Daily Trouble |
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<DAILY TROUBLE>
Tuesday, March 30, 1999
Florida Panthers Holdings
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAW)") else Response.Write("(NYSE: PAW)") end if %>
Phone: 954-712-1300
Website: http://www.pawinvestor.com
Price (3/29/99): $8 3/8
HOW DID IT FIND TROUBLE?
In 1996, Florida Panthers hockey fans would shower the team's home ice with rubber rats as they went on to the Stanley Cup Finals. Today, those rats are starting to smell.
It's not just the team at fault now. While hockey enthusiasts may point to the Stu Barnes trade as a 1997 chemistry breaker, or dismay over the team discarding the goaltending wizardry of The Beezer a year later, there is more to this story than simply a National Hockey League Cinderella story gone wrong.
In a move to help offset perpetual losses (the red ink ones, not the standings column variety), majority owner Wayne Huizenga began to diversify the holding company's portfolio. Scooping up resort hotels was supposed to help smooth out the volatile seasonality that had the company's performance heavily weighted to the December and March hockey season quarters.
It didn't work. Like a double slap shot to the face, investors were forced to cheer on a company with a money-losing hockey franchise and posh hotels in need of occupancies.
What did the Florida Panthers team and its holding company's income statement have in common? There was nothing in the net.
BUSINESS DESCRIPTION
Florida Panthers Holdings owns the namesake professional hockey team along with 1000 acres of land and six resort hotels in Florida and Arizona.
FINANCIAL FACTS
Income Statement
12-month sales: $344.0 million
12-month income: $1.2 million
12-month EPS: $0.03
Profit Margin: 0.3%
Market Cap: $294.8 million
Balance Sheet
Cash: $37.7 million
Current Assets: $96.1 million
Current Liabilities: $462.4 million
Long-term Debt: $255.3 million
Ratios
Price-to-earnings: 279.2
Price-to-sales: 0.9
HOW COULD YOU HAVE SEEN IT COMING?
Investing in sports franchises has left little in terms of bragging rights. Shares of Boston Celtics LP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BOS)") else Response.Write("(NYSE: BOS)") end if %> trade for a lot less than they did two years ago. The Cleveland Indians <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLEV)") else Response.Write("(Nasdaq: CLEV)") end if %> who, like the Panthers, set up a public offering shortly after losing their own sporting championship, have yet to sustain the initial offering excitement. The entire U.S. Basketball League (OTC: USBL) can be bought -- at penny stock prices.
Beyond arena football's Orlando Predators <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRED)") else Response.Write("(Nasdaq: PRED)") end if %> powerhouse, whose shares have been trading consistently higher in recent months, it seems like the only people making money in sports are the athletes, when they play, and the owners, when they cash out.
As a sports franchise, the odds were stacked against the Panthers.
Some investors may have jumped on the stock's bandwagon in hopes of landing Wayne Huizenga's next great growth vehicle. Unfortunately, the days of Waste Management <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMI)") else Response.Write("(NYSE: WMI)") end if %> and Blockbuster Entertainment are distant memories. Huizenga's latest batch of backings reads like a kennel club's Who's Who.
Shares of Extended Stay America <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESA)") else Response.Write("(NYSE: ESA)") end if %> and Republic Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RII)") else Response.Write("(NYSE: RII)") end if %> are trading for a fraction of what they did a couple of years ago. Discovery Zone and Boston Chicken (OTC: BOSTQ) are scrapping for solvency. Did Midas really reincarnate as Typhoid Mary? The entrepreneur who could do no wrong seems struggling to do anything right now -- with the Panthers serving as the poster children for the present malaise.
WHERE TO FROM HERE?
The move to lodging diversification was sound at the time. The company was simply biding its time until it could move out of the Miami Arena and into the National Car Rental Center, where the team began playing this season.
The economics of the new arena, where the company finally has a stake in concession sales, parking, and skybox leases, are far superior to the terms of its previous address. Despite the team's often lackluster play, the arena fills up consistently, and it is no longer just local shock jock Neil Rogers singing the praises of the game.
Yet, it is now, when the company has finally found the net, that Wall Street has sent the shares to the penalty box. This year, analysts project earnings of $0.25 a share, and for that figure to double come next year. As a now profitable concern with interesting real estate assets, the company presents an intriguing opportunity.
At last year's annual meeting in November, the company announced that it would consider spinning off the hockey team to boost sagging share prices. While that move didn't hold Jefferies & Co. back from downgrading the company a month later (with analyst James Wilson's target price reduced from $18 to just $13), the shares may provide an interesting play here. With a turnaround in the luxury hotels, or the hockey team taking a shine to improved conditions at the National Car Rental Center, the share price could very well return to its past glory. Now, if that proves to be the case, will investors flood the next annual meeting with rubber rats -- that bounce?
-- Rick Aristotle Munarriz
([email protected])
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