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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER: 1-13173
BOCA RESORTS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 65-0676005
(State of Incorporation) (I.R.S. Employer Identification No.)
501 EAST CAMINO REAL 33432
BOCA RATON, FLORIDA (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (561) 447-5300
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report:
NOT APPLICABLE
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 February 7, 2001, there were 40,628,785 shares of Class A Common
Stock, $.01 par value per share, and 255,000 shares of Class B Common Stock,
$.01 par value per share, outstanding.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOCA RESORTS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, JUNE 30,
2000 2000
------------ ----------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 207,695 $ 19,395
Restricted cash........................................... 32,970 24,775
Accounts receivable, net.................................. 28,020 30,290
Inventory................................................. 8,013 8,312
Current portion of Premier Club notes receivable.......... 4,152 4,001
Other current assets...................................... 8,414 5,911
---------- ----------
Total current assets.............................. 289,264 92,684
Property and equipment, net................................. 791,339 1,062,642
Intangible assets, net...................................... 60,297 109,516
Long-term portion of Premier Club notes receivable, net..... 7,234 7,487
Other assets................................................ 26,868 26,194
---------- ----------
Total assets...................................... $1,175,002 $1,298,523
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 47,218 $ 56,959
Current portion of deferred revenue....................... 47,419 26,233
Current portion of credit lines and notes payable......... 126,831 71,049
Other current liabilities................................. 8,315 4,873
---------- ----------
Total current liabilities......................... 229,783 159,114
Credit lines and notes payable.............................. 434 172,146
Premier Club refundable membership fees..................... 58,778 60,374
Deferred revenue, net of current portion.................... 32,194 28,074
Other non-current liabilities............................... 1,982 978
Deferred income taxes payable............................... 36,239 35,643
Senior subordinated notes payable........................... 340,000 340,000
Commitments and contingencies
Shareholders' equity:
Class A Common Stock, $.01 par value, 100,000,000 shares
authorized and 40,620,627 and 40,606,072 shares issued
and outstanding at December 31, 2000 and June 30, 2000,
respectively........................................... 406 406
Class B Common Stock, $.01 par value, 10,000,000 shares
authorized and 255,000 shares issued and outstanding at
December 31, 2000 and June 30, 2000.................... 3 3
Contributed capital....................................... 484,398 484,849
Retained earnings (accumulated deficit)................... (9,215) 16,936
---------- ----------
Total shareholders' equity........................ 475,592 502,194
---------- ----------
Total liabilities and shareholders' equity........ $1,175,002 $1,298,523
========== ==========
See accompanying notes to consolidated financial statements.
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BOCA RESORTS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999
-------- --------
Revenue:
Leisure and recreation.................................... $ 95,545 $ 91,478
Entertainment and sports.................................. 23,506 23,159
-------- --------
Total revenue..................................... 119,051 114,637
Operating expenses:
Cost of leisure and recreation services................... 41,699 40,912
Cost of entertainment and sports services................. 24,556 20,841
Selling, general and administrative expenses.............. 28,360 27,479
Amortization and depreciation............................. 10,039 8,697
-------- --------
Total operating expenses.......................... 104,654 97,929
-------- --------
Operating income............................................ 14,397 16,708
Interest and other income................................... 1,396 499
Interest and other expense.................................. (14,360) (13,661)
Minority interest........................................... -- (13)
-------- --------
Net income.................................................. $ 1,433 $ 3,533
======== ========
Net income per share -- basic and diluted................... $ 0.03 $ 0.09
======== ========
Shares used in computing net income per share -- basic...... 40,869 40,861
======== ========
Shares used in computing net income per share -- diluted.... 41,861 40,876
======== ========
See accompanying notes to consolidated financial statements.
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BOCA RESORTS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999
-------- --------
Revenue:
Leisure and recreation.................................... $155,130 $142,896
Entertainment and sports.................................. 25,909 25,840
-------- --------
Total revenue..................................... 181,039 168,736
Operating expenses:
Cost of leisure and recreation services................... 74,618 70,629
Cost of entertainment and sports services................. 29,201 28,368
Selling, general and administrative expenses.............. 54,934 53,711
Amortization and depreciation............................. 20,054 17,114
-------- --------
Total operating expenses.......................... 178,807 169,822
-------- --------
Operating income (loss)..................................... 2,232 (1,086)
Interest and other income................................... 1,760 917
Interest and other expense.................................. (30,143) (27,383)
Minority interest........................................... -- 51
-------- --------
Net loss.................................................... $(26,151) $(27,501)
======== ========
Net loss per share -- basic and diluted..................... $ (0.64) $ (0.67)
======== ========
Shares used in computing net loss per share -- basic and
diluted................................................... 40,869 40,861
======== ========
See accompanying notes to consolidated financial statements.
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BOCA RESORTS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31
(IN THOUSANDS)
2000 1999
--------- --------
Operating activities:
Net loss.................................................. $ (26,151) $(27,501)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization and depreciation.......................... 20,054 17,114
Income applicable to minority interest................. -- (51)
Imputed interest on indebtedness with no stated rate... 490 1,120
Changes in operating assets and liabilities:
Accounts receivable.................................... (6,343) (10,259)
Other assets........................................... (4,691) 26
Accounts payable and accrued expenses.................. (335) 1,146
Deferred revenue and other liabilities................. 32,796 25,018
--------- --------
Net cash provided by operating activities......... 15,820 6,613
--------- --------
Investing activities:
Net proceeds from the sale of the Arizona Biltmore........ 279,925 --
Amounts paid in connection with the acquisition of the
Arizona Biltmore....................................... -- (4,018)
Capital expenditures...................................... (36,637) (41,489)
Change in restricted cash................................. (11,456) 17,850
--------- --------
Net cash provided by (used in) investing
activities....................................... 231,832 (27,657)
--------- --------
Financing activities:
Proceeds from borrowing under credit lines................ 38,430 27,137
Payments on notes payable and credit lines................ (95,427) (11,753)
Proceeds from exercise of stock options................... 145 47
Increase in (distribution to) minority interests.......... (2,500) 71
Other..................................................... -- (8)
--------- --------
Net cash provided by (used in) financing
activities....................................... (59,352) 15,494
--------- --------
Increase (decrease) in cash and cash
equivalents...................................... 188,300 (5,550)
Cash and cash equivalents, at beginning of period........... 19,395 10,222
--------- --------
Cash and cash equivalents, at end of period................. $ 207,695 $ 4,672
========= ========
See accompanying notes to consolidated financial statements.
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BOCA RESORTS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements of
Boca Resorts, Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and with the 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, the financial information furnished in this
report reflects all material adjustments (including normal recurring accruals)
necessary for a fair presentation of the results for the interim periods
presented. The results of operations for the three and six months ended December
31, 2000 are not necessarily indicative of the results to be expected for the
entire year primarily due to seasonal variations. All significant intercompany
accounts have been eliminated.
2. NATURE OF OPERATIONS
The Company is an owner and operator of leisure and recreation businesses
and entertainment/sports businesses. The leisure and recreation business
primarily consists of the ownership and operation of five luxury resorts with
hotels, conference facilities, golf courses, spas, marinas and private clubs.
The Company's resorts include: the Boca Raton Resort and Club (Boca Raton,
Florida), the Registry Resort at Pelican Bay (Naples, Florida), the Edgewater
Beach Hotel (Naples, Florida), the Hyatt Regency Pier 66 Hotel and Marina (Fort
Lauderdale, Florida), and the Radisson Bahia Mar Resort and Yachting Center
(Fort Lauderdale, Florida). The Company also owns and operates two championship
golf courses named Grande Oaks Golf Club (Davie, Florida) and Naples Grande Golf
Club (Naples, Florida).
The entertainment and sports business primarily includes the operations of
the Florida Panthers Hockey Club (the "Panthers"), a National Hockey League
("NHL") franchise and related arena management operations. The Panthers generate
revenue through the sale of tickets to Panthers' home games, the licensing of
local market television, cable network, and radio rights, from distributions
under revenue-sharing arrangements with the NHL covering national broadcasting
contracts, as well as other ancillary sources including expansion franchise
fees. In addition, the Company generates revenue through its participation in
the net operating income of the National Car Rental Center (a multi-purpose
entertainment and sports complex), where the Panthers play their home games.
3. EARNINGS (LOSS) PER COMMON SHARE
Financial Accounting Standards No. 128, "Earnings Per Share" supersedes APB
No. 15 and replaces primary and fully diluted earnings (loss) per share with a
dual presentation of basic and diluted earnings (loss) per share. Basic earnings
(loss) per share equals net income divided by the number of weighted average
common shares outstanding. Diluted earnings (loss) per share includes the
effects of common stock equivalents to the extent they are dilutive. Stock
options were antidilutive during the six-month periods presented.
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
(IN THOUSANDS)
Basic weighted average shares outstanding................... 40,869 40,861 40,869 40,861
Stock options............................................... 992 15 -- --
------ ------ ------ ------
Diluted weighted average shares outstanding................. 41,861 40,876 40,869 40,861
====== ====== ====== ======
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BOCA RESORTS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
No benefit for income taxes was recorded for the six-month periods
presented due to an offsetting increase in the Company's valuation allowance
which totaled $10.5 million and $11.0 million for the six months ended December
31, 2000 and 1999, respectively. Realization of the future tax benefits relating
to deferred tax assets is dependent on many factors. Management has considered
these factors in reaching its conclusion as to the need for a valuation
allowance for financial reporting purposes.
5. FINANCIAL INSTRUMENT
The Company has entered into an interest rate swap agreement to hedge the
effects of changes in interest rates on certain indebtedness. The Company does
not use derivative financial instruments for trading purposes. The fair value of
the interest rate swap agreement was nominal at December 31, 2000 and June 30,
2000 and represented the spread between the interest rate the Company pays and
the interest rate the Company will receive over the remaining life of the
agreement.
6. SALE OF THE ARIZONA BILTMORE RESORT & SPA
On December 22, 2000, the Company executed a definitive agreement and
closed on the sale of the Arizona Biltmore Resort & Spa to KSL Recreation
Corporation for $335.0 million plus $8.3 million in certain working capital
adjustments. KSL Recreation Corporation paid the Company $283.9 million in cash
and assumed $59.4 million in indebtedness. The net proceeds from the asset sale
amounted to $279.9 million. The Company used approximately $56.5 million of the
net proceeds to repay the outstanding balance under its revolving credit
facility. The Company may use the remaining proceeds to make additional
investments in its business, repay indebtedness and/or for general corporate
purposes. The gain on the asset sale was nominal. The Company is contingently
liable for certain litigation relating to the Arizona Biltmore. While the
results of such proceedings cannot be predicted with certainty, management
believes that losses, if any, resulting from the ultimate resolution of these
matters will not have a material adverse effect on the Company's consolidated
results of operations, consolidated cash flows or consolidated financial
position.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash financing activities supplemental to the Consolidated Statements
of Cash Flows include the assumption of indebtedness totaling $59.4 million by
the buyer of the Arizona Biltmore Resort & Spa. See Note 6.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report may not contain all the information that is important to you.
This section should be read together with the Annual Report on Form 10-K for the
year ended June 30, 2000 because the Form 10-K provides substantially greater
detail.
RESULTS OF OPERATIONS
BUSINESS SEGMENT INFORMATION
The accompanying table outlines business segment operating data for the
three and six months ended December 31 (in 000's).
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenue:
Leisure and recreation.............................. $ 95,545 $ 91,478 $155,130 $142,896
Entertainment and sports............................ 23,506 23,159 25,909 25,840
-------- -------- -------- --------
Total revenue............................... 119,051 114,637 181,039 168,736
Operating expenses:
Cost of services:
Cost of leisure and recreation services.......... 41,699 40,912 74,618 70,629
Cost of entertainment and sports services........ 24,556 20,841 29,201 28,368
Selling, general and administrative expenses:
Leisure and recreation........................... 22,729 22,055 45,347 42,390
Entertainment and sports......................... 2,751 2,899 4,793 5,398
Corporate........................................ 2,880 2,524 4,794 5,923
Amortization and depreciation:
Leisure and recreation........................... 9,546 8,182 19,104 16,082
Entertainment and sports......................... 418 478 800 956
Corporate........................................ 75 38 150 76
-------- -------- -------- --------
Total operating expenses.................... 104,654 97,929 178,807 169,822
-------- -------- -------- --------
Operating income (loss):
Leisure and recreation........................... 21,571 20,329 16,061 13,795
Entertainment and sports......................... (4,219) (1,059) (8,885) (8,882)
Corporate........................................ (2,955) (2,562) (4,944) (5,999)
-------- -------- -------- --------
Total operating income (loss)............... 14,397 16,708 2,232 (1,086)
Interest and other income............................. 1,396 499 1,760 917
Interest and other expense............................ (14,360) (13,661) (30,143) (27,383)
Minority interest..................................... -- (13) -- 51
-------- -------- -------- --------
Net income (loss)..................................... $ 1,433 $ 3,533 $(26,151) $(27,501)
======== ======== ======== ========
EBITDA (loss):
Leisure and recreation.............................. $ 31,353 $ 28,822 $ 35,642 $ 30,531
Entertainment and sports............................ (3,601) (511) (7,811) (7,821)
Corporate........................................... (1,920) (2,406) (3,785) (5,765)
-------- -------- -------- --------
Total....................................... $ 25,832 $ 25,905 $ 24,046 $ 16,945
======== ======== ======== ========
Adjusted EBITDA (loss):
Leisure and recreation.............................. $ 33,992 $ 31,098 $ 40,871 $ 34,699
Entertainment and sports............................ (3,601) (511) (7,811) (7,821)
Corporate........................................... (1,920) (2,406) (3,785) (5,765)
-------- -------- -------- --------
Total....................................... $ 28,471 $ 28,181 $ 29,275 $ 21,113
======== ======== ======== ========
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SEASONALITY
The Company has historically experienced, and expects to continue to
experience, seasonal fluctuations in its revenue and net income (losses). Peak
season at the resorts extends from January through April while the regular
hockey season for the Panthers commences in October and ends in April.
BUSINESS PHILOSOPHY
The Company's current business strategy is to focus on expanding the
leisure and recreation business. However, management continuously evaluates
ownership, acquisition and divestiture alternatives relating to its two business
segments with the intention of maximizing shareholder value.
CONSOLIDATED RESULTS OF OPERATIONS
Net income was $1.4 million and $3.5 million for the three months ended
December 31, 2000 and 1999, respectively. Net loss was $26.2 million and $27.5
million during the six months ended December 31, 2000 and 1999, respectively.
The decrease in net income during the three months ended December 31, 2000
compared to the three months ended December 31, 1999 was primarily due to an
increase in cost of entertainment and sports services (primarily due to higher
Panthers' player salaries), partially offset by increased operating results for
the leisure and recreation business.
The decrease in the net loss during the six months ended December 31, 2000
compared to the six months ended December 31, 1999 was primarily due to an
increase in revenue and profit margins for the leisure and recreation business,
partially offset by higher interest and other expense. In addition, the prior
year six-month period included certain non-recurring legal fees. Additional
information relating to the operating results for each business segment is set
forth below.
LEISURE AND RECREATION
Select operating data for the Company's leisure and recreation business for
the three and six months ended December 31 is set forth below (in 000's except
operating statistics):
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
2000 1999 % CHG. 2000 1999 % CHG.
-------- -------- ------ -------- -------- ------
Revenue:
Room revenue............. $ 39,050 $ 37,116 5% $ 61,645 $ 57,017 8%
Non-room related
revenue............... 56,495 54,362 4% 93,485 85,879 9%
-------- -------- -------- --------
Total leisure and
recreation
revenue........ $ 95,545 $ 91,478 4% $155,130 $142,896 9%
Operating Statistics:
Available room nights...... 265,418 272,453 (3)% 538,166 536,063 --%
Average daily rate......... $ 222.20 $ 209.47 6% $ 179.46 $ 169.98 6%
Occupancy.................. 66.2% 65.0% 2% 63.8% 62.6% 2%
Room revenue per available
room..................... $ 147.13 $ 136.23 8% $ 114.55 $ 106.36 8%
Total leisure and
recreation revenue per
available room........... $ 359.99 $ 335.76 7% $ 288.26 $ 266.57 8%
Revenue
The leisure and recreation business generates a diversified stream of
revenue, which totaled $95.5 million and $91.5 million during the three months
ended December 31, 2000 and 1999, respectively, and $155.1 million and $142.9
million during the six months ended December 31, 2000 and 1999, respectively.
Approximately 60% of leisure and recreation revenue for each period presented
was derived from non-room
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sources such as food and beverage sales, yachting and marina revenue, golf
revenue, club membership fees, retail sales and other resort amenities. The
increase in non-room revenue during the three and six months ended December 31,
2000 was primarily associated with increases in golf related revenue due to the
opening of Naples Grande Golf Club in February 2000 and higher retail sales. As
outlined above, the resort portfolio also yielded increases in the average daily
room rate ("ADR") and occupancy during the three and six months ended December
31, 2000. Increases to ADR and occupancy were attributable, in large part, to an
expanded amenity base at the Company's resorts coupled with certain room
renovations. The decrease in available rooms nights during the three months
ended December 31, 2000 compared to the three months ended December 31, 1999 was
due to the sale of the Arizona Biltmore Resort & Spa on December 22, 2000. The
increase in available room nights during the six months ended December 31, 2000
compared to the six months ended December 31, 1999 was due to the sale of the
Arizona Biltmore, more than offset by an increase in available room nights at
the Arizona Biltmore rooms following the completion of a 120 guestroom addition
in September 1999.
Operating Expenses
Cost of leisure and recreation services totaled $41.7 million or 44% of
revenue during the three months ended December 31, 2000, compared to $40.9
million or 45% of revenue during the three months ended December 31, 1999. Cost
of leisure and recreation services totaled $74.6 million or 48% of revenue
during the six months ended December 31, 2000, compared to $70.6 million or 49%
of revenue during the six months ended December 31, 1999. Cost of services, as a
percent of revenue, declined during the three and six months ended December 31,
2000 primarily because of certain efficiencies relating to room labor costs
along with higher gross margins on retail and other sales.
Selling, general and administrative expenses ("S,G&A") of the leisure and
recreation business totaled $22.7 million or 24% of revenue during three months
ended December 31, 2000, compared to $22.1 million or 24% of revenue during the
three months ended December 31, 1999. S,G&A of the leisure and recreation
business totaled $45.3 million or 29% of revenue during six months ended
December 31, 2000, compared to $42.4 million or 30% of revenue during the six
months ended December 31, 1999. S,G&A, as a percent of revenue, improved during
the six months ended December 31, 2000 primarily because many fixed expenses,
including administrative payroll costs, energy and property costs, were constant
in dollar amount despite the increase in revenue. S,G&A of the leisure and
recreation business also includes, among other items, selling and marketing
expenses, real estate taxes, insurance, franchise agreement fees and other
administrative expenses.
Amortization and depreciation expense for the leisure and recreation
business was $9.5 million and $8.2 million during the three months ended
December 31, 2000 and 1999, respectively, and $19.1 million and $16.1 million
during the six months ended December 31, 2000 and 1999, respectively. The
increase during the three and six months ended December 31, 2000 compared to the
three and six months ended December 31, 1999 was primarily due to the completion
of several capital projects resulting in additional depreciation expense.
Operating Income
Operating income for the leisure and recreation business totaled $21.6
million and $20.3 million during the three months ended December 31, 2000 and
1999, respectively, and $16.1 million and $13.8 million during the six months
ended December 31, 2000 and 1999, respectively. The increase in operating income
during the three and six months ended December 31, 2000 compared to the three
and six months ended December 31, 1999 was primarily the result of an increase
in revenue and profit margins, partially offset by additional depreciation
expense associated with recently completed capital projects.
ENTERTAINMENT AND SPORTS
The primary component of the entertainment and sports business is the
Panthers and related arena operations. Revenue and direct expenses associated
with the team are primarily recorded over the regular hockey season, which
commences in October. Operating losses during the three months ended December
31,
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2000 and 1999 were $4.2 million and $1.1 million, respectively. Operating loss
was $8.9 million for both the six months ended December 31, 2000 and 1999. The
increase in the operating loss during the three months ended December 31, 2000
compared to the three months ended December 31, 1999 was primarily because of
higher Panthers players' salaries. However, operating loss was relatively flat
during the six months ended December 31, 2000 and 1999 because the 1999 period
included the buyout of certain Panther players' contracts during the off season.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses totaled $2.9 million and $2.5
million during the three months ended December 31, 2000 and 1999, respectively,
and $4.8 million and $5.9 million during the six months ended December 31, 2000
and 1999, respectively. Corporate general and administrative expenses decreased
during the six months ended December 31, 2000 because certain non-recurring
legal fees were incurred during the six months ended December 31, 1999.
INTEREST AND OTHER INCOME
Interest and other income totaled $1.4 million and $499,000 for the three
months ended December 31, 2000 and 1999, respectively, and $1.8 million and
$917,000 for the six months ended December 31, 2000 and 1999, respectively.
Interest and other income, which primarily includes interest earned on cash and
cash equivalents, increased during the three and six months ended December 31,
2000 largely because of increased cash on hand due to the sale of the Arizona
Biltmore Resort & Spa.
INTEREST AND OTHER EXPENSE
Interest and other expense totaled $14.4 million and $13.7 million for the
three months ended December 31, 2000 and 1999, respectively, and $30.1 million
and $27.4 million for the six months ended December 31, 2000 and 1999,
respectively. The increase in interest and other expense for the three and six
months ended December 31, 2000 occurred in large part because less interest was
capitalized during these periods because many capital projects got underway late
in the first quarter of fiscal 2001. See "Net Cash Used in Investing
Activities -- Capital Expenditures". Additionally, the Company's average cost of
borrowing was approximately 10% for each of the periods presented while the
average outstanding indebtedness was $578.0 million and $581.0 million during
the six months ended December 31, 2000 and 1999, respectively.
MINORITY INTEREST
No minority interest was recorded during the three and six months ended
December 31, 2000 because the arena contract with the Miami Sports and
Exhibition Authority ("MSEA"), an agency of the City of Miami, to operate the
Miami Arena was terminated effective June 30, 2000 pursuant to a settlement
agreement between MSEA and the Company's subsidiary that managed the operations
of the Miami Arena.
EBITDA
EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization and minority interest. EBITDA totaled $25.8 million
and $25.9 million during the three months ended December 31, 2000 and 1999,
respectively, and $24.0 million and $16.9 million during the six months ended
December 31, 2000 and 1999, respectively. The slight decrease in EBITDA during
the three months ended December 31, 2000 compared to the three months ended
December 31, 1999 was primarily due to $3.1 million decline in EBITDA for the
entertainment and sports business, which was nearly offset by a increase in
EBITDA for the leisure and recreation business and the corporate segment. The
increase in EBITDA during the six months ended December 31, 2000 compared to the
six months ended December 31, 1999 was primarily due to improved operating
results for the leisure and recreation business. See discussion of business
segment financial performance above for additional information on comparative
operating results. EBITDA and Adjusted EBITDA (see below) are used by management
and certain investors as indicators of the Company's historical ability to
service debt, to sustain potential future increases in debt and to satisfy
capital
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requirements. However, neither EBITDA nor Adjusted EBITDA is intended to
represent cash flows for the period. In addition, they have not been presented
as alternatives to either (a) operating income (as determined by GAAP) as an
indicator of operating performance or (b) cash flows from operating, investing
and financing activities (as determined by GAAP) and are thus susceptible to
varying calculations. EBITDA as presented may not be comparable to other
similarly titled measures of other companies.
ADJUSTED EBITDA
Adjusted EBITDA represents EBITDA plus the amount of net membership fees
deferred during the period. The net membership fees deferred during the period
represents the quarterly change in deferred revenue arising from the Premier
Clubs at the Boca Raton Resort and Club and Naples Grande and the Grande Oaks
Golf Club. Adjusted EBITDA totaled $28.5 million and $28.2 million during the
three months ended December 31, 2000 and December 31, 1999, respectively, and
$29.3 million and $21.1 million during the six months ended December 31, 2000
and December 31, 1999, respectively. The increase in Adjusted EBITDA during the
three and six months ended December 31, 2000 compared to the three and six
months ended December 31, 1999 was attributable to higher Premier Club sales
during the 2000 periods due to increased memberships at the Boca Raton Resort
and Club and the addition of the Naples Grande Premier Club together with the
factors discussed in the preceding paragraph.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $207.7 million at December 31, 2000,
from $19.4 million at June 30, 2000. The major components of the change are
discussed below.
Net Cash Provided by Operating Activities
Net cash provided by operating activities totaled $15.8 million and $6.6
million during the three months ended December 31, 2000 and 1999, respectively.
The increase in cash flow from operations from December 31, 1999 to December 31,
2000 was primarily the result of receiving more cash from the leisure and
recreation business due to higher revenue, Premier Club membership sales and
improved gross margins.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities amounted to $231.8 million during
the six months ended December 31, 2000, compared to net cash used in investing
activities of $27.7 million during the six months ended December 31, 1999. The
significant change was primarily the result of the sale of the Arizona Biltmore
Resort & Spa on December 22, 2000, which yielded net proceeds to the Company of
$279.9 million. Additional investing activities are discussed below.
Capital expenditures totaled $36.6 million during the six months ended
December 31, 2000 compared to $41.5 million during the six months ended December
31, 1999. During the six months ended December 31, 2000, capital spending at the
Boca Raton Resort and Club commenced on new projects including an eight-story
marina wing complex consisting of 112 water-view luxury guestrooms, a 40,000
square foot spa complex, a golf clubhouse and marina slips, as well as continued
spending on the room renovation with 80% of the guestrooms complete. In
addition, capital expenditures include the completion of a new Tuscan style
restaurant and retail pavilion, which opened in November 2000 at the Boca Raton
Resort and Club, a new pool/aquatic center, 6,000 square feet of additional
conference space and enhancements to the beach facility and boardwalk at the
Registry Resort and the completion of a room renovation at the Bahia Mar Resort
and Yachting Center.
During the six months ended December 31, 1999, capital spending primarily
related to the construction of a guest parking facility and commencement of a
luxury guestroom renovation at the Boca Raton Resort and Club, golf related
improvements at the Naples Grande golf course and the acquisition of commercial
property located near the Company's Fort Lauderdale resorts.
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Restricted cash increased $11.5 million during the six months ended
December 31, 2000 compared to a decrease of $17.9 million during the six months
ended December 31, 1999. During the six months ended December 31, 2000
restricted cash increased by $16.7 million in connection with the
collateralization of a letter of credit securing a note payable, which matures
April 1, 2001. This $16.7 million increase in restricted cash was partially
offset by a decrease in restricted cash at the Boca Raton Resort and Club.
Beginning in February 2000, funds previously restricted became potentially
available for distribution on a monthly basis pursuant to terms of an amended
loan and security agreement for the Boca Raton Resort and Club. Prior to the
amendment, certain restricted amounts were releasable to the Company on a
semi-annual basis. Under covenants to the loan agreement for the Boca Raton
Resort and Club, the Company is required to deposit certain amounts into reserve
accounts which are accumulated and restricted to support future debt service,
furniture, fixture and equipment replacement and real estate tax payments.
The $17.9 million decrease in restricted cash during the six months ended
December 31, 1999 related primarily to the release of restricted cash at the
Boca Raton Resort and Club for facility development.
Cash Provided by (Used in) Financing Activities
Net cash used in financing activities amounted to $59.4 million during the
six months ended December 31, 2000, compared to net cash provided by financing
activities of $15.5 million during the six months ended December 31, 1999. Cash
flows for each period primarily represent borrowings under credit facilities,
net of the repayment of indebtedness. In addition, during the six months ended
December 31, 2000, $2.5 million was paid to a former minority interest holder in
the entity that managed the Miami Arena, which represents a partial payment for
their share of a termination fee. See "Results of Operations -- Minority
Interest".
Capital Resources
The Company's capital resources are provided from both internal and
external sources. The primary capital resources from internal operations include
(1) room rentals, food and beverage sales, retail sales, golf revenue, tennis
revenue, marina and conference services at the resorts, (2) Premier Club
memberships and (3) ticket sales, broadcasting rights, sponsorship revenue,
arena operations and other revenue derived from ownership of the Panthers. The
primary external sources of liquidity have been the issuance of debt securities
and borrowing under term loans and credit lines.
As of December 31, 2000, the Company had immediate availability of $144.7
million under its revolving credit line, which matures in April 2002. As a
result of this availability combined with cash on hand at December 31, 2000
totaling $207.7 million which was derived principally from the sale of the
Arizona Biltmore Resort & Spa and expected cash from operations, management
believes the Company has sufficient funds to continue its planned capital
expenditures and support on-going operations, including meeting debt service
obligations as they come due.
FINANCIAL CONDITION
Significant changes in balance sheet data from June 30, 2000 to December
31, 2000 are discussed below. Balance sheet changes in property and equipment,
intangible assets and accounts payable and accrued expenses are primarily the
result of the sale of the Arizona Biltmore Resort & Spa.
Restricted Cash
Restricted cash increased to $33.0 million at December 31, 2000, from $24.8
million at June 30, 2000. The increase in restricted cash resulting from the
collateralization of a note payable in the amount of $16.7 million was partially
offset by the release of restricted cash at the Boca Raton Resort and Club.
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Current Portion of Deferred Revenue
Current portion of deferred revenue increased to $47.4 million at December
31, 2000, from $26.2 million at June 30, 2000. Approximately $12.2 million of
the increase related to deposits for Panther ticket sales and suite and
sponsorship revenue at the National Car Rental Center. Additionally,
approximately $9.4 million of the increase related to advance deposits for
customer stays and receipts of membership fees and annual dues of the Premier
Club at the Boca Raton Resort and Club. The membership fees are recognized as
revenue over the estimated life of the membership. The annual dues will be
recognized as revenue ratably over the membership year, which commenced on
October 1.
Credit Lines and Notes Payable, Including Current Portion
The Company's consolidated indebtedness, excluding its outstanding 9.875%
Senior Subordinated Notes, totaled $127.3 million at December 31, 2000 compared
to $243.2 million at June 30, 2000. Approximately $59.4 million of the decrease
related to the assumption of mortgage indebtedness by the buyer of the Arizona
Biltmore Resort & Spa. An additional $56.5 million was repaid under the
Company's revolving credit facility with a portion of the net proceeds from the
sale of the Arizona Biltmore. The remaining decrease related to minimum
contractual debt repayments required under various agreements.
Working Capital
Current assets exceeded current liabilities by $59.5 million at December
31, 2000, compared to a working capital deficit of $66.4 million at June 30,
2000, respectively. The increase in working capital is largely the result of the
sale of the Arizona Biltmore Resort & Spa. The increase in working capital
resulting from the asset sale was partially offset because $98.5 million
outstanding under a mortgage note payable secured by the Boca Raton Resort and
Club matures in August 2001 and therefore shifted from long-term portion of
notes payable at June 30, 2000 to current portion of notes payable at December
31, 2000.
FORWARD-LOOKING STATEMENTS
Some of the information in this report may contain forward-looking
statements. These statements discuss future expectations, contain projections of
results of operations or of financial condition or state other "forward-looking"
information. When considering such forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in this report. The
risk factors include certain known and unknown risks and uncertainties, and
could cause the Company's actual results to differ materially from those
contained in any forward looking statement.
These risk factors include, among others, the Company's ability to obtain
financing on acceptable terms to meet operating expenses and finance its growth,
risks associated with construction and development at its resort properties,
competition in the Company's principal businesses, the Company's ability to
integrate and successfully operate acquired businesses and the risks associated
with these businesses, the Company's ability to develop and implement
operational and financial systems to manage rapidly growing operations, the
Company's dependence on key personnel and the Company's ability to properly
assess and capitalize on future business opportunities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings. However, the
Company may from time to time become a party to legal proceedings arising in the
ordinary course of business, which are incidental to the business. While the
results of proceedings which arose in the normal course of business cannot be
predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's consolidated results of operations, consolidated cash
flows or consolidated financial position.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on November 2, 2000, the
shareholders voted to elect the directors named in the proxy materials dated
September 29, 2000. The results of the voting were as follows:
WITHHELD/
FOR ABSTAIN TOTAL(1)
------------- --------- -------------
Steven R. Berrard............................... 2,584,474,406 772,724 2,585,247,130
Dennis J. Callaghan............................. 2,584,477,683 769,447 2,585,247,130
Ezzat Coutry.................................... 2,584,477,573 769,557 2,585,247,130
Michael S. Egan................................. 2,584,477,540 769,590 2,585,247,130
Harris W. Hudson................................ 2,584,477,343 769,787 2,585,247,130
H. Wayne Huizenga............................... 2,584,476,857 770,273 2,585,247,130
George D. Johnson, Jr........................... 2,584,477,433 769,697 2,585,247,130
Henry Latimer................................... 2,584,477,660 769,470 2,585,247,130
Richard C. Rochon............................... 2,584,477,423 769,707 2,585,247,130
- ---------------
(1) Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to 10,000 votes.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BOCA RESORTS, INC.
Date: February 14, 2001
By: /s/ WILLIAM M. PIERCE
------------------------------------
William M. Pierce
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ STEVEN M. DAURIA
------------------------------------
Steven M. Dauria
Vice President and Corporate
Controller
(Principal Accounting Officer)
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