1
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 Quarter Ended March 31, 1997 Commission File No. 19324
Boston Celtics Limited Partnership
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(Exact name of registrant as specified in its charter)
Delaware 04-2936516
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
151 Merrimac Street, Boston, MA 02114
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(Address of principal executive offices) (Zip code)
(617) 523-6050
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(Registrant's telephone number including area code)
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 [ ]
The number of Units outstanding as of March 31, 1997 was 5,096,164 of Limited
Partnership Interest.
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Part I - Financial Information
Item I - Financial Statements
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Balance Sheets
March 31, June 30,
1997 1996
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,181,648 $ 5,982,128
Marketable securities 37,316,541 46,763,501
Other short term investments 48,913,333 78,723,365
Accounts receivable (less allowance for doubtful accounts of
$10,000 in March and in June) 764,184 3,777,729
Deferred game costs 4,428,097
Prepaid income taxes 332,895
Prepaid expenses 2,001,338 656,396
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TOTAL CURRENT ASSETS 101,938,036 135,903,119
PROPERTY AND EQUIPMENT, net of depreciation of $666,099 in
March and $526,469 in June 874,576 1,184,813
NATIONAL BASKETBALL ASSOCIATION FRANCHISE, net of amortization
of $2,120,800 in March and $2,005,120 in June 4,048,781 4,164,461
OTHER INTANGIBLE ASSETS, net of amortization of $44,468 in
March and $36,621 in June 906,092 913,939
OTHER ASSETS 7,953,518 3,067,140
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$ 115,721,003 $ 145,233,472
================================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 7,236,634 $ 15,308,610
Deferred game revenues 2,925,255 4,629,704
Ticket refunds payable 110,219 111,711
Federal and state income taxes payable 539,325
Notes payable 16,145,699 15,353,949
Deferred compensation - current portion 1,804,365 4,345,367
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TOTAL CURRENT LIABILITIES 28,222,172 40,288,666
DEFERRED REVENUES - noncurrent portion 699,871 699,871
DEFERRED FEDERAL AND STATE INCOME TAXES 20,100,000 20,100,000
LONG-TERM DEBT - noncurrent portion 50,000,000 50,000,000
DEFERRED COMPENSATION - noncurrent portion 10,788,229 11,749,666
OTHER NON-CURRENT LIABILITIES 7,083,438 5,875,000
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PARTNERS' CAPITAL (DEFICIT)
Boston Celtics Limited Partnership -
General Partner 334,478 284,422
Limited Partners (2,200,649) 15,688,456
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(1,866,171) 15,972,878
Celtics Limited Partnership - General Partner 52,933 (92,988)
Boston Celtics Communications Limited Partnership - General
Partner 640,531 640,379
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TOTAL PARTNERS' CAPITAL (DEFICIT) (1,172,707) 16,520,269
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$ 115,721,003 $ 145,233,472
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See notes to consolidated financial statements.
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BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statements of Income
Unaudited
Nine Months Ended Three Months Ended
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March 31, March 31, March 31, March 31,
1997 1996 1997 1996
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Revenues:
Basketball regular season -
Ticket sales $ 27,523,000 $ 30,233,000 $ 16,860,000 $ 18,563,000
Television and radio broadcast rights fees 19,369,000 18,551,000 12,295,000 11,366,000
Other, principally promotional advertising 7,603,000 6,893,000 4,710,000 4,133,000
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54,495,000 55,677,000 33,865,000 34,062,000
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Costs and expenses:
Basketball regular season -
Team 28,175,000 25,035,000 16,930,000 16,492,000
Game 2,153,000 2,025,000 1,440,000 1,238,000
General and administrative 9,114,742 10,669,094 3,215,798 4,568,821
Selling and promotional 3,309,145 2,150,549 1,834,650 1,030,763
Depreciation 139,630 135,496 42,660 60,471
Amortization of NBA franchise and other intangible assets 123,527 123,527 41,175 41,175
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43,015,044 40,138,666 23,504,283 23,431,230
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11,479,956 15,538,334 10,360,717 10,630,770
Interest expense (4,459,947) (4,056,778) (1,418,174) (1,335,670)
Interest income 4,922,078 6,243,343 1,258,649 2,071,667
Net realized and unrealized gains on disposition of assets
and investments 400,204 179,023 4,848 (3,483)
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Income from continuing operations before income taxes 12,342,291 17,903,922 10,206,040 11,363,284
Provision for income taxes 1,000,000 1,350,000 200,000 450,000
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Income from continuing operations 11,342,291 16,553,922 10,006,040 10,913,284
Discontinued operations:
Income from discontinued operations (less applicable
income taxes of $30,000) 82,806
Gain from disposal of discontinued operations (less
applicable income taxes of $17,770,000) 38,330,907
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Net income 11,342,291 54,967,635 10,006,040 10,913,284
Net income applicable to interests of General Partners 258,035 1,282,746 215,520 236,714
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Net income applicable to interests of Limited Partners $ 11,084,256 $ 53,684,889 $ 9,790,520 $ 10,676,570
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Per unit:
Income from continuing operations $ 1.92 $ 2.72 $ 1.83 $ 1.84
Net income $ 1.92 $ 8.99 $ 1.83 $ 1.84
Average units outstanding throughout the period 5,773,306 5,970,396 5,349,685 5,804,917
See notes to consolidated financial statements.
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BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
For the Nine Months Ended
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March 31, March 31,
1997 1996
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CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES
Receipts:
Basketball regular season receipts:
Ticket sales $ 26,615,739 $ 27,643,129
Television and radio broadcast rights fees 15,152,558 13,696,098
Other, principally promotional advertising 5,661,903 6,112,470
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47,430,200 47,451,697
Costs and expenses:
Basketball regular season expenditures:
Team expenses 27,930,313 20,429,292
Game expenses 1,902,806 2,271,221
General and administrative expenses 12,832,125 11,238,412
Selling and promotional expenses 2,867,595 1,920,418
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45,532,839 35,859,543
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1,897,361 11,592,154
Interest expense (3,323,118) (2,740,984)
Interest income 5,129,937 7,406,523
Ticket refunds paid (1,492)
Proceeds from league expansion 4,490,673
Payment of income taxes (1,872,220) (4,972,199)
Payment of deferred compensation (3,814,344) (4,149,350)
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NET CASH FLOWS FROM (USED BY) CONTINUING OPERATIONS (1,983,876) 11,626,817
NET CASH FLOWS USED BY DISCONTINUED OPERATIONS (2,935,980)
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NET CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES (1,983,876) 8,690,837
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of:
Marketable securities (30,996,438) (42,696,996)
Short term investments (505,600,000) (40,025,000)
Proceeds from sales of:
Marketable securities 40,466,725 40,388,248
Short term investments 529,300,000 28,250,000
Proceeds from the sale of BCBLP 79,200,000
Cash portion of net assets of Boston Celtics Broadcasting
Limited Partnership sold (1,602,071)
Capital expenditures (51,746) (787,633)
Other receipts (expenditures) (119,269) 1,631,556
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NET CASH FLOWS FROM INVESTING ACTIVITIES 32,999,272 64,358,104
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7
BOSTON CELTICS LIMITED PARTNERSHIP
and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
Unaudited
For the Nine Months Ended
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March 31, March 31,
1997 1996
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NET CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES 31,015,396 73,048,941
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES
Payment of bank borrowings (80,000,000)
Purchase of Boston Celtics Limited Partnership units (22,880,000) (1,941,450)
Cash distributions:
To Fox Television Stations, Inc. from Boston Celtics
Broadcasting Limited Partnership (7,797,244)
To limited partners of Boston Celtics Limited Partnership (5,935,876) (9,632,083)
To General Partners (217,887)
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NET CASH FLOWS USED BY FINANCING ACTIVITIES (28,815,876) (99,588,664)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,199,520 (26,539,723)
Cash and cash equivalents at beginning of period 5,982,128 39,563,015
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,181,648 $ 13,023,292
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Non-cash investing and financing activities:
Conversion of convertible subordinated note payable for 25%
interest in Boston Celtics Broadcasting Limited Partnership $ 10,000,000
Notes payable for acquisition of Boston Celtics Limited
Partnership units $ 14,365,096
Net non-cash assets of Boston Celtics Broadcasting Limited
Partnership sold $ 9,517,608
See notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
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BOSTON CELTICS LIMITED PARTNERSHIP AND SUBSIDIARIES
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Note 1 - Boston Celtics Limited Partnership (the "Boston Celtics", "BCLP" or
the "Partnership") a Delaware limited partnership, through Celtics Limited
Partnership ("CLP"), its 99% owned limited partnership, owns and operates the
Boston Celtics professional basketball team of the National Basketball
Association, and through BCCLP Holding Corporation ("Holdings"), a wholly-owned
subsidiary of BCLP, owns Celtics Capital Corporation ("CCC") (which holds
investments) and through Celtics Investments Incorporated ("CII"), a
wholly-owned subsidiary of BCLP, and itself owns a 99% limited partnership
interest in Boston Celtics Communications Limited Partnership ("BCCLP") which
owned a 99% limited partnership interest in Boston Celtics Broadcasting Limited
Partnership ("BCBLP") until its sale on July 7, 1995. BCBLP owned and operated
Television Station WFXT - Channel 25 ("WFXT") of Boston, Massachusetts and
BCCLP owned and operated Radio Station WEEI - 590 AM ("WEEI") of Boston,
Massachusetts until its sale on June 30, 1994. The General Partner of BCLP is
Celtics, Inc. ("CI"); the General Partner of CLP is Boston Celtics Corporation
("BCC"); and the General Partner of BCCLP is Celtics Communications, Inc.
("CCI"). The General Partners of BCLP, CLP and BCCLP are Delaware corporations
whose sole stockholders are Paul Gaston, Don Gaston (father of Paul Gaston) and
an affiliate. The consolidated financial statements include the accounts of the
Partnership, CLP, Holdings, CCC, CII and their subsidiary partnerships. All
intercompany transactions are eliminated in consolidation.
Note 2 - The unaudited interim 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 Boston Celtics Limited Partnership and Subsidiaries
included in the annual report on Form 10-K for the year ended June 30, 1996 and
the Forms 10-Q for the quarters ended September 30, 1996 and December 31, 1996.
Note 3 - Revenues and costs applicable to the regular season are recognized in
income proportionately over the 82 games played in the regular season. The
excess of revenue received or costs incurred over amounts recognized in income
are included in Deferred game costs or Deferred game revenues on the
consolidated Balance Sheets.
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Note 4 - In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share ("Statement 128"), which is required to
be adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per unit and to restate
all prior periods. Under the new requirements for calculating primary earnings
per unit, the dilutive effect of rights to purchase units of Partnership
interest will be excluded. The impact is expected to result in an increase in
primary income from continuing operations per unit for the nine months ended
March 31, 1997 and March 31, 1996 of $0.08 and $0.07 per unit, respectively,
and is expected to result in an increase in primary net income per unit for the
nine months ended March 31, 1997 and March 31, 1996 of $0.08 and $0.26,
respectively. The impact is expected to result in an increase in primary income
from continuing operations per unit and primary net income per unit for the
three months ended March 31, 1997 and March 31, 1996 of $0.09 and $0.05 per
unit, respectively. The impact of Statement 128 on the calculation of fully
diluted income from continuing operations per unit for these quarters is not
expected to be material.
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Management's Discussion and Analysis of Financial
Condition and Results of Operations
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BOSTON CELTICS LIMITED PARTNERSHIP AND SUBSIDIARIES
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General
The Partnership had consolidated net income of $11,342,000, or $1.92 per
unit, on revenues of $54,495,000 in the nine months ended March 31, 1997,
compared with consolidated net income of $54,968,000, or $8.99 per unit, on
revenues of $55,677,000 in the nine months ended March 31, 1996. Consolidated
net income in the nine months ended March 31, 1996 included a gain on the sale
of BCBLP in the amount of $38,331,000 and income from this discontinued
operation of $83,000. The Partnership had consolidated net income of
$10,006,000, or $1.83 per unit, on revenues of $33,865,000 in the three months
ended March 31, 1997, compared with consolidated net income of $10,913,000, or
$1.84 per unit, on revenues of $34,062,000 in the three months ended March 31,
1996. The Partnership had consolidated cash flows used by operating activities
of $1,984,000 in the nine months ended March 31, 1997 compared with
consolidated cash flows from operating activities of $8,691,000 in the nine
months ended March 31, 1996. The decrease in cash flows from operating
activities is primarily due to increased payments for team expenses
($7,501,000) and the receipt in the nine months ended March 31, 1996 of league
expansion payments ($4,491,000) partially offset by a reduction in income tax
payments ($3,100,000).
The Boston Celtics derive revenues principally from the sale of tickets
to home games and the licensing of television, cable network and radio rights.
A large portion of the Boston Celtics' annual revenues and operating expenses
are determinable at the commencement of each basketball season based on season
ticket sales and the Boston Celtics' multi-year contracts with its players and
broadcast organizations.
For financial reporting purposes, the Boston Celtics recognize revenues
and expenses on a game-by-game basis. Because the NBA regular season begins in
November, the first quarter which ends on September 30th will generally include
limited or no revenue and will reflect a loss attributable to general and
administrative expenses incurred in the quarter. Based on the present NBA game
schedule, the Partnership will generally recognize approximately one-third of
its annual regular season revenue in the second quarter, approximately one-half
of such revenue in the third quarter and the remainder in the fourth quarter,
and it will recognize any playoff revenue in the fourth quarter.
Results of Operations
The following discussion compares results of continuing operations of the
Partnership and its subsidiaries for the nine-month and three-month periods
ended March 31, 1997 with the nine-month and three-month periods ended March
31, 1996.
The Boston Celtics recognize revenues and direct expenses for the
basketball operations ratably over the regular season games played.
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Revenues from ticket sales recognized in income decreased $2,710,000 or
9% in the nine-month period ended March 31, 1997 compared to the same period in
1996 as a result of decreased ticket sales. Revenues from ticket sales
recognized in income decreased $1,703,000 or 9% in the three-month period ended
March 31, 1997 compared to the same period in 1996 as a result of decreased
ticket sales ($2,083,000), partially offset by the result of the team having
played one more game in the three-month period ended March 31, 1997 than in
1996 ($380,000). Ticket prices were not increased for the 1996-1997 season.
Television and radio revenues increased $818,000 or 4% in the nine-month
period ended March 31, 1997, compared to the same period in 1996 as a result of
an increase in revenue from the national network and cable television rights
agreements. Television and radio revenues increased $929,000 or 8% in the
three-month period ended March 31, 1997 compared to the same period in 1996 as
a result of an increase in revenue from the national network and cable
television rights agreements ($660,000) as well as the team having played one
more game in the three-month period ended March 31, 1997 than in 1996
($269,000).
Other regular season revenues increased $710,000 or 10% in the nine-month
period ended March 31, 1997 compared to the same period in 1996 as a result of
increased promotional income. Other regular season revenues increased $577,000
or 14% in the three-month period ended March 31, 1997 compared to the same
period in 1996 as a result of increased promotional income ($471,000) as well
as the team having played one more game in the three-month period ended March
31, 1997 than in 1996 ($106,000).
Team expenses increased $3,140,000 or 13% in the nine-month period ended
March 31, 1997 compared to the same period in 1996 primarily as a result of
increases in player compensation ($2,066,000) and other team expenses
($1,074,000). Team expenses increased $438,000 or 3% in the three-month period
ended March 31, 1997 compared to the same period in 1996 primarily as a result
of increases in player compensation and the team having played one more game in
the three-month period ended March 31, 1997 than in 1996.
Game expenses increased $128,000 or 6% in the nine-month period ended
March 31, 1997 compared to the same period in 1996, primarily as a result of an
increase in game production expenses. Game expenses increased $202,000 or 16%
in the three-month period ended March 31, 1997 compared to the same period in
1996 as a result of an increase in game production expenses ($176,000) as well
as the team having played one more game in the three-month period ended March
31, 1997 than in 1996 ($26,000).
General and administrative expenses decreased $1,554,000 or 15% in the
nine-month period ended March 31, 1997 as compared to the same period in 1996
primarily as a result of a decrease in personnel costs ($1,123,000) and
professional expenses ($535,000). General and administrative expenses decreased
$1,353,000 or 30% in the three-month period ended March 31, 1997 as compared to
the same period in 1996 primarily as a result of a decrease in personnel costs
($1,006,000) and professional expenses ($368,000).
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Selling and promotional expenses increased $1,159,000 or 54% in the
nine-month period ended March 31, 1997 as compared to the same period in 1996
due to increases in salaries and other costs related to marketing and ticket
sales ($252,000), increased sponsorship costs ($507,000) and increases in
promotional and other general marketing expenses ($399,000). Selling and
promotional expenses increased $804,000 or 78% in the three-month period ended
March 31, 1997 as compared to the same period in 1996 due to increases in
sponsorship costs ($440,000) and promotional and other general marketing
expenses ($364,000).
Interest expense increased $403,000 or 10% in the nine months ended March
31, 1997 and $83,000 or 6% in the three-month period ended March 31, 1996
compared to the same periods in 1996. The increase in the nine-month period
ended March 31, 1997 is primarily a result of a full nine months of interest in
1997 on the August 30, 1995 notes payable related to the redemption of BCLP
units as compared to seven months of interest in 1996 (resulting in an increase
of $253,000 in the nine-month period ended March 31, 1997).
Interest income decreased $1,321,000 or 21% in the nine-month period
ended March 31, 1997 and $813,000 or 39% in the three-month period ended March
31, 1997 compared to the same periods in 1996. The decreases are attributable
to a reduced amount of available funds for short-term investment.
Liquidity and Capital Resources
At March 31, 1997 the Partnership had approximately $8,182,000 of
available cash, $37,317,000 of marketable securities and $48,913,000 of other
short term investments. In addition to these amounts, sources of funds
available to the Partnership include funds generated by operations and capital
contributions from partners. These resources will be used to repay commercial
bank borrowings and notes payable related to redeemed partnership units and for
general partnership purposes, working capital needs or for possible investments
or acquisitions. Management of the Partnership from time to time reviews and
evaluates investment and acquisition opportunities on behalf of the Partnership
and investments or acquisitions may be made or consummated by the General
Partner, on behalf of the Partnership, at such times and upon such prices and
other terms as the General Partner deems to be in the best interests of the
Partnership and all of its Unitholders. Management believes that its cash, cash
equivalents and marketable securities together with cash from operations will
provide adequate cash for the Partnership and its subsidiaries to meet their
cash requirements through March 31, 1998.
During the nine months ended March 31, 1997, a cash distribution of $1.00
per unit was paid to unitholders of Boston Celtics Limited Partnership on
December 16, 1996 (declared November 18, 1996 to unitholders of record on
November 29, 1996). During the nine months ended March 31, 1996, a cash
distribution of $1.50 per unit was paid to unitholders of Boston Celtics
Limited Partnership on July 21, 1995 (declared June 26, 1995 to unitholders of
record on June 30, 1995). Future distributions will be determined by the
General Partner based, among other things, on available resources and the needs
of the Partnership.
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Part II - Other Information
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BOSTON CELTICS LIMITED PARTNERSHIP AND SUBSIDIARIES
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ITEM 6 - Exhibits and Reports on Form 8-K
Exhibits -
Exhibit (11) - Statement re: computation of earnings per unit.
Reports on Form 8-K
None.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
BOSTON CELTICS LIMITED PARTNERSHIP
(Registrant)
By: Celtics, Inc., its General Partner
Dated: May 9, 1997 By: /s/ Richard G. Pond
------------------------------------
Richard G. Pond
Executive Vice President and
Chief Financial Officer