basketball L.P. ("Celtics Basketball"), which in turn owns and operates the
Boston Celtics. The remaining 51.6867% limited partnership interest in Celtics
Basketball Holdings, L.P. is held by Castle Creek.
The 1% general partner of BCLP is BCLP GP, Inc. ("BCLP GP"), and the 1%
general partner of BCLP II is BCLP II GP, Inc. ("BCLP II GP"), a wholly owned
subsidiary of Celtics, Inc. BCC is the 1% general partner of CLP and is also
the 0.001% general partner of both Celtics Basketball Holdings and Celtics
Basketball.
Each of Celtics, Inc., BCC and BCLP GP is a Delaware corporation. BCC's
sole stockholders are Paul Gaston and Don Gaston (father of Paul Gaston), BCLP
GP's sole stockholder is Paul Gaston, and Celtics, Inc.'s sole stockholder is
Walcott.
In connection with the Reorganization, all assets and liabilities
relating to the business of owning and operating the Boston Celtics were
transferred from CLP to Celtics Basketball, an indirect subsidiary of BCLP.
Accordingly, all of CLP's rights with respect to the following assets and
liabilities, among others, were transferred to Celtics Basketball in the
Reorganization: the NBA franchise, agreements relating to local television,
cable and radio broadcasts, sponsorship agreements, rights to the name "Boston
Celtics" and the Boston Celtics logo (subject to the NBA's marketing and other
rights), player contracts, agreements with coaches and other team personnel,
leases and credit agreements.
Subsequent to the Reorganization, BCLP, through its subsidiaries, holds
investment assets and holds a minority interest in the assets and operations of
the Boston Celtics. As a result of its indirect 48.3123% limited partnership
interest in Celtics Basketball Holdings, BCLP accounts for its investment in
the accounts of the Boston Celtics on the equity method subsequent to the
Reorganization.
Basketball Operations
BCLP's most significant operating asset is its indirect investment in
Celtics Basketball, which owns and operates the Boston Celtics. The following
table summarizes the performance of the Boston Celtics during the past 15
basketball seasons:
<TABLE>
<CAPTION>
Regular RegularSeason
Season Place of Finish
Season Record in Division Playoff Results
- ------ ------- --------------- ---------------
<S> <C> <C> <C>
1997-98 36-46 Sixth --
1996-97 15-67 Seventh --
1995-96 33-49 Fifth --
1994-95 35-47 Third Lost in First Round of Conference Playoffs
1993-94 32-50 Fifth --
1992-93 48-34 Second Lost in First Round of Conference Playoffs
1991-92 51-31 First Lost in Conference Semifinals
1990-91 56-26 First Lost in Conference Semifinals
1989-90 52-30 Second Lost in First Round of Conference Playoffs
1988-89 42-40 Third Lost in First Round of Conference Playoffs
1987-88 57-25 First Lost in Conference Finals
1986-87 59-23 First Lost in Championship Finals
1985-86 67-15 First NBA Champions
1984-85 63-19 First Lost in Championship Finals
1983-84 62-20 First NBA Champions
</TABLE>
Effective July 1, 1998, the NBA commenced a lockout of NBA players in
support of its attempt to reach a new collective bargaining agreement. If the
lockout extends into the 1998-99 basketball season, it would materially and
adversely affect BCLP's financial condition and results of operations. See
"Collective Bargaining Agreement."
Sources of Revenues. The Boston Celtics derive their revenues
principally from the sale of tickets to home games and the licensing of
television, cable network and radio rights. The following table shows the
contribution to revenues of the basketball operations from these sources and
from miscellaneous other sources for each of the last three fiscal years:
<TABLE>
<CAPTION>
Contribution to Revenues
(in thousands)
Year
Ended Total
June 30, Ticket Sales Television, Cable and Radio Other Sources Revenues
- -------- ----------------------- --------------------------- ------------- --------
Regular Regular
Season(1) Playoffs Season(2) Playoffs
--------- -------- --------- --------
<S> <C> <C> <C> <C>
1998 $39,108 $28,002 $8,570 $75,680
1997 31,813 23,269 7,916 62,998
1996 35,249 22,072 7,459 64,780
___________________
<F1> Includes proceeds from exhibition games.
<F2> Includes the Boston Celtics' share of revenues under the NBA national
television contracts.
</TABLE>
The operations and financial results of the Boston Celtics are seasonal.
See "Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - General."
Ticket Sales. The Boston Celtics play an equal number of home games and
away games during the 82-game NBA regular season. In addition, the Boston
Celtics play eight exhibition games prior to the commencement of the regular
season. Under the NBA Constitution and By-laws, the Boston Celtics receive all
revenues from the sale of tickets to regular season home games (subject to the
NBA gate assessment) and no revenue from the sale of tickets to regular season
away games. Generally, the Boston Celtics retain all revenues from the sale of
tickets to home exhibition games played in Boston as well as certain ticket
revenues from home exhibition games played outside of Boston. Under certain
circumstances, the Boston Celtics pay appearance fees to the visiting team for
exhibition games, and likewise the team may receive appearance fees for
exhibition games played elsewhere.
Effective with the 1995-1996 season, all Boston Celtics regular season
home games are played in the FleetCenter, an arena located in downtown Boston,
with a seating capacity of approximately 19,300. The policy of the Boston
Celtics during the last several years has been to limit the number of season
tickets so that some tickets are available on a per game basis. During the
1997-1998 season, approximately 14,000 season tickets were sold, as compared to
13,000 in the 1996-97 season and 15,000 in 1995-96 season.
Television, Cable and Radio Broadcasting. The Boston Celtics and the NBA
license the television and radio broadcast rights to Boston Celtics basketball
games. The NBA, as agent for its members, licenses the national and
international broadcast of the games under agreements with NBC Sports, a
division of the National Broadcasting Company (the "NBC agreement"), and Turner
Network Television, Inc., an affiliate of Turner Broadcasting (the "TNT
agreement"). Each of the NBA member teams shares equally in these license
fees. In addition, the Boston Celtics previously licensed the local over the
air rights to broadcast away games under an agreement with Gillett
Communications of Boston, Inc. (subsequently assigned to Paramount
Communications), licensee of Television Station UPN 38, WSBK-TV (the "WSBK
agreement") and licenses the cable rights to broadcast home games to
Sportschannel New England Limited Partnership (subsequently renamed Fox Sports
New England) (the " Sportschannel agreement"). The Boston Celtics licenses the
rights to broadcast all games on radio under an agreement with American Radio
Systems, Inc., licensee of Radio Station WEEI - 850AM (the "ARS agreement").
The NBC and TNT agreements were renewed subsequent to the 1997-98 season and
extend through the 2001-02 season. The Sportschannel agreement extends through
the 1999-2000 season, with a right to an additional extension by Fox Sports New
England through the 2000-01 season. The ARS agreement extends through the
1999-2000 season. The WSBK agreement expired at the end of the 1997-98 season
and was not renewed. In August 1998, Celtics Basketball entered into an
agreement with Boston University Communications, Inc., licensee of WABU-TV
Boston ("WABU"), to license the local over the air rights to broadcast away
games (the "WABU Agreement"). The WABU Agreement extends through the 2000-01
season. There can be no assurance that Celtics Basketball or the NBA, upon
expiration of the aforementioned agreements, will be able to enter into new
agreements on terms as favorable as those in the current agreements.
Generally, these agreements provide for the broadcast of a specified
number of games (exhibition, regular season and playoff games) at specified
rights fees per game, which in some cases increase over the term of the
contract and in some cases provide for revenue sharing. The national
agreements provide that the licensee identify the games which it wishes to
broadcast and the local rights agreements provide for the preemption of games
broadcast under the national license agreements. The WABU agreement provides
that WABU and the Boston Celtics will jointly market and sell advertising
spots for placement in the broadcast of Boston Celtics road games. The WABU
agreement further provides that the proceeds from the sale of such spots will
be shared, with the Boston Celtics receiving 80% of the net revenue in excess
of production costs. Celtics Basketball's ability to recognize revenue under
the WABU agreement will depend on its ability to jointly market and sell
advertising spots with WABU for placement in the broadcast of Boston Celtics
road games.
The NBC agreement accounted for approximately 15% ($11,439,000), 11%
($6,896,552) and 10% ($6,552,000) of the BCLP II's total revenues for the years
ended June 30, 1998, 1997 and 1996, respectively. No other agreement accounted
for as much as 10% of BCLP II's total revenues for the years ended June 30,
1998, 1997 and 1996.
Other Sources. Other sources of revenues for the basketball operations
include promotional and novelty revenues, including royalties from NBA
Properties, Inc. ("NBA Properties"). NBA Properties is a corporation organized
in 1967 to which each NBA member has assigned the exclusive rights to the
merchandising of its team name, insignia and other similar properties to the
extent such rights were not previously assigned to others prior to the
formation of NBA Properties. NBA Properties pays royalties to each NBA team in
consideration of the receipt of such rights. This assignment is subject to the
Boston Celtics' right to use their insignia and symbols in connection with the
promotion of the team in their home territory and retail sales in their home
arena. NBA Properties licenses other companies to manufacture and sell
official NBA items such as sneakers, basketballs, warm-up jackets and
sweatshirts, as well as certain non-sports items.
Basketball Team
Players. In general, the rules of the NBA permit each team to maintain
an active roster of 12 basketball players during each regular season and up to
20 players in the off-season. The By-laws of the NBA require each member team
to enter into a uniform player contract with each of its players. The
following table sets forth certain information concerning the players under
contract with the Boston Celtics as of September 18, 1998:
<TABLE>
<CAPTION>
Last Season
Name Position Years in NBA Under Contract
- ---- -------- ------------ --------------
<S> <C> <C> <C>
Kenny Anderson Guard 7 2002-03
Dana Barros Guard 9 2000-01
Bruce Bowen Forward 2 1998-99
Andrew DeClercq Forward/Center 3 2001-02
Pervis Ellison Center 9 1999-00
Dontae Jones Forward 2 1998-99
Travis Knight Center 2 2003-04
Walter McCarty Forward 2 1998-99
Ron Mercer Guard 1 1999-00
Greg Minor Forward 4 2000-01
Antoine Walker Forward 2 1998-99
</TABLE>
Coaches, General Manager and other Team Personnel. The Head Coach of the
Boston Celtics, Rick Pitino, was appointed Head Coach, President and Director
of Basketball Operations following the 1996-97 season. Mr. Pitino was most
recently the Head Basketball Coach at the University of Kentucky since 1989,
and served as the Head Coach of the New York Knickerbockers (1987-1989), Head
Coach at Providence College (1985-1987), assistant coach of the New York
Knickerbockers (1983-1985) and Head Coach at Boston University (1978-1983).
Mr. Pitino is under contract with Celtics Basketball as President and Director
of Basketball Operations through May 6, 2007, and as Head Coach of the
Boston Celtics through the 2002-03 season.
James O'Brien has been an Associate Coach of the Boston Celtics since May
1997. Mr. O'Brien was previously an assistant coach at the University of
Kentucky (1994-1997), the Head Coach at the University of Dayton (1989-1994),
and an assistant coach of the New York Knickerbockers (1987-1989), prior to
which he held a variety of coaching positions from 1974 through 1987. Mr.
O'Brien is under contract through the end of the 1999-2000 season.
Lester Conner has been an Assistant Coach of the Boston Celtics since
July 1998. Mr. Conner was most recently a scout for the Miami Heat of the
NBA (1997) and has held several coaching positions since 1995. Previously,
Mr. Conner played in the NBA from 1982-1995. Mr. Conner is under contract
through the end of the 1999-2000 season.
John Carroll has been an Assistant Coach of the Boston Celtics since June
1997. Mr. Carroll was previously the Advance Pro Scout for the Orlando Magic
of the NBA (1996-1997) and for the Portland Trail Blazers of the NBA (1995-
1996), the Head Coach at Duquesne University (1989-1995) and an assistant coach
at Seton Hall University (1982-1989). Mr. Carroll is under contract through
the end of the 1998-99 season.
Shaun Brown has been the Strength and Conditioning Coach of the Boston
Celtics since May 1997. Mr. Brown was previously the Strength and Conditioning
Coach at the University of Kentucky (1992-1997), the Strength and Conditioning
Coach at Providence College (1989-1992) and the Assistant Strength and
Conditioning Coach at Rutgers University (1987-1988). Mr. Brown is under
contract through the end of the 1998-99 season.
Chris Wallace has been the General Manager of the Boston Celtics since
May 1997. Mr. Wallace was previously the Director of Player Personnel (1996-
1997) and a scout (1992-1996) for the Miami Heat of the NBA, prior to which he
worked in various scouting capacities for the Portland Trail Blazers, Denver
Nuggets, Los Angeles Clippers and New York Knickerbockers of the NBA. Mr.
Wallace is under contract through the end of the 1999-2000 season.
Ed Lacerte is the Head Athletic Trainer and Physical Therapist of the
Boston Celtics and has served in that capacity since September 1987. Mr.
Lacerte is under contract through the end of the 1999-2000 season.
Under its contracts with its coaches, general manager and other team
personnel (including individuals formerly employed in these positions), the
Boston Celtics had compensation expense totaling $8,852,000 during the 1997-98
season. During the 1998-99 season, the Boston Celtics are required to make
salary payments to its coaches, general manager and other team personnel
(including individuals formerly employed in these positions) totaling
$8,914,000.
Collective Bargaining Agreement. A collective bargaining agreement (the
"Collective Bargaining Agreement") was ratified by the NBA and the National
Basketball Players Association ("NBPA") on September 15, 1995 and executed by
the parties on July 11, 1996. The Collective Bargaining Agreement was to be in
effect through June 30, 2001. The Collective Bargaining Agreement provided for
maximum and minimum total team salaries to be paid to players. Both maximum
and minimum team salaries were determined based on estimates of league revenues
prior to the start of each season. The maximum team salary (the "Salary Cap")
for each team for a particular season, subject to certain exceptions, was the
greater of a predetermined dollar amount or 48.04% of the projected Basketball-
Related Income (as defined in the Collective Bargaining Agreement) ("BRI") of
all NBA teams, less league-wide benefits, divided by the number of NBA teams.
Under the terms of the Collective Bargaining Agreement, the NBA had the
right to terminate the Collective Bargaining Agreement after the 1997-98 season
if it was determined that the aggregate salaries and benefits paid by all NBA
teams for the 1997-98 season exceeded 51.8% of projected BRI. On March 23,
1998, the Board of Governors of the NBA voted to exercise that right and reopen
the Collective Bargaining Agreement effective as of June 30, 1998, as it had
been determined that the aggregate salaries and benefits paid by the NBA teams
for the 1997-98 season would exceed 51.8% of projected BRI. Effective July 1,
1998, the NBA commenced a lockout of NBA players in support of its attempt to
reach a new collective bargaining agreement. The NBA and the NBPA have been
engaged in negotiations regarding a new collective bargaining agreement, but as
of September 18, 1998, no agreement has been reached. In the event that the
lockout extends into the 1998-99 season, NBA teams, including the Boston
Celtics, will refund amounts paid by season ticket holders (plus interest) for
any games that are canceled as a result of the lockout. In addition, as a
result of the lockout, NBA teams have not made any payments due to players with
respect to the 1998-99 season. The NBPA has disputed the NBA's position on
this matter, and both the NBA and the NBPA have presented their cases to an
independent arbitrator, who will make his ruling no later than the middle of
October 1998. As of September 18, 1998, the arbitrator has not ruled on this
matter. Prior to the lockout, the Boston Celtics had made salary commitments
to its players under contract for the 1998-99 season totaling approximately
$18,801,000.
There can be no assurance that the NBA and the NBPA will reach agreement
on a new collective bargaining agreement, and there can be no assurance that
NBA teams, including the Boston Celtics, will not have to make payments to
players under contract for the 1998-99 season and beyond during the lockout.
Given the fixed nature of many of its expenses, and given that the Boston
Celtics' operating revenues are almost entirely dependent on the NBA season,
any loss of games as a result of the absence of a collective bargaining
agreement or the continuation of the lockout will have a material adverse
effect on the Partnership's financial condition and its results of
operations. Further, if NBA teams, including the Boston Celtics, are required
to honor the player contracts for the 1998-99 season and beyond without
agreeing to a new collective bargaining agreement or without ending the
lockout, which would result in the loss of games, the Partnership's financial
condition and results of operations will be materially and adversely
affected. Further, in the event that the NBA and the NBPA agree to a new
collective bargaining agreement or the lockout ends, there can be no assurance
that the NBA and NBPA will not experience labor relations difficulties in the
future or significantly increased player salaries, which could have a material
adverse effect on the Partnership's financial condition or results of
operations.
Basketball Facilities
Effective with the start of the 1995-96 basketball season, the Boston
Celtics play all home games at the FleetCenter located in Boston,
Massachusetts. On April 4, 1990, CLP entered into a License/Lease Agreement
and an Office Lease Agreement (collectively, the "Lease Agreement") with New
Boston Garden Corporation ("NBGC"), which was amended in certain respects
and was assigned to Celtics Basketball in connection with the Reorganization.
NBGC, which is not affiliated with the Boston Celtics, developed the new
building and sports entertainment facility which has a seating capacity of
approximately 19,300 spectators. The FleetCenter opened on September 30, 1995.
Under the terms of the Lease Agreement, NBGC has granted to Celtics
Basketball a license to use the basketball facilities at the FleetCenter and
provides approximately 10,000 square feet of office space. NBGC is responsible
for maintaining the FleetCenter and providing administrative personnel such as
ushers, ticket takers, police and security personnel, announcers, scorers and
statisticians. At Celtics Basketball's request, NBGC is responsible for making
all box office ticket sales and remitting the proceeds to Celtics Basketball.
In general, NBGC receives only premium fee revenues generated from preferred
seating and executive boxes in the FleetCenter. Under the terms of the Lease
Agreement, Celtics Basketball does not share in revenue from food and beverage
concessions at the FleetCenter, but may sell programs at each game subject to
the payment of a commission to NBGC's concessionaires. NBGC is also licensed
to sell merchandise bearing the Boston Celtics' name, trademark and/or logo,
subject to prior approval by, and payment of a commission to, Celtics
Basketball.
The Lease Agreement provides that it commenced on the day that the
FleetCenter was substantially completed and operational and extends for 10 full
basketball seasons (from the 1995-96 season to the 2004-2005 season). NBGC
may, at its option, extend the term of the Lease Agreement for five additional
basketball seasons (the "Extended Term"), provided NBGC gives notice during a
specified period following the fifth anniversary of the commencement of the
term of the Lease Agreement of its intention to exercise its option and subject
to the NBGC making certain payments, based on its revenues, during the Extended
Term.
Celtics Basketball also leases approximately 16,000 square feet of space
at 151 Merrimac Street, Boston, Massachusetts. This facility houses the Boston
Celtics administrative offices. The term of this lease extends through
December 2005, with an option to extend for one five-year renewal period.
Under the provisions of the Lease Agreement with NBGC, Celtics Basketball is
reimbursed for the cost of 10,000 square feet of office space during the 10-
year term of the Lease Agreement with NBGC.
On March 31, 1998, CLP entered into a lease agreement for the use of a
22,000 square feet practice facility and wellness center that is currently
under construction in Waltham, Massachusetts. The facility will also include
certain office space for Boston Celtics basketball operations personnel. The
term of the lease extends through June 30, 2010, with three three-year options
to extend. The lease agreement was assigned to Celtics Basketball in
connection with the Reorganization.
The NBA
The NBA is a joint venture, consisting of member teams, each of which
operates a professional basketball team in a major city of the United States or
Canada. NBA members operate under the rules and regulations established by the
NBA Constitution and By-laws. The NBA Constitution prohibits any NBA "owner"
(as defined in the NBA Constitution) or person with management authority over
an NBA member from (i) directly or indirectly exercising control over any other
NBA member, or (ii) holding a direct or indirect financial interest in another
NBA member, unless the financial interest does not exceed one percent of any
outstanding publicly traded class of securities or 75% of the Board of
Governors of the NBA approves the interest. The NBA Constitution also imposes
restrictions upon the transfer of interests in NBA members. The acquisition of
a 10% or greater interest in a member team must be approved by the Board of
Governors. The acquisition of an interest of less than 10% but more than 5%
must be approved by a committee appointed by the NBA Commissioner. In general,
the acquisition of a 5% or less interest must be approved by the NBA
Commissioner. However, the acquisition of less than a 5% interest in a team
that is owned by more than 500 persons is not restricted unless (i) the effect
of such acquisition is to change ownership of effective control of the NBA
member, (ii) the acquisition would result in any person or entity that has not
been approved by an NBA committee or the members holding directly or indirectly
more than a 5% interest or (iii) the acquisition would result in any person or
entity that has not been approved by the NBA members holding directly or
indirectly more than a 10% interest. Pursuant to applicable NBA rules,
referees and other employees of the NBA are not eligible to purchase or hold
BCLP Units. Accordingly, a record owner of BCLP Units may not transfer
ownership of his or her BCLP Units to any person who is not an "eligible
holder" or who does not properly execute and deliver a transfer application
certifying that he or she (or that, to the best of his or her knowledge, the
person for whom he or she is acting as nominee) is an "eligible holder."
Competition
The Boston Celtics are the only professional basketball team in the
Boston area. However, the Boston Celtics compete for spectator interest with
all forms of professional and amateur sports conducted in and near Boston.
During parts of the basketball season the Boston Celtics experience competition
from professional hockey (the Boston Bruins), professional football (the New
England Patriots), and professional baseball (the Boston Red Sox). In
addition, the colleges and universities in the Boston area, as well as public
and private schools, offer a full schedule of athletic events throughout the
year. The Boston Celtics also compete for attendance with the wide range of
other entertainment and recreational activities available in New England.
The Boston Celtics also compete with other United States and foreign
basketball teams, professional and otherwise, for available players.
Insurance
The Boston Celtics maintain accidental death and dismemberment,
disability and life insurance policies on most key players and certain
coaches. These disability policies cover injuries which result in permanent
and total disability, as well as temporary disability for injuries which cause
less severe damage, but loss of player services for more than half a playing
season. These policies would generally reimburse Celtics Basketball for a
substantial percentage of the payments which it would be required to make to
such player under his contract. The waiting period for reimbursement under
most temporary disability policies is 41 games. This Key Man Disability
Insurance Plan is maintained by the NBA through a Master Policy Program, and
underwritten by a leading national insurance company.
The Boston Celtics participate in a workers' compensation policy and a
high limit comprehensive general liability and umbrella policy maintained by
the NBA. Included under that plan is protection for team sports participant's
liability covering claims which may result from, among other things, certain
injuries which may be incurred during player contests or exhibitions sponsored
by the Boston Celtics.
The NBA has established a Disaster Plan which permits a team suffering an
air or similar disaster to draft players from the other NBA teams subject to
specified procedures. The NBA maintains an insurance policy that provides
compensation to the team suffering the disaster, as well as those teams whose
players are selected in such special draft.
In addition to basketball-related insurance, the Partnership maintains
various types of business insurance, including general liability insurance and
umbrella insurance.
Employees
In addition to the players and coaches, see "Basketball Operations -
Basketball Team," as of September 18, 1998, the Boston Celtics have 45 full-
time employees engaged in operating, marketing, advertising and administrative
activities. In addition, the Partnership has 10 full-time employees engaged in
operating and administrative activities. None of the Partnership's employees
other than its players are covered by collective bargaining agreements. The
Partnership considers its relations with its employees to be good.
Item 3. Legal Proceedings
As a member of the NBA, Celtics Basketball is a defendant along with the
other NBA members in various lawsuits incidental to the NBA's basketball
operations. Celtics Basketball will generally be liable, jointly and
severally, with all other members of the NBA for the costs of defending such
lawsuits and any liabilities of the NBA which might result from such lawsuits.
From time to time, the Partnership may become a party to legal proceedings
arising in the ordinary course of business.
In July and August 1998, four separate class action complaints (the
"Complaints") were filed by Unitholders in the Court of Chancery of the State
of Delaware in and for New Castle County against BCLP II, Celtics, Inc., Paul
E. Gaston, Don F. Gaston, Paula B. Gaston, John H.M. Leithead and John B. Marsh
III, each directors of Celtics, Inc. The named plaintiffs, who each purported
to bring their individual actions on behalf of themselves and others similarly
situated, are Kenneth L. Rilander, Harbor Finance Partners, Maryann Kelly and
Kathleen Kruse Perry. Each of the Complaints alleges, among other things, that
the Reorganization was unfair to former BCLP II Unitholders, and seeks to
recover an unspecified amount of damages, including attorneys' and experts'
fees and expenses. The Partnership filed a Motion to Dismiss the complaint
filed by Mr. Rilander on July 29, 1998, and discovery in that case has been
stayed by agreement of the parties. The Partnership is seeking to consolidate
the Complaints.
Although the ultimate outcome of these Complaints cannot be determined at
this time, management of the Partnership does not believe that the outcome of
these proceedings will have a material adverse effect on the Partnership's
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the year ended June 30, 1998, former holders
of greater than a majority of outstanding BCLP II Units approved the
Reorganization by written consent.
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
BCLP's Units are listed on the New York Stock Exchange and the Boston
Stock Exchange and are traded under the symbol "BOS". Prior to the
Reorganization, BCLP II's Units were listed on the New York Stock Exchange
and the Boston Stock Exchange and were traded under the symbol "BOS". The
following table sets forth, for the periods indicated, the high and low
sales prices per BCLP II Unit on the New York Stock Exchange and cash
distributions per BCLP II Unit to Unitholders for the years ended June 30,
1998 and 1997, respectively. Following the Reorganization, there is no
established public trading market for BCLP II Units.
<TABLE>
<CAPTION>
Year Ended June 30, 1998
---------------------------------------------
Sales Price
------------------ Cash Distribution
Period High Low Declared
- ------ ---- --- -----------------
<S> <C> <C> <C>
First Quarter $25.5000 $23.6250
Second Quarter 25.4375 20.1875 $1.00
Third Quarter 20.8125 18.8125
Fourth Quarter 21.4375 16.3750 1.00
-----
$2.00
=====
<CAPTION>
Year Ended June 30, 1997
---------------------------------------------
Sales Price
------------------ Cash Distribution
Period High Low Declared
- ------ ---- --- -----------------
<S> <C> <C> <C>
First Quarter $22.5000 $20.2500
Second Quarter 22.7500 20.6250 $1.00
Third Quarter 24.3750 22.3750
Fourth Quarter 28.1250 23.2500
-----
$1.00
=====
</TABLE>
___________________
As of September 18, 1998, the approximate number of registered holders
of BCLP's Units was 64,508.
Distributions may be declared from time to time in the sole discretion
of BCLP GP as General Partner of the Partnership. See "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Item 6. Selected Consolidated Financial Data
The selected consolidated financial information set forth below represents
the consolidated operating results and balance sheet data of BCLP and BCLP
II as described in "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Basis of Presentation".
Amounts in thousands, except per unit amounts.
<TABLE>
<CAPTION>
Consolidated Income Statement Data: Year Ended June 30
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Basketball regular season
Ticket sales $39,108 $31,813 $35,249 $22,037 $20,238
Television and radio broadcast rights fees 28,002 23,269 22,072 20,956 19,168
Other, principally promotional advertising 8,570 7,916 7,459 7,419 5,177
Basketball playoffs 1,913
----------------------------------------------------
75,680 62,998 64,780 52,325 44,583
Costs and expenses:
Basketball regular season
Team 40,402 40,941 27,891 31,204 22,468
Game 2,820 2,386 2,606 2,880 2,762
Basketball playoffs 697
General and administrative 13,465 13,914 15,053 14,086 11,304
Selling and promotional 4,819 4,680 2,974 2,692 1,396
Depreciation 208 189 141 86 83
Amortization 165 165 165 165 165
----------------------------------------------------
61,879 62,275 48,830 51,810 38,178
----------------------------------------------------
13,801 723 15,950 515 6,405
Interest income (expense), net 384 736 1,788 (2,567) (1,665)
Net revenue from league expansion 7,114
Net proceeds from life insurance 5,592
Net realized gains (losses) on
disposition of marketable securities
and other short-term investments (18) 361 (101) 110 (3,595)
----------------------------------------------------
Income from continuing operations
before income taxes 14,167 1,820 17,637 5,172 6,737
Provision for (benefit from) income taxes 1,900 1,400 1,850 (345) (600)
----------------------------------------------------
Income from continuing operations, net of taxes 12,267 420 15,787 5,517 7,337
Income from discontinued operations, net of taxes 83 10,639 2,145
Gain from disposal of discontinued operations 38,331 14,284
----------------------------------------------------
Net income $12,267 $ 420 $54,201 $16,156 $23,766
====================================================
Income from continuing operations
applicable to Limited Partners $11,961 $ 358 $15,437 $ 5,396 $ 7,124
Net income applicable to Limited Partners $11,961 $ 358 $52,910 $15,545 $23,126
Per unit:
Income from continuing operations-basic (1) $ 2.45 $ 0.07 $ 2.68 $ 0.84 $ 1.11
Income from continuing operations-diluted (1) $ 2.17 $ 0.06 $ 2.59 $ 0.84 $ 1.11
Net income-basic (1) $ 2.45 $ 0.07 $ 9.18 $ 2.43 $ 3.61
Net income-diluted (1) $ 2.17 $ 0.06 $ 8.89 $ 2.43 $ 3.61
Distributions declared to BCLP unitholders $ 2.00 $ 1.00 $ 1.50 $ 3.00 $ 1.25
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet Data: June 30
--------------------------------------------------------
1998 1997 1996 1995 (2) 1994 (2)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets $90,927 $103,801 $135,903 $186,101 $ 79,492
Current liabilities 22,411 39,139 40,289 126,010 23,289
Total assets 92,047 119,200 145,233 210,655 102,933
Deferred federal and state income taxes
- noncurrent portion 9,711 20,100 20,100 6,000 2,900
Notes payable - noncurrent portion 30,000 47,500 50,000 60,000 60,000
Deferred compensation - noncurrent portion 10,380 11,750 14,850 18,248
Subordinated debentures 32,985
Other noncurrent liabilities 9,870 6,575 19,515 11,325
Partners' capital (deficit) (32,926) (7,790) 16,520 (15,720) (12,829)
___________________
<F1> In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share ("Statement 128"). BCLP adopted
Statement 128 on December 31, 1997. All prior period earnings per unit
amounts have been restated to conform with the provisions of Statement
128.
<F2> Balance sheet captions at June 30, 1995 and 1994 include amounts
pertaining to discontinued operations. Total assets as shown in the
table above include assets from discontinued operations of $52,893 in
1995 and $39,855 in 1994. Long-term obligations, which include program
broadcast rights payable - noncurrent portion and notes payable to bank
- noncurrent portion as shown in the table above, include amounts
pertaining to discontinued operations of $19,062 in 1995 and $18,566 in
1994.
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward Looking Statements
Certain statements and information included herein are "forward-looking
statements" within the meaning of the federal Private Securities Litigation
Reform Act of 1995, including statements relating to prospective revenues,
expenses (including player and other team costs), capital expenditures, tax
burdens, earnings and distributions, and expectations, intentions and
strategies regarding the future. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Factors that could cause the
Partnership's financial condition, results of operation, liquidity and capital
resources to differ materially include the Boston Celtics' competitive success,
uncertainties as to increases in players' salaries, the Boston Celtics' ability
to attract and retain talented players, uncertainties relating to labor
relations involving players and the lockout, the risk of injuries to key
players and uncertainties regarding media contracts.
Collective Bargaining Agreement
As more fully described in "Item 1 - Business and Properties -
Collective Bargaining Agreement", in March 1998 the Board of Governors of the
NBA voted to reopen the Collective Bargaining Agreement and, effective July 1,
1998, the NBA commenced a lockout of NBA players in support of its attempt to
reach a new collective bargaining agreement. The NBA and the NBPA have been
engaged in negotiations regarding a new collective bargaining agreement, but as
of September 18, 1998, no agreement has been reached. In the event that the
lockout extends into the 1998-99 season, NBA teams, including the Boston
Celtics, will refund amounts paid by season ticket holders (plus interest)
for any games that are canceled as a result of the lockout. In addition, as
a result of the lockout, NBA teams have not made any payments due to players
with respect to the 1998-99 season. The NBPA has disputed the NBA's position
on this matter, and both the NBA and the NBPA have presented their cases to an
independent arbitrator, who will make his ruling no later than the middle of
October 1998. As of September 18, 1998, the arbitrator has not ruled on this
matter. There can be no assurance that the NBA and the NBPA will reach
agreement on a new collective bargaining agreement, and there can be no
assurance that NBA teams, including the Boston Celtics, will not have to make
payments to players under contract for the 1998-99 season and beyond during
the lockout. Given the fixed nature of many of its expenses, and given that
the Partnership's operating revenues are almost entirely dependent on the NBA
season, any loss of games as a result of the absence of a collective bargaining
agreement or the continuation of the lockout will have a material adverse
effect on the Partnership's financial condition and its results of operations.
Further, if NBA teams, including the Boston Celtics, are required to honor the
player contracts for the 1998-99 season and beyond without agreeing to a new
collective bargaining agreement or without ending the lockout, which would
result in the loss of games, the Partnership's financial condition and results
of operations will be materially and adversely affected. Further, in the event
that the NBA and the NBPA agree to a new collective bargaining agreement or the
lockout ends, there can be no assurance that the NBA and NBPA will not
experience labor relations difficulties in the future or significantly
increased player salaries, which could have a material adverse effect on the
Partnership's financial condition or results of operations.
Basis of Presentation
As more fully described in "Item 1 - Business and Properties - Overview
of the Reorganization", BCLP II completed a Reorganization on June 30, 1998
pursuant to which BCLP was formed as a holding entity for BCLP II. From its
date of formation until the completion of the Reorganization, BCLP had no
material assets and was not engaged in any business operations. Prior to
the Reorganization, BCLP II, through its subsidiaries, owned and operated
the Boston Celtics. Accordingly, the operating results of the Boston
Celtics are consolidated in BCLP II's financial statements for periods prior
to the Reorganization. Upon completion of the Reorganization, effective June
30, 1998, BCLP's and BCLP II's interest in the accounts and operations of
the Boston Celtics is reflected in their indirect 48.3% investment in
Celtics Basketball Holdings, which is accounted for on the equity method.
Because BCLP had not engaged in any business operations prior to June
30, 1998, the Selected Consolidated Income Statement Data presented in Item 6
above and following discussion compare the operating results of BCLP II and
its subsidiaries for the year ended June 30, 1998 with the year ended June 30,
1997, and for the year ended June 30, 1997 with the year ended June 30, 1996.
Effective July 1, 1998, due to the change in BCLP's and BCLP II's method of
accounting for their investment in the accounts and operations of the Boston
Celtics from consolidation to the equity method, BCLP's and BCLP II's results
of operations will be materially different than those presented herein.
General
The Boston Celtics derive revenues principally from the sale of
tickets to home games and the licensing of television, cable network and
radio rights. A large portion of the Boston Celtics' annual revenues and
operating expense is determinable at the commencement of each basketball
season based on season ticket sales and the Boston Celtics' multi-year
contracts with its players and broadcast organizations.
The operations and financial results of the Boston Celtics are
seasonal. On a cash flow basis, the Boston Celtics receive a substantial
portion of their receipts from the advance sale of season tickets during the
months of June through October, prior to the commencement of the NBA regular
season. Cash receipts from playoff ticket sales are received in March of
any year for which the team qualifies for league playoffs. Most of the
Boston Celtics' operating expenses are incurred and paid during the regular
season, which extends from late October or early November through late
April.
For financial reporting purposes the Boston Celtics recognize revenues
and expenses on a game-by-game basis. Because the NBA regular season begins
in late October or early November, the first fiscal quarter, which ends on
September 30, will generally include limited or no revenue and will reflect
a net loss attributable to general and administrative expenses incurred in
the quarter. Based on the present NBA game schedule, the Boston Celtics
will generally recognize approximately one-third of its annual regular
season revenue in the second fiscal quarter, approximately one-half of such
revenue in the third fiscal quarter and the remainder in the fourth fiscal
quarter, and it will recognize its playoff revenue, if any, in the fourth
fiscal quarter.
The consolidated statements of income for fiscal 1996 include the
results of operations of television station WFXT, sold on July 7, 1995, as
well as the gain on its disposal, as discontinued operations.
Results of Operations
Consolidated income from continuing operations and consolidated net
income for the year ended June 30, 1998 was $12,267,000 or $2.45 per unit
($2.17 diluted) on revenues of $75,680,000 compared with consolidated income
from continuing operations and consolidated net income of $420,000 or $0.07
per unit ($0.06 diluted) on revenues of $62,998,000 during the year ended
June 30, 1997.
BCLP II had a consolidated loss from continuing operations and a
consolidated net loss for the three months ended June 30, 1998 of $2,153,000
or $0.43 per unit on revenues of $10,735,000 compared with a consolidated
loss from continuing operations and a consolidated net loss of $10,922,000
or $2.10 per unit on revenues of $8,503,000 for the three months ended June
30, 1997.
Income from continuing operations for the year ended June 30, 1997
included charges totaling $8,583,000 in the three months ended June 30, 1997
related to significant personnel changes, primarily in the basketball
operations. These non-recurring charges consisted primarily of player
contract termination costs ($4,580,000), bonuses and relocation costs
($2,215,000), severance costs ($909,000) and salaries for the new coaching
staff ($879,000). No such non-recurring charges were recorded in the year
ended June 30, 1998, which, among other things, contributed to an increase
in net income for the year ended June 30, 1998 and a decrease in the net
loss for the three months ended June 30, 1998.
Revenues from regular season ticket sales increased by $7,295,000 or
23% in fiscal 1998 compared to fiscal 1997 and decreased by $3,437,000 or
10% in fiscal 1997 compared to fiscal 1996. The increase in fiscal 1998
was a result of increased ticket sales, believed to be primarily caused by
improved performance of the basketball team as well as an increase in ticket
prices. The decrease in fiscal 1997 was a result of reduced ticket sales,
believed to be primarily caused by the performance of the basketball team.
Ticket prices were not increased for the 1996-97 season.
Regular season television and radio rights fees revenues increased by
$4,733,000 or 20% in fiscal 1998 compared to fiscal 1997 and $1,197,000 or
5% in fiscal 1997 compared to fiscal 1996. The increases were primarily the
result of increases in the NBA's national broadcasting contracts.
Other revenues, principally promotional advertising revenues,
increased $654,000 or 8% in fiscal 1998 as compared to fiscal 1997 and
increased $457,000 or 6% in fiscal 1997 as compared to fiscal 1996. The
increase in fiscal 1998 was due to increases in revenues from promotional
activities ($579,000) as well as proceeds received from NBA Properties from
the licensing of novelty type products ($75,000). The increase in fiscal
1997 was also due to increased revenues from promotional activities
($1,252,000), partially offset, however, by a decrease in proceeds received
from NBA Properties ($787,000).
The Boston Celtics played no playoff games in the 1997-98 or the 1996-
97 seasons. Accordingly, there were no playoff revenues or expenses in
fiscal 1998 or 1997. Playoff revenues vary from year to year depending on
the number of home games played and the availability of such games for local
television broadcast, and playoff expenses vary depending on the number of
games played.
Team expenses decreased by $540,000 or 1% in fiscal 1998 compared to
fiscal 1997 and increased by $13,050,000 or 47% in fiscal 1997 compared to
fiscal 1996. Player and coaching salaries increased approximately
$7,368,000 in fiscal 1998 as compared to fiscal 1997 due to changes in team
player and coaching personnel, but this increase was offset by the effect of
certain charges of approximately $8,052,000 recorded in the three months
ended June 30, 1997 that did not recur in fiscal 1998. These non-recurring
charges recorded in the three months ended June 30, 1997 related to
personnel changes in the basketball operations, including player contract
termination costs ($4,580,000), bonuses and relocation costs ($1,715,000),
severance costs ($878,000) and salaries for the new coaching staff
($879,000).
Game expenses, primarily NBA assessments on gate receipts, increased
by $434,000 or 18% in fiscal 1998 as compared to fiscal 1997 and decreased
by $220,000 or 8% in fiscal 1997 compared to 1996. The increase in fiscal
1998 and the decrease in fiscal 1997 were primarily a result of the
corresponding changes in revenues from ticket sales.
General and administrative expenses decreased $449,000 or 3% in fiscal
1998 compared to fiscal 1997, primarily as a result of reduced expense
related to options to acquire units of partnership interest ($3,531,000),
partially offset by increased professional, consulting and legal expenses
primarily related to the Reorganization ($2,347,000) and increased
management fees ($757,000). General and administrative expenses decreased
$1,139,000 or 8% in fiscal 1997 compared to 1996, primarily as a result of
decreases in personnel costs ($1,081,000), management fees ($735,000) and
professional, consulting and legal expenses ($198,000), partially offset by
increased expense related to options to acquire units of partnership
interest ($875,000).
Selling and promotional expenses increased $139,000 or 3% in fiscal
1998 compared to fiscal 1997 and $1,707,000 or 57% in fiscal 1997 compared
to 1996. The increase in fiscal 1998 is a result of increased personnel
costs. The increase in fiscal 1997 compared to fiscal 1996 is primarily
attributable to increases in net sponsorship costs and promotional events
($713,000), personnel costs ($476,000), and advertising and production costs
($381,000).
Total depreciation increased $18,000 or 10% in fiscal 1998 compared to
fiscal 1997 and $48,000 or 34% in fiscal 1997 compared to fiscal 1996. The
increases in 1998 and 1997 are primarily attributable to additional
depreciation related to additions to property and equipment and leasehold
improvements in leased office space.
Interest expense increased $145,000 or 3% in fiscal 1998 compared to
fiscal 1997 and decreased $515,000 or 8% in fiscal 1997 compared to fiscal
1996. The increase in fiscal 1998 is primarily a result of the new
$30,000,000 borrowing by BCLP II in May 1998. The decrease in fiscal 1997
is a result of the payment of an $85,000,000 borrowing in July 1995 as well
as a decrease in deferred compensation liability.
BCLP II earned interest income from its marketable securities and
other short-term investments of $6,402,000 and $6,610,000 in fiscal 1998 and
1997, respectively. The decrease of $207,000 or 3% in fiscal 1998 compared
to fiscal 1997 is attributable to a reduced amount of available funds for
short-term investment.
Liquidity and Capital Resources
BCLP II generated approximately $16,301,000, $2,462,000 and
$15,359,000 in cash from continuing operations in 1998, 1997 and 1996,
respectively. Capital expenditures amounted to approximately $385,000,
$136,000 and $796,000 in 1998, 1997 and 1996, respectively. At June 30,
1998 the Partnership had approximately $8,468,000 of cash and cash
equivalents, $1,041,000 of marketable securities and $81,114,000 of other
short-term investments, a portion of which were derived from the proceeds of
BCLP II's sale of its television and radio operations in 1996 and 1994,
respectively. In addition to these amounts, sources of funds available to
the Partnership include funds generated by operations, capital contributions
from partners, unused portions of credit facilities with its commercial
bank, and distributions from Celtics Basketball Holdings, which through a
subsidiary owns and operates the Boston Celtics. These resources will be
used to repay commercial bank borrowings and notes related to redeemed
partnership units and for general partnership purposes, working capital
needs or for possible investments and/or acquisitions.
On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit
agreement with its commercial bank, $20,000,000 of which is reserved until
the repayment of notes payable related to redeemed BCLP Units. Interest on
advances under the revolving credit agreement accrues at the BCLP II's
option of either LIBOR plus 0.70% or the greater of the bank's Base Rate or
the Federal Funds Effective Rate plus 0.50%. The revolving credit agreement
expires on June 30, 2003 and is secured by a pledge of certain assets of
CCC. On May 26, 1998, $30,000,000 was advanced under the revolving credit
agreement for the purpose of purchasing investment assets to be transferred
to Castle Creek in connection with the Reorganization. Management anticipates
that amounts advanced under the revolving credit agreement will be repaid by
BCLP II out of operating cash flow.
At June 30, 1998, the aggregate outstanding principal balance of notes
payable relating to redeemed Partnership units amounted to approximately
$17,539,000. These notes are due and payable on July 1, 2000 (unless
prepaid earlier pursuant to mandatory prepayment provisions contained
therein) and also provide that the amounts to be paid to such unitholder
pursuant to the terms of the notes will be increased by specified amounts on
each July 1 during their term. If the principal unitholder holds the two
notes until July 1, 2000, he would be entitled to receive aggregate payments
(excluding interest) in the amount of $20,044,320 equal to $30.00 per unit
for each unit acquired from him. Each of the notes bear interest payable
quarterly at the rate of 7.76% per annum.
In connection with the Reorganization, BCLP II distributed 6%
subordinated debentures to certain former holders of BCLP II units. One $20
face value subordinated debenture was distributed for each of the 2,703,664
BCLP II units with respect to which a BCLP II Unitholder elected to receive
subordinated debentures and BCLP units. The subordinated debentures have
been recorded at $12.20 per debenture, the fair market value at date of
issue, or $32,984,700. The original issue discount of $21,088,580 will be
amortized over the 40-year life of the debentures using the interest method.
The subordinated debentures bear interest at the rate of 6% per annum,
payable annually commencing June 30, 1999. The subordinated debentures
mature on June 30, 2038. There is no mandatory redemption of the
subordinated debentures, and they are not entitled to any sinking fund.
During the year ended June 30, 1998, a cash distribution of $1.00 per
BCLP II unit was paid to BCLP II unitholders on January 14, 1998 (declared
December 11, 1997 to unitholders of record on December 26, 1997). In
addition, a cash distribution of $1.00 per unit was paid to BCLP II
unitholders electing to receive subordinated debentures and BCLP units in
connection with the Reorganization. Future distributions will be determined
by BCLP GP in its sole discretion based, among other things, on available
resources and the needs of the Partnership, the ability of BCLP's
subsidiaries to generate sufficient operating cash flow, and the funds
available after debt service payments related to the notes payable to
commercial bank, notes payable relating to redeemed Partnership units and
the subordinated debentures.
Management believes that its cash, cash equivalents, marketable
securities and other short-term investments together with cash from
operating activities, distributions from Celtics Basketball and amounts
available under its credit agreements with its commercial bank will provide
adequate cash for the Partnership and its subsidiaries to meet their cash
requirements through June 30, 1999.
Year 2000
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 compliance issue.
As the year 2000 approaches, such systems may be unable to accurately
process certain date-based information.
The Partnership has assessed all of its hardware and software systems,
which are comprised solely of an internal personal computer network and
commercially available software products, and has begun to assess the
embedded systems contained in its leased properties, for Year 2000 issues.
Based on this assessment, which entailed a review of the Partnership's
systems by its internal information technology specialist, the Partnership
believes that its hardware and software systems are ready for the Year 2000.
The Partnership is uncertain whether the embedded systems contained in its
leased properties are ready for the Year 2000. The Partnership has also
begun to assess potential Year 2000 issues relating to third parties with
which it deals, and is not aware of any Year 2000 issues relating to third
parties with which it has a material relationship. There can be no
assurance, however, that the systems of third parties on which the
Partnership or its systems rely will not present Year 2000 problems that
could have a material adverse effect on the Partnership.
The Partnership has not spent a material amount to remediate Year 2000
problems and does not anticipate that it will spend a material amount to
remediate Year 2000 problems in the future.
The Partnership is uncertain regarding its most reasonably likely
worst-case Year 2000 scenario, and the impact of such a scenario on its
business, operations or financial condition. The Partnership intends to
consider such a scenario and develop a contingency plan to handle it during
the next 12 months.
Item 8. Financial Statements and Supplementary Data
See Item 14.
PART III
Item 10. Directors and Executive Officers of the Registrant
General Partner
The General Partner of BCLP is BCLP GP, Inc., a Delaware corporation
organized in 1998 ("BCLP GP"), and the General Partner of BCLP II is BCLP II
GP, Inc., a Delaware corporation organized in 1998 ("BCLP II GP"). BCLP GP is
wholly owned by Paul Gaston, and BCLP II GP is wholly owned by Celtics, Inc.,
which is wholly owned by Walcott Partners, L.P., a Gaston family partnership.
BCLP's activities are managed and controlled by BCLP GP.
The General Partner of each of CLP, Celtics Basketball Holdings and
Celtics Basketball is Boston Celtics Corporation ("BCC"). Paul E. Gaston
and Don F. Gaston (Paul Gaston's father) are the sole stockholders of BCC.
The activities of CLP, Celtics Basketball Holdings and Celtics Basketball
are managed and controlled by BCC.
The General Partners of Celtics Pride GP are CLP and CCC, which is
wholly owned by BCCLP Holdings, which in turn is wholly owned by BCLP II.
The General Partner of BCCLP is Celtics Communications, Inc. ("CCI").
Paul E. Gaston and Don F. Gaston are the sole stockholders of CCI. Prior to
their sale, the broadcast operations' activities were managed and controlled
by CCI.
Management fee obligations of $1,577,000, $820,000 and $1,555,000
applicable to BCC were charged to operations during the years ended June 30,
1998, 1997, and 1996, respectively. BCC receives a management fee of
$750,000 per annum subject to annual increases based on annual cash flows
from basketball operations after June 30, 1989.
In accordance with the partnerships' respective partnership
agreements, each item of income, gain, loss and deduction is allocated and
distributions are made to the partners and Unitholders in accordance with
their respective percentage interests (excluding earnings of subsidiary
corporate entities which are taxed directly).
Directors and Executive Officers
The following table sets forth, for each of the directors and
executive officers of BCLP GP, his or her principal occupation, age and
business experience during the past five years. All of the directors and
officers are U.S. citizens and the business address of each is c/o Boston
Celtics Limited Partnership, 151 Merrimac Street, Boston, Massachusetts 02114.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Paul E. Gaston 41 Chairman of the Board of Directors
Richard G. Pond 38 Executive Vice President, Chief Operating
Officer, Chief Financial Officer, Treasurer,
and Secretary
Don F. Gaston 64 Director
Paula B. Gaston 64 Director
John H.M. Leithead 41 Director
John B. Marsh, III 41 Director
</TABLE>
Mr. Paul E. Gaston became Chairman of the Board of BCLP GP in April
1998 and has been Chairman of the Board of Celtics, Inc. since December 1992
and Director since September 1992. Mr. Gaston has been Chairman of the
Board of BCC since September 1993. Upon its formation in November 1992, he
became Managing Director of Walcott Partners L.P., a Gaston family
partnership whose investments include limited partnership interests in the
Partnership and ownership of Celtics, Inc. From inception in 1990 to June
1992 he was Co-chairman and since June 1992 has been Chairman of the Board
of Directors of Celtics Communications, Inc., the general partner of Boston
Celtics Communications Limited Partnership. Mr. Paul E. Gaston is the son
of Don F. and Paula B. Gaston.
Mr. Pond was named Vice President, Controller and Secretary of
Celtics, Inc. in December 1992. He has been employed by BCLP II since July
1992. From July 1981 to June 1992, he was with the international accounting
firm of Ernst & Young LLP, most recently as a senior audit manager.
Effective July 1, 1996, Mr. Pond assumed his responsibilities as Executive
Vice President, Chief Financial Officer and, Treasurer, and effective July
1, 1997, Mr. Pond assumed his responsibilities as Chief Operating Officer.
Upon consummation of the Reorganization, Mr. Pond assumed similar
responsibilities with BCLP GP.
Mr. Don F. Gaston has served as a Director of the General Partners of
BCLP II and CLP since his resignation as Chairman of the Board of BCLP II in
December 1992 and CLP in September 1993. He was succeeded in each of these
positions by his son, Paul E. Gaston. He became Chairman of the Board of
Directors of Boston Celtics Incorporated in September 1983 when he, together
with Alan C. Cohen and Paul R. Dupee, Jr., acquired the Boston Celtics
franchise. He has served as a Director of the BCCLP General Partner since
its inception in 1990. Mr. Gaston was Chairman of the Board of Providence
Capitol, Ltd. from July 1982 until its liquidation in December 1986. From
1962 to June 1982, he was associated with Gulf & Western Industries, Inc. in
various capacities, including Executive Vice President, director and member
of the Executive Committee. Mr. Gaston is the husband and father
respectively, of Paula B. Gaston and Paul E. Gaston.
Mrs. Paula B. Gaston became a Director of Celtics, Inc. in September
1992 and a Director of the General Partner of CLP in October 1992. She is a
private investor and is the wife of Mr. Don F. Gaston and the mother of Paul
E. Gaston.
Mr. Leithead became a Director of Celtics, Inc. in October 1992.
Since September 1993 Mr. Leithead has been employed as an executive at
Arandell Schmidt. From 1985 to 1993, he was an executive of R.R. Donnelley
& Sons Company, and from 1979 to 1985 he was an executive in the National
Marketing Division for International Business Machines Corporation.
Mr. Marsh became a director of Celtics, Inc. in September 1992. Mr.
Marsh is currently managing partner of Paradigm Capital, LLC, a strategic
investment partnership where he is an investment banker. From 1995 to 1998,
he was Director of Trading and Sales with ABSA Securities, Inc., an
investment banking firm. From 1991 to 1995, he was Chief Executive Officer
and President of Saicor Ltd., an investment banking firm specializing in
emerging markets. From 1988 to 1991 he was a Vice President at Deutsche
Bank Capital Corporation where he headed an international arbitrage
securities trading group. From 1985 to 1988 Mr. Marsh was a Vice President
in the international arbitrage department of Merrill Lynch Pierce Fenner and
Smith.
BCLP GP has an Audit Committee composed of Mr. Leithead and Mr. Marsh,
non-management directors, and Mr. Paul Gaston. The non-management directors
will be reimbursed for their expenses, and will receive directors' fees
equal to $1,000 per month and $2,500 per meeting attended with respect to
their services as directors of BCLP GP. Messrs. Leithead and Marsh received
$27,000 and $44,500, respectively, in such directors' fees in fiscal 1998.
Directors are named by the stockholders of BCLP GP and serve until their
successors are named. Thus, holders of limited partnership units have no
vote in the selection of directors of BCLP GP. BCLP GP's officers are
appointed by, and serve at the discretion of, the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder,
require executive officers and directors of BCLP GP, the general partner of
BCLP, to file reports pertaining to their beneficial ownership of the Units
of BCLP with the Securities and Exchange Commission and the New York Stock
Exchange when they are first elected, and to report (with certain
exceptions) subsequent changes in their beneficial ownership of Units.
Executive officers, directors and 10% beneficial owners are required to
furnish the Partnership with copies of all forms they file pursuant to
Section 16(a). In January 1995, John B. Marsh, III purchased 500 BCLP II
units, but failed to file timely two forms reporting this purchase. Mr.
Marsh and John H.M. Leithead each failed to timely file one Form 3 reporting
their initial statement of beneficial ownership at the time of their
respective elections to the Board of Directors of BCLP II's general partner.
In each case, the failure to make the required filings on a timely basis was
inadvertent.
Item 11. Executive Compensation
The following Summary Compensation Table sets forth the compensation
of each of the Chief Executive Officer and the most highly compensated
executive officers of BCLP GP whose annual salary and bonus, if any,
exceeded $100,000 for services in all capacities to BCLP (including
predecessor entities) and its subsidiaries during the last three fiscal
years. Only two of the Partnership's executive officers (other than its
Chief Executive Officer) had an annual salary and bonus exceeding $100,000
during the year ended June 30, 1998.
<TABLE>
<CAPTION>
Summary Compensation Table
----------------------------------- Long Term Compensation
Annual Compensation Awards
------------------------ ------------------------
Fiscal Securities
Year Other Annual Restricted Underlying
Ended Compensation Stock Options/
Name and Principal Position June 30, Salary($) Bonus($) ($)(1) Awards ($) SARs (#)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul E. Gaston 1998 $1,000,000 $ 324,596 - - -
Chief Executive Officer 1997 400,000 - $518,750(1) - -
and Chairman of the Board 1996 400,000 - - $3,658,363(2) -
Richard G. Pond 1998 400,000 250,000 - - -
Executive Vice President, 1997 250,000 125,000 - - -
Chief Operating Officer, 1996 250,000 90,000 - - -
Chief Financial Officer,
Treasurer and Secretary
Stephen C. Schram 1998 269,231 - - - -
Director and President (3) 1997 400,000 - - - -
1996 400,000 3,658,363(2) - - -
___________________
<F1> On June 27, 1997, the Audit Committee of the Board of Directors of
Celtics, Inc. voted to offer BCLP II's three option holders the right
to exchange their options to purchase BCLP II Units for an equal
number of Units of BCLP II which vested after ten years and which
contained certain significant restrictions as to transferability, but
which were entitled to receive distributions with respect to such
Units (hereinafter the "1997 Restricted Units"). The exchange ratio
was determined based on a written report received from an independent
employee benefits consultant regarding the respective values of the
1997 Restricted Units and the options to purchase BCLP Units, and the
option holders were required to make this election on or prior to July
7, 1997. On June 30, 1997, Mr. Gaston elected to exchange his options
to purchase 250,000 BCLP II Units for 250,000 1997 Restricted Units.
Mr. Gaston, who is a member of the Audit Committee, was recused from
and did not participate in any of the Audit Committee's deliberations
pertaining to this matter. As a result of this exchange, $519,000 was
charged to compensation expense in 1997, representing the difference
between the fair market value of the 1997 Restricted Units and the in-
the-money value of the optioned Units. In connection with the
Reorganization, Mr. Gaston elected to receive Castle Creek Interests
with respect to these Restricted Units.
<F2> On June 28, 1996, the annual incentive payment arrangements between
BCLP II and Messrs. Gaston and Schram were modified to permit each of
them to elect to acquire Units of BCLP II which vest after ten years
and which contain certain significant restrictions as to
transferability, but which are entitled to receive distributions with
respect to such units (hereinafter the "1996 Restricted Units") in
lieu of cash payment. Mr. Gaston elected to receive the 1996
Restricted Units in lieu of the $3,658,363 cash incentive compensation
payment to which he was entitled. Mr. Gaston did not receive a cash
bonus for the year ended June 30, 1996. Mr. Schram elected to receive
his payment in cash. Based upon a written report received from an
independent employee benefits consultant regarding the appropriate
discount to be applied, the Audit Committee of the Board of Directors
of Celtics, Inc. awarded 234,886 1996 Restricted Units to Mr. Gaston.
Mr. Gaston, who is a member of the Audit Committee, was recused from
and did not participate in any of the Audit Committee's deliberations
pertaining to this matter. In connection with the Reorganization, Mr.
Gaston elected to receive Castle Creek Interests with respect to these
Restricted Units.
<F3> Mr. Schram resigned as Director and President of Celtics, Inc.
effective February 26, 1998.
</TABLE>
Neither BCLP nor BCLP II granted any options or appreciation rights
during the year ended June 30, 1998. The following table sets forth
information concerning unit option exercises during the year ended June 30,
1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises and Option Values
Number of
Securities Value of
Underlying Unexercised In-
Unexercised The-Money
Options at Fiscal Options at Fiscal
Year-End (#) Year End ($)
----------------- -----------------
Units Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen C. Schram(1) 250,000 $3,031,250 0/0 0/0
___________________
<F1> Mr. Schram exercised these options on June 1, 1998. The value
realized represents the difference between the market price on June 1,
1998 and the exercise price on that date.
</TABLE>
Employment and Consulting Agreements
The Partnership
In August 1993, the Board of Directors of Celtics, Inc. approved
compensation arrangements and incentive plans for Paul E. Gaston, Chairman
of the Board, and Stephen C. Schram, President, respectively, of Celtics,
Inc., under which Mr. Gaston and Mr. Schram were to be employed on an at
will basis, with compensation at the rate of $400,000 per annum. In June
1997, the Board of Directors of the General Partner of BCLP II approved an
increase in Mr. Gaston's compensation to $1,000,000 per annum. The
incentive plan, which is subject to annual review, provides that each of Mr.
Gaston and Mr. Schram shall receive annual incentive payments, commencing
with the fiscal year ending June 30, 1994, of 5% of the amount by which
Consolidated Net Income before taxes on income of BCLP II for the related
fiscal year exceeds $8,000,000, payable not later than 10 days after the
issuance of audited financial statements of BCLP. During the year ended
June 30, 1998, Mr. Gaston was paid an annual incentive compensation payment
of $324,596. Mr. Schram resigned effective February 28, 1998 and received
no annual incentive compensation payment for the year ended June 30, 1998.
During the year ended June 30, 1997, no annual incentive compensation
payments were made to Messrs. Gaston and Schram. Mr. Gaston did not receive
a cash incentive compensation payment for the year ended June 30, 1996, but
rather elected to receive an aggregate award of 234,866 Restricted Units of
BCLP. Mr. Schram elected to receive his $3,658,363 incentive compensation
payment for the year ended June 30, 1996 in cash.
On January 8, 1998, BCLP II entered into an Agreement and Release with
Stephen C. Schram, pursuant to which Mr. Schram resigned from his various
executive positions with BCLP II and its affiliates effective January 31,
1998. In consideration for Mr. Schram's performance under this agreement,
certain of Mr. Schram's options to acquire BCLP II Units were amended to
extend their term and to allow Mr. Schram to pledge them or transfer them to
an entity wholly owned by Mr. Schram or members of his immediate family. As
outlined in the "Aggregated Option Exercises and Option Values" table above,
Mr. Schram exercised these options on June 1, 1998.
The Basketball Operations
Under an agreement dated as of March 13, 1981, as amended, Red
Auerbach has been retained to serve as a consultant to the Boston Celtics
for the remainder of his life. For such services, Mr. Auerbach will receive
compensation totaling $250,000 per year for his lifetime. In fiscal 1998,
1997 and 1996, Mr. Auerbach received bonus payments totaling $500,000,
$600,000 and $100,000, respectively. In the event of Mr. Auerbach's death,
his wife shall be entitled to receive for the balance of her life monthly
payments equal to those that would have otherwise been paid to Mr. Auerbach.
Mr. Auerbach shall advise the Boston Celtics with respect to, among other
things, the team's selections in the NBA college draft, evaluation of
college and professional players and the performance of the team and the
players for as long as he is physically able to perform such services.
Under an agreement dated May 6, 1997, Rick Pitino agreed to serve as
President and Director of Basketball Operations of CLP through May 6, 2007,
and as Head Coach of the team for the first six full NBA seasons of the
agreement (through the 2002-03 season). In connection with the
Reorganization, this contract was assigned to Celtics Basketball. Under the
agreement, Mr. Pitino will receive annual salaries of $6,750,000 through May
6, 2003 and $2,000,000 through May 6, 2007. Mr. Pitino was also granted a
bonus in the amount of $600,000, payable on the earlier of May 6, 2003 or
upon a change in control of CLP. In addition, in the event of a Change in
Control as defined in the agreement, Mr. Pitino will receive the lesser of
$22,000,000 or any unpaid amounts for the remainder of the term of the
agreement. The Reorganization was not a Change in Control as defined in Mr.
Pitino's employment agreement.
Compensation Committee Interlocks and Insider Participation
The non-management directors of the Audit Committee of the Board,
Messrs. Leithead and Marsh, performed the functions of a compensation
committee during the year ended June 30, 1998. Neither of the non-
management directors was, during the year ended June 30, 1998 or previously,
an officer or employee of the Partnership or any of its subsidiaries or had
any affiliated relationship requiring disclosure.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
Partnership's Units beneficially owned on September 18, 1998 by (i) each
person who is known by the Partnership to beneficially own more than five
percent (5%) of the outstanding Units, (ii) each director of BCLP GP, (iii)
each executive named in the Summary Compensation Table and (iv) all
directors and executive officers of BCLP GP as a group. All information
with respect to beneficial ownership is based solely on information
furnished by the respective Unitholders to the Partnership.
<TABLE>
<CAPTION>
Percent of
5% Unitholders, Number of Outstanding
Directors and Executive Officers Units Units(1)
- -------------------------------- --------- -----------
<S> <C> <C>
Don F. Gaston and Paula B. Gaston 200 (2) *
33 East 63rd Street
New York, New York 10021
Paul E. Gaston 100 (3) *
33 East 63rd Street
New York, New York 10021
John H.M. Leithead 0 *
33 East 63rd Street
New York, New York 10021
John B. Marsh, III 500 *
33 East 63rd Street
New York, New York 10021
Stephen C. Schram 900 *
33 East 63rd Street
New York, New York 10021
Richard G. Pond 0 *
151 Merrimac Street
Boston, Massachusetts 02114
David R. Murphey, III 525,400 19.4%
Murphey Capital, Inc.
P.O. Box 18065
Tampa, Florida 33681-8065
All directors and executive officers
as a group (6 persons) 800 *
___________________
<F*> Less than one percent.
<F1> Percent of Outstanding Units for a particular Unitholder will be
greater than such Unitholder's percentage interest in the Partnership,
due to the 1% interest in the Partnership held by the General Partner.
<F2> Includes 100 Units held by Brookwood Investments Limited Partnership,
a partnership owned by Don F. and Paula B. Gaston of which Don F.
Gaston is the General Partner. Does not include 100 Units held by
Walcott Partners L. P. See Note (3) below.
<F3> Includes 100 Units held by Walcott Partners L. P., a Gaston family
partnership. The General Partners of Walcott Partners L.P. are Paul
E. Gaston and Draycott, Inc., of which Paul E. Gaston is the only
stockholder, officer and director. For the purpose of this table, Mr.
Paul E. Gaston is deemed to be the beneficial owner of these Units.
</TABLE>
Unless otherwise indicated, all parties have both exclusive voting and
investing power.
Item 13. Certain Relationships and Related Transactions
In 1998, BCLP II reimbursed Conanicut Aircraft, Inc. ("Conanicut"), a
company wholly owned by Paul E. Gaston who is its only officer and director,
$69,453 for the business use in the fiscal year ended June 30, 1998 of an
aircraft based on standard charter rates for comparable aircraft. The
reimbursement was reviewed and approved by the Audit Committee of the Board
of Directors of Celtics, Inc. Paul E. Gaston, who is a member of the Audit
Committee, was recused from and did not participate in any of the Audit
Committee's deliberations pertaining to this matter.
Management fee obligations of $1,577,000, $820,000 and $1,555,000
applicable to BCC were charged to operations during the years ended June 30,
1998, 1997 and 1996, respectively. BCC receives a management fee of
$750,000 per annum subject to annual increases based on annual cash flows
from basketball operations after June 30, 1989.
On June 30, 1998, BCLP entered into a management services agreement by
and between BCLP II, CLP, Celtics Pride G.P., Celtics Capital Corporation,
BCCLP Holding Corporation, Castle Creek, Celtics Basketball Holdings and
Celtics Basketball. The agreement provides that Celtics Basketball will
provide certain management and corporate services on behalf of the other
entities, and will charge a fee to the other entities for these services based
on the cost of the actual services to Celtics Basketball. Although no such
services were provided and no fees were charged under this agreement for the
period from April 13, 1998 (date of formation) to June 30, 1998, it is
anticipated that certain services will be provided and fees will be paid by
the Partnership under this agreement commencing July 1, 1998.
PART IV
Item 14. Exhibits, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
The financial statements listed in the accompanying List of Financial
Statements and Financial Statement Schedules are filed as part of this
report.
2. Exhibits:
The Exhibits listed below are filed as part of this report.
(3) (a) -- Certificate of Limited Partnership of Boston Celtics
Limited Partnership II, as amended.1
(b) -- Agreement of Limited Partnership of Boston Celtics
Limited Partnership II.(1)
(c) -- Certificate of Limited Partnership of Boston Celtics
Limited Partnership.
(d) -- Agreement of Limited Partnership of Boston Celtics
Limited Partnership.(12)
(e) -- First Amendment to Amended and Restated Agreement of
Limited Partnership of Boston Celtics Limited
Partnership II.(2)
(f) -- Certificate of Amendment of Certificate of Limited
Partnership of Boston Celtics Limited Partnership,
changing the name of Boston Celtics Limited
Partnership II from its former name of "Boston Celtics
Limited Partnership".
(g) -- Certificate of Amendment of Certificate of Limited
Partnership of Boston Celtics Limited Partnership II,
changing the name of Boston Celtics Limited Partnership
from its former name of "Boston Celtics Limited
Partnership II".
(h) -- Certificate of Incorporation of BCLP GP, Inc., dated
April 13, 1998.(11)
(i) -- By-Laws of BCLP GP, Inc.(11)
(j) -- Certificate of Amendment, dated June 29, 1998,
changing the name of BCLP GP, Inc. from its former
name of "BCLP II GP, Inc."
(k) -- Certificate of Incorporation of BCLP II GP, Inc.,
dated April 13, 1998.(11)
(l) -- By-Laws of BCLP II GP, Inc.(11)
(m) -- Certificate of Amendment, dated June 29, 1998,
changing the name of BCLP II GP, Inc. from its former
name of "BCLP GP, Inc."
(4) (a) -- Form of Unit Certificate Representing Limited
Partnership Interest of BCLP.(1)
(b) -- Form of Indenture between Boston Celtics Limited
Partnership and Chase Manhattan Bank, as Trustee,
dated as of June 30, 1998.(11)
(10) (a) -- Form of Transfer Agent Agreement by and among Boston
Celtics Limited Partnership, The First National Bank
of Boston, N.A., Celtics, Inc. and BC ALP, Inc.(1)
(b) -- Joint Venture Agreement by and among NBA member
organizations.(1)
(c) -- Constitution and By-laws of the National Basketball
Association.(1)
(d) -- Collective bargaining agreement, dated as of November
1, 1988, between the NBA and the National Basketball
Players Association.(3)
(e) -- License/Lease Agreement dated April 4, 1990 between
Boston Celtics Limited Partnership and New Boston
Garden Corporation (confidential treatment previously
granted).(2)
(f) -- Office Lease Agreement dated April 4, 1990 between
Boston Celtics Limited Partnership and New Boston
Garden Corporation (confidential treatment previously
granted).(2)
(g) -- Letter Agreement dated April 4, 1990 between the
Boston Celtics Limited Partnership and New Boston
Garden Corporation (confidential treatment
granted).(2)
(h) -- Credit Agreement among Celtics Limited Partnership
("CLP"), Boston Celtics Limited Partnership ("BCLP")
and Shawmut Bank, N.A. ("Shawmut"), dated as of
January 21, 1993.(4)
(i) -- Revolving Credit Note from CLP to Shawmut, dated as
of January 21, 1993.(4)
(j) -- Security Agreement between CLP and Shawmut, dated as
of January 21, 1993.(4)
(k) -- Unit Option Agreement dated December 31, 1993 by and
between Boston Celtics Limited Partnership and Paul
E. Gaston.(5)
(l) -- Unit Option Agreement dated December 31, 1993 by and
between Boston Celtics Limited Partnership and
Stephen C. Schram.(5)
(m) -- Unit Redemption Agreement dated August 30, 1995
between Boston Celtics Limited Partnership and Alan
N. Cohen.(6)
(n) -- Unit Redemption Agreement dated August 30, 1995
between Boston Celtics Limited Partnership and Gordon
Cohen.(6)
(o) -- Unit Redemption Agreement dated August 30, 1995
between Boston Celtics Limited Partnership and Laurie
Cohen-Fenster.(6)
(p) -- Promissory Note dated August 1, 1995 by BCLP to Alan
N. Cohen.(6)
(q) -- Promissory Note dated August 1, 1995 by BCLP to Alan
N. Cohen.(6)
(r) -- Consulting Agreement dated August 30, 1995 between
Celtics Limited Partnership and Alan N. Cohen.(6)
(s) -- Restricted Unit Agreement dated June 28, 1996 between
Boston Celtics Limited Partnership and Paul E.
Gaston.(7)
(t) -- Letter from Paul Gaston electing to accept all
incentive compensation for 1996 in restricted
units.(7)
(u) -- Letter Agreement dated June 30, 1997 between Boston
Celtics Limited Partnership and Paul E. Gaston
pertaining to the election to exchange options to
purchase Limited Partnership Units for Restricted
Units.(8)
(v) -- Credit Agreement dated as of December 15, 1997 by and
between Celtics Limited Partnership as the Borrower,
Boston Celtics Limited Partnership and Citizens Bank
of Massachusetts as the Lender.(9)
(w) -- Amended and Restated Agreement and Plan of
Reorganization, dated as of June 5, 1998, among
Boston Celtics Limited Partnership, Boston Celtics
Limited Partnership II, Castle Creek Partners, L.P.,
Celtics Limited Partnership, Celtics, Inc., BCLP II
GP, Inc., Castle Creek Partners GP, Inc., Boston
Celtics Corporation, and Celtics Capital
Corporation.(11)
(x) -- Agreement and Plan of Merger of BCLP Merger, Inc.,
Boston Celtics Limited Partnership and Boston Celtics
Limited Partnership II, dated as of June 29,
1998.(11)
(y) -- Credit Agreement between Boston Celtics Limited
Partnership and Citizens Bank of Massachusetts, dated
as of May 20, 1998.(10)
(27) Financial Data Schedule
___________________
(1) Incorporated by reference from the exhibits filed with the
Partnership's registration statement on Form S-1 filed under the
Securities Act of 1933 (File No. 33-9796).
(2) Incorporated by reference from the exhibits filed with the Report on
Form 10-K of the Registrant filed with the Securities and Exchange
Commission for the year ended June 30, 1990.
(3) Incorporated by reference from exhibits filed with the Partnership's
report on Form 10-K filed with the Securities and Exchange Commission
for the year ended June 30, 1989.
(4) Incorporated by reference to the exhibits filed with the report on
Form 8-K filed with the Securities and Exchange Commission on January
22, 1993 (File No. 0-19324).
(5) Incorporated by reference to the exhibits filed with the report on
Form 10-Q filed with the Securities and Exchange Commission on
February 14, 1994 (File No. 0-19324).
(6) Incorporated by reference to the exhibits filed with the report on
Form 8-K filed with the Securities and Exchange Commission on August
31, 1995 (File No. 0-19324).
(7) Incorporated by reference to the exhibits filed with the report on
Form 10-K filed with the Securities and Exchange Commission on
September 27, 1996 (File No. 0-19324).
(8) Incorporated by reference to the exhibits filed with the report on
Form 10-K filed with the Securities and Exchange Commission on
September 26, 1997 (File No. 0-19324).
(9) Incorporated by reference to the exhibits filed with the report on
Form 10-Q filed with the Securities and Exchange Commission on
February 6, 1998 (File No. 0-19324).
(10) Incorporated by reference from the exhibits filed with the Schedule
13E-3 filed by Boston Celtics Limited Partnership (File No. 5-37799).
(11) Incorporated by reference from the exhibits filed with the report on
Form S-4 filed with the Securities and Exchange Commission on April
17, 1998, as amended (File No. 333-50367).
(12) Incorporated by reference to the exhibits filed with the Report on
Form 8-K filed with the Securities and Exchange Commission on June
30, 1998 (File No. 0-19324).
(b) Reports on Form 8-K filed in the fourth quarter of 1998 - Form
8-K dated May 14, 1998, reporting, in response to Item 5, on the
consummation of the Reorganization.
(c) Exhibits - The response to this portion of Item 14 is filed as a
part of this report.
(d) Financial Statement Schedules - The response to this portion of
Item 14 is filed as part of this report.
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2)(c) and (d)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
CERTAIN EXHIBITS
YEAR ENDED JUNE 30, 1998
BOSTON CELTICS LIMITED PARTNERSHIP
BOSTON, MASSACHUSETTS
FORM 10-K -- ITEM 14(a)(1) and (2)
BOSTON CELTICS LIMITED PARTNERSHIP
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements are included in Item 8:
Boston Celtics Limited Partnership and Subsidiaries
Consolidated Balance Sheet at June 30, 1998.
Notes to Consolidated Balance Sheet.
Boston Celtics Limited Partnership II and Subsidiaries
Consolidated Balance Sheets at June 30, 1998 and 1997.
Consolidated Statements of Income for each of the three years in the
period ended June 30, 1998.
Consolidated Statements of Partners' Capital (Deficit) for each of the
three years in the period ended June 30, 1998.
Consolidated Statements of Cash Flows for each of the three years in the
period ended June 30, 1998.
Notes to Consolidated Financial Statements.
Celtics Basketball Holdings, L.P. and Subsidiary
Consolidated Balance Sheet at June 30, 1998.
Notes to Consolidated Balance Sheet.
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
Report of Independent Auditors
To the General Partner
Boston Celtics Limited Partnership
We have audited the accompanying consolidated balance sheet of Boston Celtics
Limited Partnership and Subsidiaries as of June 30, 1998. This balance sheet is
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of Boston
Celtics Limited Partnership and Subsidiaries at June 30, 1998 in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------------------------
Boston, Massachusetts
September 18, 1998
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Balance Sheet
June 30, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,468,286
Marketable securities 1,041,446
Other short-term investments 81,114,266
Prepaid expenses and other current assets 302,900
-----------
TOTAL CURRENT ASSETS 90,926,898
PROPERTY AND EQUIPMENT, net 23,516
OTHER ASSETS 1,096,129
-----------
$92,046,543
===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,102,496
Due to related parties 3,036,184
Federal and state income taxes payable 733,800
Notes payable 17,538,780
-----------
TOTAL CURRENT LIABILITIES 22,411,260
DEFERRED FEDERAL AND STATE INCOME TAXES 9,710,875
NOTES PAYABLE TO BANK - noncurrent portion 30,000,000
SUBORDINATED DEBENTURES 32,984,700
INVESTMENT IN CAPITAL DEFICIENCY OF CELTICS BASKETBALL
HOLDINGS, L.P. 29,865,364
PARTNERS' CAPITAL (DEFICIT), authorized 25,000,000 units
of limited partnership interest, issued and outstanding
2,703,664 units
Boston Celtics Limited Partnership
General Partner 290,166
Limited Partners (34,329,896)
-----------
(34,039,730)
Boston Celtics Limited Partnership II - General Partner 210,292
Celtics Limited Partnership - General Partner 262,554
Boston Celtics Communications Limited Partnership -
General Partner 641,228
-----------
TOTAL PARTNERS' CAPITAL (DEFICIT) (32,925,656)
-----------
$92,046,543
===========
</TABLE>
See notes to consolidated balance sheet.
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Balance Sheet
Note A - Basis of Presentation
Principles of Consolidation: The consolidated balance sheet includes the
accounts of Boston Celtics Limited Partnership ("BCLP," the "Partnership") and
its majority-owned and controlled subsidiaries and partnerships. All
intercompany transactions are eliminated in consolidation.
BCLP (formerly "Boston Celtics Limited Partnership II") is a Delaware limited
partnership that was formed on April 13, 1998 in connection with a
reorganization of Boston Celtics Limited Partnership II (formerly "Boston
Celtics Limited Partnership") ("BCLP II"). Pursuant to the reorganization of
BCLP II (the "Reorganization"), which was completed on June 30, 1998, BCLP owns
a 99% limited partnership interest in BCLP II. The 1% general partner of BCLP
is BCLP GP, Inc., and its 99% limited partnership interest is comprised of
2,703,664 publicly held units.
BCLP held no material assets and was not engaged in operations from its date of
formation until the completion of the Reorganization on June 30, 1998. Upon
completion of the Reorganization, BCLP, through its subsidiaries, holds certain
investments, including a 48.3123% limited partnership investment in Celtics
Basketball Holdings, L.P., ("Celtics Basketball Holdings") which, through a
99.999% subsidiary partnership, owns and operates the Boston Celtics
professional basketball team of the National Basketball Association. BCLP's
investment in Celtics Basketball Holdings is accounted for on the equity
method, and accordingly, the investment is carried at cost, increased by equity
in earnings of Celtics Basketball Holdings and reduced by distributions
received.
Note B - Significant Accounting Policies
Cash Equivalents: Cash equivalents represent short-term investments with
maturities at the date of purchase of three months or less. Marketable
securities represent investments with maturities greater than three months.
Estimates and Assumptions: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Concentration of Credit Risk: Financial instruments which potentially subject
the Partnership to credit risk consist principally of cash equivalents,
short-term investments and marketable securities. The Partnership's cash
equivalents, short-term investments and marketable securities represent
investments with relatively short maturities in the securities of highly rated
financial institutions and United States government entities.
Marketable Securities and Other Short Term Investments: The Partnership
accounts for marketable securities and other short-term investments in
accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" which
established the accounting and reporting requirements for investments in equity
securities that have readily determinable fair values and for all investments
in debt securities. All affected investment securities are classified as
securities to be held to maturity, for trading, or available-for-sale.
Financial Instruments: The carrying value of financial instruments such as cash
equivalents and accounts payable approximate their fair values based on the
short-term maturities of these instruments. The carrying value of long-term
debt approximates its fair value based on references to similar instruments and
the variable interest rate.
Property and Equipment: Property and equipment is stated at cost and is being
depreciated over estimated useful lives of five years using the straight-line
method of depreciation.
Income Taxes: BCLP is a partnership that is taxed as a corporation. No
provision for income taxes is required by BCLP and its subsidiaries for the
period ended June 30, 1998, as they had not engaged in any business operations
during that period. Effective July 1, 1998, BCLP and its subsidiary
corporations will report their income tax provision, including the income
(losses) of subsidiary partnerships, using the liability method in accordance
with Financial Accounting Standards Board Statement 109, "Accounting for Income
Taxes." Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using tax rates and laws that will be in effect
when the differences are expected to reverse.
Comprehensive Income: In June 1997, the Financial Accounting Standards Board
issued Statement No. 130, "Reporting Comprehensive Income" ("Statement 130").
Statement 130 is effective for fiscal years beginning after December 15, 1997.
The Partnership believes that the adoption of Statement 130 will not have a
material impact on the Partnership's consolidated financial statements.
Note C - Reorganization of Boston Celtics Limited Partnership II
In connection with the Reorganization, BCLP II unitholders were given an option
of exchanging their units of interest in BCLP II for units of limited
partnership interest in Castle Creek Partners, L.P. ("Castle Creek"), a
privately held partnership formed in connection with the Reorganization, on a
100-for-one basis. BCLP II would then contribute to Castle Creek the
percentage of its net assets, subject to certain adjustments, corresponding to
the percentage of BCLP II unitholders that elected to receive Castle Creek
interests (the "Proportionate Election"). BCLP II's net assets consisted
primarily of investment assets and, through a subsidiary, the assets of the
Boston Celtics. In exchange for the contribution of assets to Castle Creek,
BCLP II was to receive limited partnership interests in Castle Creek, which
they subsequently would distribute to BCLP II unitholders electing to receive
Castle Creek interests in the Reorganization.
In anticipation of the contribution of assets to Castle Creek, BCLP II
contributed $41,022,067 of investment assets to Castle Creek in May 1998 based
on an estimate of the Proportionate Election. When the Reorganization election
was complete on June 30, 1998 and the Proportionate Election was finalized at
51.68719%, it was determined that BCLP II needed to contribute an additional
$3,036,184 of assets to Castle Creek to reflect the Proportionate Election.
This amount has been classified as due to related parties on the consolidated
balance sheet.
Note D - Investment in Capital Deficiency of Celtics Basketball Holdings, L.P.
BCLP, through its subsidiary partnerships and corporations, owns a 48.3123%
limited partnership interest in Celtics Basketball Holdings. Prior to the
completion of the Reorganization on June 30, 1998, Celtics Basketball Holdings
held no material assets and was not engaged in operations. Upon completion of
the Reorganization, Celtics Basketball Holdings, through Celtics Basketball,
L.P., its 99.999% subsidiary partnership, owns and operates the Boston Celtics
professional basketball team of the National Basketball Association. BCLP's
investment in Celtics Basketball Holdings is accounted for on the equity
method.
Summary balance sheet data for Celtics Basketball Holdings at June 30, 1998 is
as follows (amounts in thousands):
<TABLE>
<S> <C>
Current assets $ 9,867
Current liabilities 27,508
Total assets 25,255
Notes payable to bank - noncurrent portion 50,000
Deferred compensation - noncurrent portion 8,962
Other noncurrent liabilities 600
Partners' capital (deficit) (61,815)
</TABLE>
Summary income statement data for the Boston Celtics professional basketball
team for the year ended June 30, 1998 is as follows (amounts in thousands):
<TABLE>
<S> <C>
Total revenues $75,680
Total costs and expenses 54,110
Interest income (expense), net (3,067)
-------
Net income $18,503
=======
</TABLE>
Note E - Marketable Securities and Other Short Term Investments
Marketable securities at June 30, 1998 consisted of U.S. government securities
recorded at cost, which approximates market value. These securities mature in
less than one year. Expected maturities may differ from contractual maturities
because the issuers of the securities may have the right to prepay obligations
without prepayment penalties. The Partnership had no gross realized gains or
losses on available-for-sale securities and had no unrealized holding gains or
losses on available-for-sale securities recorded as a separate component of
Partners' Capital (Deficit).
Other short term investments, which consist primarily of private placement
notes with a commercial bank with a maturity of under one year, are classified
as held-to-maturity and are carried at amortized cost, which approximates
market value. There were no unrealized gains or losses in any of these
investments at June 30, 1998.
Note F - Property and Equipment
Property and equipment consists of the following at June 30, 1998:
<TABLE>
<S> <C>
Furniture and fixtures $45,473
Less: accumulated depreciation (21,957)
-------
Net property and equipment $23,516
=======
</TABLE>
Note G - Notes Payable
On August 30, 1995 BCLP II redeemed an aggregate of 758,444 units representing
assignments of beneficial ownership of limited partnership interest in BCLP II.
The redeemed units were beneficially owned by a principal unitholder and his
family. The principal unitholder received two notes from BCLP II in exchange
for 668,144 units acquired by BCLP II from him. The two notes have an aggregate
initial face amount of $14,365,096 equal to $21.50 per unit for each unit
acquired from him. The two notes, which are due and payable on July 1, 2000
(unless prepaid earlier pursuant to mandatory prepayment provisions contained
therein) also provide that the amounts to be paid to such unitholder pursuant
to the terms of the notes will be increased by specified amounts on each July 1
during their term. If the principal unitholder holds the two notes until July
1, 2000, he would be entitled to receive aggregate payments (excluding
interest) in the amount of $20,044,320 equal to $30.00 per unit for each unit
acquired from him. Each of the notes bear interest payable quarterly at the
rate of 7.76% per annum. At June 30, 1998, the aggregate balance of the notes,
including scheduled increases in the note balances, amounted to $17,538,780.
Under the terms of the redemption, the principal unitholder's family members
were paid $1,941,450, equal to $21.50 in cash for each of the 90,300 units
acquired from them.
On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit agreement
with its commercial bank, $20,000,000 of which is reserved until the repayment
of notes payable related to the redeemed BCLP II Units described in the
preceding paragraph. Interest on advances under the revolving credit agreement
accrues at BCLP II's option of either LIBOR plus 0.70% or the greater of the
bank's Base Rate or the Federal Funds Effective Rate plus 0.50% (6.39922% at
June 30, 1998). As of June 30, 1998, $30,000,000 was outstanding under the
revolving credit agreement, which is payable upon maturity of the agreement.
The revolving credit agreement expires on June 30, 2003 and is secured by a
pledge of certain assets of CCC. The revolving credit agreement contains
certain restrictions and various provisions and covenants customary in lending
arrangements of this type.
Note H - Subordinated Debentures
In connection with the Reorganization, BCLP II distributed 6% subordinated
debentures to certain former holders of BCLP II units. One $20 face value
subordinated debenture was distributed for each BCLP II unit with respect to
which a BCLP II Unitholder elected to receive subordinated debentures. In the
Reorganization, BCLP II Unitholders elected to receive subordinated debentures
with respect to 2,703,664 former BCLP II units.
The subordinated debentures have been recorded at $12.20 per debenture, the
fair market value at date of issue, or $32,984,700. The original issue discount
of $21,088,580 will be amortized over the 40-year life of the debentures using
the interest method.
The subordinated debentures bear interest at the rate of 6% per annum, payable
annually commencing June 30, 1999. The subordinated debentures mature on June
30, 2038. There is no mandatory redemption of the subordinated debentures, and
they are not entitled to any sinking fund.
Note I - Commitments and Contingencies
In July and August 1998, four separate class action complaints (the
"Complaints") were filed by Unitholders in the Court of Chancery of the State
of Delaware in and for New Castle County against BCLP II, its former general
partner (Celtics, Inc.), and the directors of Celtics, Inc. Each of the
Complaints alleges, among other things, that the Reorganization was unfair to
former BCLP II Unitholders, and seeks to recover an unspecified amount of
damages, including attorneys' and experts' fees and expenses. The Partnership
filed a Motion to Dismiss one of the complaints on July 29, 1998, and discovery
in that case has been stayed by agreement of the parties. The Partnership is
seeking to consolidate these Complaints.
Although the ultimate outcome of these Complaints cannot be determined at this
time, management of the Partnership does not believe that the outcome of these
proceedings will have a material adverse effect on the Partnership's financial
position or results of operations.
Effective June 30, 1998, the Board of Governors of the NBA voted to reopen the
collective bargaining agreement ("Collective Bargaining Agreement") between the
NBA and the NBA Players Association (the "NBPA"). Effective July 1, 1998, the
NBA commenced a lockout of NBA players in support of its attempt to reach a new
collective bargaining agreement. The NBA and the NBPA have been engaged in
negotiations regarding a new collective bargaining agreement, but as of
September 18, 1998, no agreement has been reached. In the event that the
lockout extends into the 1998-99 season, NBA teams, including the Boston
Celtics, will refund amounts paid by season ticket holders (plus interest) for
any games that are canceled as a result of the lockout. In addition, as a
result of the lockout, NBA teams have not made any payments due to players with
respect to the 1998-99 season. The NBPA has disputed the NBA's position on this
matter, and both the NBA and the NBPA have presented their cases to an
independent arbitrator, who will make his ruling no later than the middle of
October 1998. As of September 18, 1998, the arbitrator has not ruled on this
matter. Prior to the lockout, the Boston Celtics had made salary commitments to
its players under contract for the 1998-99 season totaling approximately
$18,801,000.
Although the ultimate outcome of this matter cannot be determined at this time,
any loss of games as a result of the absence of a collective bargaining
agreement or the continuation of the lockout will have a material adverse
effect on the Partnership's financial condition and its results of operations.
Further, if NBA teams, including the Boston Celtics, are required to honor the
player contracts for the 1998-99 season and beyond without agreeing to a new
collective bargaining agreement or without ending the lockout, which would
result in the loss of games, the Partnership's financial condition and results
of operations will be materially and adversely affected.
Note J - Benefit Plans
Certain of the Partnership's subsidiaries have defined contribution plans
covering substantially all employees who meet certain eligibility requirements.
Participants may make contributions to the plans up to 15% of their
compensation (as defined). Contributions to these plans are matched by the
Partnership and its subsidiaries 100% on the first 7% of compensation
contributed by each participant. Contributions are fully vested after three
years of service.
Note K - Income Taxes
Components of deferred tax liabilities and assets at June 30, 1998 are as
follows (000's omitted):
<TABLE>
<CAPTION>
June 30
-----------------------------
1998 1997 1996
-----------------------------
<S> <C> <C> <C>
Deferred tax assets:
Difference between tax and financial statement bases
of the assets and liabilities of BCLP and subsidiaries
at date of Reorganization related to:
National Basketball Association Franchise $ 5,376
Deferred compensation 3,977
Intangible assets 950
-----------------------------
10,303
Less valuation allowance (10,303)
-----------------------------
Net deferred tax assets 0
-----------------------------
Deferred tax liabilities:
Financial statement basis in excess of tax basis of
assets related to restructuring of BCCLP completed
in 1996 20,100 $20,100 $20,100
Less amount assumed by Castle Creek Partners, L.P. as
a result of indemnities in the Merger Agreement of the
Reorganization (10,389)
-----------------------------
Net deferred tax liabilities 9,711 20,100 20,100
-----------------------------
Total deferred tax liabilities $ 9,711 $20,100 $20,100
=============================
</TABLE>
The net deferred tax liabilities represent the tax-effected difference between
the tax and financial statement bases of the net assets of Holdings and CII,
and relate to Holdings or subsidiary partnerships BCCLP and BCBLP. The net
deferred tax assets relate to different entities. As a result, the deferred tax
assets and liabilities do not necessarily offset and are evaluated separately.
Because of the uncertainty of realization, a valuation allowance has been
established for the deferred tax assets.
Report of Independent Auditors
To the General Partner
Boston Celtics Limited Partnership II
We have audited the accompanying consolidated balance sheets of Boston Celtics
Limited Partnership II (formerly Boston Celtics Limited Partnership) and
Subsidiaries as of June 30, 1998 and 1997, and the related consolidated
statements of income, partners' capital (deficit) and cash flows for each of
the three years in the period ended June 30, 1998. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Boston
Celtics Limited Partnership II and Subsidiaries at June 30, 1998 and 1997, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended June 30, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
----------------------------------------
Boston, Massachusetts
September 18, 1998
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, June 30,
ASSETS 1998 1997
---------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,268,186 $ 6,498,739
Marketable securities 1,041,446 42,572,683
Other short-term investments 81,114,266 49,671,153
Accounts receivable 2,667,438
Prepaid federal and state income taxes 432,895
Prepaid expenses and other current assets 212,734 1,958,238
---------------------------
TOTAL CURRENT ASSETS 90,636,632 103,801,146
PROPERTY AND EQUIPMENT, net 23,516 909,416
NATIONAL BASKETBALL ASSOCIATION FRANCHISE, net of
amortization of $2,159,360 4,010,221
OTHER ASSETS 1,096,129 10,478,873
---------------------------
$91,756,277 $119,199,656
---------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,102,296 $ 12,877,723
Due to related parties 3,036,184
Deferred game revenues 5,584,848
Federal and state income taxes payable 733,800
Notes payable to bank - current portion 2,500,000
Notes payable 17,538,780 16,409,617
Deferred compensation - current portion 1,767,263
---------------------------
TOTAL CURRENT LIABILITIES 22,411,060 39,139,451
DEFERRED FEDERAL AND STATE INCOME TAXES 9,710,875 20,100,000
NOTES PAYABLE TO BANK - noncurrent portion 30,000,000 47,500,000
SUBORDINATED DEBENTURES 32,984,700
INVESTMENT IN CAPITAL DEFICIENCY OF CELTICS
BASKETBALL HOLDINGS, L.P. 29,865,364
DEFERRED COMPENSATION - noncurrent portion 10,380,296
OTHER NON-CURRENT LIABILITIES 9,870,000
PARTNERS' CAPITAL (DEFICIT), authorized 25,000,000 units
of limited partnership interest, issued 2,703,664 units
in 1998 and 6,399,722 units in 1997, outstanding
2,703,664 units in 1998 and 5,346,164 units in 1997
Boston Celtics Limited Partnership II -
General Partner 210,292 226,817
Limited Partners (34,329,796) (8,527,928)
---------------------------
(34,119,504) (8,301,111)
Celtics Limited Partnership - General Partner 262,554 (129,866)
Boston Celtics Communications Limited Partnership - General
Partner 641,228 640,886
---------------------------
TOTAL PARTNERS' CAPITAL (DEFICIT) (33,215,722) (7,790,091)
---------------------------
$91,756,277 $119,199,656
---------------------------
</TABLE>
See notes to consolidated financial statements.
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------
June 30, June 30, June 30,
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Revenues:
Basketball regular season -
Ticket sales $39,107,960 $31,813,019 $35,249,625
Television and radio broadcast rights fees 28,002,469 23,269,159 22,071,992
Other, principally promotional advertising 8,569,485 7,915,626 7,458,651
-----------------------------------------
75,679,914 62,997,804 64,780,268
-----------------------------------------
Costs and expenses:
Basketball regular season -
Team 40,401,643 40,941,156 27,891,264
Game 2,820,107 2,386,042 2,606,218
General and administrative 13,464,566 13,913,893 15,053,333
Selling and promotional 4,819,478 4,680,168 2,973,488
Depreciation 208,162 189,324 140,894
Amortization of NBA franchise and other intangible
assets 165,035 164,702 164,703
-----------------------------------------
61,878,991 62,275,285 48,829,900
-----------------------------------------
13,800,923 722,519 15,950,368
Interest expense (6,017,737) (5,872,805) (6,387,598)
Interest income 6,402,366 6,609,541 8,175,184
Net realized gains (losses) on disposition of marketable
securities and other short-term investments (18,235) 361,051 (101,138)
-----------------------------------------
Income from continuing operations before income taxes 14,167,317 1,820,306 17,636,816
Provision for income taxes 1,900,000 1,400,000 1,850,000
-----------------------------------------
Income from continuing operations 12,267,317 420,306 15,786,816
Discontinued operations:
Income from discontinued operations (less applicable
income taxes of $30,000) 82,806
Gain from disposal of discontinued operations (less
applicable income taxes of $17,770,000) 38,330,907
-----------------------------------------
Net income 12,267,317 420,306 54,200,529
Net income applicable to interests of General Partners 306,216 62,246 1,291,014
-----------------------------------------
Net income applicable to interests of Limited Partners $11,961,101 $ 358,060 $52,909,515
=========================================
Per unit:
Income from continuing operations-basic $2.45 $0.07 $2.68
Income from continuing operations-diluted $2.17 $0.06 $2.59
Net income-basic $2.45 $0.07 $9.18
Net income-diluted $2.17 $0.06 $8.89
Distributions declared $2.00 $1.00 $1.50
</TABLE>
See notes to consolidated financial statements.
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Partners' Capital (Deficit)
<TABLE>
<CAPTION>
Limited Partners
--------------------------
Total Units Amount
-------------------------------------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1995 $(15,720,447) 6,399,722 $(15,690,191)
Net income for the year ended June 30, 1996 54,200,529 52,909,515
Distributions:
Cash to unitholders - $1.50 per unit (8,547,925) (8,461,917)
Cash by Boston Celtics Broadcasting Limited Partnership to Celtics
Communications, Inc. (General Partner's Share) (152,887)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) (200,000)
Sale of General Partner's interest in Boston Celtics Broadcasting
Limited Partnership 13,705
Purchase of units for the treasury (16,306,546) (758,444) (16,306,546)
Issuance of units from the treasury 3,658,363 234,886 3,658,363
Unrealized loss on marketable securities (424,523) (420,768)
--------------------------------------------
BALANCE AT JUNE 30, 1996 16,520,269 5,876,164 15,688,456
Net income for the year ended June 30, 1997 420,306 358,060
Distributions:
Cash to unitholders - $1.00 per unit (5,935,876) (5,876,164)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) (95,000)
Purchase of units for the treasury (22,880,000) (780,000) (22,880,000)
Issuance of units from the treasury 4,331,250 250,000 4,331,250
Unrealized loss on marketable securities (151,040) (149,530)
--------------------------------------------
BALANCE AT JUNE 30, 1997 (7,790,091) 5,346,164 (8,527,928)
Net income for the year ended June 30, 1998 12,267,317 11,961,101
Exercise of options to purchase units of Partnership interest 5,156,250 250,000 5,156,250
Distributions:
Subordinated Debentures to unitholders (32,984,700) (32,984,700)
Cash to unitholders - $2.00 per unit (8,104,186) (8,049,828)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) (105,000)
Investment in Celtics Basketball Holdings by Celtics Limited
Partnership to Boston Celtics Corporation 319,513
Investment in Castle Creek Partners, G.P. to Celtics, Inc. (83,682)
Units of interest in Castle Creek Partners, L.P. to unitholders
pursuant to Reorganization and cancellation of related units (12,342,790) (2,892,500) (12,342,790)
Contribution from BCLP Merger, Inc. 100 100
Assumption of deferred tax liability by Castle Creek Partners, L.P. 10,389,125 10,389,125
Purchase of units for the treasury (7,147)
Unrealized gain on marketable securities 69,569 68,874
--------------------------------------------
BALANCE AT JUNE 30, 1998 $(33,215,722) 2,703,664 $(34,329,796)
============================================
</TABLE>
See notes to consolidated financial statements.
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Partners' Capital (Deficit)
(continued)
<TABLE>
<CAPTION>
General Partners' Interests
-----------------------------------------------
Boston Celtics
Limited Celtics Limited
Total Partnership II Partnership
-----------------------------------------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1995 $ (30,256) $(160,255) $(105,194)
Net income for the year ended June 30, 1996 1,291,014 534,440 212,206
Distributions:
Cash to unitholders - $1.50 per unit (86,008) (86,008)
Cash by Boston Celtics Broadcasting Limited Partnership to Celtics
Communications, Inc. (General Partner's Share) (152,887)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) (200,000) (200,000)
Sale of General Partner's interest in Boston Celtics Broadcasting
Limited Partnership 13,705
Purchase of units for the treasury
Issuance of units from the treasury
Unrealized loss on marketable securities (3,755) (3,755)
-------------------------------------------
BALANCE AT JUNE 30, 1996 831,813 284,422 (92,988)
Net income for the year ended June 30, 1997 62,246 3,617 58,122
Distributions:
Cash to unitholders - $1.00 per unit (59,712) (59,712)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) (95,000) (95,000)
Purchase of units for the treasury
Issuance of units from the treasury
Unrealized loss on marketable securities (1,510) (1,510)
-------------------------------------------
BALANCE AT JUNE 30, 1997 737,837 226,817 (129,866)
Net income for the year ended June 30, 1998 306,216 120,820 185,054
Exercise of options to purchase units of Partnership interest
Distributions:
Subordinated Debentures to unitholders
Cash to unitholders - $2.00 per unit (54,358) (54,358)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) (105,000) (105,000)
Investment in Celtics Basketball Holdings to Boston Celtics
Corporation 319,513 319,513
Investment in Castle Creek Partners, G.P. to Celtics, Inc. (83,682) (83,682)
Units of interest in Castle Creek Partners, L.P. to unitholders
pursuant to Reorganization and cancellation of related units
Contribution from BCLP Merger, Inc.
Assumption of deferred tax liability by Castle Creek Partners, L.P.
Purchase of units for the treasury (7,147) (7,147)
Unrealized gain on marketable securities 695 695
-------------------------------------------
BALANCE AT JUNE 30, 1998 $1,114,074 $ 210,292 $ 262,554
===========================================
</TABLE>
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Partners' Capital (Deficit)
(continued)
<TABLE>
<CAPTION>
General Partners' Interests
--------------------------------
Boston Celtics Boston Celtics
Communications Broadcasting
Limited Limited
Partnership Partnership
--------------------------------
<S> <C> <C>
BALANCE AT JUNE 30, 1995 $ 96,791 $138,402
Net income for the year ended June 30, 1996 543,588 780
Distributions:
Cash to unitholders - $1.50 per unit
Cash by Boston Celtics Broadcasting Limited Partnership to Celtics
Communications, Inc. (General Partner's Share) (152,887)
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share)
Sale of General Partner's interest in Boston Celtics Broadcasting
Limited Partnership 13,705
Purchase of units for the treasury
Issuance of units from the treasury
Unrealized loss on marketable securities
---------------------------
BALANCE AT JUNE 30, 1996 640,379 0
Net income for the year ended June 30, 1997 507
Distributions:
Cash to unitholders - $1.00 per unit
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share) Purchase of units for the treasury
Issuance of units from the treasury Unrealized loss on marketable
securities
---------------------------
BALANCE AT JUNE 30, 1997 640,886 0
Net income for the year ended June 30, 1998 342
Exercise of options to purchase units of Partnership interest
Distributions:
Subordinated Debentures to unitholders
Cash to unitholders - $2.00 per unit
Cash by Celtics Limited Partnership to Boston Celtics Corporation
(General Partner's Share)
Investment in Celtics Basketball Holdings to Boston Celtics
Corporation
Investment in Castle Creek Partners, G.P. to Celtics, Inc.
Units of interest in Castle Creek Partners, L.P. to unitholders
pursuant to Reorganization and cancellation of related units
Contribution from BCLP Merger, Inc.
Assumption of deferred tax liability by Castle Creek Partners, L.P.
Purchase of units for the treasury
Unrealized gain on marketable securities
---------------------------
BALANCE AT JUNE 30, 1998 $641,228 $ 0
===========================
</TABLE>
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------
June 30, June 30, June 30,
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts:
Basketball regular season receipts:
Ticket sales $ 40,147,616 $ 33,132,256 $ 31,322,745
Television and radio broadcast rights fees 26,195,503 22,009,139 19,908,800
Other, principally promotional advertising 9,068,435 8,141,716 8,424,038
Basketball playoff receipts 360,895
--------------------------------------------
75,411,554 63,283,111 60,016,478
Costs and expenses:
Basketball regular season expenditures:
Team expenses 37,476,899 34,390,240 26,066,875
Game expenses 2,706,673 2,273,709 2,481,007
Basketball playoff expenses
General and administrative expenses 13,442,475 15,650,961 13,996,805
Selling and promotional expenses 4,974,501 3,730,578 1,333,238
--------------------------------------------
58,600,548 56,045,488 43,877,925
--------------------------------------------
16,811,006 7,237,623 16,138,553
Interest income 6,459,967 6,319,302 9,553,938
Interest expense (4,484,886) (4,422,737) (4,624,043)
Proceeds from league expansion 4,490,673
Payment of income taxes (733,306) (2,372,220) (4,973,883)
Payment of deferred compensation (1,751,746) (4,300,147) (5,226,095)
--------------------------------------------
NET CASH FLOWS FROM CONTINUING OPERATIONS 16,301,035 2,461,821 15,359,143
NET CASH FLOWS (USED BY) FROM DISCONTINUED OPERATIONS (2,931,742)
--------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 16,301,035 2,461,821 12,427,401
CASH FLOWS (USED BY) FROM INVESTING ACTIVITIES
Purchases of:
Marketable securities (41,399,070) (43,482,870) (55,272,268)
Short-term investments (747,722,323) (594,400,000) (116,150,000)
Proceeds from sales of:
Marketable securities 59,895,502 47,925,944 53,355,561
Short-term investments 697,787,584 617,500,000 103,300,000
Proceeds from the sale of Boston Celtics Broadcasting
Limited Partnership 79,200,000
Cash portion of net assets of Boston Celtics Broadcasting
Limited Partnership sold (1,602,071)
Capital expenditures (384,921) (136,279) (796,424)
Other receipts (expenditures) (116,171) (441,129) 293,503
--------------------------------------------
NET CASH FLOWS (USED BY) FROM INVESTING ACTIVITIES (31,939,399) 26,965,666 62,328,301
--------------------------------------------
NET CASH FLOWS (USED BY) FROM OPERATING AND INVESTING
ACTIVITIES (15,638,364) 29,427,487 74,755,702
</TABLE>
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------
June 30, June 30, June 30,
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS (USED BY) FROM FINANCING ACTIVITIES
Proceeds from bank borrowings 80,000,000
Payment of bank borrowings (50,000,000) (80,000,000)
Purchase of Boston Celtics Limited Partnership units (7,147) (22,880,000) (1,941,450)
Proceeds from exercise of options to purchase limited
partnership units 2,125,000
Cash distributions:
To Celtics Basketball, L.P. from Celtics Limited
Partnership (6,536,134)
To its minority interest holder from Boston Celtics
Broadcasting Limited Partnership (7,797,244)
To limited partners of Boston Celtics Limited Partnership (8,068,908) (5,935,876) (18,061,500)
To General Partners (105,000) (95,000) (536,395)
--------------------------------------------
NET CASH FLOWS (USED BY) FROM FINANCING ACTIVITIES 17,407,811 (28,910,876) (108,336,589)
--------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,769,447 516,611 (33,580,887)
Cash and cash equivalents at beginning of year 6,498,739 5,982,128 39,563,015
--------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,268,186 $ 6,498,739 $ 5,982,128
============================================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Contribution of net assets of Celtics Limited Partnership to
Celtics Basketball L.P. in exchange for limited partnership
interest in Celtics Basketball L.P. $(31,631,779)
Contribution of short-term investments to Castle Creek
Partners, L.P. in exchange for units of limited partnership
interest in Castle Creek Partners, L.P. $ 43,617,669
Contribution payable to Castle Creek Partners, G.P., Inc. in
exchange for investment in Castle Creek Partners, G.P.,
Inc. $ 440,583
Contribution of limited partnership interest in Celtics
Basketball L.P. and investment asset to Celtics Basketball
Holdings L.P. in exchange for limited partnership interest
in Celtics Basketball Holdings L.P. $(38,241,796)
Distribution by Celtics Limited Partnership of investment
in Celtics Basketball Holdings to Boston Celtics
Corporation $ (319,513)
Distribution of investment in Celtics Basketball Holdings to
Castle Creek Partners, L.P. in exchange for units of limited
partnership interest in Castle Creek Partners, L.P. $(31,315,462)
Distribution of investment in Celtics Basketball Holdings to
Castle Creek Partners, G.P., Inc. in exchange for units of
limited partnership interest in Castle Creek Partners, G.P.,
Inc. $ (316,318)
Distribution of investment in Castle Creek Partners, G.P.,
Inc. to Celtics, Inc. $ (83,682)
Distribution of units of partnership interest in Castle Creek
Partners, L.P. to unitholders and subsequent cancellation of
related Boston Celtics Limited Partnership II units $ 12,342,790
Assumption of deferred tax liability by Castle Creek
Partners, L.P. $ 10,389,125
Distribution of subordinated debentures to unitholders $ 32,984,700
Conversion of convertible subordinated note payable for
25% interest in Boston Celtics Broadcasting Limited
Partnership $ 10,000,000
Notes payable for acquisition of Boston Celtics Limited
Partnership units $ 14,365,096
Net non-cash assets of Boston Celtics Broadcasting Limited
Partnership sold $ 9,517,608
</TABLE>
See notes to consolidated financial statements.
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note A - Basis of Presentation
Principles of Consolidation: The consolidated financial statements include
the accounts of Boston Celtics Limited Partnership II ("BCLP II," the
"Partnership") and its majority-owned and controlled subsidiaries and
partnerships. All intercompany transactions are eliminated in
consolidation.
BCLP II is a Delaware limited partnership formed in 1986 as Boston Celtics
Limited Partnership. Its general partner was Celtics, Inc. Pursuant to a
reorganization of its partnership structure that was completed on June 30,
1998 (the "Reorganization"), the Partnership's name was changed to Boston
Celtics Limited Partnership II, and its general partner became BCLP II GP,
Inc. ("BCLP II GP"), a wholly owned subsidiary of Celtics, Inc. As a result
of the Reorganization, the Partnership's 99% limited partnership interest is
owned by Boston Celtics Limited Partnership (a Delaware limited partnership
formed in April 1998).
Prior to the Reorganization, BCLP II, through its subsidiaries, owned and
operated the Boston Celtics professional basketball team of the National
Basketball Association (the "Boston Celtics") and held investments. The
Boston Celtics were owned by Celtics Limited Partnership ("CLP"), in which
BCLP II has a 99% limited partnership interest.
Upon completion of the Reorganization, the Boston Celtics are owned and
operated by Celtics Basketball, L.P., a subsidiary of Celtics Basketball
Holdings, L.P. ("Celtics Basketball Holdings"). BCLP II, through its
subsidiaries, holds certain investments, including a 48.3123% limited
partnership investment in Celtics Basketball Holdings.
Accordingly, the operating results of the Boston Celtics are consolidated in
the accompanying financial statements for periods prior to the
Reorganization. Effective June 30, 1998, BCLP II's interest in the accounts
and operations of the Boston Celtics is reflected in its investment in
Celtics Basketball Holdings, which is accounted for on the equity method,
and accordingly, the investment is carried at cost, increased by equity in
the earnings of Celtics Basketball Holdings and reduced by distributions
received.
Discontinued operations: The consolidated financial statements for fiscal
1996 include the results of operations of the Communications Group, which
included Television Station WFXT - Channel 25 of Boston, Massachusetts (sold
July 7, 1995) as discontinued operations. Gains on its disposal were also
included in discontinued operations. Revenues of discontinued operations
were $534,000 for the year ended June 30, 1996.
Note B - Significant Accounting Policies
Cash Equivalents: Cash equivalents represent short-term investments with
maturities at date of purchase of three months or less. Marketable
securities represent investments with maturities greater than three months.
Estimates and Assumptions: The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Concentration of Credit Risk: Financial instruments which potentially
subject the Partnership to credit risk consist principally of cash
equivalents, short-term investments, marketable securities and accounts
receivable. The Partnership's cash equivalents, short-term investments and
marketable securities represent investments with relatively short maturities
in the securities of highly rated financial institutions and United States
government entities. The Partnership performs periodic credit evaluations
of its customers' financial condition and generally does not require
collateral. Credit losses have been consistently within management's
expectations.
Marketable Securities and Other Short Term Investments: The Partnership
accounts for marketable securities and other short-term investments in
accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" which
established the accounting and reporting requirements for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. All affected investment securities are
classified as securities to be held to maturity, for trading, or available-
for-sale.
Financial Instruments: The carrying value of financial instruments such as
cash equivalents, accounts receivable and accounts payable approximate their
fair values based on the short-term maturities of these instruments. The
carrying value of long-term debt approximates its fair value based on
references to similar instruments and the variable interest rate.
Franchise and Other Intangible Assets: These assets, consisting principally
of the National Basketball Association franchise and other intangible assets
are being amortized primarily on a straight-line basis over 40 years.
Property and Equipment: Property and equipment is stated at cost and is
being depreciated over estimated useful lives of from five to fifteen years
using straight line or accelerated methods of depreciation as appropriate.
Basketball Operations: Revenues, principally ticket sales and television
and radio broadcasting fees, generally are recorded as revenues at the time
the game to which such proceeds relate is played. Team expenses,
principally player and coaches salaries, related fringe benefits and
insurance, and game and playoff expenses, principally National Basketball
Association attendance assessments and travel, are recorded as expense on
the same basis. Accordingly, advance ticket sales and payments on
television and radio broadcasting contracts and payments for team and game
expenses not earned or incurred are recorded as deferred revenues and
deferred expenses, respectively, and amortized ratably as regular season
games are played. General and administrative and selling and promotional
expenses are charged to operations as incurred.
Stock Options: The Partnership accounts for stock options in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." The Partnership has adopted the disclosure provisions
only of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Adoption of SFAS 123 did not have a material
impact on the Partnership's financial statements.
Income Taxes: No provision for income taxes is required by the Partnership
as its income and expenses are taxable to or deductible by its partners.
Celtics Capital Corporation ("CCC"), BCCLP Holding Corporation ("Holdings")
and Celtics Investments, Inc. ("CII"), wholly-owned subsidiary corporations of
the Partnership, are subject to income taxes and report their income tax
provision, including the income (losses) of subsidiary partnerships Boston
Celtics Communications Limited Partnership ("BCCLP") and Boston Celtics
Broadcasting Limited Partnership ("BCBLP") (prior to the sale of BCBLP on
July 7, 1995), using the liability method in accordance with Financial
Accounting Standards Board Statement 109, "Accounting for Income Taxes."
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using tax rates and laws that will be in effect
when the differences are expected to reverse.
Comprehensive Income: In June 1997, the Financial Accounting Standards
Board issued Statement No. 130, "Reporting Comprehensive Income" ("Statement
130"). Statement 130 is effective for fiscal years beginning after December
15, 1997. The Partnership believes that the adoption of Statement 130 will
not have a material impact on the Partnership's consolidated financial
statements.
Note C - Reorganization
In connection with the Reorganization, unitholders were given an option of
exchanging their units of interest in BCLP II for units of limited
partnership interest in Castle Creek Partners, L.P. ("Castle Creek"), a
privately held partnership formed in connection with the Reorganization, on
a 100-for-one basis. The Partnership would then contribute to Castle Creek
the percentage of its net assets, subject to certain adjustments,
corresponding to the percentage of unitholders that elected to receive Castle
Creek interests (the "Proportionate Election"). The Partnership's net assets
consisted primarily of investment assets and, through a subsidiary, the
assets of the Boston Celtics. In exchange for the contribution of assets to
Castle Creek, the Partnership was to receive limited partnership interests in
Castle Creek, which they subsequently would distribute to BCLP II unitholders
electing to receive Castle Creek interests
in the Reorganization.
In anticipation of the contribution of assets to Castle Creek, the
Partnership contributed $41,022,067 of investment assets to Castle Creek in
May 1998 based on an estimate of the Proportionate Election. When the
Reorganization election was complete on June 30, 1998 and the Proportionate
Election was finalized at 51.68719%, it was determined that the Partnership
needed to contribute an additional $3,036,184 of assets to Castle Creek to
reflect the Proportionate Election. This amount has been classified as due
to related parties on the consolidated balance sheet at June 30, 1998.
Note D - Investment in Capital Deficiency of Celtics Basketball Holdings, L.P.
BCLP II, through its subsidiary partnerships and corporations, owns a 48.3%
limited partnership interest in Celtics Basketball Holdings. Prior to the
completion of the Reorganization on June 30, 1998, Celtics Basketball
Holdings held no material assets and was not engaged in operations. Upon
completion of the Reorganization, Celtics Basketball Holdings, through
Celtics Basketball, L.P., its 99.999% subsidiary partnership, owns and
operates the Boston Celtics professional basketball team of the National
Basketball Association. BCLP II's investment in Celtics Basketball Holdings
is accounted for on the equity method.
Summary balance sheet data for Celtics Basketball Holdings at June 30, 1998
is as follows (amounts in thousands):
<TABLE>
<S> <C>
Current assets $ 9,867
Current liabilities 27,508
Total assets 25,255
Notes payable to bank - noncurrent portion 50,000
Deferred compensation - noncurrent portion 8,962
Other noncurrent liabilities 600
Partners' capital (deficit) (61,815)
</TABLE>
Summary income statement data for the Boston Celtics professional basketball
team for the year ended June 30, 1998 is as follows (amounts in thousands):
<TABLE>
<S> <C>
Total revenues $75,680
Total costs and expenses 54,110
Interest income (expense), net (3,067)
-------
Net income $18,503
=======
</TABLE>
Note E - Marketable Securities and Other Short Term Investments
The following is a summary of marketable securities which are classified as
available-for-sale securities:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1998:
U.S. government securities $ 1,036,086 $ 5,360 $ 1,041,446
-----------------------------------------------------
$ 1,036,086 $ 5,360 $ 1,041,446
=====================================================
June 30, 1997:
U.S. corporate debt securities $16,719,000 $17,734 $ (30,767) $16,705,967
U.S. government securities 25,917,892 42,120 (93,296) 25,866,716
-----------------------------------------------------
$42,636,892 $59,854 $(124,063) $42,572,683
=====================================================
</TABLE>
Gross realized gains and losses on available-for-sale securities are as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------
<S> <C> <C>
U.S. corporate debt securities
Gross realized gains $ 45,249 $ 521
Gross realized (losses) (33,319) (34,805)
U.S. government securities
Gross realized gains 15,433 596,981
Gross realized (losses) (45,598) (201,646)
----------------------
Net realized gains (losses) $(18,235) $361,051
======================
</TABLE>
The net adjustment to unrealized holding gains and losses on available-for-
sale securities included as a separate component of Partners' Capital
(Deficit) resulted in gains of $69,569 in 1998 and losses of $151,040 in
1997.
The marketable securities owned by the Partnership at June 30, 1998 are due
within one year.
Other short term investments, which consist primarily of private placement
notes with a commercial bank with a maturity of under one year, are
classified as held-to-maturity and are carried at amortized cost, which
approximates market value. There were no unrealized gains or losses in any
of these investments at June 30, 1998.
Note F - Property and Equipment
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30,
----------------------
1998 1997
----------------------
<S> <C> <C>
Leasehold improvements $1,184,244
Furniture and fixtures $45,473 440,965
----------------------
45,473 1,625,209
Less: accumulated depreciation (21,957) (715,793)
----------------------
Net property and equipment $23,516 $ 909,416
======================
</TABLE>
Note G - Notes Payable
On August 30, 1995, the Partnership redeemed an aggregate of 758,444 units
representing assignments of beneficial ownership of limited partnership
interest in the Partnership. The redeemed units were beneficially owned by
a principal unitholder and his family. The principal unitholder received
two notes from the Partnership in exchange for 668,144 units acquired by the
Partnership from him. The two notes have an aggregate initial face amount
of $14,365,096, equal to $21.50 per unit for each unit acquired. The two
notes, which are due and payable on July 1, 2000 (unless prepaid earlier
pursuant to mandatory prepayment provisions contained therein) also provide
that the amounts to be paid to such unitholder pursuant to the terms of the
notes will be increased by specified amounts on each July 1 during their
term. If the principal unitholder holds the two notes until July 1, 2000,
he would be entitled to receive aggregate payments (excluding interest) in
the amount of $20,044,320 equal to $30.00 per unit for each unit acquired
from him. Each of the notes bears interest payable quarterly at the rate of
7.76% per annum. Interest of $2,402,550, $2,247,134 and $2,008,909 related
to these notes was charged to operations in 1998, 1997 and 1996,
respectively. At June 30, 1998, the aggregate balance of the notes,
including scheduled increases in the note balances, amounted to $16,409,617.
Under the terms of the redemption, the principal unitholder's family members
were paid $1,941,450, equal to $21.50 in cash for each of the 90,300 units
acquired from them.
On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit
agreement with its commercial bank, $20,000,000 of which is reserved until
the repayment of notes payable related to the redeemed BCLP II Units
described in the preceding paragraph. Interest on advances under the
revolving credit agreement accrues at BCLP II's option of either LIBOR plus
0.70% or the greater of the bank's Base Rate or the Federal Funds Effective
Rate plus 0.50% (6.39922% at June 30, 1998). As of June 30, 1998,
$30,000,000 was outstanding under the revolving credit agreement, which is
payable upon maturity of the agreement.
The revolving credit agreement expires on June 30, 2003 and is secured by a
pledge of certain assets of CCC. The revolving credit agreement contains
certain restrictions and various provisions and covenants customary in
lending arrangements of this type.
On December 15, 1997, Celtics Limited Partnership ("CLP"), the Partnership's
99%-owned limited partnership which owned and operated the Boston Celtics
basketball team prior to the June 30, 1998 Reorganization, entered into a
$60,000,000 credit facility with its commercial bank, consisting of a
$50,000,000 term loan bearing interest at 6.29% and a $10,000,000 revolving
line of credit. As of June 30, 1998, no borrowings were outstanding against
the $10,000,000 revolving line of credit. The proceeds from the $50,000,000
term loan were used to repay a separate $50,000,000 loan from a commercial
bank that bore interest at 6.35%. Pursuant to the Reorganization, the
$60,000,000 credit facility was assigned to Celtics Basketball L.P. on June
30, 1998.
Interest charged to operations in connection with borrowings amounted to
$3,212,000, $3,219,000 and $3,366,000 in the years ended June 30, 1998, 1997
and 1996, respectively.
Note H - Subordinated Debentures
In connection with the Reorganization, BCLP II distributed 6% subordinated
debentures to certain former holders of BCLP II units. One $20 face value
subordinated debenture was distributed for each BCLP II unit with respect to
which a BCLP II Unitholder elected to receive subordinated debentures. In
the Reorganization, BCLP II Unitholders elected to receive subordinated
debentures with respect to 2,703,664 former BCLP II units.
The subordinated debentures have been recorded at $12.20 per debenture, the
fair market value at date of issue, or $32,984,700. The original issue
discount of $21,088,580 will be amortized over the 40-year life of the
debentures using the interest method.
The subordinated debentures bear interest at the rate of 6% per annum,
payable annually commencing June 30, 1999. The subordinated debentures
mature on June 30, 2038. There is no mandatory redemption of the
subordinated debentures, and they are not entitled to any sinking fund.
Note I - Related Party Transactions
Boston Celtics Corporation, general partner of CLP, receives a management
fee of $750,000 per annum, subject to annual increases based on annual cash
flows from basketball operations after June 30, 1989. Management fee
obligations of $1,577,000, $820,000 and $1,555,000 applicable to Boston
Celtics Corporation, general partner of CLP, were charged to operations
during the years ended June 30, 1998, 1997 and 1996, respectively.
Note J - Commitments and Contingencies
In July and August 1998, four separate class action complaints (the
"Complaints") were filed by Unitholders in the Court of Chancery of the State
of Delaware in and for New Castle County against BCLP II, its former general
partner (Celtics, Inc.), and the directors of Celtics, Inc. Each of the
Complaints alleges, among other things, that the Reorganization was unfair to
former BCLP II Unitholders, and seeks to recover an unspecified amount of
damages, including attorneys' and experts' fees and expenses. The Partnership
filed a Motion to Dismiss one of the complaints on July 29, 1998, and discovery
in that case has been stayed by agreement of the parties. The Partnership is
seeking to consolidate these Complaints.
Although the ultimate outcome of these Complaints cannot be determined at this
time, management of the Partnership does not believe that the outcome of these
proceedings will have a material adverse effect on the Partnership's financial
position or results of operations.
Effective June 30, 1998, the Board of Governors of the NBA voted to reopen the
collective bargaining agreement ("Collective Bargaining Agreement") between the
NBA and the NBA Players Association (the "NBPA"). Effective July 1, 1998, the
NBA commenced a lockout of NBA players in support of its attempt to reach a new
collective bargaining agreement. The NBA and the NBPA have been engaged in
negotiations regarding a new collective bargaining agreement, but as of
September 18, 1998, no agreement has been reached. In the event that the
lockout extends into the 1998-99 season, NBA teams, including the Boston
Celtics, will refund amounts paid by season ticket holders (plus interest) for
any games that are canceled as a result of the lockout. In addition, as a
result of the lockout, NBA teams have not made any payments due to players with
respect to the 1998-99 season. The NBPA has disputed the NBA's position on
this matter, and both the NBA and the NBPA have presented their cases to an
independent arbitrator, who will make his ruling no later than the middle of
October 1998. As of September 18, 1998, the arbitrator has not ruled on this
matter. Prior to the lockout, the Boston Celtics had made salary commitments
to its players under contract for the 1998-99 season totaling approximately
$18,801,000.
Although the ultimate outcome of this matter cannot be determined at this time,
any loss of games as a result of the absence of a collective bargaining
agreement or the continuation of the lockout will have a material adverse
effect on the Partnership's financial condition and its results of operations.
Further, if NBA teams, including the Boston Celtics, are required to honor the
player contracts for the 1998-99 season and beyond without agreeing to a new
collective bargaining agreement or without ending the lockout, which would
result in the loss of games, the Partnership's financial condition and results
of operations will be materially and adversely affected.
The Partnership and its subsidiaries are committed under noncancelable,
long-term operating leases, substantially all of which are related to CLP,
for certain of its facilities and equipment. Rent expense charged to
operations during the years ended June 30, 1998, 1997 and 1996 was $410,000,
$292,000 and $282,000 respectively. Pursuant to the Reorganization,
effective June 30, 1998 all noncancelable, long-term operating leases
formerly related to CLP have been assigned to Celtics Basketball, L.P.
Note K - Options to Acquire Units of Partnership Interest
On December 31, 1993, the Partnership granted options to three employees to
acquire 530,000 Limited Partnership Units of BCLP (Units) at the price of
$16.25 per Unit, less all cash distributions per Unit made by the
Partnership from July 31, 1993 to the date of exercise. All of the options
expired ten years from the date of grant, and at June 30, 1997, all of the
options were fully vested. In addition to exercising the right to purchase
units pursuant to the options, a holder may exercise a Unit Appreciation
Right, entitling the holder to receive an amount equal to the excess of the
fair market value of a Unit, determined on the date of exercise over the
exercise price of the related option on the date the Unit Appreciation Right
was granted, in which event options for an equivalent number of units will
be canceled.
On June 27, 1997, the Audit Committee of the Board of Directors of CI (the
general partner of BCLP) voted to offer the three option holders the right
to exchange their options to purchase BCLP Units for an equal number of
restricted Units of Partnership interest. The exchange ratio was determined
based on a written report received from an independent employee benefits
consultant regarding the respective values of the restricted Units and the
options to purchase BCLP Units, and the option holders were required to make
this election on or prior to July 7, 1997. On June 30, 1997, Paul E. Gaston
elected to exchange his options to purchase 250,000 BCLP Units for 250,000
restricted Units of Partnership interest. Mr. Gaston, who is a member of
the Audit Committee, was recused from and did not participate in any of the
Audit Committee's deliberations pertaining to this matter. As a result of
this exchange, $519,000 was charged to compensation expense in 1997,
representing the difference between the fair market value of the restricted
Units and the in-the-money value of the optioned Units.
In November 1997, one of the option holders exercised his Unit Appreciation
Rights with respect to his 30,000 options, and in June 1998, the remaining
option holder exercised his 250,000 options, resulting in proceeds to the
Partnership of $2,125,000. As a result, there are no outstanding options to
purchase units of partnership interest at June 30, 1998. The compensation
element of the options, comprised of income of $805,000 in the year ended
June 30, 1998 and expense of $2,208,000 and $1,851,000 in the years ended
June 30, 1997 and 1996, respectively, was charged to earnings during the
period from the date of grant until the date of exercise based on the
difference between the exercise and market price of the optioned Units at
the end of each quarter.
Note L - Benefit Plans
Certain of the Partnership's subsidiaries have defined contribution plans
covering substantially all employees who meet certain eligibility
requirements. Participants may make contributions to the plans up to 15% of
their compensation (as defined). Contributions to these plans are matched
by the Partnership and its subsidiaries 100% on the first 7% of compensation
contributed by each participant. Contributions are fully vested after three
years of service. Costs of the plans charged to operations amounted to
$232,000, $300,000 and $206,000 during the years ended June 30, 1998, 1997
and 1996, respectively.
Players, coaches, trainers and the general manager of the basketball
operation are covered by multiemployer defined benefit pension plans
administered by the National Basketball Association. Costs of these plans
charged to operations amounted to $631,000, $368,000 and $359,000 during the
years ended June 30, 1998, 1997 and 1996, respectively.
Note M - Cash Flows
Reconciliations of net income to net cash flows from operating activities
are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Net income $12,267,317 $ 420,306 $54,200,529
Items not affecting cash flows from operating activities:
Depreciation 208,162 189,324 149,046
Amortization 165,035 164,702 166,211
Increase in note issued on redemption of
Partnership interest 1,129,163 1,055,668 988,853
Changes in:
Accrued interest receivable 140,330 (264,625) 1,445,311
Accounts receivable 43,331 1,126,788 (378,126)
Notes receivable 85,772 (80,772) 4,444,444
Accounts payable and accrued expenses 11,426,790 816,434 (5,395,131)
Deferred compensation (1,628,938) (3,947,474) (3,683,023)
Deferred revenues 899,490 255,273 (2,756,599)
Other non-current liabilities (9,270,000) 3,995,000 1,851,250
Net realized gains (losses) on disposition of marketable
securities and other short-term investments 18,235 (361,051) 101,138
Gain on sale of BCBLP (38,330,907)
Other 816,348 (907,752) (375,595)
----------------------------------------
Net cash flows from operating activities $16,301,035 $2,461,821 $12,427,401
========================================
</TABLE>
Note N - Quarterly Results (Unaudited)
A summary of operating results, net income per unit based on the average
units outstanding throughout each year calculated for financial statement
purposes only, and cash distributions for the quarterly periods in the two
years ended June 30, 1998 is set forth below (000's omitted, except for per
unit amounts):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------
September 30, December 31, March 31, June 30,
1997 1997 1998 1998 Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1998:
Revenues $ 0 $25,274 $39,671 $10,735 $75,680
Net income (loss) (3,866) 6,355 11,931 (2,153) 12,267
Net income (loss) applicable to
Limited Partners (3,801) 6,223 11,676 (2,137) 11,961
Net income (loss) per unit - basic $ (0.71) $ 1.28 $ 2.40 $ (0.43) $ 2.45
Net income (loss) per unit - diluted $ (0.71) $ 1.13 $ 2.13 $ (0.43) $ 2.17
Distributions declared to unitholders $ 1.00 $ 1.00 $ 2.00
<CAPTION>
Quarter Ended
------------------------------------------------------
September 30, December 31, March 31, June 30,
1996 1996 1997 1997 Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1997:
Revenues $ 0 $20,630 $33,865 $ 8,503 $62,998
Net income (loss) (3,207) 4,544 10,006 (10,923) 420
Net income (loss) applicable to
Limited Partners (3,150) 4,444 9,791 (10,727) 358
Net income (loss) per unit - basic $ (0.56) $ 0.83 $ 2.01 $ (2.21) $ 0.07
Net income (loss) per unit - diluted $ (0.56) $ 0.76 $ 1.83 $ (2.21) $ 0.06
Distributions declared to unitholders $ 1.00 $ 1.00
</TABLE>
Note O - Income Taxes
Components of deferred tax liabilities and assets at June 30, 1998 are as
follows (000's omitted):
<TABLE>
<CAPTION>
June 30
-----------------------------
1998 1997 1996
-----------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Financial basis in excess of tax basis of assets related to
restructuring of BCCLP completed in 1996 20,100 $20,100 $20,100
Less amount assumed by Castle Creek Partners, L.P. as a result of
indemnities in the Merger Agreement of the Reorganization (10,389)
-----------------------------
Total deferred tax liabilities $ 9,711 $20,100 $20,100
=============================
</TABLE>
The deferred tax liabilities at June 30, 1998 represent the tax-effected
difference between the tax and financial statement bases of the net assets
of Holdings and CII, and relate to Holdings or subsidiary partnerships BCCLP
and BCBLP. At June 30, 1997 and 1996, the deferred tax liability of
$20,100,000 consisted of the full amount of the tax-effected difference
between the financial statement bases and the tax bases of the net assets of
Holdings and CII.
At June 30, 1998, the tax bases of the assets and liabilities of BCLP II and
its subsidiaries exceeded their financial statement bases by approximately
$25,758,000, consisting primarily of National Basketball Association
Franchise ($13,440,000), deferred compensation ($9,943,000) and intangible
assets ($2,375,000). No deferred tax asset has been provided for these
differences because BCLP II and its subsidiary partnerships are not subject
to income taxes.
The provision for income taxes included in the consolidated statements of
income consists of the following (000's omitted):
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------
<S> <C> <C> <C>
Current:
Federal $1,460 $1,100 $ 2,550
State 440 300 800
---------------------------
Total current 1,900 1,400 3,350
---------------------------
Deferred:
Federal 12,500
State 3,800
---------------------------
Total deferred 16,300
---------------------------
$1,900 $1,400 $19,650
===========================
</TABLE>
A reconciliation of the statutory federal income tax rate applied to
reported pre-tax earnings of CII, CCC, Holdings, BCCLP and BCBLP ($4,240,000
in 1998, $3,270,000 in 1997 and $60,252,000 in 1996) to the effective tax
rate of the provision is:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit 6.2 6.2 6.3
Benefit from recognition of deferred tax assets
resulting from prior merger transaction (8.2)
Other 4.6 2.6 0.5
----------------------
Effective tax rate 44.8% 42.8% 32.6%
======================
</TABLE>
Note P - Accounts Payable and Accrued Expenses
The balances include accrued compensation of $11,163,000 at June 30, 1997.
Note Q - Net Income Per Unit
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("Statement 128"). Statement 128 replaced the
calculation of primary and fully-diluted earnings per unit with basic and
diluted earnings per unit. Unlike primary earnings per unit, basic earnings
per unit excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per unit is similar to the Partnership's
previously reported primary earnings per unit. All earnings per unit
amounts for all periods presented have been restated to conform to the
Statement 128 requirements.
The following table sets forth the computation of basic and diluted earnings
per unit for each of the periods indicated:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Numerator for basic and diluted earnings per unit:
Income from continuing operations:
Income from continuing operations before interests
of General Partners $12,267,317 $ 420,306 $15,786,816
Applicable to interests of General Partners of
subsidiary partnerships 185,397 58,629 193,665
----------------------------------------
12,081,920 361,677 15,593,151
Applicable to 1% General Partnership interest of BCLP 120,819 3,617 155,932
----------------------------------------
Applicable to interests of Limited Partners $11,961,101 $ 358,060 $15,437,219
========================================
Net income:
Net income before interests of General Partners $12,267,317 $ 420,306 $54,200,529
Applicable to interests of General Partners of
subsidiary partnerships 185,397 58,629 756,574
----------------------------------------
12,081,920 361,677 53,446,955
Applicable to 1% General Partnership interest of BCLP 120,819 3,617 534,440
----------------------------------------
Net income applicable to interests of Limited Partners $11,961,101 $ 358,060 $52,909,515
========================================
Denominator:
Denominator for basic earnings per unit - weighted
average units 4,881,826 5,186,100 5,764,966
Effect of dilutive securities:
Options to purchase units of Partnership interest 147,762 250,881 183,782
Restricted stock 484,886 235,571 1,931
----------------------------------------
Denominator for diluted earnings per unit 5,514,474 5,672,552 5,950,679
========================================
Income from continuing operations per unit - basic $ 2.45 $ 0.07 $ 2.68
========================================
Income from continuing operations per unit - diluted $ 2.17 $ 0.06 $ 2.59
========================================
Net income per unit - basic $ 2.45 $ 0.07 $ 9.18
========================================
Net income per unit - diluted $ 2.17 $ 0.06 $ 8.89
========================================
</TABLE>
Report of Independent Auditors
To the General Partner
Celtics Basketball Holdings, L.P.
We have audited the accompanying consolidated balance sheet of Celtics
Basketball Holdings, L.P. and Subsidiary as of June 30, 1998. This balance
sheet is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance
sheet presentation. We believe that our audit of the balance sheet provides
a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of
Celtics Basketball Holdings, L.P. and Subsidiary at June 30, 1998 in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------
Boston, Massachusetts
September 18, 1998
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Consolidated Balance Sheet
June 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,536,334
Accounts receivable 2,875,246
Prepaid expenses and other current assets 455,012
-----------
TOTAL CURRENT ASSETS 9,866,592
PROPERTY AND EQUIPMENT, net 1,062,659
NATIONAL BASKETBALL ASSOCIATION FRANCHISE,
net of amortization of $2,313,599 3,855,982
NOTE RECEIVABLE 6,610,017
OTHER ASSETS 3,859,287
-----------
$25,254,537
===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $19,466,235
Deferred game revenues 6,484,338
Deferred compensation - current portion 1,557,030
-----------
TOTAL CURRENT LIABILITIES 27,507,603
NOTES PAYABLE TO BANK 50,000,000
DEFERRED COMPENSATION - noncurrent portion 8,961,591
OTHER NON-CURRENT LIABILITIES 600,000
PARTNERS' CAPITAL (DEFICIT)
Celtics Basketball Holdings, L.P. -
General Partner 1,000
Celtics Pride GP - Limited Partner (29,865,364)
Castle Creek Partners, L.P. - Limited Partner (31,951,293)
-----------
(61,815,657)
Celtics Basketball, L.P. - General Partner 1,000
-----------
TOTAL PARTNERS' CAPITAL (DEFICIT) (61,814,657)
-----------
$25,254,537
===========
</TABLE>
See notes to consolidated balance sheet.
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Notes to Consolidated Balance Sheet
Note A - Basis of Presentation
Principles of Consolidation: Celtics Basketball Holdings, L.P. ("Celtics
Basketball Holdings", the "Partnership"), a Delaware limited partnership,
through Celtics Basketball L.P. ("Celtics Basketball"), its 99.999% owned
subsidiary, owns and operates the Boston Celtics professional basketball
team of the National Basketball Association (the "Boston Celtics"). The
consolidated balance sheet includes the accounts of Celtics Basketball
Holdings and Celtics Basketball. All intercompany transactions are
eliminated in consolidation.
Celtics Basketball Holdings and Celtics Basketball held no material assets
and were not engaged in operations from April 13, 1998, their date of
formation, until June 30, 1998. On June 30, 1998, Celtics Limited
Partnership ("CLP"), which formerly owned and operated the Boston Celtics,
contributed the assets and liabilities of the Boston Celtics to Celtics
Basketball in exchange for a 99.999% limited partnership interest in Celtics
Basketball. Subsequently on June 30, 1998, CLP contributed its 99.999%
limited partnership interest in Celtics Basketball to Celtics Basketball
Holdings in exchange for a 99.999% limited partnership interest in Celtics
Basketball Holdings.
The general partner of both Celtics Basketball Holdings and Celtics
Basketball is Boston Celtics Corporation.
Note B - Significant Accounting Policies
Cash Equivalents: Cash equivalents represent short-term investments with
maturities at the date of purchase of three months or less.
Estimates and Assumptions: The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Concentration of Credit Risk: Financial instruments which potentially
subject the Partnership to credit risk consist principally of cash
equivalents and accounts receivable. The Partnership's cash equivalents
represent investments with relatively short maturities in the securities of
highly rated financial institutions and United States government entities.
The Partnership performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Credit
losses have been consistently within management's expectations.
Financial Instruments: The carrying value of financial instruments such as
cash equivalents, accounts receivable and accounts payable approximate their
fair values based on the short-term maturities of these instruments. The
carrying value of long-term debt approximates its fair value based on
references to similar instruments and the variable interest rate.
Franchise and Other Intangible Assets: These assets, consisting principally
of the National Basketball Association franchise and other intangible assets
are being amortized primarily on a straight-line basis over 40 years.
Property and Equipment: Property and equipment is stated at cost and is
being depreciated over estimated useful lives of from five to fifteen years
using straight line or accelerated methods of depreciation as appropriate.
Leasehold improvements are depreciated over the lesser of the remaining
lives of the leases or the assets.
Basketball Operations: Revenues, principally ticket sales and television
and radio broadcasting fees, generally are recorded as revenues at the time
the game to which such proceeds relate is played. Team expenses,
principally player and coaches salaries, related fringe benefits and
insurance, and game and playoff expenses, principally National Basketball
Association attendance assessments and travel, are recorded as expense on
the same basis. Accordingly, advance ticket sales and payments on
television and radio broadcasting contracts and payments for team and game
expenses not earned or incurred are recorded as deferred revenues and
deferred expenses, respectively, and amortized ratably as regular season
games are played. General and administrative and selling and promotional
expenses are charged to operations as incurred.
Income Taxes: No provision for income taxes is required by Celtics
Basketball Holdings as its income and expenses are taxable to or deductible
by its partners.
Comprehensive Income: In June 1997, the Financial Accounting Standards
Board issued Statement No. 130, "Reporting Comprehensive Income" ("Statement
130"). Statement 130 is effective for fiscal years beginning after December
15, 1997. The Partnership believes that the adoption of Statement 130 will
not have a material impact on the Partnership's consolidated financial
statements.
Note C - Notes Receivable
Notes receivable represents a convertible note due from an unrelated company
which has been classified as held-to-maturity and is carried at amortized
cost, which approximates market value. This note, which is comprised of
$6,000,000 face value and accrued interest of $610,017, bears interest at
LIBOR plus 1%, with quarterly interest payments beginning in May 1999 and
quarterly payments of principal plus interest beginning February 2002
through the maturity of the note in January 2007. The note is secured by
substantially all of the assets of this company. There were no unrealized
gains or losses on this investment at June 30, 1998.
Note D - Property and Equipment
Property and equipment are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements $1,301,671
Furniture and fixtures 662,986
----------
1,964,657
Less: accumulated depreciation (901,998)
----------
Net property and equipment $1,062,659
==========
</TABLE>
Note E - Deferred Compensation
Certain player contracts provide for guaranteed compensation payments which
are deferred until a future date. Operations are charged amounts equal to
the present value of future guaranteed payments in the period in which the
compensation is earned. The present value of payments due under these
agreements is as follows:
<TABLE>
<S> <C> <C>
Years ending June 30, 1999 $ 1,557,000
2000 1,300,000
2001 1,194,000
2002 1,115,000
2003 1,094,000
2004 and thereafter 4,259,000
-----------
$10,519,000
===========
</TABLE>
Note F - Notes Payable
Notes payable to bank represents outstanding borrowings under a $60,000,000
credit facility dated December 15, 1997 between Celtics Basketball and its
commercial bank. The credit agreement, which was originally entered into by
CLP and contributed to Celtics Basketball on June 30, 1998, consists of a
$50,000,000 term loan bearing interest at 6.29% and a $10,000,000 revolving
line of credit. As of June 30, 1998, no borrowings were outstanding against
the $10,000,000 revolving line of credit.
Under the terms of the $50,000,000 term loan agreement, interest is payable
quarterly in arrears at a fixed annual rate of 6.29% from December 15, 1997
through December 15, 2007. Principal payments are due in equal quarterly
installments of $2,500,000 commencing on January 1, 2003, with the final
payment due on December 15, 2007, the maturity date of the loan.
The $10,000,000 revolving line of credit agreement expires on December 15,
2000, with two automatic one-year extensions cancelable at the option of the
commercial bank. Interest on any borrowings under the revolving line of
credit accrues at the Partnership's option of either LIBOR plus 0.70% or the
greater of the bank's Base Rate or the Federal Funds Effective Rate plus
0.50%.
Borrowings under the term loan and revolving line of credit are secured by
all of the assets of and are the liability of Celtics Basketball. The loan
agreement contains certain restrictions and various provisions and covenants
customary in lending arrangements of this type.
Note G - Commitments and Contingencies
National Basketball Association ("NBA") players, including those that play for
the Boston Celtics, are covered by a collective bargaining agreement between
the NBA and the NBA Players Association (the "NBPA") that was to be in effect
through June 30, 2001 (the "Collective Bargaining Agreement"). Under the terms
of the Collective Bargaining Agreement, the NBA had the right to terminate the
Collective Bargaining Agreement after the 1997-98 season if it was determined
that the aggregate salaries and benefits paid by all NBA teams for the 1997-98
season exceeded 51.8% of projected Basketball Related Income, as defined in the
Collective Bargaining Agreement ("BRI"). Effective June 30, 1998, the Board of
Governors of the NBA voted to exercise that right and reopen the Collective
Bargaining Agreement, as it had been determined that the aggregate salaries and
benefits paid by the NBA teams for the 1997-98 season would exceed 51.8% of
projected BRI. Effective July 1, 1998, the NBA commenced a lockout of NBA
players in support of its attempt to reach a new collective bargaining
agreement. The NBA and the NBPA have been engaged in negotiations regarding a
new collective bargaining agreement, but as of September 18, 1998, no agreement
has been reached. In the event that the lockout extends into the 1998-99
season, NBA teams, including the Boston Celtics, will refund amounts paid by
season ticket holders (plus interest) for any games that are canceled as a
result of the lockout. In addition, as a result of the lockout, NBA teams
have not made any payments due to players with respect to the 1998-99 season.
The NBPA has disputed the NBA's position on this matter, and both the NBA and
the NBPA have presented their cases to an independent arbitrator, who will make
his ruling no later than the middle of October 1998. As of September 18, 1998,
the arbitrator has not ruled on this matter.
Although the ultimate outcome of this matter cannot be determined at this time,
any loss of games as a result of the absence of a collective bargaining
agreement or the continuation of the lockout will have a material adverse
effect on the Partnership's financial condition and its results of operations.
Further, if NBA teams, including the Boston Celtics, are required to honor the
player contracts for the 1998-99 season and beyond without agreeing to a new
collective bargaining agreement or without ending the lockout, which would
result in the loss of games, the Partnership's financial condition and results
of operations will be materially and adversely affected.
The Partnership has employment agreements with officers, coaches and players
of the basketball team (Celtics Basketball). Certain of the contracts
provide for guaranteed payments which must be paid even if the employee is
injured or terminated. Amounts required to be paid under such contracts in
effect as of September 18, 1998, including option years and $8,100,000
included in accrued expenses at June 30, 1998, but excluding deferred
compensation commitments disclosed in Note E - Deferred Compensation, are as
follows:
<TABLE>
<S> <C> <C>
Years ending June 30, 1999 $32,715,000
2000 33,828,000
2001 27,284,000
2002 20,860,000
2003 19,585,000
2004 and thereafter 10,800,000
</TABLE>
Commitments for the year ended June 30, 1999 include payments due to players
under contracts for the 1998-99 season in the amount of $18,801,000 which are
currently not being paid as a result of the lockout described above.
Celtics Basketball maintains disability and life insurance policies on most
of its key players. The level of insurance coverage maintained is based on
management's determination of the insurance proceeds which would be required
to meet its guaranteed obligations in the event of permanent or total
disability of its key players.
The Partnership and its subsidiary are also committed under noncancelable,
long-term operating leases, substantially all of which are related to
Celtics Basketball, for certain of its facilities and equipment. Rent
expense charged to operations during the years ended June 30, 1998, 1997 and
1996 was $410,000, $292,000 and $282,000 respectively. Minimum annual
payments, including renewable option periods, required by these operating
leases are as follows:
<TABLE>
<S> <C> <C>
Years ending June 30, 1999 $304,000
2000 319,000
2001 334,000
2002 350,000
2003 367,000
2004 and thereafter 994,000
</TABLE>
Note H - Benefit Plans
Celtics Basketball has a defined contribution plan covering substantially
all employees who meet certain eligibility requirements. Participants may
make contributions to the plans up to 15% of their compensation (as
defined). Contributions to these plans are matched by the Partnership and
its subsidiaries 100% on the first 7% of compensation contributed by each
participant. Contributions are fully vested after three years of service.
Players, coaches, trainers and the general manager of the basketball
operation are covered by multiemployer defined benefit pension plans
administered by the National Basketball Association.
Note I - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include accrued compensation to
players and coaches of $17,397,000 at June 30, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BOSTON CELTICS LIMITED PARTNERSHIP
By: BCLP GP, Inc., General Partner
-------------------------------------
Date: September 25, 1998 By: /s/ PAUL E. GASTON
-------------------------------------
Paul E. Gaston
Chairman of the Board and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title* Date
- --------------------------------------------------------------------------
/s/ DON F. GASTON Director September 25, 1998
- ----------------------
Don F. Gaston
/s/ PAULA B. GASTON Director September 25, 1998
- ----------------------
Paula B. Gaston
/s/ JOHN H.M. LEITHEAD Director September 25, 1998
- ----------------------
John H.M. Leithead
/s/ JOHN B. MARSH, III Director September 25, 1998
- ----------------------
John B. Marsh, III
/s/ RICHARD G. POND Executive Vice President, September 25, 1998
- ---------------------- Chief Financial Officer and
Richard G. Pond Chief Accounting Officer
* Title indicates position with General Partner.
Exhibit (3) (c)
CERTIFICATE OF LIMITED PARTNERSHIP OF
BOSTON CELTICS LIMITED PARTNERSHIP II
THIS Certificate of Limited Partnership of Boston Celtics Limited
Partnership II (the "Partnership"), dated as of April 13, 1998, is being
duly executed and filed by BCLP II GP, Inc., as general partner, to form a
limited partnership under the Delaware Revised Uniform Limited Partnership
Act.
1. Name. The name of the limited partnership formed hereby is
Boston Celtics Limited Partnership II.
2. Registered Office. The address of the registered office of
the Partnership in the State of Delaware is c/o National Corporate
Research, Ltd., 9 East Loockerman Street, Dover, Kent County, Delaware
19901.
3. Registered Agent. The name and address of the registered
agent for service of process on the Partnership in the State of Delaware
is National Registered Agents, Inc., 9 East Loockerman Street, Dover, Kent
County, Delaware 19901.
4. General Partner. The name and the business address of the
sole general partner of the Partnership is BCLP II GP, Inc., 151 Merrimac
Street, Boston, Massachusetts 02114.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership as of the date first-above written.
BCLP II GP, Inc.
/s/ Richard G. Pond
By: Richard G. Pond
Its: Chief Financial Officer
Exhibit (3) (f)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF LIMITED PARTNERSHIP
OF
BOSTON CELTICS LIMITED PARTNERSHIP
This Certificate of Amendment to the Certificate of Limited
Partnership of Boston Celtics Limited Partnership (the "Partnership") is
being executed by the undersigned for the purpose of changing the name of
the Partnership.
1. The name of the Partnership is:
Boston Celtics Limited Partnership
2. The name of the Partnership is hereby changed to:
Boston Celtics Limited Partnership II
3. This Certificate of Amendment shall be effective as of
June 30, 1998 at 8:01 A.M. Eastern Standard Time.
IN WITNESS WHEREOF, the undersigned, constituting the sole general
partner of the Partnership, has caused this Certificate of Amendment to be
duly executed as of the 29th day of June, 1998.
CELTICS, INC.
/s/ Richard G. Pond
By: Richard G. Pond
Its: Chief Financial Officer
Exhibit (3) (g)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF LIMITED PARTNERSHIP
OF
BOSTON CELTICS LIMITED PARTNERSHIP II
This Certificate of Amendment to the Certificate of Limited
Partnership of Boston Celtics Limited Partnership II (the "Partnership") is
being executed by the undersigned for the purpose of changing the name of
the Partnership.
1. The name of the Partnership is:
Boston Celtics Limited Partnership II
2. The name of the Partnership is hereby changed to:
Boston Celtics Limited Partnership
3. This Certificate of Amendment shall be effective as of
June 30, 1998 at 8:01 A.M. Eastern Standard Time.
IN WITNESS WHEREOF, the undersigned, constituting the sole general
partner of the Partnership, has caused this Certificate of Amendment to be
duly executed as of the 29th day of June, 1998.
BCLP II GP, Inc.
/s/ Richard G. Pond
By: Richard G. Pond
Its: Chief Financial Officer
Exhibit (3) (j)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BCLP GP, INC.,
A DELAWARE CORPORATION
BCLP GP, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify that:
FIRST: The Board of Directors of the Corporation, by unanimous
written consent of its members, adopted a resolution setting forth and
declaring a proposed amendment to the Certificate of Incorporation of the
Corporation to be advisable and calling for consideration thereof by the
stockholders of the Corporation. The resolution setting forth the proposed
amendment is as follows:
NOW, THEREFORE, BE IT RESOLVED, that this Board hereby
proposes that Article I of the Corporation's Certificate of
Incorporation be amended (the "Corporation Name Amendment") to
change the name of the Corporation to "BCLP II GP, Inc.,"
subject to approval by the holders of a majority of the
outstanding stock of the Corporation entitled to vote thereon,
so that it shall read in its entirety:
ARTICLE I
NAME OF CORPORATION
The name of this corporation is:
BCLP II GP, Inc.
SECOND: The stockholders of the Corporation considered and voted
unanimously in favor of the Corporation Name Amendment.
THIRD: The Corporation Name Amendment was duly adopted in accordance
with the provisions of Sections 242 and 228 of the DGCL.
FOURTH: That this Certificate of Amendment shall be effective as of
June 30, 1998 at 8:01 A.M. Eastern Standard Time.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment on this 29th day of June, 1998.
BCLP GP, INC.
/s/ Richard G. Pond
By: Richard G. Pond
Its: Chief Financial Officer
Exhibit (3) (m)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BCLP II GP, INC.,
A DELAWARE CORPORATION
BCLP II GP, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify that:
FIRST: The Board of Directors of the Corporation, by unanimous
written consent of its members, adopted a resolution setting forth and
declaring a proposed amendment to the Certificate of Incorporation of the
Corporation to be advisable and calling for consideration thereof by the
stockholders of the Corporation. The resolution setting forth the proposed
amendment is as follows:
NOW, THEREFORE, BE IT RESOLVED, that this Board hereby
proposes that Article I of the Corporation's Certificate of
Incorporation be amended (the "Corporation Name Amendment") to
change the name of the Corporation to "BCLP GP, Inc.," subject
to approval by the holders of a majority of the outstanding
stock of the Corporation entitled to vote thereon, so that it
shall read in its entirety:
ARTICLE I
NAME OF CORPORATION
The name of this corporation is:
BCLP GP, Inc.
SECOND: The stockholders of the Corporation considered and voted
unanimously in favor of the Corporation Name Amendment.
THIRD: The Corporation Name Amendment was duly adopted in accordance
with the provisions of Sections 242 and 228 of the DGCL.
FOURTH: That this Certificate of Amendment shall be effective as of
June 30, 1998 at 8:01 A.M. Eastern Standard Time.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment on this 29th day of June, 1998.
BCLP II GP, INC.
/s/ Richard G. Pond
By: Richard G. Pond
Its: Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
BOSTON CELTICS LIMITED PARTNERSHIP WAS FORMED ON APRIL 13, 1998. IT HELD NO
MATERIAL ASSETS AND WAS NOT ENGAGED IN OPERATIONS PRIOR TO JUNE 30, 1998.
EFFECTIVE JUNE 30, 1998, ITS ONLY MATERIAL ASSET IS ITS 99% LIMITED PARTNERSHIP
INTEREST IN BOSTON CELTICS LIMITED PARTNERSHIP II, WHICH WAS ENGAGED IN
OPERATIONS FOR THE ENTIRE FISCAL YEAR ENDED JUNE 30, 1998. ACCORDINGLY, THIS
SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF BOSTON CELTICS LIMITED PARTNERSHIP AND ITS
SUBSIDIARIES AS OF JUNE 30, 1998 AND THE CONSOLIDATED STATEMENT OF INCOME
OF BOSTON CELTICS LIMITED PARTNERSHIP II AND ITS SUBSIDIARIES FOR THE YEAR
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,468
<SECURITIES> 1,041
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90,927
<PP&E> 45
<DEPRECIATION> 21
<TOTAL-ASSETS> 92,047
<CURRENT-LIABILITIES> 22,411
<BONDS> 63,985
0
0
<COMMON> 0
<OTHER-SE> (32,926)
<TOTAL-LIABILITY-AND-EQUITY> 92,047
<SALES> 75,680
<TOTAL-REVENUES> 75,680
<CGS> 0
<TOTAL-COSTS> 61,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,018
<INCOME-PRETAX> 14,167
<INCOME-TAX> 1,900
<INCOME-CONTINUING> 12,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,267
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.17
</TABLE>
