10-Q 1 celt-q3.txt BODY 0F 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2001 _______________________________________ Commission Registrant; State of Organization; IRS Employer File No. Address and Telephone Number Identification No. ---------- ---------------------------------- ------------------ 1-14507 Boston Celtics Limited Partnership 04-3416346 (a Delaware limited partnership) 151 Merrimac Street, Boston, Massachusetts 02114 (617) 523-6050 1-9324 Boston Celtics Limited Partnership II 04-2936516 (a Delaware limited partnership) 151 Merrimac Street, Boston, Massachusetts 02114 (617) 523-6050 Indicate by checkmark whether the registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of March 31, 2001, there were 2,703,664 Units outstanding of Boston Celtics Limited Partnership, and 2,703,664 units representing limited partnership interests outstanding of Boston Celtics Limited Partnership II. Part I - Financial Information Item I - Financial Statements BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Condensed Consolidated Balance Sheets

~~December~~March 31, June 30, ~~2000~~2001 2000 ---------~~---~~ -------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 32,~~371~~964,~~505~~588 $ 3,393,509 Other short-term investments 33,~~200~~800,000 83,100,000 Prepaid expenses and other current assets ~~611~~342,~~702~~064 530,771 ----------------------------- TOTAL CURRENT ASSETS 37,~~183~~106,~~207~~652 87,024,280 PROPERTY AND EQUIPMENT, net 86,~~744~~834 11,734 OTHER ASSETS 1996,~~042,411~~684 1,053,843 ----------------------------- $ 38,~~234~~110,~~362~~170 $ 88,089,857 ============================= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) CURRENT LIABILITIES Accounts payable and other current liabilities $ ~~457~~106,~~958~~965 $ 611,360 Accrued interest 12,~~686~~497,~~911~~159 Federal and state income taxes payable ~~617~~1,~~350~~162,280 877,350 Notes payable to bank - current portion 10,000,000 ~~10,000,000~~ ----------------------------- TOTAL CURRENT LIABILITIES 123,~~762~~766,~~219~~404 11,488,710 DEFERRED FEDERAL AND STATE INCOME TAXES 9,710,875 9,710,875 NOTES PAYABLE TO BANK - noncurrent portion 10,000,000 50,000,000 NOTE PAYABLE TO RELATED PARTY ~~366~~372,~~116~~437 SUBORDINATED DEBENTURES 3334,~~999~~104,~~387~~721 33,789,695 INVESTMENT IN CAPITAL DEFICIENCY OF CELTICS BASKETBALL HOLDINGS, L.P. 3330,~~011~~060,~~643~~701 29,437,209 PARTNERS' CAPITAL (DEFICIT) Boston Celtics Limited Partnership - General Partner ~~107~~124,~~977~~637 156,332 Limited Partners (5250,~~268~~619,~~569~~213) (47,481,412) ----------------------------- (5250,~~160~~494,~~592~~576) (47,325,080) Boston Celtics Limited Partnership II - General Partner (~~322~~304,~~389~~986) 79,705 Celtics Limited Partnership - General Partner ~~231~~260,~~241~~732 266,789 Boston Celtics Communications Limited Partnership - General Partner ~~635~~633,862 641,954 ----------------------------- TOTAL PARTNERS' CAPITAL (DEFICIT) (5149,~~615~~904,~~878~~968) (46,336,632) ----------------------------- $ 38,~~234~~110,~~362~~170 $ 88,089,857 =============================

See notes to condensed consolidated financial statements. BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Condensed Consolidated Statements of Operations Unaudited

~~Six~~Nine Months Ended Three Months Ended ---------------------------- ---------------------------- ~~December~~March 31, ~~December~~March 31, ~~December~~March 31, ~~December~~March 31, 2001 2000 ~~1999~~2001 2000 ~~1999~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Equity in net income of Celtics Basketball Holdings, L.P. $ ~~290~~3,~~513~~241,455 $ 53,~~462~~556,898 $ 12,~~665~~950,~~310~~942 $ 13,~~423~~551,~~743~~436 Costs and expenses: General and administrative 34,~~784~~477,~~440~~607 2,~~036~~832,~~117~~039 2693,~~787,120~~167 1795,~~205,457~~922 Depreciation and amortization 3152,~~822~~178 2842,~~104~~156 1820,~~134~~356 14,052 --------------------------------------------------------~~---~~ 34,~~816~~529,~~262~~785 2,~~064~~874,~~221~~195 2713,~~805,254~~523 1809,~~219,509~~974 --------------------------------------------------------~~---~~ (31,~~525~~288,~~749~~330) (682,703 2,~~058~~237,~~759)~~419 (12,~~139~~741,~~944)~~462 ~~204,234~~ Interest expense (35,~~965~~070,~~029~~683) (35,~~425~~176,~~299~~977) (1,~~890~~105,~~949~~654) (1,~~742~~751,~~718~~678) Interest income 23,~~915~~496,~~395~~540 23,~~446~~839,~~204~~398 1581,~~385,229~~145 1,~~281~~393,~~277~~194 --------------------------------------------------------~~---~~ ~~Loss~~Income (loss) before income taxes (42,~~575~~862,~~383~~473) (3654,~~037,854~~876) (1,~~645~~712,~~664)~~910 ~~(257~~2,~~207)~~382,978 Provision for income taxes 300,000 ~~800~~1,200,000 400,000 --------------------------------------------------------~~---~~ Net ~~loss~~income (~~4,875,383~~loss) (3,~~837~~162,~~854~~473) (1,~~645~~854,~~664~~876) ~~(657~~1,~~207)~~712,910 1,982,978 Net income (loss) applicable to interests of General Partners (8824,~~226~~672) ~~(66~~12,~~143)~~921 ~~(11~~63,~~724)~~554 579,~~499~~064 --------------------------------------------------------~~---~~ Net income (loss) applicable to interests of Limited Partners $(43,~~787~~137,~~157~~801) $(31,~~771~~867,~~711~~797) $(1,~~633~~649,~~940)~~356 $ ~~(662~~1,~~706)~~903,914 ========================================================~~===~~ Net income (loss) per unit $ (1.7716) $ (10.4069) $ (0.~~60)~~61 $ (0.~~25)~~70 Weighted average units outstanding 2,703,664 2,703,664 2,703,664 2,703,664

See notes to condensed consolidated financial statements. BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Condensed Consolidated Statements of Cash Flows Unaudited

~~Six~~Nine Months Ended --------------------------------- ~~December~~March 31, ~~December~~March 31, 2001 2000 ~~1999~~ ---------~~---~~ ---------~~---~~ CASH FLOWS USED IN OPERATING ACTIVITIES General and administrative expenses $ (45,~~303~~162,~~582~~471) $ (2,~~015~~787,~~184~~028) Interest expense (2,~~064~~248,~~764~~514) (12,~~601~~424,~~249~~792) Interest income 3,~~254~~940,~~315~~181 23,~~075~~745,~~624~~066 Income taxes paid, net of refunds received (~~560~~15,~~000~~070) (~~799~~1,~~055~~273,854) -------------------------------- NET CASH FLOWS USED IN OPERATING ACTIVITIES (3,~~674~~485,~~031~~874) (2,~~339~~740,~~864~~608) -------------------------------- CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Purchases of short-term investments (~~328~~402,240,000) (~~295~~460,~~900~~100,000) Proceeds from sales of short-term investments ~~378~~451,~~140~~540,000 ~~295~~458,~~100~~400,000 Other receipts (expenditures) (6255,~~054~~128) 911,~~481~~457 -------------------------------- NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES 49,~~837~~244,~~946~~872 (~~790~~1,~~519~~688,543) -------------------------------- CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Proceeds from bank borrowings 24,500,000 Payment of bank borrowings (50,000,000) Cash distribution from Celtics Basketball Holdings, L.P. 3,864,947 Cash distribution by Celtics Limited Partnership to Boston Celtics Corporation (General Partner's share) (38,449) Cash distribution by Boston Celtics Limited Partnership II to BCLP II GP, Inc. (General Partner's share) (9,417) Cash distribution by Boston Celtics Communications Limited Partnership to Celtics Communications, Inc. (General Partner's share) (35,000) -------------------------------- NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (46,~~185~~187,919) 24,500,000 -------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22428,~~004~~921) ~~(630~~70,~~383)~~849 Cash and cash equivalents at beginning of period 3,393,509 2,607,725 -------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,~~371~~964,~~505~~588 $ 12,~~977~~678,~~342~~574 ================================ NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued distribution by Boston Celtics Limited Partnership II to BCLP II GP, Inc. $ 361,882

See notes to condensed consolidated financial statements. BOSTON CELTICS LIMITED PARTNERSHIP and Subsidiaries Notes to Condensed Consolidated Financial Statements Note 1 - The condensed consolidated financial statements include the accounts of Boston Celtics Limited Partnership ("BCLP," the "Partnership") and its majority-owned and controlled subsidiaries and partnerships. BCLP is a Delaware limited partnership that was formed on April 13, 1998 in connection with a reorganization of Boston Celtics Limited Partnership II ("BCLP II"). Pursuant to the reorganization of BCLP II (the "Reorganization"), which was completed on June 30, 1998, BCLP owns a 99% limited partnership interest in BCLP II. In addition, BCLP, through its subsidiaries, holds certain investments, including a 48.3123% limited partnership investment in Celtics Basketball Holdings, L.P., ("Celtics Basketball Holdings") which, through Celtics Basketball, L.P. ("Celtics Basketball"), its 99.999% subsidiary partnership, owns and operates the Boston Celtics professional basketball team (the "Boston Celtics") of the National Basketball Association (the "NBA"). BCLP's investment in Celtics Basketball Holdings is accounted for on the equity method, and accordingly, the investment is carried at cost, effected by equity in income or loss of Celtics Basketball Holdings and reduced by distributions received. Note 2 - The unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with 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, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included therein. Operating results for interim periods are not indicative of the results that may be expected for the full year. Such financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto of Boston Celtics Limited Partnership and Subsidiaries included in the annual report on Form 10-K for the year ended June 30, 2000 and the Forms 10-Q for the quarters ended September 30, 2000 and December 31, 2000. Note 3 - BCLP, through its subsidiary partnerships and corporations, owns a 48.3123% limited partnership interest in Celtics Basketball Holdings. Celtics Basketball Holdings, through Celtics Basketball, owns and operates the Boston Celtics. BCLP's investment in Celtics Basketball Holdings is accounted for on the equity method. Summary statement of operations data for Celtics Basketball Holdings for the nine and three months ended March 31, 2001 and 2000 is as follows:

~~Six~~Nine Months Ended Three Months Ended ----------------------------- ----------------------------- ~~December~~March 31, ~~December~~March 31, ~~December~~March 31, ~~December~~March 31, 2001 2000 ~~1999~~2001 2000 ~~1999~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Total revenues $29 71,~~679~~176,000 $26 69,~~986~~252,000 $29 41,~~679~~497,000 $26 42,~~986~~266,000 Total costs and expenses (2762,~~650~~332,~~832~~000) (2559,~~440~~702,~~233~~000) (2534,~~529~~681,~~913~~000) (2334,~~361~~261,~~552~~000) Interest income (expense), net (12,~~426~~135,~~840~~000) (12,~~534~~188,~~462~~000) (~~702~~708,~~086~~000) (~~677~~654,~~462~~000) --------------------------------------------------------------- Net income $ ~~601~~6,~~328~~709,000 $ 117,~~305~~362,000 $ 36,~~447~~108,~~001~~000 $ 27,~~946~~351,~~986~~000 ===============================================================

~~December~~March 31, June 30, ~~2000~~2001 2000 ---------~~---~~ -------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 1697,~~343,138~~306 $ 3,389,400 Other short-term investments 83,100,000 Due from related parties ~~617~~825,~~899~~371 6,323 Prepaid expenses and other current assets ~~422~~221,~~557~~954 522,005 ----------------------------- TOTAL CURRENT ASSETS 21,~~383~~744,~~594~~631 87,017,728 PROPERTY AND EQUIPMENT, net 86,~~744~~834 11,734 OTHER ASSETS ~~788~~753,~~811~~273 1,053,843 ----------------------------- $ 32,~~181~~504,~~149~~738 $ 88,083,305 ============================= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) CURRENT LIABILITIES Accounts payable and other current liabilities $ ~~426~~34,~~353~~879 $ 607,654 Accrued interest 12,~~686~~497,~~911~~159 Federal and state income taxes payable ~~515~~513,201 877,350 Notes payable to bank - current portion 10,000,000 ~~10,000,000~~ ----------------------------- TOTAL CURRENT LIABILITIES 123,~~628~~045,~~465~~239 11,485,004 DEFERRED FEDERAL AND STATE INCOME TAXES 6,812,105 9,710,875 NOTES PAYABLE TO BANK - noncurrent portion 10,000,000 50,000,000 DUE TO RELATED PARTY 4,800,000 NOTE PAYABLE TO RELATED PARTY ~~366~~372,~~116~~437 SUBORDINATED DEBENTURES 3334,~~999~~104,~~387~~721 33,789,695 INVESTMENT IN CAPITAL DEFICIENCY OF CELTICS BASKETBALL HOLDINGS, L.P. 3330,~~011~~060,~~643~~701 29,437,209 PARTNERS' CAPITAL (DEFICIT) Boston Celtics Limited Partnership II - General Partner (~~322~~304,~~389~~986) 79,705 Limited Partners (8887,~~982~~281,~~250~~071) (47,327,926) ----------------------------- (8987,~~304~~586,~~639~~057) (47,248,221) Celtics Limited Partnership - General Partner ~~231~~260,~~241~~732 266,789 Celtics Pride GP - General Partner ~~969~~998 Boston Celtics Communications Limited Partnership - General Partner ~~635~~633,862 641,954 ----------------------------- TOTAL PARTNERS' CAPITAL (DEFICIT) (8886,~~436~~690,~~567~~465) (46,339,478) ----------------------------- $ 32,~~181~~504,~~149~~738 $ 88,083,305 =============================

See notes to condensed consolidated financial statements. BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Condensed Consolidated Statements of Operations Unaudited

~~Six~~Nine Months Ended Three Months Ended ---------------------------- ---------------------------- ~~December~~March 31, ~~December~~March 31, ~~December~~March 31, ~~December~~March 31, 2001 2000 ~~1999~~2001 2000 ~~1999~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ ---------~~---~~ Equity in net income of Celtics Basketball Holdings, L.P. $ ~~290~~3,~~513~~241,455 $ 53,~~462~~556,898 $ 12,~~665~~950,~~310~~942 $ 13,~~423~~551,~~743~~436 Costs and expenses: General and administrative 2,~~554~~645,~~603~~550 1,~~072~~413,~~748~~843 190,~~944,834~~947 ~~770~~341,~~545~~095 Amortization 2744,~~949~~815 2335,~~557~~335 16,~~171~~866 11,~~779~~778 ----------------------------------------------------------- 2,~~582~~690,~~552~~365 1,~~096~~449,~~305~~178 1107,~~961,005~~813 ~~782~~352,~~324~~873 ----------------------------------------------------------- (551,090 2,~~292~~107,~~039)~~720 (12,~~090,~~843~~) (295~~,~~695)~~129 ~~641~~3,~~419~~198,563 Interest expense (34,~~492~~598,~~807~~461) (35,~~425~~176,~~299~~977) (1,~~418~~105,~~727~~654) (1,~~742~~751,~~718~~678) Interest income 2,~~073~~084,~~400~~027 23,~~446~~839,~~204~~398 ~~543~~10,~~234~~627 1,~~281~~393,~~277~~194 ----------------------------------------------------------- Income (loss) before income taxes (31,~~711~~963,~~446~~344) (2770,~~069,938)~~141 (1,~~171~~748,~~188)~~102 ~~179~~2,~~978~~840,079 Provision for income taxes 300,000 ~~800~~1,200,000 400,000 ----------------------------------------------------------- Net ~~loss~~income (~~4,011,446~~loss) (2,~~869~~263,~~938~~344) (429,859) 1,~~171~~748,~~188)~~102 ~~(220~~2,~~022)~~440,079 Net income ~~(loss)~~ applicable to interests of General Partners ~~(39~~7,~~860)~~063 ~~(28~~31,~~044)~~789 446,~~791~~923 1259,~~194~~833 ----------------------------------------------------------- Net income (loss) applicable to interests of Limited Partners $(32,~~971~~270,~~586~~407) $ (2461,~~841,894~~648) $( 1,~~175~~701,~~979)~~179 $ ~~(232~~2,~~216)~~380,246 ===========================================================

See notes to condensed consolidated financial statements. BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Condensed Consolidated Statements of Cash Flows Unaudited

~~Six~~Nine Months Ended --------------------------------- ~~December~~March 31, ~~December~~March 31, 2001 2000 ~~1999~~ ---------~~---~~ ---------~~---~~ CASH FLOWS USED IN OPERATING ACTIVITIES General and administrative expenses $ (3,~~278~~749,~~295~~045) $ (2,~~012~~780,~~935~~958) Interest expense (1,~~592~~776,~~542~~292) (12,~~601~~424,~~249~~792) Interest income 2,~~087~~098,~~313~~665 23,~~075~~745,~~624~~066 Income taxes paid (~~560~~562,000) (~~799~~1,~~055~~273,854) -------------------------------- NET CASH FLOWS USED IN OPERATING ACTIVITIES (3,~~343~~988,~~524~~672) (2,~~337~~734,~~615~~538) -------------------------------- CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Purchases of short-term investments (232,840,000) (~~295~~460,~~900~~100,000) Proceeds from sales of short-term investments 233,940,000 ~~295~~458,~~100~~400,000 Other receipts (expenditures) (1311,~~194~~878) 911,~~481~~457 -------------------------------- NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES 1,~~086~~088,~~806~~122 (~~790~~1,~~519~~688,543) -------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank borrowings 24,500,000 Distribution by Boston Celtics Limited Partnership II to Boston Celtics Limited Partnership of investment in BCCLP Holding Corporation (3,550,980) Cash distribution by Boston Celtics Limited Partnership II to Boston Celtics Limited Partnership (52,645) Cash distribution from Celtics Basketball Holdings, L.P. 3,864,947 Cash distribution by Celtics Limited Partnership to Boston Celtics Corporation (General Partner's share) (38,449) Cash distribution by Boston Celtics Limited Partnership II to BCLP II GP, Inc. (General Partner's share) (9,417) Cash distribution by Boston Celtics Communications Limited Partnership to Celtics Communications, Inc. (General Partner's share) (35,000) -------------------------------- NET CASH FLOWS FROM FINANCING ACTIVITIES ~~210~~208,456 24,500,000 -------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,~~046~~692,~~262~~094) ~~(628~~76,~~134)~~919 Cash and cash equivalents at beginning of period 3,389,400 2,597,546 -------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1697,~~343,138~~306 $ 12,~~969~~674,~~412~~465 ================================ NON-CASH INVESTING AND FINANCING ACTIVITIES: Distribution by Boston Celtics Limited Partnership II to Boston Celtics Limited Partnership of investment in BCCLP Holding Corporation, net of note payable to bank $ 34,078,155 Accrued distribution by Boston Celtics Limited Partnership II to BCLP II GP, Inc. $ 361,882

See notes to condensed consolidated financial statements. BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Notes to Condensed Consolidated Financial Statements Note 1 - The condensed consolidated financial statements include the accounts of Boston Celtics Limited Partnership II ("BCLP II," the "Partnership") and its majority-owned and controlled subsidiaries and partnerships. All intercompany transactions are eliminated in consolidation. Pursuant to a reorganization of its partnership structure that was completed on June 30, 1998 (the "Reorganization"), the Partnership's name was changed to Boston Celtics Limited Partnership II. As a result of the Reorganization, the Partnership's 99% limited partnership interest is owned by Boston Celtics Limited Partnership (a Delaware limited partnership formed in April 1998) ("BCLP"). Prior to the Reorganization, BCLP II, through its subsidiaries, owned and operated the Boston Celtics professional basketball team (the "Boston Celtics") of the National Basketball Association (the "NBA") and held investments. The Boston Celtics were owned by Celtics Limited Partnership ("CLP"), in which BCLP II has a 99% limited partnership interest. Upon completion of the Reorganization, the Boston Celtics are owned and operated by Celtics Basketball, L.P. ("Celtics Basketball"), a 99.999% subsidiary of Celtics Basketball Holdings, L.P. ("Celtics Basketball Holdings"). BCLP II, through its subsidiaries, holds certain investments, including a 48.3123% limited partnership investment in Celtics Basketball Holdings. Accordingly, effective June 30, 1998, BCLP II's interest in the accounts and operations of the Boston Celtics is reflected in its investment in Celtics Basketball Holdings, which is accounted for on the equity method. Accordingly, the investment is carried at cost, effected by equity in income or loss of Celtics Basketball Holdings and reduced by distributions received. Note 2 - The unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with 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, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included therein. Operating results for interim periods are not indicative of the results that may be expected for the full year. Such financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto of Boston Celtics Limited Partnership II and Subsidiaries included in the annual report on Form 10-K for the year ended June 30, 2000 and the Forms 10-Q for the quarters ended September 30, 2000 and December 31, 2000. Note 3 - BCLP II, through its subsidiary partnerships and corporations, owns a 48.3123% limited partnership interest in Celtics Basketball Holdings. Celtics Basketball Holdings, through Celtics Basketball, owns and operates the Boston Celtics. BCLP II's investment in Celtics Basketball Holdings is accounted for on the equity method. Summary statement of operations data for Celtics Basketball Holdings for the nine and three months ended March 31, 2001 and 2000 is as follows:

Note 4 - On October 31, 2000, in order to achieve certain efficiencies, BCLP II distributed to BCLP all of the outstanding capital stock of BCCLP Holding Corporation ("BCCLP Holdings"), and BCLP assumed all of BCLP II's liability for borrowings under its revolving credit agreement aggregating $50,000,000. The net assets of BCCLP Holdings at the date of distribution amounted to $87,629,000 and included, among other things, cash of $3,551,000, short-term investments of $82,000,000, an amount receivable from Celtics Investments, Inc., a wholly owned subsidiary of BCLP II, of $4,800,000, and deferred tax liabilities of $2,899,000. In connection with this distribution, BCLP II issued a note payable to BCLP II GP, Inc., its general partner, in the amount of $361,882, representing its 1% share of the fair value of the distribution. The note accrues interest at 7% annually, and is payable on August 1, 2003. Note 5 - In July and August 1998, four separate class action complaints (the "Complaints") were filed by Unitholders in the Court of Chancery of the State of Delaware in and for New Castle County against BCLP II, Celtics, Inc., Paul E. Gaston, Don F. Gaston, Paula B. Gaston, John H.M. Leithead and John B. Marsh III, each a director or former director of Celtics, Inc. The named plaintiffs, who each purported to bring their individual actions on behalf of themselves and others similarly situated, are Kenneth L. Rilander, Harbor Finance Partners, Maryann Kelly and Kathleen Kruse Perry. Each of the Complaints alleges, among other things, that the Reorganization was unfair to former BCLP II Unitholders, and seeks to recover an unspecified amount of damages, including attorneys' and experts' fees and expenses. The Partnership filed a Motion to Dismiss the complaint filed by Mr. Rilander on July 29, 1998, and discovery in that case has been stayed by agreement of the parties. The Complaints have been consolidated. On August 6, 1999, the Court of Chancery issued an opinion granting in part, and denying in part, the Partnership's Motion to Dismiss, and on September 3, 1999, the plaintiffs filed an amended consolidated Complaint. On October 1, 1999, the Partnership filed an answer to the Complaint. Although the ultimate outcome of the Complaint cannot be determined at this time, management of the Partnership does not believe that the outcome of these proceedings will have a material adverse effect on the Partnership's financial position or results of operations. BOSTON CELTICS LIMITED PARTNERSHIP BOSTON CELTICS LIMITED PARTNERSHIP II and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements Certain statements and information included herein are "forward-looking statements" within the meaning of the federal Private Securities Litigation Reform Act of 1995, including statements relating to prospective game, broadcast and other revenues, expenses (including player and other team costs), capital expenditures, tax burdens, earnings and distributions, and expectations, intentions and strategies regarding the future. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of BCLP or BCLP II to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause BCLP's or BCLP II's financial condition, results of operation, liquidity or capital resources to differ materially include the competitive success of the Boston Celtics, uncertainties as to increases in players' salaries and team expenses, the Boston Celtics' ability to attract and retain talented players, the risk of injuries to key players, uncertainties regarding media contracts, the performance of certain investments by subsidiaries of the Partnership and the extent to which the Partnership's subsidiaries generate, and are able to distribute, operating cash flow. General BCLP accounts for its indirect investment in the accounts and operations of the Boston Celtics using the equity method, and accordingly, its equity in the net income (loss) of the Boston Celtics is reported on a single line item in its Condensed Consolidated Statements of Operations. Following is a general description of certain matters related to the operations of the Boston Celtics. The Boston Celtics derive revenues principally from the sale of tickets to home games and the licensing of television, cable network and radio rights. The most significant expenses of the Boston Celtics are player and coaching salaries. A large portion of the Boston Celtics' annual revenues and operating expenses is determinable at the commencement of each basketball season based on season ticket sales and the Boston Celtics' multi-year contracts with its players, coaches and broadcast organizations. The operations and financial results of the Boston Celtics are seasonal. On a cash flow basis, the Boston Celtics receive a substantial portion of their receipts from the advance sale of season tickets during the months of June through October, prior to the commencement of the NBA regular season. Cash receipts from playoff ticket sales are received in March of any year for which the team qualifies for league playoffs. Most of the Boston Celtics' operating expenses are incurred and paid during the regular season, which normally extends from late October or early November through late April. For financial reporting purposes the Boston Celtics recognize revenues and expenses on a game-by-game basis. Because the NBA regular season normally begins in late October or early November, the first fiscal quarter, which ends on September 30, generally includes limited or no revenue and reflects a net loss attributable to general and administrative expenses and selling and promotional expenses incurred in the quarter. Based on the standard NBA game schedule, the Boston Celtics historically recognize approximately one- third of its annual regular season revenue in the second fiscal quarter, approximately one-half of such revenue in the third fiscal quarter and the remainder in the fourth fiscal quarter, and recognize its playoff revenue, if any, in the fourth fiscal quarter. Accordingly, BCLP's and BCLP II's equity in the net income (loss) of Celtics Basketball Holdings, which indirectly owns and operates the Boston Celtics, will generally result in a loss in its first fiscal quarter, income in its second and third fiscal quarters and a loss in its fourth fiscal quarter unless there is significant income from playoff revenues. Results of Operations The following discussion compares the operating results of BCLP and its subsidiaries for the nine and three months ended March 31, 2001 with the nine and three months ended March 31, 2000. Equity in net income of Celtics Basketball Holdings, L.P. represents BCLP's 48.3% interest in the net income of the entity that indirectly owns and operates the Boston Celtics. The Boston Celtics recognize revenues and expenses on a game-by-game basis, and the NBA regular season normally begins in late October or early November. As a result, Celtics Basketball Holdings' first fiscal quarter, which ends on September 30, generally includes limited or no revenue and reflects a net loss attributable to general and administrative expenses and selling and promotional expenses incurred in the quarter. BCLP's equity in the net income of Celtics Basketball Holdings amounted to $3,241,000 and $2,951,000 in the nine and three months ended March 31, 2001, respectively, as compared to income of $3,557,000 and $3,551,000 in the nine and three months ended March 31, 2000, respectively. The decreases in the nine and three months ended March 31, 2001 are primarily a result of decreased ticket revenues and increased player salaries and selling and promotional expenses. These factors were partially offset by increased television revenues and increased revenues from sponsorships. General and administrative expenses of $4,478,000 in the nine months ended March 31, 2001 increased by $1,646,000 compared to $2,832,000 in the nine months ended March 31, 2000. The increase was primarily attributable to increased professional expenses ($1,333,000) associated with, among other things, BCLP II's distribution of its investment in BCCLP Holding Corporation and $50,000,000 of borrowings under its revolving credit agreement on October 31, 2000 (see "Liquidity and Capital Resources" below) and the payment of a non-recurring sales tax at one of BCLP's subsidiary partnerships ($325,000) in December 2000. General and administrative expenses of $693,000 in the three months ended March 31, 2001 decreased by $103,000 compared to $796,000 in the three months ended March 31, 2000, primarily attributable to a decrease in personnel expenses. Interest expense of $5,071,000 in the nine months ended March 31, 2001 decreased $106,000 compared to $5,177,000 in the nine months ended March 31, 2000, and interest expense of $1,106,000 in the three months ended March 31, 2001 decreased by $646,000 compared to $1,752,000 in the three months ended March 31, 2000. The decreases in the nine and three months ended March 31, 2001 are primarily attributable to a decrease in average borrowings outstanding under BCLP's revolving credit agreement with its commercial bank. As more fully described in "Liquidity and Capital Resources" below, $50,000,000 of borrowings under BCLP's revolving credit agreement was repaid in mid-December 2000. Interest income of $3,497,000 in the nine months ended March 31, 2001 decreased by $342,000 compared to $3,839,000 in the nine months ended March 31, 2000, and interest income of $581,000 in the three months ended March 31, 2001 decreased by $812,000 compared to $1,393,000 in the three months ended March 31, 2000. The decreases in the nine and three months ended March 31, 2001 are primarily attributable to a decrease in invested balances combined with a decrease in interest rates earned on invested balances. As more fully described in "Liquidity and Capital Resources" below, $50,000,000 of short-term investments were liquidated in mid-December 2000 to repay borrowings under BCLP's revolving credit agreement. BCLP's provision for income taxes relates to BCLP's subsidiary corporations. The provision of $300,000 in the nine months ended March 31, 2001 decreased by $900,000 compared to $1,200,000 in the nine months ended March 31, 2000. Effective November 1, 2000, certain of BCLP's subsidiary corporations will begin filing tax returns consolidated with those of BCLP. As a result, income earned by BCLP's subsidiary corporations through March 31, 2001 will be offset by losses of BCLP. Liquidity and Capital Resources BCLP used approximately $3,486,000 in cash flows from operating activities in the nine months ended March 31, 2001. At March 31, 2001, the Partnership had approximately $2,965,000 of available cash and $33,800,000 of other short- term investments. In addition to these amounts, sources of funds available to the Partnership include funds generated by operations and distributions from Celtics Basketball Holdings, which through a subsidiary owns and operates the Boston Celtics. These resources may be used to repay commercial bank borrowings and for general partnership purposes, working capital needs or for possible investments and/or acquisitions. On May 20, 1998, BCLP II entered into a $60,000,000 revolving credit agreement with its commercial bank. Interest on advances under the revolving credit agreement accrues at BCLP II's option of either LIBOR plus 0.70% or the greater of the bank's Base Rate or the Federal Funds Effective Rate plus 0.50%. The revolving credit agreement expires on June 30, 2003 and is secured by a pledge of certain short-term investments of Celtics Capital Corporation, an indirect subsidiary of BCLP. On October 31, 2000, in order to achieve certain efficiencies, BCLP II distributed to BCLP all of the outstanding capital stock of BCCLP Holding Corporation ("BCCLP Holdings"), and BCLP assumed all of BCLP II's liability for borrowings under its revolving credit agreement aggregating $50,000,000. As a result, BCCLP Holdings currently is a direct subsidiary of BCLP. In December 2000, BCCLP Holdings, through Celtics Capital Corporation, its wholly owned subsidiary, liquidated $50,000,000 of short-term investments and distributed the proceeds to BCLP. BCLP used those proceeds to repay the $50,000,000 of borrowings under the revolving credit agreement that were assumed from BCLP II on October 31, 2000. As a result, at March 31, 2001, BCLP had no amounts outstanding under the revolving credit agreement, and BCLP II had $10,000,000 outstanding under the revolving credit agreement, which matures on June 30, 2003. Management anticipates that amounts advanced under the revolving credit agreement will be repaid by BCLP and BCLP II out of cash flows, principally distributions from its subsidiaries. In connection with the October 31, 2000 distribution by BCLP II of its investment in BCCLP Holdings and $50,000,000 of borrowings under its revolving credit agreement, BCLP II issued a note payable to BCLP II GP, Inc., its general partner, in the amount of $361,882, representing its 1% share of the fair value of the distribution. The note accrues interest at 7% annually, and is payable on August 1, 2003. BCLP II has outstanding 6% subordinated debentures due on June 30, 2038. The subordinated debentures were recorded at $12.20 per debenture, the fair market value at date of issue, or $32,984,700. The original issue discount of $21,088,580 is being amortized over the 40-year life of the debentures using the interest method and, accordingly, the subordinated debentures are carried on the balance sheet at $34,104,721 at March 31, 2001. The subordinated debentures bear interest at the rate of 6% per annum, payable annually on June 30, and mature on June 30, 2038 at an aggregate principal amount of $54,073,280. There are no mandatory redemption or sinking fund requirements with respect to the subordinated debentures. In the nine months ended March 31, 2001, BCLP and its subsidiaries received distributions from Celtics Basketball Holdings aggregating $3,865,000. Future distributions from Celtics Basketball Holdings will be determined by Boston Celtics Corporation, the general partner of Celtics Basketball Holdings, in its sole discretion subject to applicable credit agreements and based, among other things, on available resources and the needs of Celtics Basketball Holdings and Celtics Basketball, the ability of Celtics Basketball Holdings and Celtics Basketball to generate sufficient operating cash flow, and the funds available after debt service payments related to Celtics Basketball's revolving credit agreement with its commercial bank. No cash distributions to unitholders of BCLP were declared or paid during the quarters ended March 31, 2001 and 2000. Future distributions will be determined by BCLP GP, Inc., the general partner of BCLP, in its sole discretion based, among other things, on available resources and the needs of the Partnership, the ability of BCLP's subsidiaries to generate sufficient operating cash flow, and the funds available after debt service payments related to the revolving credit agreement with its commercial bank and the subordinated debentures. Management believes that BCLP's cash, cash equivalents and other short-term investments together with cash from operating activities and distributions from Celtics Basketball Holdings will provide adequate cash for the Partnership and its subsidiaries to meet their cash requirements through March 31, 2002. Market Risk At March 31, 2001, BCLP had invested approximately $33,800,000 in loan participations issued by a commercial bank with maturities of less than ninety days. Management believes that BCLP's investment in the loan participations does not expose BCLP to significant market risk due to the short maturities and transfer restrictions applicable to these participation interests. Management further believes that the Partnership has no other assets that are subject to significant market risk. Part II - Other Information ITEM 6 - Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit (10.1) - First Amendment to the Amended and Restated Credit Agreement and Second Amendment to the Credit Support Agreements, Dated as of May 10, 2001, among Boston Celtics Limited Partnership, as Borrower and a Credit Support Affiliate, Boston Celtics Limited Partnership II, as Borrower, BCCLP Holding Corporation, as a Credit Support Affiliate, Celtics Limited Partnership, as a Credit Support Affiliate, Celtics Basketball Holdings, L.P., as a Credit Support Affiliate, and Celtics Pride G.P., as a Credit Support Affiliate, and The Royal Bank of Scotland, plc, as the Existing Lender, and The Other Lender Parties Thereto, and Citizens Bank of Massachusetts, as Agent for the Lenders. Exhibit (10.2) - Amendment, Dated as of May 10, 2001, to Amended and Restated Pledge and Security Agreement between Celtics Capital Corporation and Citizens Bank of Massachusetts, as Agent for the Lenders. Exhibit (10.3) - Third Amendment, Dated as of May 10, 2001, to Credit Agreement among Celtics Basketball, L.P., as Borrower, Boston Celtics Limited Partnership, Boston Celtics Limited Partnership II, Celtics Limited Partnership, Celtics Basketball Holdings, L.P., Celtics Pride, G.P., as Borrower Affiliates, and Citizens Bank of Massachusetts, as Lender. (b) Reports on Form 8-K - None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOSTON CELTICS LIMITED PARTNERSHIP ---------------------------------- (Registrant) By: BCLP GP, Inc., its General Partner Dated: May 11, 2001 By: /s/ Richard G. Pond -------------------------------- Richard G. Pond Executive Vice President Chief Financial Officer and Chief Operating Officer Dated: May 11, 2001 BOSTON CELTICS LIMITED PARTNERSHIP II ------------------------------------- (Registrant) By: BCLP II GP, Inc., its General Partner By: /s/ Richard G. Pond ---------------------------------- Richard G. Pond Executive Vice President Chief Financial Officer and Chief Operating Officer

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