SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended March 31, 2004 | ||
| or | ||
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o
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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.
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Delaware
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65-0676005 | |
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(State of Incorporation)
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(I.R.S. Employer Identification No.) | |
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501 East Camino Real
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33432 | |
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Boca Raton, Florida
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(Zip Code) | |
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(Address of Principal Executive Offices)
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Registrant’s telephone number, including area code:
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 April 30, 2004, there were 39,911,954 shares of Class A Common Stock, $.01 par value per share, and 255,000 shares of Class B Common Stock, $.01 par value per share, outstanding.
Part I — Financial Information
Item 1. Financial Statements
BOCA RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | June 30, | |||||||||
| 2004 | 2003 | |||||||||
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 26,093 | $ | 8,110 | ||||||
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Restricted cash
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152 | 641 | ||||||||
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Accounts receivable, net
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26,174 | 20,960 | ||||||||
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Income taxes receivable
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12,600 | — | ||||||||
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Inventory
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7,131 | 6,616 | ||||||||
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Current portion of Premier Club notes receivable
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4,354 | 3,631 | ||||||||
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Other current assets
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3,126 | 3,238 | ||||||||
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Total current assets
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79,630 | 43,196 | ||||||||
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Property and equipment, net
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813,743 | 823,681 | ||||||||
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Intangible assets
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35,937 | 35,937 | ||||||||
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Long-term portion of Premier Club notes receivable
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9,153 | 8,157 | ||||||||
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Other assets
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8,145 | 9,179 | ||||||||
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Total assets
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$ | 946,608 | $ | 920,150 | ||||||
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LIABILITIES AND SHAREHOLDERS’
EQUITY
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 37,057 | $ | 33,515 | ||||||
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Current portion of deferred revenue and advance
deposits
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24,836 | 23,288 | ||||||||
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Net liabilities of discontinued operations
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1,045 | 1,074 | ||||||||
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Current portion of credit line and note payable
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— | 79 | ||||||||
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Total current liabilities
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62,938 | 57,956 | ||||||||
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Credit line and note payable
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— | 18,000 | ||||||||
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Deferred revenue, net of current portion
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33,316 | 33,498 | ||||||||
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Other liabilities
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9,560 | 9,560 | ||||||||
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Deferred income taxes
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52,849 | 34,242 | ||||||||
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Senior subordinated notes payable
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190,145 | 190,145 | ||||||||
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Premier Club refundable membership fees
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54,828 | 56,700 | ||||||||
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Total liabilities
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403,636 | 400,101 | ||||||||
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Commitments and contingencies
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Shareholders’ equity:
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Class A Common Stock, $.01 par value,
100,000,000 shares authorized and 39,890,949 and 39,035,078
shares issued and outstanding at March 31, 2004 and
June 30, 2003, respectively
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399 | 390 | ||||||||
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Class B Common Stock, $.01 par value,
10,000,000 shares authorized and 255,000 shares issued and
outstanding at March 31, 2004 and June 30, 2003.
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3 | 3 | ||||||||
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Contributed capital
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470,208 | 459,548 | ||||||||
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Retained earnings
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72,362 | 60,108 | ||||||||
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Total shareholders’ equity
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542,972 | 520,049 | ||||||||
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Total liabilities and shareholders’ equity
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$ | 946,608 | $ | 920,150 | ||||||
See accompanying notes to consolidated financial statements.
1
BOCA RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| 2004 | 2003 | |||||||||
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Leisure and recreation revenue
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$ | 113,120 | $ | 100,277 | ||||||
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Operating expenses:
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Cost of leisure and recreation services
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41,920 | 37,802 | ||||||||
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Selling, general and administrative expenses
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22,633 | 22,576 | ||||||||
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Depreciation
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10,368 | 10,073 | ||||||||
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Total operating expenses
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74,921 | 70,451 | ||||||||
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Operating income
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38,199 | 29,826 | ||||||||
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Interest income and other income (expense)
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(45 | ) | 39 | |||||||
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Interest expense
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(5,253 | ) | (5,407 | ) | ||||||
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Income before provision for income taxes
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32,901 | 24,458 | ||||||||
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Provision for income taxes
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(12,666 | ) | (9,416 | ) | ||||||
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Net income
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$ | 20,235 | $ | 15,042 | ||||||
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Net income per share – basic
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$ | .51 | $ | .38 | ||||||
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Net income per share – diluted
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$ | .49 | $ | .38 | ||||||
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Weighted average shares used in computing net
income per share – basic
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40,025 | 39,209 | ||||||||
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Weighted average shares used in computing net
income per share – diluted
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41,594 | 39,563 | ||||||||
See accompanying notes to consolidated financial statements.
2
BOCA RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| 2004 | 2003 | |||||||||
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Leisure and recreation revenue
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$ | 233,051 | $ | 213,615 | ||||||
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Operating expenses:
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Cost of leisure and recreation services
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101,795 | 95,859 | ||||||||
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Selling, general and administrative expenses
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65,221 | 63,978 | ||||||||
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Depreciation
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30,476 | 28,093 | ||||||||
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Loss on early retirement of debt
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— | 149 | ||||||||
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Total operating expenses
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197,492 | 188,079 | ||||||||
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Operating income
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35,559 | 25,536 | ||||||||
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Interest and other income
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131 | 78 | ||||||||
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Interest expense
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(15,765 | ) | (16,447 | ) | ||||||
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Income before provision for income taxes
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19,925 | 9,167 | ||||||||
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Provision for income taxes
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(7,671 | ) | (3,529 | ) | ||||||
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Net income
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$ | 12,254 | $ | 5,638 | ||||||
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Net income per share – basic
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$ | .31 | $ | .14 | ||||||
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Net income per share – diluted
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$ | .30 | $ | .14 | ||||||
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Weighted average shares used in computing net
income per share – basic
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39,618 | 39,367 | ||||||||
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Weighted average shares used in computing net
income per share – diluted
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40,690 | 39,907 | ||||||||
See accompanying notes to consolidated financial statements.
3
BOCA RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2004 | 2003 | ||||||||||
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Operating activities:
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Net income
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$ | 12,254 | $ | 5,638 | |||||||
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Adjustments to reconcile net income to net cash
provided by operating activities:
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Depreciation
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30,476 | 28,093 | |||||||||
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Non-cash compensation expense
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453 | 217 | |||||||||
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Impairment loss on land parcel
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— | 2,396 | |||||||||
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Gain on sale of land parcel
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— | (2,291 | ) | ||||||||
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Loss on early retirement of debt
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— | 149 | |||||||||
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Provision for deferred income taxes
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7,671 | 3,529 | |||||||||
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Changes in operating assets and liabilities
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Accounts receivable
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(5,214 | ) | (3,730 | ) | |||||||
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Other assets
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(1,088 | ) | 3,604 | ||||||||
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Accounts payable and accrued expenses
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6,842 | 2,616 | |||||||||
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Deferred revenue and other liabilities
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(506 | ) | 4,092 | ||||||||
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Net liabilities of discontinued operations
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(29 | ) | (1,362 | ) | |||||||
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Net cash provided by operating activities
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50,859 | 42,951 | |||||||||
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Investing activities:
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Capital expenditures
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(23,838 | ) | (42,563 | ) | |||||||
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Change in restricted cash
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489 | 74 | |||||||||
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Net proceeds from the sale of land parcels
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— | 12,786 | |||||||||
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Net cash used in investing activities
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(23,349 | ) | (29,703 | ) | |||||||
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Financing activities:
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Borrowings under credit facilities
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24,000 | 37,000 | |||||||||
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Payments under long-term debt agreements and
credit facility
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(42,079 | ) | (29,688 | ) | |||||||
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Proceeds from exercise of stock options
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8,552 | 750 | |||||||||
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Repurchases of common stock
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— | (6,174 | ) | ||||||||
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Repurchases of senior subordinated notes payable
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— | (2,750 | ) | ||||||||
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Net cash used in financing activities
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(9,527 | ) | (862 | ) | |||||||
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Cash provided by continuing operations
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18,012 | 13,748 | |||||||||
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Cash used in discontinued operations
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(29 | ) | (1,362 | ) | |||||||
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Cash and cash equivalents, at beginning of period
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8,110 | 3,691 | |||||||||
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Cash and cash equivalents, at end of period
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$ | 26,093 | $ | 16,077 | |||||||
See accompanying notes to consolidated financial statements.
4
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 nine months ended March 31, 2004 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 per share equals net income divided by the number of weighted average common shares outstanding. Diluted earnings per share includes the effects of common stock equivalents to the extent they are dilutive.
| Three Months | Nine Months | |||||||||||||||
| Ended | Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
| (In thousands) | ||||||||||||||||
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Basic weighted average shares outstanding
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40,025 | 39,209 | 39,618 | 39,367 | ||||||||||||
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Stock options
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1,569 | 354 | 1,072 | 540 | ||||||||||||
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Diluted weighted average shares outstanding
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41,594 | 39,563 | 40,690 | 39,907 | ||||||||||||
Options to purchase shares of common stock totaling 6.6 million and 6.5 million were outstanding at March 31, 2004 and 2003, respectively, but were not included in the computation of income per share for the nine-month periods because the effect would be antidilutive.
4. Income Taxes Receivable
The Company adopted a new tax accounting policy whereby it uses tax lives and methods for its property and equipment as permitted by the Internal Revenue Service in various rulings and regulations. The tax accounting policy has resulted in a decrease in income taxes currently payable, as well as, a refund of income taxes paid in prior years totaling approximately $12.6 million. The refund was received in April 2004. The income tax accounting method change has no impact on the Company’s total income tax expense for financial reporting purposes.
5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. 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 income, 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 nine months ended March 31, 2004 and $217,000 (or $133,000 net of benefit for income taxes) during the nine months ended March 31, 2003. The following table summarizes the effect of accounting for stock option awards as if the fair value recognition provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123, as amended by SFAS No. 148, had been applied for the three and nine months ended March 31, 2004 and 2003 (000’s omitted):
| Nine Months | ||||||||||||||||
| Three Months Ended | Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
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Net income as reported
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$ | 20,235 | $ | 15,042 | $ | 12,254 | $ | 5,638 | ||||||||
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Less: total stock based compensation determined
under fair value based method for awards, net of related tax
effects
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(305 | ) | (365 | ) | (1,036 | ) | (1,213 | ) | ||||||||
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Pro forma net income
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$ | 19,930 | $ | 14,677 | $ | 11,218 | $ | 4,425 | ||||||||
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Net income per share – basic , as
reported
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$ | .51 | $ | .38 | $ | .31 | $ | .14 | ||||||||
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Net income per share – diluted, as
reported
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$ | .49 | $ | .38 | $ | .30 | $ | .14 | ||||||||
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Net income per share – basic, Pro forma
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$ | .50 | $ | .37 | $ | .28 | $ | .11 | ||||||||
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Net income per share – diluted, Pro
forma
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$ | .48 | $ | .37 | $ | .28 | $ | .11 | ||||||||
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 nine months ended March 31, 2004 and 2003:
| 2004 | 2003 | |||||||
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Risk free interest rate
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1.00% | 1.50% | ||||||
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Expected lives
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6 years | 6 years | ||||||
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Expected volatility
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30% | 30% | ||||||
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Shareholders’ Equity
The accompanying table sets forth the components of the change in shareholders’ equity for the nine months ended March 31, 2004 (000’s omitted):