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 September 30, 2001
_______________________________________
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
Indicate by checkmark whether the registrant (1) has filed reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of September 30, 2001, 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.
Part I - Financial Information
Item I - Financial Statements
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, June 30,
2001 2001
------------- --------
(Unaudited)
<s> <c> <c>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,094,333 $ 3,062,645
Other short-term investments 30,400,000 30,000,000
Prepaid expenses and other current assets 340,454 100,336
------------------------------
TOTAL CURRENT ASSETS 32,834,787 33,162,981
PROPERTY AND EQUIPMENT, net 4,118 4,925
OTHER ASSETS 321,058 351,806
------------------------------
$ 33,159,963 $ 33,519,712
==============================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 501,383 $ 398,079
Accrued interest 873,516
Federal and state income taxes payable 1,162,280 1,162,280
------------------------------
TOTAL CURRENT LIABILITIES 2,537,179 1,560,359
DEFERRED FEDERAL AND STATE INCOME TAXES 9,710,875 9,710,875
NOTES PAYABLE TO BANK - noncurrent portion 10,000,000 10,000,000
SUBORDINATED DEBENTURES 34,316,368 34,210,381
INVESTMENT IN CAPITAL DEFICIENCY OF CELTICS
BASKETBALL HOLDINGS, L.P. 30,559,976 29,111,174
PARTNERS' CAPITAL (DEFICIT)
Boston Celtics Limited Partnership -
General Partner 93,301 121,546
Limited Partners (53,721,402) (50,925,113)
------------------------------
(53,628,101) (50,803,567)
Boston Celtics Limited Partnership II -
General Partner (334,195) (307,387)
Celtics Limited Partnership - General Partner 255,739 270,227
Other comprehensive loss (257,878) (232,350)
------------------------------
TOTAL PARTNERS' CAPITAL (DEFICIT) (53,964,435) (51,073,077)
------------------------------
$ 33,159,963 $ 33,519,712
==============================
See notes to condensed consolidated financial statements.
1
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
Three Months Ended
-------------------------------
September 30, September 30,
2001 2000
------------- -------------
<s> <c> <c>
Costs and expenses:
General and administrative $ (610,494) $ (997,320)
Depreciation and amortization (20,211) (13,688)
-----------------------------
(630,705) (1,011,008)
Equity in net loss of Celtics Basketball Holdings, L.P. (1,448,802) (1,374,797)
Interest expense (1,106,086) (2,074,080)
Interest income 319,763 1,530,166
-----------------------------
Loss before income taxes (2,865,830) (2,929,719)
Provision for income taxes 300,000
-----------------------------
Net loss (2,865,830) (3,229,719)
Net loss applicable to interests of General Partners (69,541) (76,502)
-----------------------------
Net loss applicable to interests of Limited Partners $(2,796,289) $(3,153,217)
=============================
Net loss per unit $ (1.03) $ (1.17)
Weighted average units outstanding 2,703,664 2,703,664
See notes to condensed consolidated financial statements.
2
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
Three Months Ended
-------------------------------
September 30, September 30,
2001 2000
------------- -------------
<s> <c> <c>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
General and administrative expenses $ (753,802) $ (894,073)
Interest expense (187,833)
Interest income 361,981 1,339,570
Income taxes paid (310,000)
-------------------------------
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (579,654) 135,497
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of short-term investments (90,900,000) (177,440,000)
Proceeds from sales of short-term investments 90,500,000 176,200,000
Capital expenditures (829)
Other receipts (expenditures) 11,342 1,922
-------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (388,658) (1,238,907)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distribution from Celtics Basketball Holdings, L.P. 3,864,947
Cash distribution by Celtics Limited Partnership to
Boston Celtics Corporation (General Partner's share) (38,449)
Cash distribution by Boston Celtics Limited
Partnership II to BCLP II GP, Inc. (General
Partner's share) (9,417)
-------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES -- 3,817,081
-------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (968,312) 2,713,671
Cash and cash equivalents at beginning of period 3,062,645 3,393,509
-------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,094,333 $ 6,107,180
===============================
See notes to condensed consolidated financial statements.
3
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - The condensed consolidated financial statements include the
accounts of Boston Celtics Limited Partnership ("BCLP," the "Partnership")
and its majority-owned and controlled subsidiaries and partnerships.
BCLP is a Delaware limited partnership that was formed on April 13, 1998 in
connection with a reorganization of Boston Celtics Limited Partnership II
("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. In addition, 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 Celtics Basketball, L.P. ("Celtics
Basketball"), its 99.999% subsidiary partnership, owns and operates the
Boston Celtics professional basketball team (the "Boston Celtics") of the
National Basketball Association (the "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 the earnings of
Celtics Basketball Holdings and reduced by distributions received.
Note 2 - The unaudited interim condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with instructions to Form 10-
Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation have been included therein. Operating results for interim
periods are not indicative of the results that may be expected for the full
year. Such financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto of BCLP and its
subsidiaries included in the annual report on Form 10-K for the year ended
June 30, 2001.
Note 3 - BCLP, through its subsidiary partnerships and corporations, owns a
48.3123% limited partnership interest in Celtics Basketball Holdings.
Celtics Basketball Holdings, through Celtics Basketball, owns and operates
the Boston Celtics. BCLP's investment in Celtics Basketball Holdings is
accounted for on the equity method. Summary statement of operations data
for Celtics Basketball Holdings for the three months ended September 30,
2001 and 2000 is as follows:
Three Months Ended
-------------------------------
September 30, September 30,
2001 2000
------------- -------------
<s> <c> <c>
Total costs and expenses $(2,206,322) $(2,120,919)
Interest income (expense), net (792,531) (724,754)
-----------------------------
Net loss $(2,998,853) $(2,845,673)
=============================
Note 4 - 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. The named plaintiffs, each of whom 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. BCLP II 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, BCLP II's Motion to Dismiss,
and on September 3, 1999, the plaintiffs filed an amended consolidated
Complaint. On October 1, 1999, BCLP II filed an answer to the Complaint.
Although the ultimate outcome of the Complaint 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.
4
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, June 30,
2001 2001
------------- --------
(Unaudited)
<s> <c> <c>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 419,763 $ 839,962
Prepaid expenses and other current assets 197,435 22,636
------------------------------
TOTAL CURRENT ASSETS 617,198 862,598
PROPERTY AND EQUIPMENT, net 4,118 4,925
OTHER ASSETS 98,182 112,208
------------------------------
$ 719,498 $ 979,731
==============================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 347,336 $ 315,051
Accrued interest 873,516
Federal and state income taxes payable 513,201 513,201
------------------------------
TOTAL CURRENT LIABILITIES 1,734,053 828,252
DEFERRED FEDERAL AND STATE INCOME TAXES 6,812,105 6,812,105
NOTES PAYABLE TO BANK - noncurrent portion 10,000,000 10,000,000
NOTE PAYABLE TO RELATED PARTY 3,000,000 3,000,000
DUE TO RELATED PARTY 4,800,000 4,800,000
SUBORDINATED DEBENTURES 34,316,368 34,210,381
INVESTMENT IN CAPITAL DEFICIENCY OF CELTICS
BASKETBALL HOLDINGS, L.P. 30,559,976 29,111,174
PARTNERS' CAPITAL (DEFICIT)
Boston Celtics Limited Partnership II -
General Partner (334,195) (307,387)
Limited Partners (90,167,663) (87,513,679)
------------------------------
(90,501,858) (87,821,066)
Celtics Limited Partnership - General Partner 255,739 270,227
Celtics Pride GP - General Partner 993 1,008
Other comprehensive loss (257,878) (232,350)
------------------------------
TOTAL PARTNERS' CAPITAL (DEFICIT) (90,503,004) (87,782,181)
------------------------------
$ 719,498 $ 979,731
==============================
See notes to condensed consolidated financial statements.
5
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
Three Months Ended
------------------------------
September 30, September 30,
2001 2000
------------- -------------
<s> <c> <c>
Costs and expenses:
General and administrative $ (63,433) $ (609,769)
Amortization (17,026) (11,778)
----------------------------
(80,459) (621,547)
Equity in net loss of Celtics Basketball Holdings, L.P. (1,448,802) (1,374,797)
Interest expense (1,171,711) (2,074,080)
Interest income 5,677 1,530,166
----------------------------
Loss before income taxes (2,695,295) (2,540,258)
Provision for income taxes 300,000
----------------------------
Net loss (2,695,295) (2,840,258)
Net loss applicable to interests of General Partners (41,311) (44,651)
----------------------------
Net loss applicable to interest of Limited Partner $(2,653,984) $(2,795,607)
============================
See notes to condensed consolidated financial statements.
6
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
Three Months Ended
-------------------------------
September 30, September 30,
2001 2000
------------- -------------
<s> <c> <c>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
General and administrative expenses $(238,100) $ (886,428)
Interest expense (187,833)
Interest income 5,734 1,339,570
Income taxes paid (310,000)
------------------------------
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (420,199) 143,142
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of short-term investments (177,440,000)
Proceeds from sales of short-term investments 176,200,000
Capital expenditures (829)
Other receipts (expenditures) 1,922
------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES -- (1,238,907)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distribution from Celtics Basketball Holdings, L.P. 3,864,947
Cash distribution by Celtics Limited Partnership to
Boston Celtics Corporation (General Partner's share) (38,449)
Cash distribution by Boston Celtics Limited
Partnership II to Boston Celtics Limited Partnership (52,645)
Cash distribution by Boston Celtics Limited Partnership II
to BCLP II GP, Inc. (General Partner's share) (9,417)
------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES -- 3,764,436
------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (420,199) 2,668,671
Cash and cash equivalents at beginning of period 839,962 3,389,400
------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 419,763 $ 6,058,071
==============================
See notes to condensed consolidated financial statements.
7
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - The condensed 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.
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. As a result of the Reorganization,
the Partnership's 99% limited partnership interest is owned by Boston Celtics
Limited Partnership (a Delaware limited partnership).
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
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 99.999%
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, 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. Accordingly, the
investment is carried at cost, increased by equity in the earnings of
Celtics Basketball Holdings and reduced by distributions received.
Note 2 - The unaudited interim condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with instructions to Form 10-
Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation have been included therein. Operating results for interim
periods are not indicative of the results that may be expected for the full
year. Such financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto of BCLP II
and its subsidiaries included in the annual report on Form 10-K for the year
ended June 30, 2001.
Note 3 - BCLP II, through its subsidiary partnerships and corporations,
owns a 48.3123% limited partnership interest in Celtics Basketball
Holdings. Celtics Basketball Holdings, through Celtics Basketball, owns
and operates the Boston Celtics. BCLP II's investment in Celtics
Basketball Holdings is accounted for on the equity method. Summary
statement of operations data for Celtics Basketball Holdings for the three
months ended September 30, 2001 and 2000 is as follows:
Three Months Ended
-------------------------------
September 30, September 30,
2001 2000
------------- -------------
<s> <c> <c>
Total costs and expenses $(2,206,322) $(2,120,919)
Interest income (expense), net (792,531) (724,754)
-----------------------------
Net loss $(2,998,853) $(2,845,673)
=============================
Note 4 - 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.
The named plaintiffs, each of whom 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. BCLP II filed a Motion to Dismiss the complaint filed by Mr.
Rilander on July 29, 1998, and
8
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
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, BCLP II's Motion to
Dismiss, and on September 3, 1999, the plaintiffs filed an amended
consolidated Complaint. On October 1, 1999, BCLP II filed an answer
to the Complaint.
Although the ultimate outcome of the Complaint 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.
9
BOSTON CELTICS LIMITED PARTNERSHIP
BOSTON CELTICS LIMITED PARTNERSHIP II
and Subsidiaries
Item 2 - 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), liquidity, capital expenditures, interest rate risk, 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 BCLP or BCLP II to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Factors that could cause BCLP's
or BCLP II's financial condition, results of operation, liquidity and capital
resources to differ materially include the competitive success of the Boston
Celtics, uncertainties as to increases in players' salaries and team
expenses, including the potential impact of the luxury tax and escrow system
under the New Collective Bargaining Agreement, the Boston Celtics' ability to
attract and retain talented players, the risk of injuries to key players,
uncertainties regarding media contracts, the performance of certain
investments by subsidiaries of BCLP or BCLP II, the extent to which such
subsidiaries generate, and are able to distribute, operating cash flow,
general economic conditions and the impact of declining economic conditions
on consumer spending for entertainment and leisure-oriented activities.
General
BCLP accounts for its indirect investment in the accounts and operations of
the Boston Celtics using the equity method and, accordingly, its equity in
the net income (loss) of the Boston Celtics is reported on a single caption
in its Condensed Consolidated Statements of Operations. Following is a
general description of certain matters related to the operations of the
Boston Celtics.
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 expenses 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.
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 normally 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 normally
begins in late October or early November, the first fiscal quarter, which
ends on September 30, generally includes limited or no revenue and reflects
a net loss attributable to general and administrative expenses and selling
and promotional expenses incurred in the quarter. Based on the standard
NBA game schedule, the Boston Celtics historically recognize approximately
one-third of its annual regular season revenue in the second fiscal
quarter, approximately one-half of such revenue in the third fiscal quarter
and the remainder in the fourth fiscal quarter, and recognize its playoff
revenue, if any, in the fourth fiscal quarter. Accordingly, BCLP's and
BCLP II's equity in the net income (loss) of Celtics Basketball Holdings,
which indirectly owns and operates the Boston Celtics, will generally
result in a loss in its first fiscal quarter, income in its second and
third fiscal quarters and a loss in its fourth fiscal quarter unless there
is significant income from playoff revenues.
Results of Operations
The following discussion compares the operating results of BCLP and its
subsidiaries for the three months ended September 30, 2001 with the three
months ended September 30, 2000.
10
BCLP's general and administrative expenses of $610,000 in the three months
ended September 30, 2001 decreased by $387,000 compared to $997,000 in the
three months ended September 30, 2000. The decrease in 2001 was primarily
attributable to the provision for a non-recurring sales tax at one of BCLP's
subsidiary partnerships ($300,000) in the three months ended September 30,
2000, as well as a decrease in professional expenses.
BCLP II's general and administrative expenses of $63,000 in the three months
ended September 30, 2001 decreased by $547,000 compared to $610,000 in the
three months ended September 30, 2000. The decrease in 2001 was primarily
attributable to the provision in the three months ended September 30, 2000
for the non-recurring sales tax described in the preceding paragraph. In
addition, BCLP II's general and administrative expenses in the three months
ended September 30, 2000 included $228,000 related to BCCLP Holding
Corporation ("BCCLP Holdings") and Celtics Capital Corporation ("CCC"), its
wholly owned subsidiary. As more fully described in "Liquidity and Capital
Resources" below, effective October 31, 2000, BCLP II distributed to BCLP all
of the outstanding capital stock of BCCLP Holdings, and, as a result, the
results of operations of BCCLP Holdings and CCC are currently not
consolidated with those of BCLP II.
Equity in net loss of Celtics Basketball Holdings, L.P. represents BCLP's
48.3% interest in the net loss of the entity that indirectly owns and
operates the Boston Celtics. The Boston Celtics recognize revenues and
expenses on a game-by-game basis, and the NBA regular season normally
begins in late October or early November. As a result, Celtics Basketball
Holdings' first fiscal quarter, which ends on September 30, generally
includes limited or no revenue and reflects a net loss attributable to
general and administrative expenses and selling and promotional expenses
incurred in the quarter. BCLP's equity in the net loss of Celtics
Basketball Holdings of $1,449,000 in the three months ended September 30,
2001 increased by $74,000 compared to $1,375,000 in the three months ended
September 30, 2000. The increase is primarily a result of increased
personnel expenses.
Interest expense of $1,106,000 in the three months ended September 30, 2001
decreased by $968,000 compared to $2,074,000 in the three months ended
September 30, 2000. The decrease is primarily attributable to a decrease in
borrowings under BCLP's revolving credit agreement with its commercial
bank. As more fully described in "Liquidity and Capital Resources" below,
$50,000,000 of borrowings under BCLP's revolving credit agreement was
repaid in December 2000.
Interest income of $320,000 in the three months ended September 30, 2001
decreased by $1,210,000 compared to $1,530,000 in the three months ended
September 30, 2000. The decrease is primarily as a result of a decrease in
invested balances, combined with lower interest rates on investments. As
more fully described in "Liquidity and Capital Resources" below, $50,000,000
of short-term investments were liquidated in December 2000 to repay
borrowings under BCLP's revolving credit agreement. BCLP's interest income
in the three months ended September 30, 2001 included $314,000 related to
BCCLP Holdings and CCC, wholly owned subsidiaires of BCLP that, effective
October 31, 2000, are not consolidated with BCLP II.
BCLP's provision for income taxes relates to BCLP's subsidiary corporations.
Effective November 1, 2000, certain of BCLP's subsidiary corporations began
filing tax returns consolidated with those of BCLP. As a result, income
earned by BCLP's subsidiary corporations subsequent to November 1, 2000 is
offset by losses of BCLP.
Liquidity and Capital Resources
BCLP used approximately $580,000 in cash flows from operating activities in
the three months ended September 30, 2001. At September 30, 2001, BCLP
had approximately $2,094,000 of available cash and $30,400,000 of
other short-term investments. In addition to these amounts, sources of
funds available to BCLP and BCLP II include funds generated by operations
and distributions from Celtics Basketball Holdings, which through a
subsidiary owns and operates the Boston Celtics. These resources may be
used to repay commercial bank borrowings and for general partnership
purposes, working capital needs or for possible investments and/or
acquisitions.
On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit
agreement with its commercial bank. 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 is secured by a pledge of
certain short-term investments of CCC, an indirect subsidiary of BCLP.
BCLP II borrowed $30,000,000 under the revolving credit agreement in fiscal
1998, and borrowed an additional $22,500,000 in fiscal 1999 and $7,500,000
in fiscal 2000. As a result, at June 30, 2000, $60,000,000 was outstanding
under the revolving credit agreement.
11
On October 31, 2000, in order to achieve certain efficiencies, BCLP II
distributed to BCLP all of the outstanding capital stock of BCCLP Holdings,
and BCLP assumed all of BCLP II's liability for borrowings under its
revolving credit agreement aggregating $50,000,000. As a result, effective
October 31, 2000, BCCLP Holdings is a direct subsidiary of BCLP. In December
2000, BCCLP Holdings, through CCC, liquidated $50,000,000 of short-term
investments and distributed the proceeds to BCLP. BCLP used those proceeds
to repay the $50,000,000 of borrowings under the revolving credit agreement
that were assumed from BCLP II. In connection with this distribution, BCLP
II issued a note payable to BCLP II GP, Inc., its general partner, in the
amount of $361,882, representing its 1% share of the fair value of the
distribution. The note accrued interest at 7% annually, and was paid in
full on June 26, 2001.
As a result, borrowings under the revolving credit agreement amounted to
$10,000,000 at September 30, 2001. On May 10, 2001, the revolving credit
agreement was amended to reduce the amount of borrowings available under the
agreement to $10,000,000. The agreement expires on June 30, 2003.
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 November 2000, in order to fix the interest rate on the borrowings under
the revolving credit agreement, BCLP II entered into an interest
rate cap agreement with a notional amount of $10,000,000, expiring in May
2002. The interest rate cap agreement provides for the payment of interest
at a fixed interest rate of 6.65%. The interest rate differential is
recognized as an adjustment to interest expense.
BCLP II has outstanding 6% subordinated debentures due on June 30, 2038.
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 $34,316,368 at September 30, 2001. The
subordinated debentures bear interest at the rate of 6% per annum, payable
annually on June 30, and mature on June 30, 2038 at an aggregate principal
amount of $54,073,280. There is no mandatory redemption or sinking fund
requirements of the subordinated debentures.
In the three months ended September 30, 2001, BCLP and its subsidiaries
received no distributions from Celtics Basketball Holdings, as compared to
$3,865,000 in the three months ended September 30, 2000. On October 17,
2001, BCLP and its subsidiaries received distributions from Celtics
Basketball Holdings aggregating $4,831,000. Future distributions from
Celtics Basketball Holdings will be determined by Boston Celtics Corporation,
the general partner of Celtics Basketball Holdings, in its sole discretion
subject to applicable credit agreements and based, among other things, on
available resources and the needs of Celtics Basketball Holdings and Celtics
Basketball, the ability of Celtics Basketball Holdings and Celtics Basketball
to generate sufficient operating cash flow, and the funds available after
debt service payments related to Celtics Basketball's revolving credit
agreement with its commercial bank.
No cash distributions to unitholders of BCLP were declared or paid during the
three months ended September 30, 2001 and 2000. Future distributions will be
determined by BCLP GP, Inc., the general partner of BCLP, in its sole
discretion based, among other things, on available resources and the needs of
BCLP, the ability of BCLP's subsidiaries to generate sufficient
operating cash flow, and the funds available after debt service payments
related to the revolving credit agreement with its commercial bank and the
subordinated debentures.
Management believes that BCLP's cash, cash equivalents and other short-term
investments together with cash from operating activities and distributions
from Celtics Basketball Holdings will provide adequate cash for BCLP and its
subsidiaries to meet their cash requirements through September 30, 2002.
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
At September 30, 2001, BCLP had invested approximately $30,400,000 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.
In November 2000, in order to fix the interest rate on the borrowings under
the revolving credit agreement, BCLP II entered into an interest rate
cap agreement. See "Liquidity and Capital Resources." As a result,
fluctuations in interest rates will have no effect on interest expense, or on
the earnings or cash flows of BCLP II. A hypothetical 10% increase in
interest rates would not materially affect the fair value of the interest
rate cap agreement.
12
Part II - Other Information
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit (10.1) - Fourth Amendment to the Amended and Restated
Credit Agreement, Dated as of October 16, 2001, to Credit
Agreement among Celtics Basketball, L.P., as Borrower,
Boston Celtics Limited Partnership, Boston Celtics Limited
Partnership II, Celtics Limited Partnership, Celtics
Basketball Holdings, L.P., Celtics Pride, G.P., as Borrower
Affiliates, and Citizens Bank of Massachusetts, as Lender.
(b) Reports on Form 8-K -
None.
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrants have duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
BOSTON CELTICS LIMITED PARTNERSHIP
----------------------------------
(Registrant)
By: BCLP GP, Inc., its General Partner
Dated: October 26, 2001 By: /s/ Richard G. Pond
--------------------------------------
Richard G. Pond
Executive Vice President
Chief Financial Officer
and Chief Operating Officer
Dated: October 26, 2001 BOSTON CELTICS LIMITED PARTNERSHIP II
-------------------------------------
(Registrant)
By: BCLP II GP, Inc., its General Partner
By: /s/ Richard G. Pond
--------------------------------------
Richard G. Pond
Executive Vice President
Chief Financial Officer
and Chief Operating Officer
14