<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended April 30, 1997
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Commission File Number 1-12360
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GC COMPANIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-3200876
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill, MA 02167
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(Address of principal executive offices) (Zip Code)
(617) 278-5600
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of June 5, 1997, there were outstanding 7,705,330 shares of the issuer's
common stock, $.01 par value.
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GC COMPANIES, INC.
I N D E X
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Part I. Financial Information Page Number
--------------------- -----------
Item 1. Condensed Consolidated Balance Sheets as of
April 30, 1997 and October 31, 1996 1
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended April 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended April 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-7
Part II. Other Information
-----------------
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibit 10.15
Exhibit 10.16
Exhibit 10.17
Exhibit 11.1
Exhibit 27.1
<PAGE> 3
GC COMPANIES, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
April 30, October 31,
1997 1996
(Unaudited)
----------- -----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 52,158 $ 71,745
Short-term investments 43,433 1,566
Receivable from financial institution 11,370 17,599
Other current assets 3,648 3,602
Deferred income taxes 2,552 2,552
-------- --------
Total current assets 113,161 97,064
Property and equipment, net 160,333 162,847
Other assets 61,055 54,392
-------- --------
Total assets $334,549 $314,303
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current maturities of long-term
obligations 685 721
Trade payables 39,863 30,514
Other current liabilities 70,415 62,428
-------- --------
Total current liabilities 110,963 93,663
Long-term liabilities:
Capital lease obligations 2,537 3,059
Other long-term liabilities 29,389 29,029
-------- --------
Total long-term liabilities 31,926 32,088
Deferred income taxes 12,571 12,571
Shareholders' equity:
Common stock 77 78
Additional paid-in capital 136,604 136,359
Retained earnings 42,408 39,544
-------- --------
Total shareholders' equity 179,089 175,981
-------- --------
Total liabilities and shareholders' equity $334,549 $314,303
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
GC COMPANIES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
(In thousands, Six Months Three Months
except for per share amounts) Ended April 30, Ended April 30,
--------------------------- -------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Admissions $159,013 $151,151 $ 73,744 $ 65,147
Concessions 69,112 64,422 32,544 27,837
Other 6,870 6,476 2,473 2,583
-------- -------- -------- --------
234,995 222,049 108,761 95,567
Costs of theatre operations:
Film rentals 81,599 77,374 35,155 30,423
Concessions 12,211 11,484 5,654 4,694
Theatre operations and
administrative expenses 117,496 110,875 58,794 54,286
Depreciation and amortization 9,252 9,769 4,627 4,739
-------- -------- -------- --------
220,558 209,502 104,230 94,142
Corporate expenses 3,401 3,135 1,693 1,587
-------- -------- -------- --------
Operating earnings (loss) 11,036 9,412 2,838 (162)
Investment income (loss), net 2,151 (1,363) 1,125 (1,602)
Interest expense (251) (309) (117) (149)
Loss on disposition of
theatre assets (784) (493) (1,169) (447)
-------- -------- -------- --------
Earnings (loss) before income taxes 12,152 7,247 2,677 (2,360)
Income tax (expense) benefit (4,982) (2,971) (1,098) 968
-------- -------- -------- --------
Net earnings (loss) $ 7,170 $ 4,276 $ 1,579 $ (1,392)
======== ======== ======== ========
Weighted average number of common
and common equivalent shares
outstanding 7,786 7,850 7,746 7,816
======== ======== ======== ========
Net earnings (loss) per common share $ .92 $ .54 $ .20 $ (.18)
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
GC COMPANIES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<CAPTION>
Six Months
Ended April 30,
-------------------------
1997 1996
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,170 $ 4,276
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Loss on disposition of theatre assets 784 493
Loss from minority investments - 3,145
Depreciation and amortization 9,252 9,769
Changes in current assets and liabilities:
Other current assets 6,183 2,182
Trade payables 9,349 3,766
Other current liabilities 7,987 (5,275)
-------- -------
Net cash provided by operating activities 40,725 18,356
-------- -------
Cash flows from investing activities:
Capital expenditures (7,935) (8,112)
Proceeds from the disposition of theatre assets 781 38
(Purchase of) proceeds from short-term investments (41,867) 31,560
Purchase of investments (7,073) -
Other investing activities (121) 28
-------- -------
Net cash (used) provided by investing activities (56,215) 23,514
-------- -------
Cash flows from financing activities:
Repurchase of common stock (4,306) -
Other financing activities 209 197
-------- -------
Net cash (used) provided by financing activities (4,097) 197
-------- -------
Net change in cash and cash equivalents (19,587) 42,067
Cash and cash equivalents at beginning of period 71,745 35,999
-------- -------
Cash and cash equivalents at end of period $ 52,158 $78,066
======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
GC COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of GC Companies, Inc.
(GCC or the Company) are submitted in response to the requirements of
Form 10-Q and should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form
10-K. In the opinion of management, these financial statements contain
all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the results for the interim periods presented.
Certain prior year amounts have been reclassified to conform to the
current year presentation. The Company's business is seasonal in nature,
and historically the results of operations for these periods have not
been indicative of the results for the full year.
2. OTHER ASSETS
Included in other assets at April 30, 1997 were a $16.7 million
investment in an optical superstore retailer, a $13.4 million investment
in a German cable television systems operator, a $20.2 million investment
in an international telecommunications service provider and a $7.0
million investment in a wireless location and two-way messaging company.
The Company closed on the $7.0 million investment in the wireless
location and two-way messaging company in December 1996.
3. STOCK REPURCHASE
In December 1996, the Company's Board of Directors authorized the
purchase of up to one million shares of the Company's common stock in the
open market over the next twelve months. During the six months ended
April 30, 1997, the Company repurchased 118,700 shares at an average
price of approximately $36.27 per share. The shares repurchased were
immediately retired. Differences between the par value of the shares and
the repurchase price were charged against retained earnings.
4
<PAGE> 7
GC COMPANIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of operations
---------------------
Six Months Ended April 30, 1997 Compared with Six Months Ended April 30, 1996
-----------------------------------------------------------------------------
Theatre revenues - Total revenues increased 5.8% to $235.0 million in 1997 from
$222.0 million in 1996. The increase in revenues was primarily attributable to a
2.8% increase in patronage, a 2.4% increase in average ticket price and a 4.4%
increase in concession sales per patron. The growth in concession sales per
patron was principally due to limited price increases and new product offerings.
Cost of theatre operations - Cost of theatre operations, including theatre
general and administrative expenses, increased 5.3% for the six months ended
April 30, 1997 to $220.6 million from $209.5 million in the same 1996 period.
The increase was primarily attributable to higher film and other variable costs
related to the increase in revenues as well as operating costs related to the
two recently opened megaplexes in Chicago. However, as a percentage of revenues,
the cost of theatre operations declined to 93.9% for the six months ended April
30, 1997 from 94.3% for the six months ended April 30, 1996. The improvement was
primarily a result of higher revenues coupled with stable margins during the
1997 period as well as continued efforts to focus on cost containment. The
Company operated 1,174 screens at April 30, 1997 compared to 1,179 at April 30,
1996.
Investment income (loss) - The Company recorded net investment income of $2.2
million for the six months ended April 30, 1997 compared to a net investment
loss of $1.4 million in the same 1996 period. The net investment income for the
first half of 1997 represented dividend and interest income earned on the
Company's short-term investment portfolio. The net investment loss for the
comparable 1996 period included a first quarter pretax charge of $0.6 million to
record the Company's share of losses incurred by its radio group minority
investment, a $2.5 million second quarter pretax charge to write off its
remaining investment in a children's clothing retailer and pretax dividend and
interest income of $1.8 million.
Income tax expense - The Company's effective tax rate is expected to be 41.0% in
fiscal 1997, unchanged from fiscal 1996.
Three Months Ended April 30, 1997 Compared with Three Months Ended
------------------------------------------------------------------
April 30, 1996
--------------
Theatre revenues - Total revenues increased 13.8% to $108.8 million in 1997 from
$95.6 million in 1996. The higher revenues primarily resulted from an 10.9%
increase in patronage, a 5.4% increase in concession sales per patron, and a
2.1% increase in average ticket price. The growth in concession sales per patron
was principally due to limited price increases and new product offerings.
Cost of theatre operations - Cost of theatre operations increased 10.7% for the
three months ended April 30, 1997 to $104.2 million from $94.1 million in the
comparable 1996 quarter. The increase was primarily attributable to higher film
and other variable costs related to the increase in revenues as well as
operating costs related to the two recently opened megaplexes in Chicago.
However, as a percentage of revenues, the cost of theatre operations declined to
95.8% for the quarter ended April 30, 1997 from 98.5%
5
<PAGE> 8
GC COMPANIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three Months Ended April 30, 1997 Compared with Three Months Ended
------------------------------------------------------------------
April 30, 1996 (continued)
--------------------------
for the three months ended April 30, 1996. The improvement was primarily a
result of higher revenues during the 1997 period as well as continued efforts to
focus on cost containment.
Investment income (loss) - The Company recorded net investment income of $1.1
million for the three months ended April 30, 1997 compared to a net investment
loss of $1.6 million in the same 1996 period. The net investment income for the
second quarter of 1997 represented dividend and interest income earned on the
Company's short-term investment portfolio. The net investment loss for the three
months ended April 30, 1996 included a pretax charge of $2.5 million to write
off the Company's remaining investment in a children's clothing retailer
partially offset by dividend and interest income of $0.9 million.
New Accounting Standard
-----------------------
The Company will adopt Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128) in the first quarter of 1998. Had such standard
been applied to the earnings per share calculation for the three and six month
periods described above, there would not have been a material change.
Liquidity and Capital Resources
-------------------------------
Virtually all of GCC's revenues are collected in cash, principally through
theatre admissions and concession sales. Because revenues are received in cash
prior to the payment of related expenses, the Company has historically not
required working capital to finance its growth or to meet its operating
requirements. Cash generated by the business in excess of that needed for
operations and capital expenditures will be available for investment.
The Company has commitments to open 17 new megaplex theatres with approximately
270 screens during the next three years. Of these theatres, we expect to open
five new theatres with a total of 71 screens by January 31, 1998, the end of our
fiscal 1998 first quarter. In November 1996, two new units with a combined 30
screens opened in the Chicago area. GCC entered into an agreement in November
1996 with a major financial institution to provide operating leases for up to
$250 million of assets over the next five years for its theatre expansion
program. A receivable due from this financial institution may arise from time to
time throughout the year from GCC initially advancing monies for leased assets
as the financial institution's agent. On a periodic basis, these advances are
reimbursed by the financial institution. The $17.6 million receivable at October
31, 1996 was reimbursed to the Company in December 1996.
For the six months ended April 30, 1997, GCC made expenditures of $7.9 million
for leasehold improvements, furniture and equipment purchases, and new
point-of-sale systems. Total capital expenditures are expected to approximate
$22.0 million during fiscal 1997.
6
<PAGE> 9
GC COMPANIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
-------------------------------------------
The Company invested $41.9 million of cash in certain short-term securities
during the first six months of 1997. These securities are highly liquid and
consist of high quality commercial paper, certificates of deposit, corporate
debt securities and securities of U.S. government agencies.
On December 6, 1996, the Company invested $7.0 million in a wireless location
and two-way messaging company.
The Company has significant lease commitments. Lease payments totaled $57.7
million in 1996 and minimum lease payments from existing obligations are
expected to approximate $62.7 million in 1997. Additional lease commitments will
arise as the Company implements its new operating lease facility.
In December 1996, the Company's Board of Directors authorized the repurchase of
up to one million shares of the Company's common stock over the next twelve
months. Through April 1997, the Company repurchased 118,700 shares at a cost of
$4.3 million.
The Company believes that cash generated from operations, cash and short-term
investments on hand, the $50 million available under the Company's revolving
credit agreement, which expires in June 1997 (the Company is in the process of
renegotiating), and the operating lease arrangement will be sufficient to fund
operating requirements, capital expenditures and the Company's investment
activities for the foreseeable future.
Forward-looking Statements
--------------------------
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing, including those contained
herein. Such forward-looking statements may be included in, without limitation,
reports to stockholders, press releases, oral statements made with the approval
of an authorized executive officer of the Company and filings with the
Securities and Exchange Commission. The words or phrases "anticipates",
"expects", "will continue", "estimates", "projects", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
The results contemplated by the Company's forward-looking statements are subject
to certain risks, trends, and uncertainties that could cause actual results to
vary materially from anticipated results, including without limitation, delays
in obtaining leases, permits and approvals for new megaplex locations,
construction risks and delays, the lack of strong film product, the impact of
competition, market and other risks associated with the Company's investment
activities and other factors described herein and in the Company's Annual Report
included in its Form 10-K.
7
<PAGE> 10
PART II
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Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on March 12, 1997.
The following matters were voted upon at the meeting:
1. Election of the following individuals as Class III
Directors for a term of three years:
<TABLE>
<CAPTION>
William L. Brown Richard A. Smith
------------------------ ----------------------
<S> <C> <C> <C>
For 6,864,293 For 6,863,662
Withheld 18,284 Withheld 18,915
</TABLE>
2. Approval of the GCC Investments, Inc. Incentive Pool Plan
<TABLE>
<S> <C>
For 6,088,146
Against 89,126
Abstain 15,085
Non-voting -
</TABLE>
2. Ratification of the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the 1997 fiscal
year.
<TABLE>
<S> <C>
For 6,868,837
Against 5,958
Abstain 7,782
Non-voting -
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
---------
10.15 GC Companies, Inc. 1993 Incentive Plan First
Amendment.
10.16 GC Companies, Inc. Key Executive Stock Purchase
Loan Plan First Amendment.
10.17 GCC Investments, Inc. Incentive Pool Plan.
11.1 Computation of weighted average number of shares
outstanding used in determining primary and
fully diluted earnings per share.
27.1 Financial data schedule.
(b) Reports on Form 8-K.
--------------------
The Company did not file any reports on Form 8-K during the
quarter ended April 30, 1997.
8
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GC COMPANIES, INC.
Date: June 12, 1997 /s/ Richard A. Smith
-----------------------------------
Richard A. Smith
Chairman of the Board of
Directors and Chief Executive
Officer
Date: June 12, 1997 /s/ G. Gail Edwards
-----------------------------------
G. Gail Edwards
Vice President, Chief Financial
Officer and Treasurer
Principal Accounting Officer
9
<PAGE> 1
Exhibit 10.15
Amendment Number One to
GC Companies Inc. 1993 Incentive Plan
This is Amendment Number One to the GC Companies, Inc. 1993 Equity Incentive
Plan (the "Plan"). Defined terms contain herein shall have the meaning set forth
in the Plan unless otherwise defined herein.
The Plan is hereby amended in the following respects:
(1) Section 6(b)3 entitled TRANSFERABILITY OF AWARDS is hereby
amended to add at the end thereof the following:
"Notwithstanding the foregoing, the Committee may provide in an
option agreement that the optionee may transfer, without
consideration for the transfer, his Stock Options to members of
his immediate family, to trusts for the benefit of such family
members and to partnerships in which such family members are the
only partners."
(2) Section 7(a) of the Plan is hereby replaced in its entirety by
the following:
"MERGERS AND OTHER TRANSACTIONS. In the case of (I) the
dissolution or liquidation of the Company, (ii) the sale of all
or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a
merger, reorganization or consolidation in which the holders of
the Company's outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power
of the surviving or resulting entity immediately upon completion
of such transaction, (iv) the sale of all of the Stock of the
Company to an unrelated person or entity or (v) any other
transaction in which the owners of the Company's outstanding
voting power prior to such transaction do not own at least a
majority of the outstanding voting power of the relevant entity
after the transaction (in each case, a "Transaction"), 100% of
all unvested Options, Stock Appreciation Rights and other Awards
which are not vested as of the effective date of such Transaction
shall become vested as of such effective date, except as the
Committee may otherwise specify with respect to particular
Awards. Upon the effectiveness of the Transaction, the Plan and
outstanding Options, Stock Appreciation Rights and other Awards
granted hereunder shall terminate, unless provision is made in
connection with the Transaction for the assumption of Awards
heretofore granted, or substitution of such Awards of new Awards
of the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and, if
appropriate, the per share exercise prices, as provided herein.
In the event of such termination, each optionee shall be
permitted to exercise for a period of at least 90 days prior to
the date of such termination all outstanding Options, Stock
Appreciation Rights and other Awards held by such optionee which
are then exercisable or become exercisable upon the effectiveness
of the Transaction."
(3) In all other respects, the Plan shall remain in effect and be
unmodified.
<PAGE> 1
Exhibit 10.16
Amendment Number One
to
GC Companies Inc. Key Executive Stock Purchase Loan Plan
This is Amendment Number One to the GC Companies, Inc. Key Executive Stock
Purchase Loan Plan (the "Plan"). Defined terms contain herein shall have the
meaning set forth in the Plan unless otherwise defined herein.
The Plan is hereby amended in the following respects:
(1) The last paragraph of Section 5 entitled AMOUNT OF LOAN;
LIMITATIONS is hereby amended to read as follows:
"Subject to the provisions of Section 16, the aggregate unpaid
principal amount of all stock purchase loans outstanding under
the Plan shall not exceed $3,000,000 at any time."
(2) This amendment was approved by the Board of Directors pursuant to
Section 16 of the Plan on March 12, 1997.
(3) In all other respects, the Plan shall remain in effect and be
unmodified.
<PAGE> 1
EXHIBIT 10.17
GCC INVESTMENTS, INC.
INCENTIVE POOL PLAN
1. Purpose. This Plan is intended as an incentive for a select group of
management employees of the Company and to allow the Company to attract and
retain in its employ persons who will contribute to the future success of the
Company's business.
2. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings set forth below:
(a) "Chief Investment Officer" shall mean John Berylson or his
successor as Chief Investment Officer of GCC.
(b) "Change in Control" shall have the meaning set forth in Section
11.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
and the regulations promulgated thereunder.
(d) "Committee" shall mean the Compensation Committee of the Board of
Directors of GCC. Each member of the Committee shall be an "outside
director" within the meaning of Section 162(m) of the Code and a
"non-employee director" within the meaning of Rule 16b-3(b)(3)(I)
promulgated under the Securities Exchange Act of 1934, as amended and as in
effect as of the Effective Date.
(e) "Common Stock" shall mean the common stock of GCC.
(f) "Company" shall mean GCC Investments, Inc. and its wholly-owned
subsidiaries, including limited liability partnerships and like entities.
(g) "Covered Employee" shall mean each Employee who is a "covered
employee" for the relevant Fiscal Year of the Company within the meaning of
Section 162(m) of the Code.
(h) "Effective Date" shall mean November 1, 1996.
(i) "Employee" shall mean an employee of the Company.
(j) "Fiscal Year" shall mean the fiscal year of the Company which is
the twelve month period commencing on November 1 and ending on the
following October 31 and "Fiscal Year Quarter" shall mean each of the three
month periods ending on January 31, April 30, July 31 and October 31.
(k) "GCC" shall mean GC Companies, Inc.
(l) "GCC Plan" shall mean the GC Companies, Inc. 1993 Equity Incentive
Plan.
(m) "Investment" shall mean a portfolio investment made by the
Company.
(n) "Invested Capital" shall mean the total amount actively invested
by the Company in an Investment other than any amounts invested in
connection with a Secondary Investment.
(o) "Net Gains" shall mean, for any Fiscal Year Quarter, the realized
profit attributable to the Sale Events occurring in such Fiscal Year
Quarter reduced by (1) a certain rate of compound annual growth on that
portion of the Invested Capital with respect to which the relevant Sale
Events occurred, calculated through the date of the relevant Sale Event,
(2) all or a portion of Company's realized after-tax losses not previously
recovered against gains, increased by a certain rate of compound annual
growth determined through the last day of such Fiscal Year Quarter, and (3)
certain expenses. The Committee
1
<PAGE> 2
shall determine, at or prior to the beginning of each Fiscal Year, (or by
such later date as may be permitted under Section 162(m) of the Code for
the establishment of goals pursuant to which performance-based compensation
is to be payable for a particular period), the specific methodology to be
applied during such Fiscal Year to determine Net Gains.
(p) "Participant" shall mean a person designated by the Committee to
receive a benefit under this Plan.
(q) "Permanent Disability" shall be deemed to have occurred on the
date when a Participant is determined under the Company's long-term
disability plan to be eligible for disability benefits under that plan.
(r) "Plan" shall mean the GCC Investments, Inc. Incentive Pool Plan,
as amended from time to time.
(s) "Pool" shall mean, for any Fiscal Year Quarter, twenty percent
(20%) of the Net Gains determined for such Fiscal Year Quarter.
(t) "Post-Effective Date Pool" shall mean a Pool for any Fiscal Year
Quarter determined with respect to Investments made on or after the
Effective Date. For this purpose, an Investment shall not be deemed to have
been made on or after the Effective Date if it relates to a portfolio
company in which an Investment was made prior to the Effective Date.
(u) "Pre-Effective Date Pool" shall mean a Pool for any Fiscal Year
Quarter determined with respect to Investments (other than the Investment
made in Crescent Communications L.P.) made prior to the Effective Date.
(v) "Sale Event" shall mean (1) a disposition of an Investment, (2)
the occurrence of an Initial Public Offering or, if later, the date the
Company's Investment becomes fully transferable without restriction, (3)
the conversion of noncash proceeds received in connection with a prior Sale
Event to cash or (4) any similar transaction determined by the Committee to
justify a valuation of an Investment. In any event, a Sale Event will be
deemed to have occurred six years after an Investment is made if no other
event occurs which results in a valuation hereunder.
(w) "Secondary Investment" shall mean a second tranche or later
investment made to increase current holdings in a pre-existing Investment
to secure or supplement control positions in a pre-existing Investment
which the Committee determines to be a core investment.
(x) "Senior Investment Officer" shall mean any Employee hired as a
senior investment officer of the Company other than the Chief Investment
Officer or a Senior Vice President.
(y) "Senior Vice President" shall mean Michael Greeley or his
successor as the Senior Vice President of the Company, or for purposes of
any Post-Effective Date Pool, any other Senior Vice President elected by
the Board of Directors of the Company.
3. Administration.
(a) The Committee shall have sole discretionary power to interpret the
provisions of this Plan, to determine the methodology to be used in each
Fiscal Year to determine Net Gains and to administer and make all decisions
and exercise all rights of the Company with respect to this Plan. The
Committee shall have final authority to apply the provisions of the Plan
and determine, in its sole discretion, the amount of any Pool and benefits
to be paid or allocated to Participants hereunder and shall also have the
exclusive discretionary authority to make all other determinations
(including, without limitation, the interpretation and construction of the
Plan and the determination of relevant facts) regarding the entitlement to
benefits
2
<PAGE> 3
hereunder and the amount of benefits to be paid from the Plan. The
Committee's exercise of this discretionary authority shall at all times be
in accordance with the terms of the Plan and shall be entitled to deference
upon review by any court, agency or other entity empowered to review its
decision, and shall be enforced provided that it is not arbitrary,
capricious or fraudulent.
(b) In addition to its general administrative duties, no payment shall
be made under Section 4 or Section 5 without prior certification made by
the Committee, in accordance with the requirements of Section 162(m) of the
Code, that such payment is properly due under the terms of this Plan.
4. Pre-Effective Date Pool. For any Fiscal Year Quarter, any Pre-Effective
Date Pool shall be allocated forty-six percent (46%) to the Chief Investment
Officer and thirty-four percent (34%) to the Senior Vice President. The
remaining twenty percent (20%), shall be allocated by the Committee to other
Employees other than the Chief Investment Officer and Senior Vice President and
shall be capped at an annual amount of $250,000, with any excess above such cap
being treated as described in Section 6(a).
5. Post-Effective Date Pool.
(a) For any Fiscal Year Quarter, any Post-Effective Date Pool will be
allocated thirty-five percent (35%) to the Chief Investment Officer,
twenty-five percent (25%) to the Senior Vice President and 20% to be
reserved for allocations to newly hired Employees who are Senior Investment
Officers (the "Post-Effective Date New Hire Pool"). The remaining 20% shall
be allocated by the Committee to other Employees who do not have specific
allocations and shall be capped at an annual amount of $250,000 (or such
lower number as the Committee deems reasonable given the number of staff
who do not have specific Pool allocations to whom bonuses would be paid)
with any excess above such cap being treated as described in Section 6(a)
below.
(b) The Committee shall allocate to new hires who are Senior
Investment Officers a portion (based on a percentage) of the Post-Effective
Date New Hire Pool immediately upon hire. These new hires shall vest in
this percentage over time as the Committee shall determine. Once the
Post-Effective Date New Hire Pool has been allocated, the remaining
unallocated twenty percent (20%) will be reduced by a maximum of fifty
percent (50%) (i.e., ten percent (10%) of the total Pool) for allocations
as part of the Post-Effective Date New Hire Pool.
(c) If (i) percentages have been allocated to Senior Investment
Officers which when combined with the percentage allocated to the Chief
Investment Officer and the Senior Vice President total ninety percent (90%)
or (ii) the percentage to be allocated to any newly hired Senior Investment
Officer would otherwise cause the total allocated percentages to exceed
ninety percent (90%), any future allocation to newly hired Senior
Investment Officers will be deducted from other Senior Investment Officers,
the Chief Investment Officer and Senior Vice President allocations on a
pro-rata basis so that the total allocations to Participants under this
Section 6 does not exceed ninety percent (90%).
(d) No Senior Investment Officer shall be entitled to a portion of any
Post-Effective Date New Hire Pool in excess of twenty-five percent (25%) of
the total Pool.
(e) In no event will Pool percentage allocations made to Participants
exceed ninety percent (90%).
3
<PAGE> 4
6. Unallocated Pool Amounts.
(a) Any Pool amount unallocated under Section 4 or 5 (which amount
does not include any amount which is allocated but subsequently forfeited)
will be used as follows:
(1) firstly, to cover any excess Company expenses that have not
been previously recouped; and
(2) secondly, to fund a reserve for future accounting or actual
losses; as determined by the Company, which may occur on Investments.
Any Pool amount which has not been used as described in (1) or (2) above
within five years from the last day of the Fiscal Year Quarter for which the
Pool was determined, shall be reallocated to all Participants with allocation
percentages with respect to such allocation percentages. Notwithstanding the
foregoing, the Committee may defer any payment to be made under this Section
6(a) to the extent such payment would not be deductible compensation paid by the
Company for Federal income tax purposes. Any such deferral will be credited with
interest, until paid at a time when it would be deductible by the Company, at an
annual rate specified by the Committee from time to time.
(b) Any amount forfeited pursuant to Section 10 will be used as
follows:
(1) firstly, to cover any excess Company expenses that have not
been previously recouped; and
(2) secondly, to fund a reserve for future accounting or actual
losses; as determined by the Company, which may occur on Investments.
7. Payment of Pool Allocations.
Subject to Section 3(b), any Pool allocation under Section 4 or 5 to a
Participant who is the Chief Investment Officer, a Senior Vice President or any
Senior Investment Officer shall be payable to such Participant in accordance
with this Section 7.
(a) Seventy percent (70%) of any Pool allocation shall be payable to
such Participant in cash in a number of substantially equal installments
specified by the Committee. The first installment shall be made within
thirty (30) days following the end of the Fiscal Year Quarter (the "Pool
Determination Date") in which the Sale Event takes place. All future
installments shall be paid on such date or dates specified by the
Committee. The Participant must be employed on the payment date to be
entitled to receive each installment payment. Pool allocations to be paid
in installments after the first installment shall be credited with interest
until paid at an annual rate specified by the Committee from time to time.
(b) The remaining thirty percent (30%) of a Participant's Pool
allocation shall be paid in (i) cash or (ii) awards of restricted Common
Stock in accordance with the GCC Plan, or any combination thereof, as
determined by the Committee. This portion of a Participant's Pool
allocation shall be payable (or, in the case of restricted Common Stock,
shall vest) in a number of substantially equal installments specified by
the Committee. The first installment shall be made (or, in the case of
restricted Common Stock, shall vest) on the Pool Determination Date. All
future installments shall be paid (or, in the case of restricted Common
Stock, shall vest) on such date or dates specified by the Committee. The
Participant must be employed on the payment or vesting date, whichever is
applicable, to be entitled to receive each installment. If any part of this
portion of a Participant's Pool allocation is awarded in cash, the
installments after the first installment shall be credited with interest
until paid at an annual rate specified by the Committee from time to time.
(c) If restricted Common Stock is awarded under the GCC Plan pursuant
to (b) above, the conversion of dollar amounts into awards of Common Stock
will be made on the basis of the fair market value of the Common Stock on
the last business day of the Fiscal Year Quarter to which the Pool relates.
For this purpose, fair market value of the Common Stock on any given date
shall mean the closing price
4
<PAGE> 5
reported for the Common Stock on the New York Stock Exchange on such date.
Prior to the time shares of restricted Common Stock become vested, the
rights of the Participant with respect to such restricted Common Stock
shall be governed by the GCC Plan.
8. Secondary Investments.
(a) Upon the consummation of any Secondary Investment, an amount equal
to the sum of (a) three percent (3%) of the first $50 million invested as
part of such Secondary Investment and (b) one and one-half percent (1.5%)
of any amount in excess of $50 million invested as part of such Secondary
Investment will be credited to a Secondary Pool ("Secondary Pool"). Amounts
allocated to a Secondary Pool shall be allocated among Participants on the
same basis as allocations are made to the Pre-Effective Date Pool or
Post-Effective Date Pool, whichever is applicable, to which the original
Investment relates. Amounts allocated to a Secondary Pool shall be paid in
cash in three substantially equal installments, with the first installment
made upon the closing of the relevant Secondary Investment and the second
and third installments made on the second and third anniversary of such
closing provided the Participant is employed on such dates. Secondary Pool
allocations to be paid in installments after the first installment shall be
credited with interest until paid at an annual rate specified by the
Committee from time to time.
(b) Notwithstanding the foregoing, the Committee may defer any payment
to be made under this Section 8 to the extent such payment would not be
deductible compensation paid by the Company for Federal income tax
purposes. Any such deferral will be credited with interest, until paid at a
time when it would be deductible by the Company, at an annual rate
specified by the Committee from time to time.
9. Elective Payment Deferrals.
(a) A Participant who is a member of a "select group of management or
highly compensated employees" (within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of
1974, as amended, as determined by the Committee) may elect to defer
payment of up to 100% of any amount otherwise to be paid to such
Participant under Section 7(a).
(b) A Participant's election to defer payments hereunder (a "Deferral
Election") shall be in writing and shall be deemed to have been made upon
receipt and acceptance by the Company. In order to be effective hereunder,
a Deferral Election must be made not later than the December 31 of the
calendar year preceding the calendar year in which the affected payment
would otherwise be paid, and in any case shall specify the (i) period of
deferral and (ii) time and method of payment applicable to the amount(s)
deferred hereunder. A Deferral Election made for a calendar year may not be
revised after the last date on which it could have been made.
(c) All amounts deferred by a Participant under this Section 9 shall
be credited by the Company, to a book account (a "Deferred Compensation
Account") in the name of such Participant as of the dates such amounts
would have been paid to the Participant but for his or her Deferral
Election.
(d) Any amounts deferred hereunder shall be credited with interest
until paid based on an annual rate specified by the Committee from time to
time. Alternatively, the Committee may, from time to time and in its sole
discretion, (i) select one or more investment vehicles to be made available
as the measuring standards for crediting earnings or losses to a
Participant's Deferred Compensation Account, and (ii) allow a Participant
to select from such investment vehicles in a manner established by the
Committee, the investment vehicle or vehicles to apply to his or her
Deferred Compensation Account; provided, however, that the Committee shall
only select investment vehicles and permit Participant selection to the
extent neither action will cause the payments hereunder to Covered
Employees to cease to qualify as performance-based compensation under
Section 162(m) of the Code. The earnings or losses
5
<PAGE> 6
to be credited to the portion of any Participant's Deferred Compensation
Account under this Section 9(d) for any period shall be equivalent to the
amount of earnings or losses which would have been credited to the Deferred
Compensation Account if such portion of such Deferred Compensation Account
had actually been invested in such vehicles during such period in the
manner selected by the Participant.
(e) Amounts standing to the credit of a Participant's Deferred
Compensation Account shall be paid, or commence to be paid, in accordance
with the Participant's Deferral Election(s). The amount of each payment
hereunder shall be determined by the amount credited to such Deferred
Compensation Account as of the preceding December 31.
10. Termination of Employment.
(a) If a Participant (1) dies or becomes Permanently Disabled while
employed with the Company, or (2) retires with the approval of the Company,
the Participant (or the Participant's Beneficiary in the case of death)
shall receive full payment of any amount payable to the Participant
pursuant to Section 7(a) in accordance with the remainder of the
installment schedule and shall continue to vest in the amounts granted
pursuant to Section 7(b).
(b) A Participant who voluntarily terminates employment with the
Company prior to completing the minimum months of employment with the
Company required by the Committee or who is terminated for one of the
reasons described in Section 13, shall forfeit all rights to benefits
previously allocated to him or her which are not yet vested and shall have
no right to any payment with respect to any Pool not yet allocated.
(c) A Participant who is terminated by the Company for reasons other
than those described in Section 13, or who voluntarily terminates
employment with the Company after completing the minimum months of
employment with the Company required by the Committee will be entitled to
receive the remainder of any installment payments to be made pursuant to
Section 7(a) but shall forfeit any unvested amounts credited pursuant to
Section 7(b). In addition, such a Participant shall be entitled to share in
that portion of the proceeds which would have been payable pursuant to
Section 7(a), as a result of any Sale Events, other than those Sale Events
described in Section 2(u)(4), occurring within twelve months following his
or her termination without regard to the fact that the Participant is no
longer an Employee.
(d) Any amounts forfeited under this Section 10, whether represented
by Pool percentages or unpaid installments or otherwise shall be treated as
described in Section 6(b) above and shall not be reallocated to any other
Employee.
11. Change In Control
Notwithstanding anything to the contrary elsewhere herein, if a "Change in
Control" shall occur, Participants who are employed by GCC on such date shall be
100% vested in and shall immediately receive all of the benefits due under
Section 7(a) and (b) and Section 8.
A "Change in Control" for this purpose shall be deemed to have occurred if,
after the occurrence of any of the events described in (a), (b) or (c) below,
the capital made available for investment to the Company by GCC for any Fiscal
Year following such event falls below $50,000,000 or the total amount under
investment by the Company (including amounts available for investment but not
currently invested) falls below $200,000,000.
(a) Any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under
the Act) (other than the Smith Family Group (as described in the
6
<PAGE> 7
most recent proxy statement filed by GCC with the Securities and Exchange
Commission)) directly or indirectly, of securities of GCC representing more
than the greater of (i) twenty percent (20%) of the combined voting power
of GCC's then outstanding securities or (ii) the percentage of the combined
voting power of GCC's then outstanding securities as to which the Smith
Family Group is the beneficial owner.
(b) The Smith Family Group becomes the beneficial owner of less than
twenty percent (20%) of the combined voting power of GCC's then outstanding
securities.
(c) Persons who, as of the Effective Date, constituted GCC's Board of
Directors (the "Incumbent Board") cease for any reason, including without
limitation as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board of Directors,
provided that any person becoming a director of GCC subsequent to the
Effective Date whose nomination or election was approved by at least a
majority of the directors then comprising the Incumbent Board shall, for
purposes of this Plan, be considered a member of the Incumbent Board.
12. Beneficiary. Payments required to be made hereunder shall be made to
the Participant, if then living, otherwise to a Beneficiary or Beneficiaries
designated by the Participant in writing to the Company prior to the
Participant's death, or failing such designation, to the Participant's estate.
By written notice to the Company, a Participant may change such designation from
time to time, and may revoke such designation at any time.
13. Termination of Rights. Notwithstanding anything to the contrary
contained herein, in the event of a good faith determination by the Committee
that a Participant, while an employee, (a) committed fraud in respect of any
matter involving the Company in any respect whatsoever, (b) breached any
contract with, or other obligation to, the Company, (c) misappropriated an asset
or assets of the Company, whether tangible or intangible, (d) committed gross
misconduct, or (e) has been convicted of a crime involving moral turpitude, then
all rights to payments or any other benefits hereunder shall immediately
terminate, and the Participant, his or her estate, Beneficiary or Beneficiaries,
or the estate of any of his or her Beneficiaries shall have no further rights
with respect thereto or any claims against the Company under this Plan.
14. Amendment or Termination of Plan. The Company may amend or terminate
this Plan at any time or from time to time; provided, however, that no such
amendment or termination shall, without the written consent of the Participants,
in any material adverse way affect the rights of a Participant with respect to
benefits resulting from Sale Events, other than those described in Section
2(u)(4), which occur prior to the date of amendment or termination.
15. Limitation of Company's Liability. Subject to its obligation to make
payments as provided for hereunder, neither the Company nor any person acting on
behalf of the Company shall be liable for any act performed or the failure to
perform any act with respect to this Plan, except in the event that there has
been a judicial determination of willful misconduct on the part of the Company
or such person. The Company is under no obligation to fund any of the payments
required to be made hereunder in advance of their actual payment or to establish
any reserves with respect to this Plan. Any benefits which become payable
hereunder shall be paid from the general assets of the Company. No Participant,
his or her estate, Beneficiary or Beneficiaries, or the estate of any of his or
her Beneficiaries shall have any right, other than the right of an unsecured
general creditor, against the Company in respect of the benefits to be paid
hereunder.
16. Withholding of Tax. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder shall be subject to the
withholding of such amounts as the Company reasonably may determine that it is
required to withhold pursuant to applicable federal, state or local law or
regulation.
7
<PAGE> 8
17. Assignability. Except as otherwise provided by law, no benefit
hereunder shall be assignable, or subject to alienation, garnishment, execution
or levy of any kind, and any attempt to cause any benefit to be so subject shall
be void.
18. No Contract for Continuing Services. This Plan shall not be construed
as creating any contract for continued services between the Company and any
Participant and nothing herein contained shall give any Participant the right to
be retained as an employee of the Company.
19. Governing Law. This Plan shall be construed, administered, and enforced
in accordance with the laws of the Commonwealth of Massachusetts.
20. Miscellaneous. No amount credited to the account of, or distributed to,
any Participant under this Plan shall enter in any way into the computation of
such Participant's compensation for the purpose of any insurance, retirement,
profit-sharing, or other benefit of the Company.
21. Stockholder Approval. This Plan is subject to approval by the holders
of a majority of the Common Stock of GCC present or represented and entitled to
vote at a meeting of stockholders and no payment may be made hereunder prior to
such approval.
8
<PAGE> 1
EXHIBIT 11.1
GC COMPANIES, INC.
-----------------
Computation of weighted average number of shares outstanding used in determining
primary and fully diluted earnings per share:
<TABLE>
<CAPTION>
(In thousands) Six months Three months
ended April 30, ended April 30,
1997 1996 1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
PRIMARY
- -------
1. Weighted average number of common
shares outstanding 7,750 7,816 7,707 7,816
2. Assumed exercise of certain stock
options based on average
market value 36 34 39 -
----- ------ ----- -----
3. Weighted average number of shares
used in primary per share
computations 7,786 7,850 7,746 7,816
===== ====== ===== =====
FULLY DILUTED (A)
- -------------
1. Weighted average number of common
shares outstanding 7,750 7,816 7,707 7,816
2. Assumed exercise of all dilutive
options based on higher of
average or closing market value 40 36 44 -
----- ------ ----- -----
3. Weighted average number of shares
used in fully diluted per share
computations 7,790 7,852 7,751 7,816
===== ====== ===== =====
</TABLE>
(A) This calculation is submitted in accordance with the Securities
Exchange Act of 1934 Release No. 9083 although not required by Footnote
2 to Paragraph 14 of APB Opinion No. 15 because it results in dilution
of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS A SUMMARY OF FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 52,158
<SECURITIES> 43,433
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 113,161
<PP&E> 331,122
<DEPRECIATION> 170,789
<TOTAL-ASSETS> 334,549
<CURRENT-LIABILITIES> 110,963
<BONDS> 0
0
0
<COMMON> 77
<OTHER-SE> 179,012
<TOTAL-LIABILITY-AND-EQUITY> 334,549
<SALES> 234,995
<TOTAL-REVENUES> 234,995
<CGS> 93,810
<TOTAL-COSTS> 223,959
<OTHER-EXPENSES> (1,367)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251
<INCOME-PRETAX> 12,152
<INCOME-TAX> 4,982
<INCOME-CONTINUING> 7,170
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,170
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
</TABLE>
