<PAGE> 1
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, 1999
------------------------------------
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
(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 ___.
<PAGE> 2
The aggregate market value of the 2,151,564 Units held by non-affiliates of
Boston Celtics Limited Partnership as of September 10, 1999 was
approximately $24,071,000, based on the closing price of the Units on the
New York Stock Exchange on that date of $11.1875 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 10, 1999 was
approximately $32,102,000, based on the closing price of the Subordinated
Debentures on the New York Stock Exchange on that date of $11.875 per
Debenture.
As of September 10, 1999, 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.
<PAGE> 3
BOSTON CELTICS LIMITED PARTNERSHIP
1999 FORM 10-K ANNUAL REPORT
INDEX
PART I
Page
----
Items 1.
and 2. Business and Properties 1
Item 3. Legal Proceedings 9
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 18
PART III
Item 10. Directors and Executive Officers of the Registrant 19
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain 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 73
This document contains the Annual Reports on Form 10-K for the fiscal
year ended June 30, 1999 for each of Boston Celtics Limited Partnership and
Boston Celtics Limited Partnership II. 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.
<PAGE> 4
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"), 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.
<PAGE> 5
"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." 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. See "Item 12 - Security Ownership of Certain Beneficial Owners and
Management" regarding ownership and control of 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.
<PAGE> 6
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 Regular Season
Season Place of Finish
Season Record in Division Playoff Results
- -------------------------------------------------------
<S> <C> <C> <C>
1998-99 19-31 Fifth --
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
</TABLE>
<PAGE> 7
Effective July 1, 1998, the NBA commenced a lockout of NBA players in
support of its attempt to reach a new collective bargaining agreement. On
January 20, 1999, the NBA and the NBA Players Association (the "NBPA")
entered into a new collective bargaining agreement (the "New Collective
Bargaining Agreement"), thereby ending the lockout. The New Collective
Bargaining Agreement is to be in effect through June 30, 2004, and the NBA
has an option to extend it for one year thereafter. As a result of the
lockout, the 1998-99 NBA regular season consisted of 50 games per team (25
of which were home games), beginning in early February 1999. The impact of
the lockout and the shortened NBA season had a materially adverse effect on
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, the licensing of
television, cable network and radio rights, and promotional and novelty
revenues. 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:
Contribution to Revenues
(in thousands)
<TABLE>
<CAPTION>
Year
Ended Television, Cable
June 30, Ticket Sales (1) and Radio (2) Other Sources Total Revenues
- -------- ---------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C>
1999 (3) $23,284 $14,626 $5,142 $43,052
1998 39,108 28,002 8,570 75,680
1997 31,813 23,269 7,916 62,998
- --------------------
<FN>
<F1> Includes proceeds from exhibition games. No ticket revenues were
derived from exhibition games in the year ended June 30, 1999.
<F2> Includes the Boston Celtics' share of revenues under the NBA national
television contracts.
<F3> The reduced amounts for the year ended June 30, 1999 are due to the
shortened NBA season.
</FN>
</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."
<PAGE> 8
Ticket Sales. Ordinarily, 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 ordinarily 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 of 6%) 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.
As a result of the lockout, the 1998-99 NBA regular season was
shortened to 50 regular season games consisting of an equal number of home
games and away games. In addition, upon resolution of the lockout, NBA
teams, including the Boston Celtics, played two exhibition games for which
tickets were issued at no charge.
Effective with the 1995-96 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 1998-99 season, approximately 13,000 season tickets were sold, as
compared to 14,000 in the 1997-98 season and 13,000 in the 1996-97 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 share 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 Boston
University Communications, Inc., licensee of WABU-TV Boston ("WABU"), (the
"WABU agreement") and license the cable rights to broadcast home games to
Sportschannel New England Limited Partnership (doing business as Fox Sports
Net New England) (the "Sportschannel agreement"). The Boston Celtics
license 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 extend through the 2001-02
season. The ARS agreement extends through the 1999-2000 season. WABU was
purchased subsequent to the 1998-99 season, and the WABU agreement was
terminated. In August 1999, Celtics Basketball entered into an agreement
with Sportschannel New England Limited Partnership to license the right
to air all Boston Celtics home and away games (the "SNE agreement").
The SNE agreement extends through the 2002-03 season, with a right to an
additional extension by Sportschannel New England Limited Partnership
through the 2005-06 season. There can be no assurance that Celtics
Basketball or the NBA as agent for its members, upon expiration of the
aforementioned agreements, will be able to enter into new agreements on
terms as favorable as those in the current agreements.
<PAGE> 9
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 NBC agreement accounted for approximately 14% ($6,142,000) of
Celtics Basketball's total revenues for the year ended June 30, 1999, of
which BCLP's 48.3% interest is reflected in its equity in loss of Celtics
Basketball Holdings. The NBC agreement accounted for approximately 15%
($11,439,000) and 11% ($6,896,552) of BCLP II's total revenues for the years
ended June 30, 1998 and 1997, respectively. No other agreement accounted
for as much as 10% of BCLP's, BCLP II's and Celtics Basketball's total
revenues during any of the years ended June 30, 1999, 1998 and 1997.
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 right of each team, including the Boston
Celtics, to use its insignia and symbols in connection with the promotion of
the team in its home territory and retail sales in its 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 10, 1999:
<PAGE> 10
<TABLE>
<CAPTION>
Last Season
Name Position Years in NBA Under Contract
- --------------------------------------------------------------------
<S> <C> <C> <C>
Kenny Anderson Guard 8 2002-03
Dana Barros Guard 10 2000-01
Tony Battie Forward/Center 2 1999-00
Calbert Cheaney Forward 6 2001-02
Pervis Ellison Center 10 1999-00
Danny Fortson Forward 2 1999-00
Adrian Griffin Guard -- 1999-00
Walter McCarty Forward 3 2001-02
Greg Minor Forward 5 2000-01
Paul Pierce Forward 1 2001-02
Vitaly Potapenko Center 3 2004-05
Wayne Turner Guard -- 1999-00
Antoine Walker Forward 3 2004-05
Eric Washington Guard 2 1999-00
Eric Williams Forward 4 2003-04
</TABLE>
Compensation expense related to player salaries amounted to
$16,875,000 during the 1998-99 season. The Boston Celtics were only
required to pay 50/82 of each player's salary with respect to the 1998-99
regular season. See "Collective Bargaining Agreement." During the 1999-
2000 season, the Boston Celtics are contractually required to make salary
payments to its players totaling $41,126,000.
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 previously the Head Basketball Coach at the University of Kentucky
(1989-1997), and served as the Head Coach of the New York Knickerbockers of
the NBA (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 previously a scout for the Miami Heat of the NBA
(1997), held several coaching positions since 1995, and played in the NBA
from 1982 through 1995. Mr. Conner is under contract through the end of the
1999-2000 season.
<PAGE> 11
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 1999-2000 season.
Andy Enfield has been an Assistant Coach of the Boston Celtics since
August 1998. Mr. Enfield was previously a private coach for a number of NBA
players, and was the shooting coach for the Milwaukee Bucks of the NBA
(1994-96). Mr. Enfield is under contract through the end of the 1999-2000
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).
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.
Compensation expense for coaches, general manager and other Boston
Celtics team personnel, including compensation payments to team personnel
not under contract, amounted to $8,921,000 during the 1998-99 season.
During the 1999-2000 season, the Boston Celtics are contractually required
to make salary payments to its coaches, general manager and other team
personnel totaling $8,481,000.
Collective Bargaining Agreement. NBA players, including those that
play for the Boston Celtics, were previously covered by a collective
bargaining agreement between the NBA and the NBPA that was to be in effect
through June 30, 2001 (the "Collective Bargaining Agreement"). 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.
<PAGE> 12
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.
On January 20, 1999, the NBA and the NBPA entered into a New
Collective Bargaining Agreement, thereby ending the lockout. The New
Collective Bargaining Agreement is to be in effect through June 30, 2004,
and the NBA has an option to extend it for one year thereafter. As a result
of the lockout, the 1998-99 NBA regular season consisted of 50 games per
team (25 of which were home games), beginning in early February 1999.
Ordinarily, the NBA regular season consists of 82 games per team (41 of
which are home games), and generally begins in late October or early
November. Further, as provided under the terms of the New Collective
Bargaining Agreement, NBA teams were only required to pay 50/82 of each
player's salary with respect to the 1998-99 regular season. Previously, an
independent arbitrator ruled that NBA teams, including the Boston Celtics,
were not required to pay player salaries during the lockout.
Given the fixed nature of many of its expenses, and given that the
Boston Celtics' operating income is almost entirely dependent on the NBA
season, the cancellation of 32 regular season games (of which 16 were home
games) as a result of the lockout had a material adverse effect on the
Partnership's financial condition and its results of operations for the
fiscal year ended June 30, 1999. Celtics Basketball estimates that each
canceled regular season home game resulted in a loss of ticket revenue of
approximately $950,000, which includes refunds paid to season ticket holders
as well as an estimate of lost ticket sales. Celtics Basketball's local
television and radio broadcast rights agreements provide for the broadcast
of a specified number of games at specified rights fees per game. In
addition, the NBA, as agent for its members, licenses the national and
international broadcast of games, and each of the NBA member teams shares
equally in these license fees. Celtics Basketball estimates that each
canceled regular season game resulted in a loss of television and radio
broadcast rights fees of approximately $314,000. Celtics Basketball was
only required to pay 50/82 of each player's salary with respect to the 1998-
99 regular season, and, as a result, estimates that each canceled regular
season game resulted in a reduction in player salaries of $370,000.
<PAGE> 13
The estimates of lost revenues and reduced expenses set forth in the
preceding paragraph are based on historical experience and certain
assumptions, including assumptions regarding ticket sales, amounts realized
under broadcast agreements and composition of the Boston Celtics team
roster. There can be no assurance as to the accuracy of these assumptions
or that Celtics Basketball would have recognized the aforementioned per-game
estimates of revenues and expenses had the games not been canceled, and such
per-game estimates of revenues and expenses should not be relied upon as an
indication of future revenues and expenses. Further, there can be no
assurance that the NBA and NBPA will not experience labor relations
difficulties in the future or that Celtics Basketball will not,
notwithstanding the New Collective Bargaining Agreement, experience
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, the Boston Celtics 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. Celtics Basketball does not pay rent to
NBGC, and NBGC generally 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 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 2004-05 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 to Celtics Basketball, based on
NBGC's revenues, during the Extended Term.
<PAGE> 14
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 in Waltham,
Massachusetts. The facility also includes certain office space for Boston
Celtics basketball operations personnel. Celtics Basketball does not pay
rent under this lease agreement. 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.
Celtics Basketball does not own any real property.
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."
<PAGE> 15
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 10, 1999, the Boston Celtics have 44 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.
<PAGE> 16
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 a director or former director of Celtics, Inc. BCLP
II GP, Inc. is a wholly owned subsidiary 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 Complaints have been consolidated. On August 6, 1999, the
Court of Chancery issued an opinion granting in part, and denying in part,
the Partnership's Motion to Dismiss, and on September 3, 1999, the
plaintiffs filed an amended consolidated Complaint.
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
None.
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".
Holders of BCLP II Units at the time of the Reorganization who elected to
continue their interest in BCLP received, for each BCLP II Unit held, one
BCLP Unit, $20 principal amount of Subordinated Debentures and $1.00 in
cash. The Subordinated Debentures trade on the New York Stock Exchange and
provide for annual interest payments. (See Item 1 for more information
regarding the Reorganization.)
<PAGE> 17
The following table sets forth, for the periods indicated, the high
and low sales prices per BCLP Unit on the New York Stock Exchange and cash
distributions per BCLP Unit to Unitholders for the year ended June 30, 1999
and 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 year
ended June 30, 1998. Following the Reorganization, there is no established
public trading market for BCLP II Units.
<TABLE>
<CAPTION>
Year Ended June 30, 1999
-----------------------------------------------
Sales Price for BCLP Units
--------------------------
Cash Distribution
Period High Low Declared
- -----------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $11.3750 $ 7.0000
Second Quarter 12.0000 7.2500
Third Quarter 17.5000 10.2500
Fourth Quarter 12.9375 11.5625
-----
$0.00
=====
<CAPTION>
Year Ended June 30, 1998
-----------------------------------------------
Sales Price for BCLP II Units
-----------------------------
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
=====
- --------------------
<FN>
As of September 10, 1999, the approximate number of registered holders
of BCLP's Units was 65,069.
</FN>
</TABLE>
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."
<PAGE> 18
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.
<PAGE> 19
Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended June 30
------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Basketball regular season
Ticket sales $39,108 $31,813 $35,249 $22,037
Television and radio broadcast rights fees 28,002 23,269 22,072 20,956
Other, principally promotional advertising 8,570 7,916 7,459 7,419
Basketball playoffs 1,913
----------------------------------------------
75,680 62,998 64,780 52,325
Costs and expenses:
Basketball regular season -
Team 40,402 40,941 27,891 31,204
Game 2,820 2,386 2,606 2,880
Basketball playoffs 697
General and administrative $ 3,837 13,465 13,914 15,053 14,086
Selling and promotional 4,819 4,680 2,974 2,692
Depreciation 9 208 189 141 86
Amortization of NBA franchise and other
intangible assets 47 165 165 165 165
-----------------------------------------------------------
3,893 61,879 62,275 48,830 51,810
-----------------------------------------------------------
(3,893) 13,801 723 15,950 515
Equity in loss of Celtics Basketball
Holdings, L.P. (1) (205)
Interest income (expense), net (2,151) 384 736 1,788 (2,567)
Net revenue from league expansion 7,114
Net realized gains (losses) on
disposition of marketable securities
and other short-term investments 6 (18) 361 (101) 110
-----------------------------------------------------------
Income (loss) from continuing operations before
income taxes and extraordinary charge (6,243) 14,167 1,820 17,637 5,172
Provision for (benefit from) income taxes 1,600 1,900 1,400 1,850 (345)
-----------------------------------------------------------
Income (loss) from continuing operations before
extraordinary charge (7,843) 12,267 420 15,787 5,517
Extraordinary charge for early retirement
of notes payable (2,256)
Income from discontinued operations, net of taxes 83 10,639
Gain from disposal of discontinued operations, net
of taxes 38,331
-----------------------------------------------------------
Net income (loss) $(10,099) $12,267 $ 420 $54,201 $16,156
============================================================
<PAGE> 20
Income (loss) from continuing operations before
extraordinary charge applicable to interests of
Limited Partners $ (7,709) $11,961 $ 358 $15,437 $ 5,396
Net income (loss) applicable to interests of
Limited Partners $ (9,920) $11,961 $ 358 $52,910 $15,545
Consolidated Statement of Operations Data (continued):
<CAPTION>
Year Ended June 30
------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per unit:
Income (loss) from continuing operations
before extraordinary charge-basic $ (2.85) $ 2.45 $ 0.07 $ 2.68 $ 0.84
Income (loss) from continuing operations
before extraordinary charge-diluted $ (3.67) $ 2.17 $ 0.06 $ 2.59 $ 0.84
Net income (loss)-basic $ (2.85) $ 2.45 $ 0.07 $ 9.18 $ 2.43
Net income (loss)-diluted $ (3.67) $ 2.17 $ 0.06 $ 8.89 $ 2.43
Distributions declared to Unitholders $ 2.00 $ 1.00 $ 1.50 $ 3.00
</TABLE>
<PAGE> 21
Consolidated Balance Sheet Data:
<TABLE>
<CAPTION>
As of June 30
---------------------------------------------------------------
1999 1998 1997 1996 1995 (2)
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets $ 86,045 $90,927 $103,801 $135,903 $186,101
Current liabilities 3,351 22,411 39,139 40,289 126,010
Total assets 87,274 92,047 119,200 145,233 210,655
Deferred federal and state income taxes -
noncurrent portion 9,711 9,711 20,100 20,100 6,000
Notes payable - noncurrent portion 50,000 30,000 47,500 50,000 60,000
Deferred compensation - noncurrent portion 10,380 11,750 14,850
Subordinated debentures 33,385 32,985
Investment in capital deficiency of Celtics
Basketball Holdings, L.P. 33,790 29,865
Other noncurrent liabilities 9,870 6,575 19,515
Partners' capital (deficit) (42,963) (32,926) (7,790) 16,520 (15,720)
- --------------------
<FN>
<F1> See consolidated financial statements of Celtics Basketball
Holdings,.P. contained elsewhere herein.
<F2> Balance sheet captions at June 30, 1995 include amounts pertaining to
discontinued operations. Total assets as shown in the table above
include assets from discontinued operations of $52,893 in 1995. 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.
</FN>
</TABLE>
<PAGE> 22
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
game, broadcast and other revenues, expenses (including player and other
team costs), estimates of future impacts of the player lockout, 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
continuing effects of the player lockout and cancellation of 32 regular
season games in the 1998-99 season as a result of the lockout, the impact of
the lockout on television and other revenues, the competitive success of the
Boston Celtics, uncertainties as to increases in players' salaries, the
Boston Celtics' ability to attract and retain talented players, the risk of
injuries to key players, uncertainties regarding media contracts,
uncertainties regarding labor relations and the performance of certain
investments by subsidiaries of the Partnership.
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. Celtics Basketball Holdings has a 99.999% limited
partnership interest in Celtics Basketball, which owns and operates the
Boston Celtics effective July 1, 1998.
Because BCLP had not engaged in any business operations prior to June
30, 1998, the Selected Consolidated Statement of Operations Data presented
in "Item 6" above and the following discussion compare the operating results
of BCLP and its subsidiaries for the year ended June 30, 1999 with those of
BCLP II and its subsidiaries for the year ended June 30, 1998, and compare
the operating results of BCLP II and its subsidiaries for the year ended
June 30, 1998 with the year ended June 30, 1997. Due to the July 1, 1998
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 in the fiscal year
ended June 30, 1999 are materially different than those in the fiscal year
ended June 30, 1998.
<PAGE> 23
Reorganization costs amounted to approximately $2,350,000, which
consisted primarily of legal and professional expenses, costs of printing
and distribution and filing fees. These costs were charged to operations by
BCLP II prior to June 30, 1998.
Collective Bargaining Agreement
NBA players, including those that play for the Boston Celtics, were
previously covered by a collective bargaining agreement between the NBA and
the NBPA that was to be in effect through June 30, 2001. 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"). In March
1998 the Board of Governors of the NBA voted to 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.
On January 20, 1999, the NBA and the NBPA entered into a New
Collective Bargaining Agreement, thereby ending the lockout. The New
Collective Bargaining Agreement is to be in effect through June 30, 2004,
and the NBA has an option to extend it for one year thereafter. As a result
of the lockout, the 1998-99 NBA regular season consisted of 50 games per
team (25 of which were home games), beginning in early February 1999.
Ordinarily, the NBA regular season consists of 82 games per team (41 of
which are home games), and generally begins in late October or early
November. Further, as provided under the terms of the New Collective
Bargaining Agreement, NBA teams were only required to pay 50/82 of each
player's salary with respect to the 1998-99 regular season. Previously, an
independent arbitrator ruled that NBA teams, including the Boston Celtics,
were not required to pay player salaries during the lockout.
NBA teams, including the Boston Celtics, refunded amounts paid by
season ticket holders (plus interest at 6%) for a total of 18 home games
(including two exhibition games) that were canceled as a result of the
lockout. Refunds of approximately $11,632,000 (including interest of
$185,000) were paid by Celtics Basketball on a monthly basis for games
canceled in the preceding month. In addition, certain season ticket holders
elected to leave their refunds and interest on deposit for future games.
Such refunds and interest amounted to approximately $571,000 at June 30,
1999 (including interest of approximately $12,000). No interest has accrued
on such amounts since January 31, 1999.
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. The most significant expenses of the Boston Celtics are
player and coaching salaries. 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, coaches and broadcast organizations.
<PAGE> 24
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
generally recognizes 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 recognizes its playoff revenue, if any, in the fourth fiscal quarter.
Due to the lockout in the 1998-99 season, however, the operating results of
the Boston Celtics for the year ended June 30, 1999 did not reflect
historical seasonal trends.
The consolidated statements of operations data include the results of
operations of television station WFXT prior to its sale on July 7, 1995, as
well as the gain on its disposal, as discontinued operations.
Results of Operations
Consolidated loss before extraordinary charge for the year ended June
30, 1999 was $7,843,000 or $2.85 per unit and consolidated net loss for the
year ended June 30, 1999 was $10,099,000 or $3.67 per unit compared with
BCLP II's consolidated net income for the year ended June 30, 1998 of
$12,267,000 or $2.45 per unit. The significant loss before extraordinary
charge in fiscal 1999 is primarily a result of the lockout, the cancellation
of 32 regular season games and the reduced number of games in the revised
1998-99 NBA schedule. In addition, interest expense on the Subordinated
Debentures issued on June 30, 1998 in connection with the Reorganization,
including amortization of the original issue discount, amounted to
$3,644,000 in fiscal 1999.
BCLP II recorded an extraordinary charge in the three months ended
September 30, 1998 related to the early retirement of notes payable to a
former principal unitholder relating to redeemed BCLP II units. The notes
payable to the former principal unitholder had an aggregate initial face
amount of $14,365,096. The notes, which were due and payable on July 1,
2000, also provided that the amounts to be paid to such unitholder were to
be increased by specified amounts on each July 1 during their term. If the
principal unitholder held the notes until July 1, 2000, he would have been
entitled to receive aggregate payments (excluding interest) in the amount of
$20,044,320. Each of the notes bore interest payable quarterly at the rate
of 7.76% per annum. At September 30, 1998, BCLP II repaid the notes
payable, which had an aggregate balance, including scheduled increases in
the note balances, of $17,538,780. The notes payable were repaid in the
amount of $19,794,320, resulting in an extraordinary charge of $2,255,540
related to early retirement of notes payable.
<PAGE> 25
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 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.
Equity in loss of Celtics Basketball Holdings, L.P. of $205,000 for
the year ended June 30, 1999 represents BCLP's 48.3% interest in the income
(loss) of the entity that indirectly owns and operates the Boston Celtics
basketball team subsequent to the Reorganization. Prior to the
Reorganization, the operating results of the Boston Celtics basketball team
were consolidated with BCLP II's operating results. Celtics Basketball
recognizes Boston Celtics team and game revenues and expenses on a game-by-
game basis, and the NBA regular season ordinarily begins in late October or
early November. As a result, BCLP II's operating results for the year ended
June 30, 1998 included revenues from ticket sales, television and radio
broadcast rights fees and promotional advertising, and included team and
game expenses. Had BCLP II accounted for a 48.3% interest of the Boston
Celtics basketball team for the year ended June 30, 1998 using the equity
method, BCLP II's pro forma equity in income of the Boston Celtics would
have amounted to $8,940,000, reflecting, among other things, team and game
revenues and expenses related to the 82 regular season games played by the
Boston Celtics in the year ended June 30, 1998. Due to the cancellation of
32 regular season games in the 1998-99 season, the Boston Celtics did not
commence their 1998-99 season until early February 1999, and the Boston
Celtics played 50 regular season games in the year ended June 30, 1999. As
a result, the results of operations of Celtics Basketball for the year ended
June 30, 1999 reflected a net loss, as net team and game income related to
the 50 regular season games played were more than offset by general and
administrative expenses, selling and promotional expenses, certain team
expenses contractually related to the 32 canceled games and interest
expense, net of interest income.
Revenues from regular season ticket sales of $39,108,000 in fiscal
1998, which related entirely to the Boston Celtics basketball team,
increased by $7,295,000 compared to $31,813,000 in fiscal 1997. The
increase 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.
Regular season television and radio rights fees revenues of
$28,002,000 in fiscal 1998, which related entirely to the Boston Celtics
basketball team, increased by $4,733,000 compared to $23,269,000 in fiscal
1997. The increase was primarily the result of increases in the NBA's
national broadcasting contracts.
Other revenues, principally promotional advertising revenues of
$8,570,000 in fiscal 1998, which related entirely to the Boston Celtics
basketball team, increased $654,000 as compared to $7,916,000 in fiscal
1997. 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).
<PAGE> 26
Team expenses of $40,402,000 in fiscal 1998, which related entirely to
the Boston Celtics basketball team, decreased by $539,000 compared to
$40,941,000 in fiscal 1997. 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 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 of $2,820,000 in fiscal 1998, which related entirely to
the Boston Celtics basketball team, consist primarily of the NBA's 6%
assessment on gate receipts. Game expenses in fiscal 1998 increased by
$434,000 as compared to $2,386,000 in fiscal 1997. The increase in fiscal
1998 was primarily a result of the corresponding change in revenue from
ticket sales.
BCLP's general and administrative expenses of $3,837,000 in fiscal
1999 decreased by $9,628,000 compared to BCLP II's general and
administrative expenses of $13,465,000 in fiscal 1998. General and
administrative expenses in fiscal 1998 included general and administrative
expenses related to the Boston Celtics basketball team of $5,709,000.
Effective July 1, 1998, BCLP accounts for its 48.3% indirect interest in the
Boston Celtics basketball team using the equity method, and, accordingly,
general and administrative expenses related to the Boston Celtics basketball
team in fiscal 1999 are included in equity in loss of Celtics Basketball
Holdings. The balance of the decreases in general and administrative
expenses in fiscal 1999 is a result of decreased personnel and other general
and administrative expenses as a result of the Reorganization. General and
administrative expenses of $13,465,000 in fiscal 1998 decreased $449,000
compared to $13,914,000 in 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 ($2,350,000) and
increased management fees ($757,000).
Selling and promotional expenses of $4,819,000 in fiscal 1998, which
related entirely to the Boston Celtics basketball team, increased $139,000
compared to $4,680,000 in fiscal 1997. The increase in fiscal 1998 is a
result of increased personnel costs.
Depreciation expense of $9,000 in fiscal 1999 decreased by $199,000
compared to BCLP II's depreciation expense of $208,000 in fiscal 1998.
Depreciation expense in fiscal 1998 included $199,000 of depreciation
expense related to the Boston Celtics basketball team. Depreciation expense
of $208,000 in fiscal 1998 increased $19,000 compared to $189,000 in fiscal
1997. The increase in 1998 is primarily attributable to additional
depreciation related to additions to property and equipment and leasehold
improvements in leased office space.
<PAGE> 27
Amortization expense of $47,000 in fiscal 1999 decreased by $118,000
compared to BCLP II's amortization expense of $165,000 in fiscal 1998.
BCLP's amortization expense increased $43,000 in fiscal 1999 due to an
increase in deferred financing costs, but this increase was offset by the
fact that amortization expense in fiscal 1998 included $161,000 of
amortization related to the Boston Celtics basketball team. Amortization
expense of $165,000 in fiscal 1998 was consistent with amortization expense
in fiscal 1997.
Interest expense of $6,649,000 in fiscal 1999 increased $631,000
compared to $6,018,000 in fiscal 1998. The increase in fiscal 1999 is
primarily attributable to interest of $3,644,000 related to the Subordinated
Debentures issued by BCLP II in connection with the Reorganization
(including amortization of the original issue discount on the Subordinated
Debentures) and interest of $419,000 related to new borrowings under
BCLP II's revolving credit agreement with its commercial bank. These
increases were partially offset by the fact that interest expense in fiscal
1998 included interest expense related to the Boston Celtics basketball team
of $3,431,000. Effective July 1, 1998, BCLP accounts for its 48.3% indirect
interest in the Boston Celtics basketball team using the equity method, and,
accordingly, interest expense related to the Boston Celtics basketball team
for the year ended June 30, 1999 is included in equity in loss of Celtics
Basketball Holdings. Interest expense of $6,018,000 in fiscal 1998 increased
$145,000 compared to $5,873,000 in fiscal 1997. The increase in fiscal 1998
is primarily a result of the new $30,000,000 borrowing by BCLP II in May 1998.
Interest income from marketable securities and other short-term
investments of $4,498,000 in fiscal 1999 decreased $1,904,000 compared to
$6,402,000 in fiscal 1998, and interest income in fiscal 1998 decreased
$208,000 compared to $6,610,000 in fiscal 1997. The decreases are
attributable to a reduced amount of available funds for short-term
investment as well as the effect of a decrease in interest rates on those
invested balances in 1999.
BCLP's provision for income taxes of $1,600,000 in fiscal 1999, which
relates to BCLP's subsidiary corporations, decreased $300,000 compared to
$1,900,000 in fiscal 1998.
<PAGE> 28
Liquidity and Capital Resources
BCLP used approximately $7,700,000 in cash flows from operating
activities in fiscal 1999. BCLP II generated approximately $16,301,000 and
$2,462,000 in cash from operating activities in 1998 and 1997, respectively.
The decrease in cash flows from operating activities in fiscal 1999 is
directly attributable to BCLP's accounting for its interest in the Boston
Celtics on the equity method effective July 1, 1998. In addition, cash used
in operating activities in fiscal 1999 included the first annual interest
payment due on the Subordinated Debentures in the amount of $3,244,000.
Capital expenditures amounted to approximately $385,000 and $136,000 in 1998
and 1997, respectively. At June 30, 1999 the Partnership had approximately
$2,608,000 of cash and cash equivalents and $83,200,000 of other short-term
investments. In addition to these amounts, sources of funds available to
the Partnership include funds generated by operations, 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 for general partnership purposes, working capital needs or 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 was reserved for
the repayment of notes payable related to redeemed BCLP II Units. 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%. The revolving credit agreement
expires on June 30, 2003 and is secured by a pledge of certain short-term
investments of CCC, an indirect subsidiary of BCLP and BCLP II. On May 26,
1998, $30,000,000 was advanced under the revolving credit agreement in
connection with the Reorganization, and on September 30, 1998, BCLP II
borrowed the $20,000,000 reserved for the repayment of notes payable related
to redeemed BCLP II Units and repaid the notes with the proceeds. On June
30, 1999, BCLP II borrowed $2,500,000 against the revolving credit agreement
for general working capital purposes. Management anticipates that amounts
advanced under the revolving credit agreement will be repaid by BCLP II out
of cash flows, principally distributions from Celtics Basketball Holdings.
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, cash and BCLP units. The Subordinated Debentures
were 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 is being
amortized over the 40-year life of the debentures using the interest method
and accordingly, the Subordinated Debentures are carried on the balance
sheet at $33,384,771 at June 30, 1999. The Subordinated Debentures bear
interest at the rate of 6% per annum, payable annually commencing June 30,
1999, and mature on June 30, 2038. There is no mandatory redemption of the
Subordinated Debentures, and they are not entitled to any sinking fund.
<PAGE> 29
No cash distributions to unitholders of BCLP were declared or paid
during the year ended June 30, 1999. 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 BCLP's cash, cash equivalents and other
short-term investments together with cash from operating activities will
provide adequate cash for the Partnership and its subsidiaries to meet their
cash requirements through June 30, 2000.
Market Risk
At June 30, 1999, BCLP had invested approximately $83,200,000 in loan
participations issued by a commercial bank with maturities of less than
ninety days. Due to their short maturities and applicable transfer
restrictions, management believes that the loan participations are not
exposed to market risk. Management further believes that the partnership
has no other assets that are subject to market risk.
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. As used by the Partnership, "Year
2000 ready" means that a system will function in the year 2000 without
modification or adjustment, or with a one-time manual adjustment.
State of Readiness
The Partnership has established a Year 2000 Committee and an action
plan for addressing Year 2000 issues. The Partnership's action plan for
addressing Year 2000 issues in its information technology ("IT") and non-IT
systems covers four phases: (i) identification of all IT and non-IT
systems; (ii) assessment of Year 2000 issues; (iii) repair of IT and non-IT
systems, if necessary, and testing and integration of repaired systems; and
(iv) creation of a contingency plan to address any potential Year 2000
failures. The Partnership is also contacting third parties with which it
deals (such as customers and suppliers) to evaluate their Year 2000
readiness and determine whether any Year 2000 failure will affect their
ability to perform as the Year 2000 approaches and arrives.
<PAGE> 30
As of June 30, 1999, the Partnership has completed the first three
phases of its Year 2000 action plan with respect to its IT systems. The
Partnership has identified all of its IT systems (which are comprised solely
of an internal personal computer network and commercially available software
products), assessed the Year 2000 readiness of these systems (which involved
review and testing by the Partnership's internal information technology
specialists) and made necessary repairs. As of June 30, 1999, the
Partnership has completed the first phase of its Year 2000 action plan, and
has begun the second phase, with respect to its non-IT systems. The
Partnership has identified all of its non-IT systems (which are comprised of
embedded systems contained in its leased properties) and has assessed the
Year 2000 readiness of approximately 50% of these systems through review and
testing. The Partnership is scheduled to complete all four phases of its
Year 2000 initiative with respect to both IT and non-IT systems no later
than September 30, 1999.
The Partnership has received assurances from a majority of its
suppliers and third parties with which it interacts that they have addressed
their Year 2000 issues. The Partnership is evaluating these assurances for
their adequacy and accuracy and, in cases where the Partnership has not
received assurances from third parties, is initiating further mail or phone
correspondence. As a general matter, the Partnership is vulnerable to
failures by third parties to address their own Year 2000 issues. The
Partnership relies heavily upon third parties for ticketing, producing and
broadcasting basketball games and for transporting the Boston Celtics'
players, coaches and equipment to and from basketball games. There can be
no assurance that the Partnership's suppliers and third parties will
adequately address their Year 2000 issues, and any such issues could have a
material adverse effect upon the Partnership's financial condition and
results of operations.
Costs to Address the Year 2000 Issue
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.
Risks Presented by the Year 2000 Issue
Until it has fully completed the first two phases of its Year 2000
action plan with respect to both IT and non-IT systems, the Partnership
cannot accurately estimate the risks of its Year 2000 issue. To date, the
Partnership has not identified any IT system or non-IT system that presents
a material risk of not being ready for the Year 2000. The Partnership's
Year 2000 action plan may, however, identify systems that present a risk of
Year 2000 related disruption. Any such disruption could have a material
adverse effect upon the Partnership's financial condition and results of
operations. In addition, the failure to address Year 2000 issues by the
Partnership's suppliers and other third parties with which it interacts
could have a material adverse effect upon the Partnership's financial
condition and results of operations.
<PAGE> 31
Contingency Plans
The Partnership's Year 2000 action plan calls for the Partnership to
develop a Year 2000 contingency plan. Because the Partnership has not fully
assessed its possible risks from Year 2000 failures, it has not yet
developed a Year 2000 contingency plan. The Partnership will develop such a
plan if the results of its Year 2000 action plan identify risks of a Year
2000 failure.
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.
BCC receives a management fee of $750,000 per annum, subject to annual
increases based on annual cash flows from basketball operations. Management
fees of $750,000 were charged to Celtics Basketball's operations in the year
ended June 30, 1999 and management fees of $1,577,000 and $820,000 were
charged to BCLP II's operations during the years ended June 30, 1998 and
1997, respectively.
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).
<PAGE> 32
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 42 Chairman of the Board of Directors
Richard G. Pond 39 Executive Vice President, Chief Operating
Officer, Chief Financial Officer, Treasurer,
and Secretary
Don F. Gaston 65 Director
Paula B. Gaston 65 Director
John B. Marsh, III 42 Director
</TABLE>
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.
Richard G. 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.
<PAGE> 33
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.
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.
John B. Marsh became a director of Celtics, Inc. in September 1992.
Mr. Marsh is currently managing partner of Corvus 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. Marsh, a non-management
director, and Mr. Paul Gaston. 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. Mr. Marsh received $12,000 in such directors' fees in
fiscal 1999. 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). The Partnership believes that all filing requirements were
complied with in a timely fashion during the year ended June 30, 1999.
<PAGE> 34
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 one of the Partnership's executive officers had an annual
salary and bonus exceeding $100,000 for services to BCLP and its
subsidiaries during the year ended June 30, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation Long Term Compensation Awards
----------------------- -----------------------------
Fiscal Securities
Year Other Annual Restricted Underlying
Ended Compensation Stock Options/
Name and Principal Position June 30, Salary ($) Bonus ($) ($) (1) Awards ($) SARs (#)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul E. Gaston 1999
Chief Executive Officer 1998 $1,000,000 $324,596
and Chairman of the Board 1997 400,000 $518,750 (1)
Richard G. Pond 1999 360,000 250,000
Executive Vice President, 1998 400,000 250,000
Chief Operating Officer, 1997 250,000 125,000
Chief Financial Officer,
Treasurer and Secretary
- --------------------
<FN>
<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, $518,750 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.
</FN>
</TABLE>
<PAGE> 35
Neither BCLP nor BCLP II granted any options or appreciation rights
during the year ended June 30, 1999. No options were exercised during the
year ended June 30, 1999, and there are no options outstanding at June 30,
1999.
Employment and Consulting Agreements
The Partnership
In August 1993, the Board of Directors of Celtics, Inc. approved
compensation arrangements and an incentive plan for Paul E. Gaston, Chairman
of the Board of Celtics, Inc., under which Mr. Gaston was 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 Mr. Gaston
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. Because of the lockout, Mr. Gaston
voluntarily received no compensation from BCLP during the year ended June
30, 1999. During the years ended June 30, 1999 and 1997, no annual
incentive compensation payments were made to Mr. Gaston, and during the year
ended June 30, 1998, Mr. Gaston was paid an annual incentive compensation
payment of $324,596.
The Basketball Operations
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
Mr. Marsh, the non-management director of the Audit Committee of the
Board, performed the functions of a compensation committee during the year
ended June 30, 1999. Mr. Marsh was not, during the year ended June 30, 1999
or previously, an officer or employee of the Partnership or any of its
subsidiaries, and he did not have any affiliated relationship requiring
disclosure.
<PAGE> 36
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 10, 1999 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 551,900 (3) 20.4%
33 East 63rd Street
New York, New York 10021
John B. Marsh, III 500 *
33 East 63rd Street
New York, New York 10021
Richard G. Pond 0 *
151 Merrimac Street
Boston, Massachusetts 02114
Castle Creek Partners, L.P. 551,800 20.4%
151 Merrimac Street
Boston, Massachusetts 02114
David R. Murphey, III 244,700 9.1%
Murphey Capital, Inc.
P.O. Box 18065
Tampa, Florida 33681-8065
All directors and executive officers
as a group (5 persons) 552,600 20.4%
<PAGE> 37
- --------------------
<FN>
<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, L.P., 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, and 551,800 Units held by Castle Creek Partners, L.P.
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. The General Partner of Castle Creek Partners,
L.P. is Castle Creek Partners GP, Inc., which is wholly owned by
Celtics, Inc., which is wholly owned by Walcott Partners, L.P. In
addition, 96.3% of Castle Creek's limited partnership interests are
held by a limited partnership of which Walcott Partners, L.P. owns a
majority of the limited partnership interests and Draycott, Inc. is
the general partner. Castle Creek holds a 51.6867% limited
partnership interest in Celtics Basketball Holdings. For the purpose
of this table, Mr. Paul E. Gaston is deemed to be the beneficial owner
of these Units.
</FN>
</TABLE>
Unless otherwise indicated, all parties have both exclusive voting and
investing power.
Item 13. Certain Relationships and Related Transactions
In 1999, BCLP II reimbursed Conanicut Aircraft, Inc. ("Conanicut")
approximately $20,000 for the business use in the fiscal year ended June 30,
1999 of an aircraft based on standard charter rates for comparable aircraft.
Conanicut is wholly owned by Walcott Partners, L.P. 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. The reimbursement
was reviewed and approved by the Audit Committee of the Board of Directors
of BCLP GP. 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.
BCC receives a management fee of $750,000 per annum, subject to annual
increases based on annual cash flows from basketball operations. Management
fees of $750,000 were charged to Celtics Basketball's operations in the year
ended June 30, 1999 and management fees of $1,577,000 and $820,000 were
charged to BCLP II's operations during the years ended June 30, 1998 and
1997, respectively.
<PAGE> 38
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 these entities will provide
certain management and corporate services on behalf of the other entities,
and will charge a fee for these services based on the cost of the actual
services. BCLP II received reimbursements from Celtics Basketball and
Castle Creek in the amounts of $702,000 and $1,259,000, respectively, in the
fiscal year ended June 30, 1999 for services provided under this agreement.
See "Item 12 - Security Ownership of Certain Beneficial Owners and
Management" regarding ownership and control of Castle Creek.
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.10
(d) -- Agreement of Limited Partnership of Boston Celtics
Limited Partnership.9
(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." 10
(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." 10
(h) -- Certificate of Incorporation of BCLP GP, Inc., dated
April 13, 1998.8
<PAGE> 39
(i) -- By-Laws of BCLP GP, Inc.8
(j) -- Certificate of Amendment, dated June 29, 1998,
changing the name of BCLP GP, Inc. from its former
name of "BCLP II GP, Inc." 10
(k) -- Certificate of Incorporation of BCLP II GP, Inc.,
dated April 13, 1998.8
(l) -- By-Laws of BCLP II GP, Inc.8
(m) -- Certificate of Amendment, dated June 29, 1998,
changing the name of BCLP II GP, Inc. from its former
name of "BCLP GP, Inc." 10
(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, 1998.8
(10) (a) -- Joint Venture Agreement by and among NBA member
organizations.1
(b) -- Constitution and By-laws of the National Basketball
Association.1
(c) -- License/Lease Agreement dated April 4, 1990 between
Boston Celtics Limited Partnership and New Boston
Garden Corporation (confidential treatment previously
granted).2
(d) -- Office Lease Agreement dated April 4, 1990 between
Boston Celtics Limited Partnership and New Boston
Garden Corporation (confidential treatment previously
granted).2
(e) -- Letter Agreement dated April 4, 1990 between the
Boston Celtics Limited Partnership and New Boston
Garden Corporation (confidential treatment granted).2
(f) -- Unit Option Agreement dated December 31, 1993 by and
between Boston Celtics Limited Partnership and Paul
E. Gaston.3
(g) -- Restricted Unit Agreement dated June 28, 1996 between
Boston Celtics Limited Partnership and Paul E.
Gaston.4
(h) -- Letter from Paul Gaston electing to accept all
incentive compensation for 1996 in restricted units.4
(i) -- 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. 5
<PAGE> 40
(j) -- 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.6
(k) -- 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.8
(l) -- Agreement and Plan of Merger of BCLP Merger, Inc.,
Boston Celtics Limited Partnership and Boston Celtics
Limited Partnership II, dated as of June 29, 1998.8
(m) -- Credit Agreement between Boston Celtics Limited
Partnership and Citizens Bank of Massachusetts, dated
as of May 20, 1998.7
(n) -- Second Amendment to Credit Agreement dated as of July
30, 1999 among Celtics Limited Partnership, Boston
Celtics Limited Partnership II, Boston Celtics
Limited Partnership, Celtics Basketball, L.P.,
Celtics Basketball Holdings, L.P., Celtics Pride,
G.P. and Citizens Bank of Massachusetts.
(o) -- Second Amendment to Credit Agreement dated as of July
30, 1999 among Boston Celtics Limited Partnership II,
the Borrower, and The Royal Bank of Scotland plc, the
Lender, and Citizens Bank of Massachusetts, the
Agent.
(27) Financial Data Schedule
- --------------------
[FN]
<F1> 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).
<F2> 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.
<F3> 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).
<F4> 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).
<F5> 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).
<F6> 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).
<PAGE> 41
<F7> Incorporated by reference from the exhibits filed with the Schedule
13E-3 filed by Boston Celtics Limited Partnership (File No. 5-37799).
<F8> 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).
<F9> 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).
<F10> Incorporated by reference to the exhibits filed with the report on
Form 10-K filed with the Securities and Exchange Commission on
September 25, 1998 (File No. 0-19324).
</FN>
(b) Reports on Form 8-K filed in the fourth quarter of 1999 - None.
(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.
<PAGE> 42
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, 1999
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 Sheets at June 30, 1999 and 1998.
Consolidated Statement of Operations for the year ended June 30, 1999.
Consolidated Statement of Partners' Capital (Deficit) for the year
ended June 30, 1999.
Consolidated Statement of Cash Flows for the year ended June 30, 1999.
Notes to Consolidated Financial Statements.
Boston Celtics Limited Partnership II and Subsidiaries
Consolidated Balance Sheets at June 30, 1999 and 1998.
Consolidated Statements of Operations for each of the three years in
the period ended June 30, 1999.
Consolidated Statements of Partners' Capital (Deficit) for each of the
three years in the period ended June 30, 1999.
Consolidated Statements of Cash Flows for each of the three years in
the period ended June 30, 1999.
Notes to Consolidated Financial Statements.
<PAGE> 43
Celtics Basketball Holdings, L.P. and Subsidiary
Consolidated Balance Sheets at June 30, 1999 and 1998.
Consolidated Statement of Operations for the year ended June 30, 1999.
Consolidated Statement of Partners' Capital (Deficit) for the year
ended June 30, 1999.
Consolidated Statement of Cash Flows for the year ended June 30, 1999.
Notes to Consolidated Financial Statements.
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.
<PAGE> 44
Report of Independent Auditors
To the General Partner
Boston Celtics Limited Partnership
We have audited the accompanying consolidated balance sheets of Boston
Celtics Limited Partnership and Subsidiaries as of June 30, 1999 and 1998,
and the related consolidated statements of operations, partners' capital
(deficit) and cash flows for the year ended June 30, 1999. 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 and Subsidiaries at June 30,
1999 and 1998, and the consolidated results of their operations and their
cash flows for the year ended June 30, 1999, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
September 10, 1999
<PAGE> 45
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,607,725 $ 8,468,286
Marketable securities 1,041,446
Other short-term investments 83,200,000 81,114,266
Prepaid expenses and other current assets 237,245 302,900
------------------------------
TOTAL CURRENT ASSETS 86,044,970 90,926,898
PROPERTY AND EQUIPMENT, net 14,422 23,516
OTHER ASSETS 1,214,314 1,096,129
------------------------------
$ 87,273,706 $ 92,046,543
==============================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 99,893 $ 1,102,496
Due to related parties 3,036,184
Federal and state income taxes payable 751,204 733,800
Notes payable to bank - current portion 2,500,000
Notes payable 17,538,780
------------------------------
TOTAL CURRENT LIABILITIES 3,351,097 22,411,260
DEFERRED FEDERAL AND STATE INCOME TAXES 9,710,875 9,710,875
NOTES PAYABLE TO BANK - noncurrent portion 50,000,000 30,000,000
SUBORDINATED DEBENTURES 33,384,771 32,984,700
INVESTMENT IN CAPITAL DEFICIENCY OF
CELTICS BASKETBALL HOLDINGS, L.P. 33,790,372 29,865,364
<PAGE> 46
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 189,968 290,166
Limited Partners (44,151,483) (34,329,896)
------------------------------
(43,961,515) (34,039,730)
Boston Celtics Limited Partnership II
- General Partner 133,234 210,292
Celtics Limited Partnership - General Partner 223,298 262,554
Boston Celtics Communications Limited
Partnership - General Partner 641,574 641,228
------------------------------
TOTAL PARTNERS' CAPITAL (DEFICIT) (42,963,409) (32,925,656)
------------------------------
$ 87,273,706 $ 92,046,543
==============================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 47
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statement of Operations
For the Year Ended June 30, 1999
<TABLE>
<S> <C>
Costs and expenses:
General and administrative $ 3,837,185
Depreciation 9,095
Amortization 47,114
------------
3,893,394
Equity in loss of Celtics Basketball Holdings, L.P. (204,960)
Interest expense (6,649,201)
Interest income 4,498,452
Net realized gains on disposition of marketable
securities and other short-term investments 6,020
------------
Loss before income taxes and extraordinary charge (6,243,083)
Provision for income taxes 1,600,000
------------
Loss before extraordinary charge (7,843,083)
Extraordinary charge for early retirement of notes payable 2,255,540
------------
Net loss (10,098,623)
Net loss applicable to interests of General Partners (178,912)
------------
Net loss applicable to interests of Limited Partners $ (9,919,711)
============
Loss per unit before extraordinary charge $ (2.85)
Net loss per unit $ (3.67)
</TABLE>
See notes to consolidated financial statements.
<PAGE> 48
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statement of Partners' Capital (Deficit)
<TABLE>
<CAPTION>
Limited Partners
----------------------------
Total Units Amount
-----------------------------------------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1998 $(32,925,656) 2,703,664 $(34,329,896)
Net income (loss) for the year ended
June 30, 1999 (10,098,623) (9,919,711)
Cash distribution from Castle Creek
Partners, L.P. 103,430 103,430
Cash distribution paid by Celtics Limited
Partnership to Boston Celtics Corporation
(General Partner's share) (37,200)
Unrealized loss on marketable securities (5,360) (5,306)
----------------------------------------------
BALANCE AT JUNE 30, 1999 $(42,963,409) 2,703,664 $(44,151,483)
==============================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 49
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statement of Partners' Capital (Deficit)
(continued)
<TABLE>
<CAPTION>
General Partners
------------------------------------------------------------
Boston Celtics
Boston Celtics Boston Celtics Celtics Communications
Limited Limited Limited Limited
Total Partnership Partnership II Partnership Partnership
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1998 $1,404,240 $ 290,166 $210,292 $262,554 $641,228
Net income (loss) for the year ended
June 30, 1999 (178,912) (100,198) (77,004) (2,056) 346
Cash distribution from Castle Creek
Partners, L.P.
Cash distribution paid by Celtics Limited
Partnership to Boston Celtics Corporation
(General Partner's share) (37,200) (37,200)
Unrealized loss on marketable securities (54) (54)
-----------------------------------------------------------------------
BALANCE AT JUNE 30, 1999 $1,188,074 $189,968 $133,234 $223,298 $641,574
=======================================================================
</TABLE>
<PAGE> 50
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statement of Cash Flows
For the Year Ended June 30, 1999
<TABLE>
<S> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
General and administrative expenses $ (4,523,674)
Interest expense (6,432,925)
Interest income 4,839,294
Income taxes paid (1,582,595)
-------------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (7,699,900)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of short-term investments (437,446,570)
Proceeds from sales of marketable securities 1,000,000
Proceeds from sales of short-term investments 434,727,039
Payment of due to related parties (3,036,184)
Other receipts (expenditures) 12,967
-------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,742,748)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings 23,500,000
Payment of bank borrowings (1,000,000)
Payment of notes payable (19,794,320)
Cash distribution from Celtics Basketball Holdings, L.P. 3,682,811
Cash distribution from Castle Creek Partners, L.P. 103,430
Cash contributions from General Partner 90,166
-------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 6,582,087
-------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,860,561)
Cash and cash equivalents at beginning of year 8,468,286
-------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,607,725
=============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amortization of original issue discount on Subordinated
Debentures $ 400,071
</TABLE>
See notes to consolidated financial statements.
<PAGE> 51
BOSTON CELTICS LIMITED PARTNERSHIP
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 ("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
("NBA"). 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.
<PAGE> 52
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: In June 1998, the Financial Accounting Standards
Board issued Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("Statement 133"), which is required to be adopted in
years beginning after June 15, 1999. The Statement will require that all
derivatives be recognized on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in fair
value of the hedged assets, liabilities or firm commitments will either be
immediately recognized in earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The ineffective
portion of a derivatives change in fair value will be immediately recognized
in earnings. The Partnership has not yet determined what the effect of
Statement 133 will be on the earnings and financial position of the
Partnership.
<PAGE> 53
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Financial Statements
Note B - Significant Accounting Policies (continued)
In September 1998, in order to fix the interest rate on the debt described
in Note F, BCLP entered into two interest rate cap agreements with an
aggregate notional amount of $50,000,0000, expiring in September 1999 and
March 2000. The fixed interest rate on these contracts is 4.99%. The
interest rate differential is recognized as an adjustment to interest
expense.
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.
The Partnership estimates that the interest rate swap agreements have a fair
value of approximately $40,000 at June 30, 1999, based upon interest rates
at that date.
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. BCLP
and its subsidiary corporations 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: The Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income"
("Statement 130") in the fiscal year ended June 30, 1999. The Partnership's
comprehensive income is comprised of net income (loss) and unrealized gains
and losses on marketable securities held as available-for-sale investments.
Comprehensive loss of approximately $10,104,000 for the fiscal year ended
June 30, 1999 was not materially different from reported net loss.
<PAGE> 54
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 then contributed 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 received limited partnership interests in Castle
Creek, which were subsequently distributed 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 was classified as due to related
parties on the consolidated balance sheet at June 30, 1998 and was paid to
Castle Creek in July 1998.
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. ("Celtics Basketball"), 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.
<PAGE> 55
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Financial Statements
Note D - Investment in Capital Deficiency of Celtics
Basketball Holdings, L.P. (continued)
Summary balance sheet and statement of operations data for Celtics
Basketball Holdings is as follows (amounts in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------
1999 1998
----------------------
<S> <C> <C>
Current assets $ 5,241 $ 9,867
Current liabilities 25,905 27,508
Total assets 14,264 25,255
Notes payable to bank - noncurrent portion 50,000 50,000
Deferred compensation - noncurrent portion 7,626 8,962
Other noncurrent liabilities 672 600
Partners' capital (deficit) (69,939) (61,815)
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30, 1999
-------------
<S> <C>
Total revenues $ 43,052
Total costs and expenses (41,458)
Interest and other income (expense), net (2,018)
--------
Net income (loss) $ (424)
========
</TABLE>
Note E - Marketable Securities and Other Short-Term Investments
The Partnership held no marketable securities at June 30, 1999. Gross
realized gains from available-for-sale U.S. government securities amounted
to $6,020 in the fiscal year ended June 30, 1999. 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
a loss of $5,360 in 1999.
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, 1999 and 1998.
<PAGE> 56
Note F - 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 and his family members were paid $1,941,450, equal to $21.50 in cash for
each of the 90,300 units acquired from them. The two notes payable to the
principal unitholder had 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 were due and payable on July 1, 2000, also provided that the amounts
to be paid to such unitholder pursuant to the terms of the notes were to be
increased by specified amounts on each July 1 during their term. If the
principal unitholder held the two notes until July 1, 2000, he would have
been 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 accrued interest payable quarterly at the rate of
7.76% per annum.
On September 30, 1998, BCLP II borrowed $20,000,000 reserved under its
revolving credit agreement (described below) and used the proceeds to repay
the notes payable related to the redeemed BCLP II units. At September 30,
1998, the notes payable had an aggregate balance, including scheduled
increases, of $17,538,780. The notes payable were repaid in the amount of
$19,794,320, resulting in an extraordinary charge of $2,255,540 ($0.82 per
unit) related to early retirement of notes payable. Interest expense of
$343,000 related to these notes was charged to operations in 1999.
<PAGE> 57
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Financial Statements
Note F - Notes Payable (continued)
On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit
agreement with its commercial bank, $20,000,000 of which was reserved for
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% (6.03% at June 30, 1999). On May 26, 1998, $30,000,000 was
advanced under the revolving credit agreement in connection with the
Reorganization, and on September 30, 1998, BCLP II borrowed the $20,000,000
reserved for the repayment of notes payable related to redeemed BCLP II
Units and repaid the notes with the proceeds. As of June 30, 1999,
$52,500,000 was outstanding under the revolving credit agreement, $2,500,000
of which is payable on September 30, 1999 and $50,000,000 of 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 short-term investments of Celtics Capital Corporation, an
indirect subsidiary of BCLP and BCLP II. The revolving credit agreement
contains certain restrictions and various provisions and covenants customary
in lending arrangements of this type.
Interest charged to operations in connection with borrowings amounted to
$2,662,000 in the fiscal year ended June 30, 1999.
Note G - 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 were 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 is being amortized over the 40-year life of the Subordinated
Debentures using the interest method and, accordingly, the Subordinated
Debentures are valued at $33,384,771 at June 30, 1999.
The Subordinated Debentures bear interest at the rate of 6% per annum,
payable annually commencing June 30, 1999 and mature on June 30, 2038.
There is no mandatory redemption of the Subordinated Debentures, and they
are not entitled to any sinking fund.
<PAGE> 58
Note H - 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 Complaints have been consolidated. On August 6, 1999, the
Court of Chancery issued an opinion granting in part, and denying in part,
the Partnership's Motion to Dismiss, and on September 3, 1999, the
plaintiffs filed an amended consolidated complaint.
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.
<PAGE> 59
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Financial Statements
Note H - Commitments and Contingencies (continued)
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. On January 20,
1999, the NBA and the NBPA entered into a new collective bargaining
agreement (the "New Collective Bargaining Agreement"), thereby ending the
lockout. As a result of the lockout, the 1998-99 NBA regular season
consisted of 50 games per team, beginning in early February 1999.
Ordinarily, the NBA regular season consists of 82 games per team and
generally begins in late October or early November.
NBA teams, including the Boston Celtics, refunded amounts paid by season
ticket holders (plus interest at 6%) for a total of 18 home games (including
two exhibition games) that were canceled as a result of the lockout.
Refunds of approximately $11,632,000 (including interest of $185,000) were
paid by Celtics Basketball on a monthly basis for games canceled in the
preceding month. In addition, certain season ticket holders elected to
leave their refunds and interest on deposit for future games. Such refunds
amounted to approximately $571,000 at June 30, 1999 (including interest of
approximately $12,000). No interest has accrued on such amounts since
January 31, 1999.
All amounts paid by season ticket holders are recorded by Celtics Basketball
as deferred revenue and are subsequently recognized as revenue on a game-by-
game basis as regular season games are played. No revenues were recognized
with respect to amounts paid by season ticket holders for canceled games or
for refunds left on deposit for future games. Amounts refunded are recorded
by Celtics Basketball as reductions in the deferred revenue liability when
paid.
Note I - 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
$41,000 in the fiscal year ended June 30, 1999.
<PAGE> 60
Note J - Cash Flows
A reconciliation of net loss to net cash flows used in operating activities
is as follows:
<TABLE>
<S> <C>
Net loss $(10,098,623)
Items not affecting cash flows from operating activities:
Depreciation 9,095
Amortization 47,114
Extraordinary charge for early retirement of notes payable 2,255,540
Amortization of original issue discount on Subordinated
Debentures 400,071
Net realized losses on disposition of marketable securities
and other short-term investments (6,020)
Equity in loss of Celtics Basketball Holdings, L.P. 204,960
Changes in:
Accrued interest receivable 304,384
Accounts receivable 192,657
Accounts payable and accrued expenses (1,009,078)
------------
Net cash flows used in operating activities $ (7,699,900)
============
</TABLE>
<PAGE> 61
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Financial Statements
Note K - Quarterly Results (Unaudited)
A summary of operating results, net income (loss) 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 fiscal year ended June 30, 1999 is set forth below (000's omitted,
except for per unit amounts):
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------
September 30, December 31, March 31, June 30,
1998 1998 1999 1999 Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1999:
Income (loss) from operations
before extraordinary charge $(3,236) $(5,244) $1,429 $ (792) $ (7,843)
Extraordinary charge for early
retirement of notes payable (2,256) (2,256)
Net income (loss) (5,492) (5,244) 1,429 (792) (10,099)
Net income (loss) applicable to
Limited Partners (5,378) (5,116) 1,362 (788) (9,920)
Net income (loss) per unit from
operations before extraordinary charge $ (1.17) $ (1.89) $ 0.50 $(0.29) $ (2.85)
Net income (loss) per unit $ (1.99) $ (1.89) $ 0.50 $(0.29) $ (3.67)
</TABLE>
Note L - Income Taxes
BCLP is a partnership that is taxed as a corporation. The consolidated
financial statements include the accounts and operating results of wholly
owned subsidiary corporations that file tax returns separate from those of
BCLP. As a result, income of those subsidiary corporations can not be
offset by losses of BCLP. Aggregate pre-tax income of BCLP's wholly owned
taxable subsidiary corporations amounted to $3,553,000 in the year ended
June 30, 1999.
<PAGE> 62
Components of deferred tax liabilities and assets at June 30, 1999 and 1998
are as follows (000's omitted):
<TABLE>
<CAPTION>
June 30,
----------------------
1999 1998
----------------------
<S> <C> <C>
Deferred tax assets:
Difference between tax and financial statement bases of
the assets and liabilities of BCLP and subsidiaries
related to:
Step-up in basis in connection with Unit redemptions $ 30,078
Difference between tax and financial statement basis
of investment in Celtics Basketball Holdings, L.P. 9,865 $ 10,303
Intangible assets 386
Net operating loss carryforward 6,018
----------------------
46,347 10,303
Less valuation allowance (46,347) (10,303)
----------------------
Net deferred tax assets 0 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
Less amount assumed by Castle Creek Partners, L.P. as
a result of indemnities in the Merger Agreement of
the Reorganization (10,389) (10,389)
----------------------
Net deferred tax liabilities 9,711 9,711
----------------------
Total deferred tax liabilities $ 9,711 $ 9,711
======================
</TABLE>
At June 30, 1999, the Partnership has net operating loss carryforwards of
$14,946,000 for income tax purposes that expire in fiscal 2014. The net
deferred tax liabilities represent the tax-effected difference between the
tax and financial statement bases of the net assets of BCCLP Holding
Corporation ("Holdings") and Celtics Investments, Inc. ("CII"), and
<PAGE> 63
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Consolidated Financial Statements
Note L - Income Taxes (continued)
relate to Holdings or subsidiary partnerships Boston Celtics Communications
Limited Partnership ("BCCLP") and Boston Celtics Broadcasting Limited
Partnership ("BCBLP"). The net deferred tax assets are derived from
different entities in the consolidated group. 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.
The provision for income taxes included in the consolidated statement of
operations consists of the following (000's omitted):
<TABLE>
<S> <C>
Current:
Federal $1,200
State 400
------
$1,600
======
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
tax rate of the provision is:
<TABLE>
<S> <C>
Tax (benefit) at statutory federal income tax rate (34.0)%
Current year losses for which no tax benefit has
been recognized 34.0
Federal income taxes of subsidiary corporations 19.4
State income taxes of subsidiary corporations,
net of federal tax benefit 3.5
Other 2.7
-----
Effective tax rate 25.6 %
=====
</TABLE>
Note M - 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.
<PAGE> 64
The following table sets forth the computation of basic and diluted earnings
per unit for the fiscal year ended June 30, 1999:
<TABLE>
<S> <C>
Numerator for loss per unit:
Loss from operations before extraordinary charge:
Loss from operations before extraordinary charge $ (7,843,083)
Applicable to interests of General Partners of
subsidiary partnerships (56,158)
------------
(7,786,925)
Applicable to 1% General Partnership interest of BCLP (77,869)
------------
Applicable to interests of Limited Partners $ (7,709,056)
============
Net loss:
Net loss $(10,098,623)
Applicable to interests of General Partners of
subsidiary partnerships (78,714)
------------
(10,019,909)
Applicable to 1% General Partnership interest of BCLP (100,198)
------------
Applicable to interests of Limited Partners $ (9,919,711)
============
Denominator for loss per unit - weighted average units 2,703,664
============
Loss per unit from operations before extraordinary charge $ (2.85)
============
Net loss per unit $ (3.67)
============
</TABLE>
<PAGE> 65
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, 1999 and 1998, and the related consolidated
statements of operations, partners' capital (deficit) and cash flows for
each of the three years in the period ended June 30, 1999. 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, 1999 and 1998, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended June 30,
1999, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
September 10, 1999
<PAGE> 66
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,597,546 $ 8,268,186
Marketable securities 1,041,446
Other short-term investments 83,200,000 81,114,266
Due from related parties 2,049,516
Prepaid expenses and other current assets 217,162 212,734
------------------------------
TOTAL CURRENT ASSETS 88,064,224 90,636,632
PROPERTY AND EQUIPMENT, net 14,422 23,516
OTHER ASSETS 1,214,314 1,096,129
------------------------------
$ 89,292,960 $ 91,756,277
==============================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 99,488 $ 1,102,296
Due to related parties 3,036,184
Federal and state income taxes payable 751,204 733,800
Notes payable to bank - current portion 2,500,000
Notes payable 17,538,780
------------------------------
TOTAL CURRENT LIABILITIES 3,350,692 22,411,060
DEFERRED FEDERAL AND STATE INCOME TAXES 9,710,875 9,710,875
NOTES PAYABLE TO BANK - noncurrent portion 50,000,000 30,000,000
SUBORDINATED DEBENTURES 33,384,771 32,984,700
INVESTMENT IN CAPITAL DEFICIENCY OF
CELTICS BASKETBALL HOLDINGS, L.P. 33,790,372 29,865,364
<PAGE> 67
PARTNERS' CAPITAL (DEFICIT), authorized
25,000,000 units of limited partnership
interest, issued and outstanding 2,703,664 units
Boston Celtics Limited Partnership II -
General Partner 133,234 210,292
Limited Partners (41,941,856) (34,329,796)
------------------------------
(41,808,622) (34,119,504)
Celtics Limited Partnership - General Partner 223,298 262,554
Boston Celtics Communications Limited
Partnership - General Partner 641,574 641,228
------------------------------
TOTAL PARTNERS' CAPITAL (DEFICIT) (40,943,750) (33,215,722)
------------------------------
$ 89,292,960 $ 91,756,277
==============================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 68
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Year Ended
---------------------------------------------
June 30, June 30, June 30,
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Revenues:
Basketball regular season -
Ticket sales $39,107,960 $31,813,019
Television and radio broadcast rights fees 28,002,469 23,269,159
Other, principally promotional advertising 8,569,485 7,915,626
----------------------------
75,679,914 62,997,804
----------------------------
Costs and expenses:
Basketball regular season -
Team 40,401,643 40,941,156
Game 2,820,107 2,386,042
General and administrative $ 1,536,555 13,464,566 13,913,893
Selling and promotional 4,819,478 4,680,168
Depreciation 208,162 189,324
Amortization of NBA franchise and other
intangible assets 47,114 165,035 164,702
---------------------------------------------
1,583,669 61,878,991 62,275,285
---------------------------------------------
(1,583,669) 13,800,923 722,519
Equity in loss of Celtics Basketball Holdings, L.P. (204,960)
Interest expense (6,649,201) (6,017,737) (5,872,805)
Interest income 4,498,452 6,402,366 6,609,541
Net realized gains (losses) on disposition of
marketable securities and other short-term
investments 6,020 (18,235) 361,051
---------------------------------------------
Income (loss) before income taxes and
extraordinary charge (3,933,358) 14,167,317 1,820,306
Provision for income taxes 1,600,000 1,900,000 1,400,000
---------------------------------------------
Income (loss) before extraordinary charge (5,533,358) 12,267,317 420,306
Extraordinary charge for early retirement of
notes payable 2,255,540
---------------------------------------------
Net income (loss) (7,788,898) 12,267,317 420,306
Net income (loss) applicable to interests
of General Partners (78,714) 306,216 62,246
---------------------------------------------
Net income (loss) applicable to interests
of Limited Partners $(7,710,184) $11,961,101 $ 358,060
==============================================
<PAGE> 69
Per unit:
Income before extraordinary charge-basic $ 2.45 $ 0.07
Income before extraordinary charge-diluted $ 2.17 $ 0.06
Net income-basic $ 2.45 $ 0.07
Net income-diluted $ 2.17 $ 0.06
Distributions declared $ 2.00 $ 1.00
</TABLE>
See notes to consolidated financial statements.
<PAGE> 70
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, 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)
<PAGE> 71
Net income (loss) for the year ended June 30, 1999 (7,788,898) (7,710,184)
Cash distribution from Castle Creek Partners, L.P. 103,430 103,430
Cash distribution paid by Celtics Limited
Partnership to Boston Celtics Corporation
(General Partner's share) (37,200)
Unrealized loss on marketable securities (5,360) (5,306)
----------------------------------------------
BALANCE AT JUNE 30, 1999 $(40,943,750) 2,703,664 $(41,941,856)
==============================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 72
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Partners' Capital (Deficit)
(continued)
<TABLE>
<CAPTION>
General Partners' Interests
-------------------------------------------------
Boston Celtics
Boston Celtics Communications
Limited Celtics Limited Limited
Total Partnership II Partnership Partnership
--------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1996 $ 831,813 $284,422 $ (92,988) $640,379
Net income for the year ended June 30, 1997 62,246 3,617 58,122 507
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) 640,886
Net income for the year ended June 30, 1998 306,216 120,820 185,054 342
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
by Celtics Limited Partnership 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 1,114,074 210,292 262,554 641,228
<PAGE> 73
Net income (loss) for the year ended June 30, 1999 (78,714) (77,004) (2,056) 346
Cash distribution from Castle Creek Partners, L.P.
Cash distribution paid by Celtics Limited
Partnership to Boston Celtics Corporation
(General Partner's share) (37,200) (37,200)
Unrealized loss on marketable securities (54) (54)
----------------------------------------------------------
BALANCE AT JUNE 30, 1999 $ 998,106 $133,234 $ 223,298 $641,574
==========================================================
</TABLE>
<PAGE> 74
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------------------
June 30, June 30, June 30,
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Receipts:
Basketball regular season receipts:
Ticket sales $ 40,147,616 $ 33,132,256
Television and radio broadcast rights fees 26,195,503 22,009,139
Other, principally promotional advertising 9,068,435 8,141,716
--------------------------------
75,411,554 63,283,111
Costs and expenses:
Basketball regular season expenditures:
Team expenses 37,476,899 34,390,240
Game expenses 2,706,673 2,273,709
Basketball playoff expenses
General and administrative expenses $ 4,243,587 13,442,475 15,650,961
Selling and promotional expenses 4,974,501 3,730,578
---------------------------------------------------
4,243,587 58,600,548 56,045,488
---------------------------------------------------
(4,243,587) 16,811,006 7,237,623
Interest expense (6,432,925) (4,484,886) (4,422,737)
Interest income 4,839,294 6,459,967 6,319,302
Income taxes paid (1,582,595) (733,306) (2,372,220)
Payment of deferred compensation (1,751,746) (4,300,147)
---------------------------------------------------
NET CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES (7,419,813) 16,301,035 2,461,821
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Purchases of:
Marketable securities (41,399,070) (43,482,870)
Short-term investments (437,446,570) (747,722,322) (594,400,000)
Proceeds from sales of:
Marketable securities 1,000,000 59,895,502 47,925,944
Short-term investments 434,727,039 697,787,584 617,500,000
Payment of due to related parties (3,036,184)
Capital expenditures (384,921) (136,279)
Other receipts (expenditures) 12,967 (116,172) (441,129)
---------------------------------------------------
NET CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES (4,742,748) (31,939,399) 26,965,666
</TABLE>
<PAGE> 75
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,
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from bank borrowings 23,500,000 80,000,000
Payment of bank borrowings (1,000,000) (50,000,000)
Payment of notes payable (19,794,320)
Purchase of Boston Celtics Limited Partnership
units (7,147) (22,880,000)
Proceeds from exercise of options to purchase
limited partnership units 2,125,000
Cash distributions:
From Celtics Basketball Holdings, L.P. 3,682,811
From Castle Creek Partners, L.P. 103,430
To Celtics Basketball, L.P. from Celtics Limited
Partnership (6,536,134)
To limited partners of Boston Celtics Limited
Partnership (8,068,908) (5,935,876)
To General Partners (105,000) (95,000)
---------------------------------------------------
NET CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES 6,491,921 17,407,811 (28,910,876)
---------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,670,640) 1,769,447 516,611
Cash and cash equivalents at beginning of year 8,268,186 6,498,739 5,982,128
---------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,597,546 $ 8,268,186 $ 6,498,739
===================================================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amortization of original issue discount on
Subordinated Debentures $ 400,071
Contribution of net capital deficiency 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
<PAGE> 76
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
</TABLE>
See notes to consolidated financial statements.
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,
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES (continued):
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
</TABLE>
See notes to consolidated financial statements.
<PAGE> 77
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. ("Celtics Basketball"), 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.
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.
<PAGE> 78
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.
Property and Equipment: Property and equipment is stated at cost and is
being depreciated over estimated useful lives from three to ten years using
straight line or accelerated methods of depreciation as appropriate.
<PAGE> 79
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note B - Significant Accounting Policies (continued)
Financial Instruments: In June 1998, the Financial Accounting Standards
Board issued Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("Statement 133"), which is required to be adopted in
years beginning after June 15, 1999. The Statement will require that all
derivatives be recognized on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in fair
value of the hedged assets, liabilities or firm commitments will either be
immediately recognized in earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The ineffective
portion of a derivatives change in fair value will be immediately recognized
in earnings. The Partnership has not yet determined what the effect of
Statement 133 will be on the earnings and financial position of the
Partnership.
In September 1998, in order to fix the interest rate on the debt described
in Note F, BCLP entered into two interest rate cap agreements with an
aggregate notional amount of $50,000,0000, expiring in September 1999 and
March 2000. The fixed interest rate on these contracts is 4.99%. The
interest rate differential is recognized as an adjustment to interest
expense.
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.
The Partnership estimates that the interest rate swap agreements have a fair
value of approximately $40,000 at June 30, 1999, based upon interest rates
at that date.
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.
<PAGE> 80
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 Boston Celtics Communications
Limited Partnership ("BCCLP"), a subsidiary partnership, 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: The Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income"
("Statement 130") in the fiscal year ended June 30, 1999. The Partnership's
comprehensive income is comprised of net income (loss) and unrealized gains
and losses on marketable securities held as available-for-sale investments.
Comprehensive income (loss) of approximately ($7,794,000), $12,337,000 and
$269,000 for the fiscal years ended June 30, 1999, 1998 and 1997,
respectively, was not materially different from reported net income (loss).
<PAGE> 81
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to 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 then contributed 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 received limited partnership interests in
Castle Creek, which were subsequently distributed 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 was classified as due to
related parties on the consolidated balance sheet at June 30, 1998 and was
paid to Castle Creek in July 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, 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.
<PAGE> 82
Summary balance sheet and statement of operations data for Celtics
Basketball Holdings is as follows (amounts in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------
1999 1998
----------------------
<S> <C> <C>
Current assets $ 5,241 $ 9,867
Current liabilities 25,905 27,508
Total assets 14,264 25,255
Notes payable to bank - noncurrent portion 50,000 50,000
Deferred compensation - noncurrent portion 7,626 8,962
Other noncurrent liabilities 672 600
Partners' capital (deficit) (69,939) (61,815)
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30, 1999
-------------
<S> <C>
Total revenues $ 43,052
Total costs and expenses (41,458)
Interest and other income (expense), net (2,018)
--------
Net income (loss) $ (424)
========
</TABLE>
<PAGE> 83
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note E - Marketable Securities and Other Short-Term Investments
The Partnership held no marketable securities at June 30, 1999. Gross
realized gains and losses on available-for-sale securities during the fiscal
years ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------
<S> <C> <C>
U.S. corporate debt securities
Gross realized gains $ 45,249
Gross realized (losses) (33,319)
U.S. government securities
Gross realized gains $6,020 15,433
Gross realized (losses) (45,598)
--------------------
Net realized gains (losses) $6,020 $(18,235)
====================
</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 a loss of $5,360 in 1999 and a gain of $69,569 in
1998.
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, 1999.
Note F - 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 and his family members were paid $1,941,450, equal to
$21.50 in cash for each of the 90,300 units acquired from them. The two
notes payable to the principal unitholder had 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 were due and payable on July 1, 2000, also
provided that the amounts to be paid to such unitholder pursuant to the
terms of the notes were to be increased by specified amounts on each July 1
during their term. If the principal unitholder held the two notes until
July 1, 2000, he would have been 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 accrued interest payable
quarterly at the rate of 7.76% per annum.
<PAGE> 84
On September 30, 1998, the Partnership borrowed $20,000,000 reserved under
its revolving credit agreement (described below) and used the proceeds to
repay the notes payable related to the redeemed units. At September 30,
1998, the notes payable had an aggregate balance, including scheduled
increases, of $17,538,780. The notes payable were repaid in the amount of
$19,794,320, resulting in an extraordinary charge of $2,255,540 ($0.82 per
unit) related to early retirement of notes payable. Interest of $343,000,
$2,403,000 and $2,247,000 related to these notes was charged to operations
in 1999, 1998 and 1997, respectively.
On May 20, 1998, the Partnership entered into a $60,000,000 revolving credit
agreement with its commercial bank, $20,000,000 of which was reserved for
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 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% (6.03% at June 30, 1999). On May 26, 1998,
$30,000,000 was advanced under the revolving credit agreement in connection
with the Reorganization, and on September 30, 1998, the Partnership borrowed
the $20,000,000 reserved for the repayment of notes payable related to
redeemed BCLP II Units and repaid the notes with the proceeds. As of June
30, 1999, $52,500,000 was outstanding under the revolving credit agreement,
$2,500,000 of which is payable on September 30, 1999 and $50,000,000 of
which is payable upon maturity of the agreement.
<PAGE> 85
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note F - Notes Payable (continued)
The revolving credit agreement expires on June 30, 2003 and is secured by a
pledge of certain short-term investments of Celtics Capital Corporation
("CCC"), an indirect subsidiary of BCLP II. 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. 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 on June 30, 1998.
Interest charged to operations in connection with borrowings amounted to
$2,662,000, $3,212,000, and $3,219,000 in the years ended June 30, 1999,
1998 and 1997, respectively.
Note G - 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 were 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 is being amortized over the 40-year life of the Subordinated
Debentures using the interest method and, accordingly, the Subordinated
Debentures are valued at $33,384,771 at June 30, 1999.
The Subordinated Debentures bear interest at the rate of 6% per annum,
payable annually commencing June 30, 1999 and mature on June 30, 2038.
There is no mandatory redemption of the Subordinated Debentures, and they
are not entitled to any sinking fund.
Note H - Related Party Transactions
Boston Celtics Corporation, the general partner of CLP and Celtics
Basketball, receives a management fee of $750,000 per annum, subject to
annual increases based on annual cash flows from basketball operations.
Management fees of $750,000 were charged to Celtics Basketball's operations
in the year ended June 30, 1999 and management fees of $1,577,000 and
$820,000 were charged to BCLP II's operations during the years ended June
30, 1998 and 1997, respectively.
<PAGE> 86
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 Complaints have been consolidated. On August 6, 1999, the
Court of Chancery issued an opinion granting in part, and denying in part,
the Partnership's Motion to Dismiss, and on September 3, 1999, the
plaintiffs filed an amended consolidated complaint.
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.
<PAGE> 87
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note I - Commitments and Contingencies (continued)
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. On January 20,
1999, the NBA and the NBPA entered into a new collective bargaining
agreement (the "New Collective Bargaining Agreement"), thereby ending the
lockout. As a result of the lockout, the 1998-99 NBA regular season
consisted of 50 games per team, beginning in early February 1999.
Ordinarily, the NBA regular season consists of 82 games per team and
generally begins in late October or early November.
NBA teams, including the Boston Celtics, refunded amounts paid by season
ticket holders (plus interest at 6%) for a total of 18 home games (including
two exhibition games) that were canceled as a result of the lockout.
Refunds of approximately $11,632,000 (including interest of $185,000) were
paid by Celtics Basketball on a monthly basis for games canceled in the
preceding month. In addition, certain season ticket holders elected to
leave their refunds and interest on deposit for future games. Such refunds
amounted to approximately $571,000 at June 30, 1999 (including interest of
approximately $12,000). No interest has accrued on such amounts since
January 31, 1999.
All amounts paid by season ticket holders are recorded by Celtics Basketball
as deferred revenue and are subsequently recognized as revenue on a game-by-
game basis as regular season games are played. No revenues were recognized
with respect to amounts paid by season ticket holders for canceled games or
for refunds left on deposit for future games. Amounts refunded are recorded
by Celtics Basketball as reductions in the deferred revenue liability when
paid.
Celtics Basketball is committed under noncancelable, long-term operating
leases for certain of its facilities and equipment. These leases were
assigned to Celtics Basketball by CLP effective June 30, 1998 pursuant to
the Reorganization. Rent expense charged to operations during the years
ended 1998 and 1997 amounted to $410,000 and $292,000, respectively.
Note J - 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 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. The options also contained Unit Appreciation Rights, 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.
<PAGE> 88
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. 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 in the year ended June 30, 1997, 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.
<PAGE> 89
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note K - 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
$41,000, $232,000 and $300,000 during the years ended June 30, 1999, 1998
and 1997, respectively. In addition, costs of these plans charged to
Celtics Basketball amounted to $159,000 in the year ended June 30, 1999.
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 Celtics Basketball's operations amounted to $689,000 in the year
ended June 30, 1999, and costs of these plans charged to BCLP II's
operations amounted to $631,000 and $368,000 during the years ended June 30,
1998 and 1997, respectively.
<PAGE> 90
Note L - Cash Flows
Reconciliations of net income (loss) to net cash flows from (used in)
operating activities are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
1999 1998 1997
----------------------------------------------
<S> <C> <C> <C>
Net income (loss) $(7,788,898) $12,267,317 $ 420,306
Items not affecting cash flows from operating
activities:
Depreciation 208,162 189,324
Amortization 47,114 165,035 164,702
Increase in note issued on redemption of
Partnership interest 1,129,163 1,055,668
Extraordinary charge for early retirement of
notes payable 2,255,540
Amortization of original issue discount on
Subordinated Debentures 400,071
Net realized gains (losses) on disposition
of marketable securities and other short-term
investments (6,020) 18,235 (361,051)
Equity in loss of Celtics Basketball Holdings, L.P. 204,960
Changes in:
Accrued interest receivable 316,384 140,330 (264,625)
Accounts receivable (1,836,775) 43,331 1,126,788
Notes receivable 85,772 (80,772)
Accounts payable and accrued expenses (1,012,189) 11,426,790 816,434
Deferred compensation (1,628,938) (3,947,474)
Deferred revenues 899,490 255,273
Other non-current liabilities (9,270,000) 3,995,000
Other 816,348 (907,752)
----------------------------------------------
Net cash flows from (used in) operating activities $(7,419,813) $16,301,035 $ 2,461,821
==============================================
</TABLE>
<PAGE> 91
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note M - Quarterly Results (Unaudited)
A summary of operating results, net income (loss) 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, 1999 is set forth below (000's omitted, except
for per unit amounts):
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------
September 30, December 31, March 31, June 30,
1998 1998 1999 1999 Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1999:
Income (loss) from operations before
extraordinary charge $(2,524) $(4,594) $1,929 $ (344) $(5,533)
Extraordinary charge for early retirement
of notes payable (2,256) (2,256)
Net income (loss) (4,780) (4,594) 1,929 (344) (7,789)
Net income (loss) applicable to Limited Partners (4,721) (4,517) 1,876 (348) (7,710)
<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 $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
</TABLE>
<PAGE> 92
Note N - Income Taxes
Components of deferred tax liabilities and assets at June 30 are as follows
(000's omitted):
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1999 1998 1997
-----------------------------------
<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) (10,389)
-----------------------------------
Total deferred tax liabilities $ 9,711 $ 9,711 $20,100
===================================
</TABLE>
The deferred tax liabilities at June 30, 1999 and 1998 represent the tax-
effected difference between the tax and financial statement bases of the net
assets of BCCLP Holding Corporation ("Holdings") and Celtics Investments,
Inc. ("CII"), and relate to Holdings or subsidiary partnerships Boston
Celtics Communications Limited Partnership ("BCCLP") and Boston Celtics
Broadcasting Limited Partnership ("BCBLP"). At June 30, 1997, 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.
<PAGE> 93
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note N - Income Taxes (continued)
At June 30, 1999, the tax bases of the assets and liabilities of BCLP II and
its subsidiaries exceeded their financial statement bases by approximately
$101,701,000, consisting primarily of a step-up in basis in connection with
Unit redemptions ($75,822,000), differences between tax and financial
statement basis of the investment in Celtics Basketball Holdings
($24,914,000), and intangible assets ($965,000). 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
operations consists of the following (000's omitted):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------
<S> <C> <C> <C>
Current:
Federal $1,200 $1,460 $1,100
State 400 440 300
------------------------------
$1,600 $1,900 $1,400
==============================
</TABLE>
A reconciliation of the statutory federal income tax rate applied to
reported pre-tax earnings of CII, CCC, Holdings and BCCLP ($3,553,000 in
1999, $4,240,000 in 1998 and $3,270,000 in 1997) to the effective tax rate
of the provision is:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------
<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 6.2
Other 4.8 4.6 2.6
--------------------------
Effective tax rate 45.0% 44.8% 42.8%
==========================
</TABLE>
<PAGE> 94
Note O - 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.
<PAGE> 95
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Consolidated Financial Statements
Note O - Net Income Per Unit (continued)
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
---------------------------
<S> <C> <C>
Numerator for basic and diluted earnings per unit:
Income from operations before extraordinary charge:
Income from operations before extraordinary
charge before interests of General Partners $12,267,317 $ 420,306
Applicable to interests of General Partners of subsidiary
partnerships 185,397 58,629
---------------------------
12,081,920 361,677
Applicable to 1% General Partnership interest of BCLP II 120,819 3,617
---------------------------
Applicable to interests of Limited Partners $11,961,101 $ 358,060
===========================
Net income:
Net income before interests of General Partners $12,267,317 $ 420,306
Applicable to interests of General Partners of subsidiary
partnerships 185,397 58,629
12,081,920 361,677
Applicable to 1% General Partnership interest of BCLP II 120,819 3,617
---------------------------
Applicable to interests of Limited Partners $11,961,101 $ 358,060
===========================
Denominator:
Denominator for basic earnings per unit - weighted average
units 4,881,826 5,186,100
Effect of dilutive securities:
Options to purchase units of Partnership interest 147,762 250,881
Restricted stock 484,886 235,571
---------------------------
Denominator for diluted earnings per unit 5,514,474 5,672,552
===========================
<PAGE> 96
Income per unit from operations before extraordinary
charge - basic $ 2.45 $ 0.07
===========================
Income per unit from operations before extraordinary
charge - diluted $ 2.17 $ 0.06
===========================
Net income per unit - basic $ 2.45 $ 0.07
===========================
Net income per unit - diluted $ 2.17 $ 0.06
===========================
</TABLE>
<PAGE> 97
Report of Independent Auditors
To the General Partner
Celtics Basketball Holdings, L.P.
We have audited the accompanying consolidated balance sheets of Celtics
Basketball Holdings, L.P. and Subsidiary as of June 30, 1999 and 1998, and
the related consolidated statements of operations, partners' capital
(deficit) and cash flows for the year ended June 30, 1999. 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 Celtics Basketball Holdings, L.P. and Subsidiary at June 30,
1999 and 1998, and the consolidated results of their operations and their
cash flows for the year ended June 30, 1999, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
September 10, 1999
<PAGE> 98
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,274,513 $ 6,536,334
Accounts receivable 1,445,063 2,875,246
Prepaid expenses and other current assets 521,058 455,012
------------------------------
TOTAL CURRENT ASSETS 5,240,634 9,866,592
PROPERTY AND EQUIPMENT, net 1,347,715 1,062,659
NATIONAL BASKETBALL ASSOCIATION FRANCHISE,
net of amortization of $2,467,839 in 1999
and $2,313,599 in 1998 3,701,742 3,855,982
NOTE RECEIVABLE 6,610,017
OTHER ASSETS 3,973,698 3,859,287
------------------------------
$ 14,263,789 $ 25,254,537
==============================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 14,141,822 $ 19,466,235
Deferred game revenues 10,415,589 6,484,338
Deferred compensation - current portion 1,347,616 1,557,030
------------------------------
TOTAL CURRENT LIABILITIES 25,905,027 27,507,603
NOTES PAYABLE TO BANK 50,000,000 50,000,000
DEFERRED COMPENSATION - noncurrent portion 7,625,674 8,961,591
OTHER NON-CURRENT LIABILITIES 672,000 600,000
PARTNERS' CAPITAL (DEFICIT)
Celtics Basketball Holdings, L.P. -
General Partner 918 1,000
Celtics Pride GP - Limited Partner (33,790,372) (29,865,364)
Castle Creek Partners, L.P. - Limited Partner (36,150,442) (31,951,293)
------------------------------
(69,939,896) (61,815,657)
Celtics Basketball, L.P. - General Partner 984 1,000
------------------------------
TOTAL PARTNERS' CAPITAL (DEFICIT) (69,938,912) (61,814,657)
------------------------------
$ 14,263,789 $ 25,254,537
==============================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 99
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Consolidated Statement of Operations
For the Year Ended June 30, 1999
<TABLE>
<S> <C>
Revenues:
Basketball regular season -
Ticket sales $23,283,661
Television and radio broadcast rights fees 14,626,632
Other, principally promotional advertising 5,142,031
-----------
43,052,324
-----------
Costs and expenses:
Basketball regular season -
Team 30,171,482
Game 1,526,202
General and administrative 5,002,103
Selling and promotional 4,328,740
Depreciation 271,796
Amortization of NBA franchise and other intangible assets 157,727
-----------
41,458,050
-----------
1,594,274
Interest expense (3,583,980)
Interest income 628,434
Other income 937,017
-----------
Net loss (424,255)
Net loss applicable to interests of General Partners (21)
-----------
Net loss applicable to interests of Limited Partners $ (424,234)
===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 100
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Consolidated Statement of Partners' Capital (Deficit)
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------------
Castle Creek
Total Total Celtics Pride GP Partners, L.P.
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1998 $(61,814,657) $(61,816,657) $(29,865,364) $(31,951,293)
Net loss for the year ended June 30, 1999 (424,255) (424,234) (204,960) (219,274)
Distributions to partners (7,700,000) (7,699,923) (3,720,048) (3,979,875)
---------------------------------------------------------------------
BALANCE AT JUNE 30, 1999 $(69,938,912) $(69,940,814) $(33,790,372) $(36,150,442)
=====================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 101
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Consolidated Statement of Partners' Capital (Deficit)
(continued)
<TABLE>
<CAPTION>
General Partners
------------------------------------------
Celtics
Basketball Celtics
Total Holdings, L.P. Basketball, L.P.
------------------------------------------
<S> <C> <C> <C>
BALANCE AT JUNE 30, 1998 $2,000 $1,000 $1,000
Net loss for the year ended June 30, 1999 (21) (5) (16)
Distributions to partners (77) (77)
-------------------------------------
BALANCE AT JUNE 30, 1999 $1,902 $ 918 $ 984
=====================================
</TABLE>
<PAGE> 102
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended June 30, 1999
<TABLE>
<S> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Receipts:
Basketball regular season receipts:
Ticket sales $30,865,500
Television and radio broadcast rights fees 21,074,883
Other, principally promotional advertising 5,623,785
-----------
57,564,168
Costs and expenses:
Basketball regular season expenditures:
Team expenses 35,609,280
Game expenses 1,524,846
General and administrative expenses 6,081,954
Selling and promotional expenses 3,533,091
-----------
46,749,171
-----------
10,814,997
Interest expense (2,637,022)
Interest income 601,538
Ticket refunds paid (9,290,577)
Payment of deferred compensation (1,517,774)
-----------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (2,028,838)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of note receivable 7,850,000
Capital expenditures (556,852)
Other receipts (expenditures) (827,931)
-----------
NET CASH FLOWS FROM INVESTING ACTIVITIES 6,465,217
-----------
NET CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES 4,436,379
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from bank borrowings 3,000,000
Payment of bank borrowings (3,000,000)
Cash distribution to Boston Celtics Corporation (77)
Cash distribution to Castle Creek Partners, L.P. (3,979,875)
Cash distribution to Celtics Pride G.P. (3,720,048)
Cash contributions from General Partner 1,800
-----------
NET CASH FLOWS USED IN FINANCING ACTIVITIES (7,698,200)
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,261,821)
Cash and cash equivalents at beginning of year 6,536,334
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,274,513
===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 103
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Notes to Consolidated Financial Statements
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 financial statements include 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.
<PAGE> 104
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 ten 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.
<PAGE> 105
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Notes to Consolidated Financial Statements
Note B - Significant Accounting Policies (continued)
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: The Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income"
("Statement 130") in the fiscal year ended June 30, 1999. The adoption of
Statement 130 did not have a material impact on the Partnership's
consolidated financial statements.
Note C - Notes Receivable
Notes receivable represented a convertible note due from an unrelated
company which was classified as held-to-maturity and carried at amortized
cost, which approximated market value. This note accrued 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. On March 18, 1999, the
company redeemed the note for cash in the amount of $7,850,000. The balance
of the note on that date, including accrued interest, was $6,912,983. The
$937,017 gain on the note, consisting of a prepayment penalty of $553,039
pursuant to the terms of the note agreement and a premium paid by the
company of $383,978, has been classified as other income in the consolidated
statement of operations.
Note D - Property and Equipment
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
June 30,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
Leasehold improvements $ 1,413,357 $1,301,671
Furniture, fixtures and equipment 1,108,152 662,986
---------------------------
2,521,509 1,964,657
Less accumulated depreciation (1,173,794) (901,998)
---------------------------
Net property and equipment $ 1,347,715 $1,062,659
===========================
</TABLE>
<PAGE> 106
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>
Years ending June 30, 2000 $1,348,000
2001 1,235,000
2002 1,150,000
2003 1,126,000
2004 1,107,000
2005 and thereafter 3,007,000
----------
$8,973,000
==========
</TABLE>
<PAGE> 107
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Notes to Consolidated Financial Statements
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. On January 29, 1999, Celtics Basketball borrowed $3,000,000
against the revolving line of credit for general working capital purposes.
This amount was repaid on June 1, 1999. As of June 30, 1999, 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%.
Interest charged to operations in connection with the term loan and
revolving line of credit amounted to $3,247,000 in the year ended June 30,
1999.
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 - Related Party Transactions
Boston Celtics Corporation, the general partner of CLP, Celtics Basketball
Holdings and Celtics Basketball, receives a management fee of $750,000 per
annum, subject to annual increases based on annual cash flows from
basketball operations. Management fees of $750,000 were charged to Celtics
Basketball's operations in the year ended June 30, 1999.
<PAGE> 108
Note H - Commitments and Contingencies
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. On January 20,
1999, the NBA and the NBPA entered into a new collective bargaining
agreement (the "New Collective Bargaining Agreement"), thereby ending the
lockout. As a result of the lockout, the 1998-99 NBA regular season
consisted of 50 games per team, beginning in early February 1999.
Ordinarily, the NBA regular season consists of 82 games per team and
generally begins in late October or early November.
NBA teams, including the Boston Celtics, refunded amounts paid by season
ticket holders (plus interest at 6%) for a total of 18 home games (including
two exhibition games) that were canceled as a result of the lockout.
Refunds of approximately $11,632,000 (including interest of $185,000) were
paid by Celtics Basketball on a monthly basis for games canceled in the
preceding month. In addition, certain season ticket holders elected to
leave their refunds and interest on deposit for future games. Such refunds
amounted to approximately $571,000 at June 30, 1999 (including interest of
approximately $12,000). No interest has accrued on such amounts since
January 31, 1999.
All amounts paid by season ticket holders are recorded by Celtics Basketball
as deferred revenue and are subsequently recognized as revenue on a game-by-
game basis as regular season games are played. No revenues were recognized
with respect to amounts paid by season ticket holders for canceled games or
for refunds left on deposit for future games. Amounts refunded are recorded
by Celtics Basketball as reductions in the deferred revenue liability when
paid.
<PAGE> 109
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Notes to Consolidated Financial Statements
Note H - Commitments and Contingencies (continued)
Celtics Basketball is committed under noncancelable, long-term operating
leases for certain of its facilities and equipment. These leases were
assigned to Celtics Basketball by CLP effective June 30, 1998 pursuant to
the Reorganization. Rent expense charged to operations during the year
ended June 30, 1999 amounted to $299,000.
Celtics Basketball has employment agreements with officers, coaches and
players of the Boston Celtics basketball team. 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 10, 1999, including option years but excluding
deferred compensation commitments disclosed in Note E - Deferred
Compensation, are as follows:
<TABLE>
<S> <C>
Years ending June 30, 2000 $49,607,000
2001 47,879,000
2002 43,137,000
2003 38,203,000
2004 26,755,000
2005 and thereafter 25,216,000
</TABLE>
Commitments for the year ended June 30, 2000 include payments due to players
under contracts for the 1999-2000 season in the amount of $41,126,000.
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, 1999, 1998 and
1997 was $299,000, $410,000 and $292,000 respectively. Minimum annual
payments, including renewable option periods, required by these operating
leases are as follows:
<TABLE>
<S> <C>
Years ending June 30, 2000 $368,000
2001 385,000
2002 404,000
2003 423,000
2004 444,000
2005 and thereafter 703,000
</TABLE>
<PAGE> 110
Note I - 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.
Costs of these plans charged to operations amounted to $159,000 in the year
ended June 30, 1999.
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 $689,000 in the year ended
June 30, 1999.
Note J - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include accrued compensation to
players and coaches of $12,473,000 and $17,397,000 at June 30, 1999 and
1998, respectively.
<PAGE> 111
CELTICS BASKETBALL HOLDINGS, L.P.
and Subsidiary
Notes to Consolidated Financial Statements
Note K - Cash Flows
A reconciliation of net loss to net cash flows used in operating activities
for the year ended June 30, 1999 is as follows:
<TABLE>
<S> <C>
Net loss $ (424,255)
Items not affecting cash flows from operating activities:
Depreciation 271,796
Amortization 157,727
Net realized gains on disposition of note receivable (937,017)
Changes in:
Accounts receivable 1,430,183
Accounts payable and accrued expenses (5,324,412)
Deferred compensation (1,545,331)
Deferred revenues 3,931,251
Other non-current liabilities 72,000
Other 339,220
-----------
Net cash flows used in operating activities $(2,028,838)
===========
</TABLE>
<PAGE> 112
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 17, 1999 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 17, 1999
- -------------------------
Don F. Gaston
/s/ Paula B. Gaston Director September 17, 1999
- -------------------------
Paula B. Gaston
/s/ John B. Marsh, III Director September 17, 1999
- -------------------------
John B. Marsh, III
/s/ Richard G. Pond Executive Vice President, September 17, 1999
- ------------------------- Chief Financial Officer
Richard G. Pond and Chief Accounting Officer
- -------------------
[FN]
<F*> Title indicates position with General Partner.
</FN>
<PAGE> 113
Exhibit (10)(n)
SECOND AMENDMENT TO
CREDIT AGREEMENT
Dated as of July 30, 1999
Among
CELTICS LIMITED PARTNERSHIP
BOSTON CELTICS LIMITED PARTNERSHIP II
BOSTON CELTICS LIMITED PARTNERSHIP
CELTICS BASKETBALL, L.P.
CELTICS BASKETBALL HOLDINGS, L.P.
CELTICS PRIDE, G.P.
and
CITIZENS BANK OF MASSACHUSETTS
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT AND ASSUMPTION AGREEMENT is
entered into as of July 30, 1999 by and among CELTICS LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Borrower"), CELTICS BASKETBALL, L.P., a
Delaware limited partnership ("Celtics Basketball"), BOSTON CELTICS LIMITED
PARTNERSHIP II, a Delaware limited partnership ("BCLP"), BOSTON CELTICS
LIMITED PARTNERSHIP, a Delaware limited partnership ("BCLP II"), CELTICS
BASKETBALL HOLDINGS, L.P., a Delaware limited partnership ("Celtics
Basketball Holdings"), CELTICS PRIDE, G.P., a Delaware general partnership
(each a "Borrower Affiliate" and collectively the "Borrower Affiliates") and
CITIZENS BANK OF MASSACHUSETTS, a Massachusetts trust company (the
"Lender").
Recitals
--------
The Borrower, BCLP II and the Lender are parties to a Credit Agreement
dated as of December 15, 1997 (as amended, the "Credit Agreement"). The
Borrower desires to amend the Credit Agreement in certain respects, and the
Lender is willing to do so on the terms stated herein. All capitalized
terms used herein and not otherwise defined shall have the meanings set
forth in the Credit Agreement.
NOW, THEREFORE, the Borrower, BCLP II and the Lender hereby amend the
Credit Agreement and Celtics Basketball and the Borrower Affiliates hereby
agree as follows:
Section 1. Amendment of Section 2.2. Section 2.2 of the Credit
Agreement is hereby amended by deleting paragraph (b) thereof in its
entirety and substituting therefor the following:
<PAGE> 114
"(b) Subject to the terms and conditions set forth in this
Credit Agreement, the Lender hereby establishes a revolving credit
(the loans made thereunder being referred to as the "Revolving
Credit Loans") in favor of the Borrower in the principal amount of
the Commitment (the "Available Commitment"). The Borrower may
repay and reborrow from time to time between the Closing Date and
the Expiration Date upon notice by the Borrower to the Lender
given in accordance with [Section] 2.6. All Revolving Credit
Loans shall be made as LIBOR Rate Loans or Base Rate Loans at
Borrower's option. LIBOR Rate Loans may be converted to Base Rate
Loans and Base Rate Loans may be converted to LIBOR Rate Loans.
LIBOR Rate Loans shall be continued or converted to Base Rate
Loans under circumstances specified in [Section] 2.7 hereof. Each
request for a Revolving Credit Loan hereunder shall constitute a
representation and warranty by the Borrower that the conditions
set forth in [Section] 9 and [Section] 10, in the case of the
initial Revolving Credit Loan to be made on the Closing Date, and
[Section] 10, in the case of all other Revolving Credit Loans,
have been satisfied on the date of such request."
Section 2. Amendment of Section 8.6. Section 8.6 of the Credit
Agreement is hereby amended by adding the following proviso to the end
thereof:
"provided, however, that the Borrower need not comply with
the requirement set forth herein for the period of four
consecutive quarters ending June 30, 1999."
Section 3. Representations and Warranties; No Default. The Borrower
hereby confirms to the Lender the representations and warranties of the
Borrower set forth in Article 6 of the Credit Agreement (as amended hereby)
as of the date hereof, as if set forth herein in full. The Borrower hereby
certifies that no Default exists under the Credit Agreement. The Borrower
hereby represents, warrants and agrees as follows after giving effect to the
execution and delivery of this Second Amendment: The Borrower has obtained
all consents and approvals of and has made all required filings with, all
other Persons required by laws, rules, regulations, court order, agreements,
or other undertakings, required of the Borrower in order to enter into and
perform its obligations under this Second Amendment. Without limiting the
generality of the foregoing, the Borrower represents and warrants that the
execution, delivery and performance of this Second Amendment by the
Borrower, the Banks and the Agent do not require the consent or approval of
any other Person, including without limitation the NBA.
Section 4. Miscellaneous. The Borrower agrees to pay on demand all
the Lender's reasonable expenses in preparing, executing and delivering this
Second Amendment to Credit Agreement, and all related instruments and
documents, including, without limitation, the reasonable fees and out-of-
pocket expenses of the Lender's special counsel, Goodwin, Procter & Hoar
LLP. This Second Amendment to Credit Agreement shall be a Lender Agreement
and shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Borrower, BCLP and the Lender and the other
Borrower Affiliates have caused this Second Amendment to Credit Agreement to
be executed by their duly authorized officers as of the date first set forth
above.
<PAGE> 115
CELTICS BASKETBALL, L.P.
By: Boston Celtics Corporation,
as General Partner
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President,
Chief Operating Officer,
Chief Financial Officer,
Treasurer and Secretary
BOSTON CELTICS LIMITED PARTNERSHIP II
By: Boston Celtics Limited
Partnership II GP, Inc.,
as General Partner
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
BOSTON CELTICS LIMITED PARTNERSHIP
By: Boston Celtics Limited
Partnership GP, Inc.,
as General Partner
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
CELTICS BASKETBALL HOLDINGS, L.P.
By: Boston Celtics Corporation,
as General Partner
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President,
Chief Operating Officer,
Chief Financial Officer,
Treasurer and Secretary
CELTICS BASKETBALL, L.P.
By: Boston Celtics Corporation,
as General Partner
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President,
Chief Operating Officer,
Chief Financial Officer,
Treasurer and Secretary
<PAGE> 116
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Lori B. Leeth
----------------------------------
Name: Lori B. Leeth
Title: Senior Vice President
<PAGE> 117
Exhibit (10)(o)
SECOND AMENDMENT TO
CREDIT AGREEMENT
Dated as of July 30, 1999
Among
BOSTON CELTICS LIMITED PARTNERSHIP II,
the Borrower
and
THE ROYAL BANK OF SCOTLAND plc,
the Lender
and
CITIZENS BANK OF MASSACHUSETTS,
the Agent
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT is entered into as of July
30, 1999 by and among BOSTON CELTICS LIMITED PARTNERSHIP II, a Delaware
limited partnership (the "Borrower"), THE ROYAL BANK OF SCOTLAND plc, as the
Lender party to the Credit Agreement referred to below (the "Lender"), and
CITIZENS BANK OF MASSACHUSETTS, as Agent (the "Agent") under the Credit
Agreement referred to below.
Recitals
--------
The Borrower, the Lender and the Agent are parties to a Credit
Agreement dated as of May 20, 1998 (as amended, the "Credit Agreement").
The Borrower desires to amend the Credit Agreement in certain respects, and
the Lender is willing to do so on the terms stated herein. All capitalized
terms used herein and not otherwise defined shall have the meanings set
forth in the Credit Agreement.
NOW, THEREFORE, the Borrower, the Lender and the Agent hereby agree as
follows:
Section 1. Definitions. Section 1.1 of the Credit Agreement is
hereby amended by deleting the definition of "Borrowing Base" in its
entirety and substituting therefor a new definition as follows:
"Borrowing Base" shall mean an amount equal to 80% of Eligible
Pledged Collateral.
Section 2. Amendment of Covenants. Article 7 of the Credit Agreement
is hereby amended by deleting Section 7.1 thereof in its entirety and
substituting therefor the following:
"Section 7.1 [Intentionally Omitted]."
<PAGE> 118
Section 3. Representations and Warranties; No Default. The Borrower
hereby confirms to the Agent and the Lender, the representations and
warranties of the Borrower set forth in Article 5 of the Credit Agreement
(as amended hereby) as of the date hereof, as if set forth herein in full.
The Borrower hereby certifies that no Default exists under the Credit
Agreement.
Section 4. Miscellaneous. The Borrower agrees to pay on demand all
the Agent's reasonable expenses in preparing, executing and delivering this
Second Amendment to Credit Agreement, and all related instruments and
documents, including, without limitation, the reasonable fees and out-of-
pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar
LLP. This Second Amendment to Credit Agreement shall be a Lender Agreement
and shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Borrower, the Lender and the Agent have caused
this Second Amendment to Credit Agreement to be executed by their duly
authorized officers as of the date first set forth above.
BOSTON CELTICS LIMITED PARTNERSHIP II
By: Celtics, Inc.,
its General Partner
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President,
Chief Operating Officer,
Chief Financial Officer,
Treasurer and Secretary
THE ROYAL BANK OF SCOTLAND plc
By: /s/ Scott Barton
----------------------------------
Name: Scott Barton
Title: Vice President
CITIZENS BANK OF MASSACHUSETTS,
as Agent
By: /s/ Lori B. Leeth
----------------------------------
Name: Lori B. Leeth
Title: Senior Vice President
<PAGE> 119
The undersigned acknowledge that (a) they have received and reviewed a
copy of this Second Amendment to Credit Agreement and (b) their obligations
under the BCCLP Credit Support Agreement, the CCC Pledge Agreement, the
Boston Celtics Limited Partnership Credit Support Agreement, the Celtics
Basketball Holdings, L.P. Credit Support Agreement, the Celtics Limited
Partnership Credit Support Agreement, the Celtic Pride Credit Support
Agreement and the other Lender Agreements executed by the undersigned shall
continue in full force and effect.
CELTICS CAPITAL CORPORATION
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
BCCLP HOLDING CORPORATION
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
BOSTON CELTICS LIMITED PARTNERSHIP
By: Boston Celtics Limited
Partnership GP, Inc.
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
CELTICS BASKETBALL HOLDINGS, L.P.
By: Boston Celtics Corporation
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
CELTICS LIMITED PARTNERSHIP
By: Boston Celtics Corporation
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
<PAGE> 120
CELTICS PRIDE
By: Celtics Limited Partnership
By: /s/ Richard Pond
----------------------------------
Name: Richard Pond
Title: Executive Vice President and
Chief Financial Officer
<PAGE> 121
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF BOSTON CELTICS LIMITED PARTNERSHIP AND ITS
SUBSIDIARIES AS OF JUNE 30, 1999 AND THE CONSOLIDATED STATEMENT OF OPERATIONS
OF BOSTON CELTICS LIMITED PARTNERSHIP AND ITS SUBSIDIARIES FOR THE YEAR ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,608
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,045
<PP&E> 45
<DEPRECIATION> 31
<TOTAL-ASSETS> 87,274
<CURRENT-LIABILITIES> 3,351
<BONDS> 83,790
0
0
<COMMON> 0
<OTHER-SE> (42,963)
<TOTAL-LIABILITY-AND-EQUITY> 87,274
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 3,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,649
<INCOME-PRETAX> (6,243)
<INCOME-TAX> 1,600
<INCOME-CONTINUING> (7,843)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,256)
<CHANGES> 0
<NET-INCOME> (10,099)
<EPS-BASIC> (3.67)
<EPS-DILUTED> (3.67)
</TABLE>
