##### 



SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   FORM 10-Q (Mark One) þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13
OR15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
 Commission file number: 1-13173 BOCA RESORTS, INC.  Delaware
(State of Incorporation)
    
    65-0676005
(I.R.S. Employer Identification No.)501 East Camino Real
Boca Raton, Florida
(Address of Principal Executive Offices)
    
    33432
(Zip Code)
 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   
o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes   x   No   
o As of November 1, 2004, there were 40,059,226 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. CONDENSED CONSOLIDATED BALANCE SHEETS (000s Omitted, Except Share Data)
 (Unaudited)
 September 30,
    
    June 30,2004
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    42,413
    
    
    $
    47,587Restricted cash
    
    
    126
    
    
    
    138Accounts receivable, net
    
    
    18,983
    
    
    
    18,616Inventory
    
    
    6,956
    
    
    
    6,774Current portion of Premier Club notes receivable
    
    
    4,618
    
    
    
    5,301Other current assets
    
    
    6,131
    
    
    
    7,019Total current assets
    
    
    79,227
    
    
    
    85,435Property and equipment, net
    
    
    805,009
    
    
    
    808,734Intangible assets, net
    
    
    35,937
    
    
    
    35,937Long-term portion of Premier Club notes receivable
    
    
    10,302
    
    
    
    10,516Other assets
    
    
    8,102
    
    
    
    7,961Total assets
    
    $
    938,577
    
    
    $
    948,583LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    26,505
    
    
    $
    30,708Current portion of deferred revenue and advance deposits
    
    
    33,781
    
    
    
    26,095Net liabilities of discontinued operations
    
    
    1,045
    
    
    
    1,045Total current liabilities
    
    
    61,331
    
    
    
    57,848Deferred revenue, net of current portion
    
    
    32,033
    
    
    
    31,172Other liabilities
    
    
    9,660
    
    
    
    9,560Deferred income taxes
    
    
    46,677
    
    
    
    56,553Credit line and note payable
    
    
    200,000
    
    
    
    Senior subordinated notes payable
    
    
    
    
    
    
    190,145Premier Club refundable membership fees
    
    
    53,603
    
    
    
    54,198Total liabilities
    
    
    403,304
    
    
    
    399,476Commitments and contingenciesShareholders equity:Class A Common Stock, $.01 par value, 100,000,000 shares
authorized and 40,018,789 and 39,919,579 shares issued and
outstanding at September 30, 2004 and June 30, 2004, respectively
    
    
    400
    
    
    
    399Class B Common Stock, $.01 par value, 10,000,000 shares
authorized and 255,000 shares issued and outstanding at September 30,
2004 and June 30, 2004
    
    
    3
    
    
    
    3Contributed capital
    
    
    472,251
    
    
    
    470,586Retained earnings
    
    
    62,619
    
    
    
    78,119Total shareholders equity
    
    
    535,273
    
    
    
    549,107Total liabilities and shareholders equity
    
    $
    938,577
    
    
    $
    948,583
 See accompanying notes to condensed consolidated financial statements. 2




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##### 



BOCA RESORTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended September 30
 (000s Omitted, Except Per Share Data)
 (Unaudited)
 2004
    
    2003Leisure and recreation revenue
    
    $
    48,794
    
    
    $
    46,989Operating expenses:Cost of leisure and recreation services
    
    
    27,165
    
    
    
    26,614Selling, general and administrative expenses
    
    
    20,467
    
    
    
    20,889Depreciation
    
    
    9,227
    
    
    
    9,962Loss on early retirement of debt
    
    
    13,088
    
    
    
    Total operating expenses
    
    
    69,947
    
    
    
    57,465Operating loss
    
    
    (21,153
    )
    
    
    (10,476
    )Interest and other income
    
    
    106
    
    
    
    59Interest expense
    
    
    (4,156
    )
    
    
    (5,082
    )Loss before benefit for income taxes
    
    
    (25,203
    )
    
    
    (15,499
    )Benefit for income taxes
    
    
    9,703
    
    
    
    5,967Net loss
    
    $
    (15,500
    )
    
    $
    (9,532
    )Net loss per share  basic and diluted
    
    $
    (.39
    )
    
    $
    (.24
    )Weighted average shares used in computing net loss per share  basic and diluted
    
    
    40,242
    
    
    
    39,325
 See accompanying notes to condensed consolidated financial statements. 3




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##### 



BOCA RESORTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended September 30
 (000s Omitted)
 (Unaudited)
 2004
    
    2003Operating activities:Net loss
    
    $
    (15,500
    )
    
    $
    (9,532
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation
    
    
    9,227
    
    
    
    9,962Loss on early retirement of debt
    
    
    13,088
    
    
    
    Non-cash compensation expenses
    
    
    
    
    
    
    453Benefit for deferred income taxes
    
    
    (9,703
    )
    
    
    (5,967
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    (367
    )
    
    
    4,776Other assets
    
    
    2,159
    
    
    
    (185
    )Accounts payable and accrued expenses
    
    
    (4,027
    )
    
    
    4,993Deferred revenue and other liabilities
    
    
    8,052
    
    
    
    8,508Net cash provided by operating activities
    
    
    2,929
    
    
    
    13,008Investing activities:Capital expenditures
    
    
    (5,680
    )
    
    
    (11,475
    )Change in restricted cash
    
    
    12
    
    
    
    28Net cash used in investing activities
    
    
    (5,668
    )
    
    
    (11,447
    )Financing activities:Borrowings under credit facility
    
    
    200,000
    
    
    
    5,000Redemption of senior subordinated notes payable
    
    
    (190,145
    )
    
    
    Call premium to redeem senior subordinated notes payable
    
    
    (9,388
    )
    
    
    Debt issuance costs
    
    
    (4,395
    )
    
    
    Payments under credit facility
    
    
    
    
    
    
    (8,059
    )Proceeds from exercise of stock options
    
    
    1,493
    
    
    
    586Net cash used in financing activities
    
    
    (2,435
    )
    
    
    (2,473
    )Cash used in operations
    
    
    (5,174
    )
    
    
    (912
    )Cash and cash equivalents, at beginning of period
    
    
    47,587
    
    
    
    8,110Cash and cash equivalents, at end of period
    
    $
    42,413
    
    
    $
    7,198
 See accompanying notes to condensed consolidated financial statements. 4




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##### 



BOCA RESORTS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Unless the context otherwise indicates, references to we, us and our
mean Boca Resorts, Inc., a company incorporated in Florida in 1996 and
re-incorporated in Delaware in 1997. The accompanying Unaudited Condensed Consolidated Financial Statements
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 periods presented are not
necessarily indicative of the results to be expected for the entire year
primarily due to seasonal variations and because the three months ended
September 30, 2004 include a loss on the early extinguishment of debt. See
Note 6. All significant intercompany accounts have been eliminated. 2. Nature of Operations We are an owner and operator of five distinctive destination resorts
located in Florida with hotels, conference facilities, golf courses, spas,
marinas and private clubs. We have focused on the luxury and upscale resort
segment because we believe these segments outperform other lodging industry
segments, particularly in times of economic downturn. Our 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 Hotel and Marina (Fort Lauderdale) and the Radisson
Bahia Mar Resort and Yachting Center (Fort Lauderdale). We also own and
operate two golf clubs located in Florida (Grande Oaks Golf Club in Fort
Lauderdale and Naples Grande Golf Club in Naples) that serve as additional
amenities to our resorts, as well as components of our exclusive social club,
known as the Premier Club. In addition, we own and operate two golf courses in
Boca Raton that are part of the Boca Raton Resort & Club. 3. Loss Per Common Share Loss per share equals net loss divided by the number of weighted average
common shares outstanding.
Options to purchase shares of common stock totaling 6.5 million and 6.8 million
were outstanding during the three months ended September 30, 2004 and 2003,
respectively, but were not included in the computation of loss per share
because the effect would be antidilutive. 4. Stock Option Plan We grant 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. We
account 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 expenses 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 three
months ended September 30, 2003. The following table summarizes the effect of
accounting for stock option awards as if the fair value recognition provisions
of Statement of 5




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##### 



BOCA RESORTS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Financial Accounting Standard (SFAS) No. 123, as amended by SFAS No.
148, had been applied for the three months ended September 30, 2004 and 2003
(000s omitted): 2004
    
    2003Net loss as reported
    
    $
    (15,500
    )
    
    $
    (9,532
    )Add: total stock based compensation included in the determination of net
loss, net of related tax effects
    
    
    
    
    
    
    279Less: total stock based compensation determined under fair value based
method for awards, net of related tax effects
    
    
    (394
    )
    
    
    (377
    )Pro forma net loss
    
    $
    (15,894
    )
    
    $
    (9,630
    )Net loss per share  basic and diluted, as reported
    
    $
    (.39
    )
    
    $
    (.24
    )Net loss per share  basic and diluted, Pro forma
    
    $
    (.40
    )
    
    $
    (.24
    )
 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 months ended September 30: 2004
    
    2003Risk free interest rate
    
    
    1.00
    %
    
    
    1.00
    %Expected lives
    
    6 years
    
    6 yearsExpected volatility
    
    
    30
    %
    
    
    30
    %
 5. Shareholders Equity The accompanying table sets forth the components of the change in
shareholders equity for the three months ended September 30, 2004 (000s
omitted): Class A
    
    Class BCommon Stock
    
    Common StockNumber
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totalof
    
    
    
    
    
    of
    
    
    
    
    
    Contributed
    
    Retained
    
    Shareholders'Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Earnings
    
    EquityBalance, June 30, 2004
    
    
    39,920
    
    
    $
    399
    
    
    
    255
    
    
    $
    3
    
    
    $
    470,586
    
    
    $
    78,119
    
    
    $
    549,107Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,500
    )
    
    
    (15,500
    )Exercise of stock options
    
    
    99
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,492
    
    
    
    
    
    
    
    1,493Tax deduction associated
with exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    173Balance, September 30, 2004
    
    
    40,019
    
    
    $
    400
    
    
    
    255
    
    
    $
    3
    
    
    $
    472,251
    
    
    $
    62,619
    
    
    $
    535,273
 6. Loss on Early Retirement of Debt In July 2004 we closed on a new $325.0 million senior credit facility.
The senior credit facility consists of a term loan in the principal amount of
$200.0 million, which matures in July 2009 and a revolving credit facility in
the principal amount of $125.0 million, which expires in July 2007. The
interest rate on the new facility is tied to consolidated leverage ratios, but
generally ranges from LIBOR plus 225 basis points to 250 basis points on the
term loan and from LIBOR plus 175 basis points to 250 basis points on the
revolver. The proceeds of the term loan were used in August 2004 to redeem in
full our outstanding $190.1 million principal amount of senior subordinated notes payable. As
a result, we recorded a loss on the early retirement of debt during the quarter
ending September 30, 2004 of approximately $13.1 million, which includes a $9.4
million premium paid to redeem the notes, together with the write-off of $3.7
million in debt issuance costs previously capitalized in connection with the
issuance of the notes. 6




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##### 



BOCA RESORTS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 7. Subsequent Event We entered into an Agreement and Plan of Merger, dated as of October 20,
2004 (the Merger Agreement), with Baton Holdings Inc., a Delaware corporation
(Parent), and Baton Acquisition Inc., a Delaware corporation and a wholly
owned subsidiary of Parent (Merger Sub), pursuant to which Merger Sub will
merge with and into us (the Merger), and we will continue as the surviving
corporation. Parent and Merger Sub are affiliates of The Blackstone Group. As
a result of the Merger, we will become a wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, at the effective time of the Merger,
each outstanding share of our Class A common stock, par value $.01 per share,
and each outstanding share of our Class B common stock, par value $.01 per
share (collectively, the Shares), other than any Shares owned by us, Merger
Sub, Parent or any direct or indirect wholly owned subsidiary of Parent or of
us, or by any stockholders who are entitled to and who properly exercise
appraisal rights under Delaware law, shall be canceled and shall be converted
automatically into the right to receive $24.00 in cash, without interest. The Merger is conditioned, among other things, on the adoption of the
Merger Agreement by our stockholders and the termination or expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended. Concurrent with the execution of the Merger Agreement, H. Wayne Huizenga,
the Chairman of our Board of Directors and our Chief Executive Officer and
Huizenga Investments Limited Partnership (HILP), a Nevada limited partnership
controlled by Mr. Huizenga, entered into a Voting Agreement (the Voting
Agreement) with Parent. Pursuant to the Voting Agreement, Mr. Huizenga has
agreed to vote his shares of Class B common stock, which represent
approximately 98% of our voting power, in favor of the Merger and against any
proposal or action that could reasonably be expected to interfere with the
Merger. We may terminate the Merger Agreement under certain circumstances,
including prior to the adoption of the Merger Agreement by our stockholders if
our board of directors determines in good faith, in the exercise of its
fiduciary duties, that it has received an unsolicited bona fide superior
proposal, as defined in the Merger Agreement, and otherwise complies with
certain terms of the Merger Agreement (including giving Parent the opportunity
to make an offer that is at least as favorable to our stockholders as such
superior proposal). In connection with such termination we must pay a fee of
$38 million to Parent. The Voting Agreement will terminate upon any
termination of the Merger Agreement. In certain other circumstances the Merger
Agreement provides for Parent or us to pay to the other party a fee of $38
million upon termination of the Merger Agreement. The foregoing descriptions of the Merger Agreement and the Voting
Agreement (the Agreements) do not purport to be complete and are qualified in
their entirety by reference to the Agreements, which are filed as exhibits to
our Current Report on Form 8-K filed on October 21, 2004 and are incorporated
herein by reference. 7




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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
and should be read together with the Annual Report on Form 10-K for the fiscal
year ended June 30, 2004, including the disclosure relating to critical
accounting policies in Managements Discussion and Analysis. The Securities
and Exchange Commission (SEC) has requested that all registrants list their
most critical accounting policies in MD&A. The SEC indicated that a critical
accounting policy is one that is both important to the portrayal of our
financial position and results of operations and requires managements most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. Overview We are an owner and operator of five distinctive destination resorts
located in Florida with hotels, conference facilities, golf courses, spas,
marinas and private clubs. We have focused on the luxury and upscale resort
segment because we believe these segments outperform other lodging industry
segments, particularly in times of economic downturn. Our 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 Hotel and Marina (Fort Lauderdale) and the Radisson
Bahia Mar Resort and Yachting Center (Fort Lauderdale). We also own and
operate two golf clubs located in Florida (Grande Oaks Golf Club in Fort
Lauderdale and Naples Grande Golf Club in Naples) that serve as additional
amenities to our resorts, as well as, components of our exclusive social club,
known as the Premier Club. In addition, we own and operate two golf courses in
Boca Raton that are part of the Boca Raton Resort & Club. Our resorts possess considerable competitive and operational strengths.
They are unique, irreplaceable assets in desirable waterfront locations with
strong name recognition and positioning in their respective markets. We
believe it would be difficult for potential competitors to replicate our
resorts and, therefore, we benefit from high barriers to entry. Our resorts
provide us with multiple, diverse revenue streams and primarily attract
corporate groups and affluent leisure customers. We further believe that each
of our properties is well positioned to maintain or increase market share. We
historically increased revenue and cash flow in large part through the
development of additional guestrooms and resort amenities at our existing
properties and believe there are additional opportunities for development
initiatives to our portfolio in the future. Business Philosophy Our objective is to enhance shareholder value principally through
improvements in earnings, cash flow and the quality of our resorts. While
management continuously evaluates ownership, acquisition and divestiture
alternatives, we continue to pursue internal expansion and development
opportunities at our existing properties. See Note 7 of the Condensed
Consolidated Financial Statements, which discusses the merger agreement we
entered into on October 20, 2004. Seasonality The resort operations are generally seasonal. The resorts historically
experience greater revenue, costs and income in the third and fourth quarters
of the fiscal year ended June 30 due to increased occupancy and room rates
during the winter and spring months. Historically, approximately 16%, 23%, 36%
and 25% of annual revenue has been derived during the first, second, third and
fourth fiscal quarters, respectively. Hurricanes We face a variety of risks relating to travel including disruption caused
by natural disaster such as hurricanes, which are common to South Florida.
During the three months ended September 30, 2004 Hurricanes Charley, Frances
and Jeanne interrupted our business. While we experienced only 8




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##### 



minor landscaping damage and clean up efforts, we were required to
evacuate certain of our resorts as the storms approached landfall, which
adversely affected our results of operations. Historical Results The accompanying table sets forth the operating results for the three
months ended September 30 (000s omitted): 2004
    
    2003Leisure and recreation revenue
    
    $
    48,794
    
    
    $
    46,989Operating expenses:Cost of leisure and recreation services
    
    
    27,165
    
    
    
    26,614Selling, general and administrative expenses:Leisure and recreation
    
    
    18,815
    
    
    
    18,865Corporate
    
    
    1,652
    
    
    
    2,024Depreciation:Leisure and recreation
    
    
    9,174
    
    
    
    9,909Corporate
    
    
    53
    
    
    
    53Loss on early retirement of debt
    
    
    13,088
    
    
    
    Total operating expenses
    
    
    69,947
    
    
    
    57,465Operating loss:Leisure and recreation
    
    
    (6,360
    )
    
    
    (8,399
    )Corporate
    
    
    (14,793
    )
    
    
    (2,077
    )Total operating loss
    
    
    (21,153
    )
    
    
    (10,476
    )Interest and other income
    
    
    106
    
    
    
    59Interest expense
    
    
    (4,156
    )
    
    
    (5,082
    )Loss before benefit for income taxes
    
    
    (25,203
    )
    
    
    (15,499
    )Benefit for income taxes
    
    
    9,703
    
    
    
    5,967Net loss
    
    $
    (15,500
    )
    
    $
    (9,532
    )Net cash provided by operating activities
    
    $
    2,929
    
    
    $
    13,008Net cash used in investing activities
    
    $
    (5,668
    )
    
    $
    (11,447
    )Net cash used in financing activities
    
    $
    (2,435
    )
    
    $
    (2,473
    )
 We derive all significant revenue from a single line of business, hotel
and resort real estate ownership, which we characterize as leisure and
recreation revenue. Corporate expenses have been segregated in the preceding
table and in the accompanying discussion because they largely relate to public
company compliance costs and corporate governance expenses. The accompanying table sets forth additional operating data for the three
months ended September 30 (000s omitted, except operating statistics): 2004
    
    2003
    
    % ChangeRevenue:Room revenue
    
    $
    17,431
    
    
    $
    16,297
    
    
    
    7
    %Non-room related revenue
    
    
    31,363
    
    
    
    30,692
    
    
    
    2
    %Total leisure and recreation revenue
    
    $
    48,794
    
    
    $
    46,989
    
    
    
    4
    %Operating Statistics:Available room nights
    
    
    213,072
    
    
    
    213,164
    
    
    
    Average daily rate
    
    $
    136.55
    
    
    $
    132.61
    
    
    
    3
    %Occupancy
    
    
    59.9
    %
    
    
    57.7
    %
    
    
    4
    %Room revenue per available room
    
    $
    81.81
    
    
    $
    76.45
    
    
    
    7
    %Total leisure and recreation revenue per available room
    
    $
    229.01
    
    
    $
    220.43
    
    
    
    4
    %
 Leisure and Recreation Revenue We generate a diversified stream of revenue. Leisure and recreation
revenue totaled $48.8 million and $47.0 million for the three months ended
September 30, 2004 and 2003, respectively. Non-room revenue, which represented
over 60% of leisure and recreation revenue for each period presented, was
derived from sources such as food and beverage sales, yachting and marina
revenue, spa revenue, golf revenue, Premier Club membership fees and dues,
retail sales and other resort amenities. 9




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##### 



The $1.8 million increase in revenue for the three months ended September
30, 2004, compared to the three months ended September 30, 2003, resulted from
increases in occupancy at each of our properties (contributing $650,000 of the
increase to revenue), increases to average daily rate (contributing $484,000 of
the increase to revenue), as well as increased revenue derived from non-room
sources such as food and beverage revenue, yachting and marina revenue, and spa
revenue (contributing $671,000 of the increase to revenue). We believe
increases in resort occupancy and rate are largely the result of an improving
economic landscape, significant property enhancements, the high quality of our
assets, our commitment to quality customer service resulting in strong guest
loyalty and a favorable market mix that combines high-end leisure travelers and
corporate groups. Leisure and Recreation Operating Expenses Cost of leisure and recreation services totaled $27.2 million, or 56% of
revenue, for the three months ended September 30, 2004, compared to cost of
leisure and recreation services of $26.6 million, or 57% of revenue, for the
three months ended September 30, 2003. Cost of leisure and recreation services
primarily consisted of direct costs to service rooms, marinas, food and
beverage operations, retail establishments, spas and other amenities at the
resorts. Leisure and recreation selling, general and administrative expenses
(S,G&A) totaled $18.8 million, or 39% of revenue, for the three months ended
September 30, 2004, compared to S,G&A of $18.9 million, or 40% of revenue, for
the three months ended September 30, 2003. Leisure and recreation S,G&A
primarily consisted of utility and property maintenance costs, real estate
taxes, property and casualty insurance, franchise agreement fees, sales and
marketing expenses and administrative salaries and expenses. Leisure and recreation depreciation expense totaled $9.2 million and $9.9
million for the three months ended September 30, 2004 and 2003, respectively.
The decrease in depreciation expense for the three months ended September 30,
2004, compared to the three months ended September 30, 2003, was primarily
because certain furniture, furnishings and equipment, which was assigned a
seven year estimated life (upon acquisition of certain resorts), became fully
depreciated during the three months ended June 30, 2004. Corporate General and Administrative Expenses and Corporate Depreciation Expense Corporate general and administrative expenses totaled $1.7 million and
$2.0 million for the three months ended September 30, 2004 and 2003,
respectively. During the three months ended September 30, 2003, corporate
general and administrative expenses included certain non-cash compensation
expenses associated with the modification in terms of stock option awards,
which totaled $453,000. Corporate depreciation expense totaled $53,000 for both the three months
ended September 30, 2004 and 2003 and represents depreciation on corporate
furniture and equipment. Loss on Early Retirement of Debt In July 2004 we closed on a new $325.0 million senior credit facility.
The senior credit facility consists of a term loan in the principal amount of
$200.0 million, which matures in July 2009 and a revolving credit facility in
the principal amount of $125.0 million, which expires in July 2007. The
proceeds of the term loan were used in August 2004 to redeem in full our
outstanding $190.1 million principal amount of senior subordinated notes
payable. As a result, we recorded a loss on the early retirement of debt
during the quarter ending September 30, 2004 of approximately $13.1 million,
which includes a $9.4 million premium paid to redeem the notes, together with
the write-off of $3.7 million in debt issuance costs previously capitalized in
connection with the issuance of the notes. 10




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Interest Expense Interest expense totaled $4.2 million and $5.1 million for the three
months ended September 30, 2004 and 2003, respectively. The decrease in
interest expense was primarily because we retired our outstanding 9.875% senior
subordinated notes on August 27, 2004 following the completion of a lower-cost
financing. See Note 6. Benefit for Income Taxes We recorded a benefit for income taxes totaling $9.7 million, or 38.5% of
pretax loss, and $6.0 million, or 38.5% of pretax loss, for the three months
ended September 30, 2004 and 2003, respectively. Net Loss Net loss totaled $15.5 million and $9.5 million for the three months ended
September 30, 2004 and 2003, respectively. Leisure and recreation revenue and
gross margins increased following gains in occupancy and average daily rate
despite disruption caused by Hurricanes Charley, Frances and Jeanne. However,
the improvement in operating results derived from core operations was more than
offset by a $13.1 million loss on the early retirement of debt. Liquidity and Capital Resources Unrestricted cash and cash equivalents decreased to $42.4 million at
September 30, 2004, from $47.6 million at June 30, 2004. The major components
of the change are discussed below. Net Cash Provided by Operating Activities Net cash provided by operating activities totaled $2.9 million and $13.0
million for the three months ended September 30, 2004 and 2003, respectively.
The decrease in net cash provided by operating activities for the three months
ended September 30, 2004, compared to the three months ended September 30,
2003, was primarily because we retired our outstanding senior subordinated
notes payable in August 2004 and paid accrued interest totaling $6.9 million
associated with such notes. Interest on the notes would have otherwise been
paid on October 15 (interest on the notes was paid semi-annually on October 15
and April 15). Net Cash Used In Investing Activities Net cash used in investing activities totaled $5.7 million and $11.4
million for the three months ended September 30, 2004 and 2003, respectively,
and primarily relate to capital expenditures. During the three months ended September 30, 2003 capital expenditures
included the final stages of a marina renovation at the Bahia Mar Resort and
Yachting Center. This extensive marina renovation, which was funded
substantially from operations, results in a state-of-the art yachting center
with 245 reconfigured boat slips, sized to accommodate larger yachts ranging
from 80 feet to over 200 feet, without reducing the rentable linear feet. We
were also working on a number of smaller initiatives during the three-month
period including the renovation of the pool area at the Boca Raton Resort &
Club and new themed restaurants at Pier 66 Resort and Marina and at Registry
Resort. Net Cash Used in Financing Activities Net cash used in financing activities totaled $2.4 million and $2.5
million during the three months ended September 30, 2004 and 2003,
respectively. Financing activities for the periods primarily includes
borrowings, net of repayments, under credit agreements, proceeds from the
exercise of stock options, as well as costs paid in connection with the
origination and extinguishment of debt. 11




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Capital Resources Our capital resources are provided from both internal and external
sources. The primary capital resources from internal sources include (1) room
rentals, food and beverage sales, retail sales, spa revenue, golf revenue,
tennis revenue, marina revenue and conference service revenue at our resorts
and (2) Premier Club membership revenue, net of related costs. The primary
external sources of liquidity have been the issuance of debt securities,
borrowing under term loans and credit lines, the issuance of our stock for
property acquisitions and the exercise of non-qualified stock options by
employees pursuant to our stock option plan. In July 2004 we closed on a new $325.0 million senior credit facility.
The senior credit facility consists of a term loan in the principal amount of
$200.0 million, which matures in July 2009 and a revolving credit facility in
the principal amount of $125.0 million, which expires in July 2007. The
proceeds of the term loan were used in August 2004 to redeem in full our
outstanding $190.1 million principal amount of senior subordinated notes
payable. As a result, we recorded a loss on the early retirement of debt
during the quarter ending September 30, 2004 of approximately $13.1 million,
which includes a $9.4 million premium paid to redeem the notes, together with
the write-off of $3.7 million in debt issuance costs previously capitalized in
connection with the issuance of the notes. The $125.0 million revolving credit
facility replaces our previous revolver, which was scheduled to mature in June
2005. We have no borrowings under the new revolving credit facility. As a
result of our cash on hand, our availability under the new revolving credit
facility and expected cash from operations over the ensuing year, we believe we
have sufficient funds to continue our capital maintenance and expansion plans
and support on-going operations, including meeting debt service obligations as
they come due. Off-Balance Sheet Arrangements Off-balance sheet arrangements, as defined by the SEC, include certain
transactions, agreements or other contractual arrangements pursuant to which a
company has any obligation under certain guarantee contracts, certain retained
or contingent interests in assets transferred to an unconsolidated entity, any
obligation under certain derivative investments, or any obligation under a
material variable interest in an unconsolidated entity that provides financing,
liquidity, market risk or credit risk support or engages in leasing, hedging or
research and development services with us. We generally do not enter into
off-balance sheet arrangements, other than those described in our Annual report
on Form 10-K for the fiscal year ended June 30, 2004 relating to operating
leases and commitments outstanding for capital expenditures under purchase
orders and contracts. There has been no material change in our off-balance
sheet arrangements from June 30, 2004. Contractual Obligations There has been no material change in our contractual obligations under
operating leases from that disclosed in our Annual Report on Form 10-K for the
year ended June 30, 2004. We are also obligated to make future payments under
our new senior credit facility. The following table sets forth our contractual
debt obligations as of September 30, 2004 (000 omitted): 2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    Thereafter
    
    TotalTerm loan pursuant to senior credit facility
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    200,000
    
    
    $
    200,000
 Financial Condition Significant changes in balance sheet data from June 30, 2004 to September
30, 2004 are discussed below. 12




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Accounts Payable and Accrued Expenses Accounts payable and accrued expenses decreased to $26.5 million at
September 30, 2004, from $30.7 million at June 30, 2004. The decrease in
accounts payable and accrued expenses was primarily the result of a $3.9
million decrease in accrued interest on our senior subordinated notes. At
September 30, 2004, there was no accrual for interest on the notes since they
were fully redeemed in August 2004. At June 30, 2004, the accrual for interest
totaled $3.9 million (and represented interest for 76 days on $190.1 million
outstanding notes). Current Portion of Deferred Revenue and Advance Deposits Current portion of deferred revenue and advance deposits increased to
$33.8 million at September 30, 2004, from $26.1 million at June 30, 2004. The
increase substantially related to the receipt of annual Premier Club dues at
the Boca Raton Resort & Club. We bill such annual Premier Club dues in August
of each year. The annual dues are being recognized as revenue ratably over the
membership year, which commenced on October 1. Working Capital Current assets exceeded current liabilities by $17.9 million and $27.6
million at September 30, 2004 and June 30, 2004, respectively. The decrease in
working capital is primarily because we collected annual Premier Club dues
associated with the Boca Raton Resort & Club and such dues are reflected as
deferred revenue on the accompanying Condensed Consolidated Balance Sheet as
September 30, 2004. Deferred revenue will be relieved (and revenue recognized)
ratably over the membership year, which commenced on October 1. Forward-Looking Statements Some of the information in this report contains forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as may, will, expect, anticipate, estimate,
continue or other similar words. These statements discuss future
expectations (including those related to the expected completion and timing of
the merger and other information relating to the merger), contain projections
of results of operations or of financial position 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 our actual results to differ
materially from those contained in any forward-looking statement. These risk factors include, among others, risks relating to travel; risks
associated with construction and development at our properties; competition in
our principal business; the availability of financing on terms suitable to us
and our dependence on key personnel. Risks relating to travel include a change
in travel patterns resulting from slowing economic conditions and geopolitical
conditions, as well as changes in corporate policies relating to group meetings
and air or other travel disruption. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to a number of financial market risks in the ordinary
course of business. Our primary financial market risk exposure pertains to
changes in interest rates. We have examined exposures to these risks and
concluded that none of the exposures are material to cash flows or earnings.
As of September 30, 2004 and June 30, 2004, we have no financial instruments in
place to manage the impact of changes in interest rates. However, under the
terms of our $325.0 million senior credit facility we are obligated to purchase
interest rate caps or fixed rate swaps on the amount of our indebtedness that
accrues interest at a variable rate in excess of $250.0 million. 13




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Item 4. Controls and Procedures As of September 30, 2004, we carried out an evaluation, under the
supervision and with the participation of our management, including our
chairman of the board (our principal executive officer) and chief financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Our disclosure
controls and procedures are designed to ensure that information required to be
disclosed by us in our periodic filings with SEC is effectively recorded,
processed and reported within the time periods specified in the SECs rules and
forms. In designing and evaluating the disclosure controls and procedures, we
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
objectives and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
It should be noted that the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions, regardless of how remote. Based on the
foregoing, our chairman of the board and chief financial officer concluded as
of September 30, 2004 that our disclosure controls and procedures were
effective in timely alerting them to material information relating to our
company (including its consolidated subsidiaries) required to be included in
our periodic SEC filings. Additionally, there have been no significant changes
in our internal controls or in other factors that could significantly affect
the internal controls subsequent to the date we completed our evaluation. Part II  Other Information Item 1. Legal Proceedings We are not currently involved in any material legal proceedings. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits. Exhibits
    
    
    
    Description Of Exhibit31.1
    
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act -
H. Wayne Huizenga.31.2
    
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act -
Wayne Moor.32.1
    
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act.
 14




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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: November 8, 2004
    By:
    WAYNE MOORWayne MoorSenior Vice President,
Treasurer and
Chief Financial Officer
(Principal Financial Officer) By:
    MARYJO FINOCCHIAROMaryJo FinocchiaroVice President and Corporate
Controller
(Principal Accounting
Officer) 15