BOCA RESORTS INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended December 31, 2003

or

o		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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

As of January 30, 2004, there were 39,732,919 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.

TABLE OF CONTENTS


PART I -- FINANCIAL INFORMATION
PART II -- OTHER INFORMATION
SIGNATURES
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32.1 Section 906 Certification of CEO & CFO

PART I — FINANCIAL INFORMATION


Item 1.	*Financial Statements*

BOCA RESORTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


			December 31,		June 30,
			2003		2003


			(Unaudited)

			(000’s Omitted, Except
			Share Data)
ASSETS
Current assets:
	Cash and cash equivalents		$	4,317	$	8,110
	Restricted cash			152		641
	Accounts receivable, net			19,448		20,960
	Inventory			7,663		6,616
	Current portion of Premier Club notes receivable			3,927		3,631
	Other current assets			4,196		3,238

		Total current assets		39,703		43,196
Property and equipment, net				820,486		823,681
Intangible assets				35,937		35,937
Long-term portion of Premier Club notes receivable				8,794		8,157
Other assets				8,454		9,179

		Total assets	$	913,374	$	920,150

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	26,765	$	33,515
	Current portion of deferred revenue and advance deposits			30,885		23,288
	Net liabilities of discontinued operations			1,045		1,074
	Current portion of credit line and note payable			—		79

		Total current liabilities		58,695		57,956
Credit line and note payable				20,000		18,000
Deferred revenue, net of current portion				33,462		33,498
Other liabilities				9,560		9,560
Deferred income taxes				28,456		34,242
Senior subordinated notes payable				190,145		190,145
Premier Club refundable membership fees				55,178		56,700

		Total liabilities		395,496		400,101

Commitments and contingencies
Shareholders’ equity:
	Class A Common Stock, $.01 par value, 100,000,000 shares authorized and 39,512,459 and 39,035,078 shares issued and outstanding at December 31, 2003 and June 30, 2003, respectively			396		390
	Class B Common Stock, $.01 par value, 10,000,000 shares authorized and 255,000 shares issued and outstanding at December 31, 2003 and June 30, 2003.			3		3
	Contributed capital			465,352		459,548
	Retained earnings			52,127		60,108

		Total shareholders’ equity		517,878		520,049

		Total liabilities and shareholders’ equity	$	913,374	$	920,150

See accompanying notes to consolidated financial statements.

BOCA RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31


			2003			2002


			(000’s Omitted,
			Except Per
			Share Data)
			(Unaudited)
Leisure and recreation revenue			$	72,942		$	67,046
Operating expenses:
	Cost of leisure and recreation services			33,261			31,656
	Selling, general and administrative expenses			21,699			21,288
	Depreciation			10,146			9,074
	Loss on early retirement of debt			—			149

		Total operating expenses		65,106			62,167

Operating income				7,836			4,879
Interest and other income				117			9
Interest expense				(5,430	)		(5,429	)

Income (loss) before (provision) benefit for income taxes				2,523			(541	)
(Provision) benefit for income taxes				(972	)		208

Net income (loss)			$	1,551		$	(333	)

Net income (loss) per share — basic and diluted			$	.04		$	(.01	)

Weighted average shares used in computing net income (loss) per share — basic				39,508			39,236

Weighted average shares used in computing net income (loss) per share — diluted				40,516			39,236

See accompanying notes to consolidated financial statements.

BOCA RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Six Months Ended December 31


			2003			2002


			(Unaudited)
			(000’s Omitted, Except
			Per Share Data)
Leisure and recreation revenue			$	119,931		$	113,338
Operating expenses:
	Cost of leisure and recreation services			59,875			58,057
	Selling, general and administrative expenses			42,588			41,401
	Depreciation			20,108			18,020
	Loss on early retirement of debt			—			149

		Total operating expenses		122,571			117,627

Operating loss				(2,640	)		(4,289	)
Interest and other income				176			39
Interest expense				(10,512	)		(11,040	)

Loss before benefit for income taxes				(12,976	)		(15,290	)
Benefit for income taxes				4,995			5,887

Net loss			$	(7,981	)	$	(9,403	)

Net loss per share — basic and diluted			$	(.20	)	$	(.24	)

Weighted average shares used in computing net loss per share — basic and diluted				39,417			39,444

See accompanying notes to consolidated financial statements.

BOCA RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended December 31


				2003			2002


				(Unaudited)
				(000’s Omitted)
Operating activities:
	Net loss			$	(7,981	)	$	(9,403	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation			20,108			18,020
		Non-cash compensation expense			453			163
		Impairment loss on land parcel			—			2,396
		Gain on sale of land parcel			—			(2,291	)
		Loss on early retirement of debt			—			149
		Benefit for deferred income taxes			(4,995	)		(5,887	)
	Changes in operating assets and liabilities
		Accounts receivable			1,512			4,334
		Other assets			(2,213	)		2,075
		Accounts payable and accrued expenses			(3,513	)		(4,942	)
		Deferred revenue and other liabilities			6,039			9,392
		Net liabilities of discontinued operations			(29	)		(467	)

			Net cash provided by operating activities		9,381			13,539

Investing activities:
	Capital expenditures				(20,151	)		(30,719	)
	Change in restricted cash				489			81
	Net proceeds from the sale of land parcels				—			12,786

			Net cash used in investing activities		(19,662	)		(17,852	)

Financing activities:
	Borrowings under credit facilities				24,000			37,000
	Payments under long-term debt agreements and credit facility				(22,079	)		(13,611	)
	Proceeds from exercise of stock options				4,567			—
	Repurchases of common stock				—			(6,174	)
	Repurchases of senior subordinated notes payable				—			(2,750	)

			Net cash provided by financing activities		6,488			14,465

Cash provided by (used in) continuing operations					(3,764	)		10,619
Cash used in discontinued operations					(29	)		(467	)
Cash and cash equivalents, at beginning of period					8,110			3,691

Cash and cash equivalents, at end of period				$	4,317		$	13,843

See accompanying notes to consolidated financial statements.

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, 2003 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 five luxury resorts located in Florida, with hotels, conference facilities, golf courses, spas, marinas and private clubs. The Company’s resorts include the Boca Raton Resort & Club (Boca Raton), the Registry Resort at Pelican Bay (Naples), the Edgewater Beach Hotel (Naples), the Hyatt Regency Pier 66 Resort and Marina (Fort Lauderdale), and the Radisson Bahia Mar Resort and Yachting Center (Fort Lauderdale). The Company also owns and operates two golf clubs located in Florida, Grande Oaks Golf Club in Davie and Naples Grande Golf Club in Naples, and owns and operates two golf courses in Boca Raton that are part of the Boca Raton Resort & Club.

3. Earnings Per Common Share

Basic earnings (loss) per share equals net income (loss) 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.



	Three Months Ended				Six Months Ended
	December 31,				December 31,

	2003		2002		2003		2002


	(In thousands)
Basic weighted average shares outstanding		39,508		39,236		39,417		39,444
Stock options		1,008		—		—		—

Diluted weighted average shares outstanding		40,516		39,236		39,417		39,444

Options to purchase shares of common stock totaling 7.0 million and 7.2 million were outstanding at December 31, 2003 and 2002, respectively, but were not included in the computation of loss per share for the associated periods because the effect would be antidilutive.

4. Stock Option Plan

The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for the options granted under the intrinsic value method, which follows the recognition and measurement principles of Accounting Principals Board Opinion No. 25, “Accounting for Stock Issued to Employees.” No stock-based employee compensation cost is reflected in net loss, except for certain non-cash compensation expense associated with the modification in terms of stock option awards which totaled $453,000 (or $279,000 net of benefit for income taxes) during the six months ended December 31, 2003 and $163,000 (or $100,000 net of benefit for income taxes) during the six months ended December 31, 2002. The following table summarizes the effect of accounting for stock

BOCA RESORTS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

option awards as if the fair value recognition provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123, as amended by SFAS No. 148, had been applied for the three and six months ended December 31, 2003 and 2002 (000’s omitted):



	Three Months Ended						Six Months Ended
	December 31,						December 31,

	2003			2002			2003			2002

Net income (loss) as reported	$	1,551		$	(333	)	$	(7,981	)	$	(9,403	)
Less: total stock based compensation determined under fair value based method for awards, net of related tax effects		(354	)		(440	)		(731	)		(848	)

Pro forma net income (loss)	$	1,197		$	(773	)	$	(8,712	)	$	(10,251	)

Net income (loss) per share — basic and diluted, as reported	$	.04		$	(.01	)	$	(.20	)	$	(.24	)

Net income (loss) per share — basic and diluted, Pro forma	$	.03		$	(.02	)	$	(.22	)	$	(.26	)

The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the three and six months ended December 31, 2003 and 2002:


	2003			2002

Risk free interest rate		1.00	%		1.50	%
Expected lives		6 years			6 years
Expected volatility		30	%		30	%

5. Shareholders’ Equity

The accompanying table sets forth the components of the change in shareholders’ equity for the six months ended December 31, 2003 (000’s omitted):

Class A

Class B

Common Stock

Number

Total

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