UNITED STATES
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 quarterly period ended March 21, 2000
Commission file numbers 33-89818, 33-96568, 333-08041 and 333-57107
CLUBCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2778488
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
3030 LBJ Freeway, Suite 700 Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 243-6191
Former name, former address and former fiscal year,
if changed since last report: NONE
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 twelve 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.
---
The number of shares of the Registrant's Common Stock outstanding as of April
25, 2000 was 94,475,974.
CLUBCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Independent Accountants' Review Report 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Stockholders' Equity
and Comprehensive Income 4
Consolidated Statement of Cash Flows 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk 13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
The Board of Directors
ClubCorp, Inc.
We have reviewed the consolidated balance sheet of ClubCorp, Inc. and
subsidiaries (ClubCorp) as of March 21, 2000 and March 23, 1999 and the related
consolidated statements of operations, stockholders' equity and comprehensive
income and cash flows for the twelve weeks ended March 21, 2000 and March 23,
1999. These consolidated financial statements are the responsibility of
ClubCorp's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ClubCorp as of December 28, 1999
and the related consolidated statements of operations, stockholders' equity and
comprehensive income and cash flows for the year then ended (not presented
herein); and in our report dated February 25, 2000 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 28, 1999 is fairly presented, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
KPMG LLP
Dallas, Texas
April 28, 2000
ClubCorp, Inc.
Consolidated Balance Sheet
(Dollars in thousands, except share amounts)
(Unaudited)
March 23, December 28, March 21,
Assets 1999 1999 2000
------ ----------- -------------- -----------
Current assets:
Cash and cash equivalents $ 52,255 $ 36,606 $ 59,910
Membership and other receivables, net 71,068 109,391 96,508
Inventories 20,961 22,937 23,565
Other assets 17,011 16,213 17,611
----------- -------------- -----------
Total current assets 161,295 185,147 197,594
Property and equipment, net 777,073 1,122,369 1,138,960
Other assets 214,619 239,014 253,991
----------- -------------- -----------
$1,152,987 $ 1,546,530 $1,590,545
=========== ============== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 45,911 $ 76,063 $ 63,104
Long-term debt - current portion 36,086 57,867 65,900
Other liabilities 118,185 106,120 118,314
----------- -------------- -----------
Total current liabilities 200,182 240,050 247,318
Long-term debt 269,604 454,258 501,975
Other liabilities 103,898 118,069 117,374
Membership deposits 97,640 96,365 98,250
Redemption value of common stock held by benefit plan 65,751 72,835 70,098
Stockholders' equity:
Preferred stock, $.01 par value, 150,000,000 shares
authorized, none issued or outstanding - - -
Common stock, $.01 par value, 250,000,000 shares
authorized, 90,219,408 issued at March 23, 1999,
99,594,408 issued at December 28, 1999 and
March 21, 2000, 85,242,342 outstanding at
March 23, 1999, 94,436,903 outstanding at
December 28, 1999 and 94,475,974 outstanding
at March 21, 2000 902 996 996
Additional paid-in capital 15,943 160,408 160,743
Accumulated other comprehensive income (loss) (460) 841 118
Retained earnings 442,916 449,840 440,447
Treasury stock (43,389) (47,132) (46,774)
----------- -------------- -----------
Total stockholders' equity 415,912 564,953 555,530
----------- -------------- -----------
$1,152,987 $ 1,546,530 $1,590,545
=========== ============== ===========
See accompanying condensed notes to consolidated financial statements.
2
ClubCorp, Inc.
Consolidated Statement of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Twelve Weeks Ended
------------------------
March 23, March 21,
1999 2000
----------- -----------
Operating revenues $ 182,251 $ 199,397
Operating costs and expenses 149,271 169,391
Depreciation and amortization 13,508 19,184
Selling, general and administrative expenses 15,951 18,003
----------- -----------
Operating income (loss) 3,521 (7,181)
Interest expense (7,153) (10,791)
Other income 1,441 856
----------- -----------
Loss from operations before income taxes (2,191) (17,116)
Income tax (provision) benefit (191) 4,986
----------- -----------
Net loss $ (2,382) $ (12,130)
=========== ===========
Basic and diluted loss per share $ (.03) $ (.13)
=========== ===========
See accompanying condensed notes to consolidated financial statements.
3
ClubCorp, Inc.
Consolidated Statement of Stockholders' Equity and Comprehensive Income
Twelve Weeks Ended March 23, 1999 and March 21, 2000
(Dollars in thousands, except share amounts)
(Unaudited)
Preferred stock
(150,000,000 shares
authorized, par Common stock (250,000,000 shares
value $.01 per share) authorized, par value $.01 per share)
--------------------- -------------------------------------------
Treasury Additional
Shares Shares Shares Stock Shares Par Paid-in
Issued Outstanding Issued Shares Outstanding Value Capital
------ ----------- ---------- ---------- ----------- ------ -----------
Balances at December 29, 1998 - - 90,219,408 5,589,599 84,629,809 $ 902 $ 11,205
Stock issued in connection with:
Acquisition - - - (597,533) 597,533 - 4,717
Exercise of stock options - - - (15,000) 15,000 - 21
Comprehensive income:
Net loss - - - - - - -
Foreign currency translation adjustment - - - - - - -
Total comprehensive loss
Change in redemption value of common
stock held by benefit plan - - - - - - -
------ ----------- ---------- ---------- ---------- ------ -----------
Balances at March 23, 1999 - - 90,219,408 4,977,066 85,242,342 $ 902 $ 15,943
====== =========== ========== ========== ========== ====== ===========
Balances at December 28, 1999 - - 99,594,408 5,157,505 94,436,903 $ 996 $ 160,408
Stock issued in connection with bonus plans - - - (39,071) 39,071 - 335
Comprehensive income:
Net loss - - - - - - -
Foreign currency translation adjustment - - - - - - -
Total comprehensive loss
Change in redemption value of common
stock held by benefit plan - - - - - - -
------ ----------- ---------- ---------- ---------- ------ -----------
Balances at March 21, 2000 - - 99,594,408 5,118,434 94,475,974 $ 996 $ 160,743
====== =========== ========== ========== ========== ====== ===========
Accumulated
Other Total
Comprehensive Retained Treasury Stockholders'
Income (Loss) Earnings Stock Equity
--------------- ---------- ---------- ---------------
Balances at December 29, 1998 $ (119) $ 445,770 $ (48,722) $ 409,036
Stock issued in connection with:
Acquisition - - 5,202 9,919
Exercise of stock options - - 131 152
Comprehensive income:
Net loss - (2,382) - (2,382)
Foreign currency translation adjustment (341) - - (341)
---------------
Total comprehensive loss (2,723)
Change in redemption value of common
stock held by benefit plan - (472) - (472)
--------------- ---------- ---------- ---------------
Balances at March 23, 1999 $ (460) $ 442,916 $ (43,389) $ 415,912
=============== ========== ========== ===============
Balances at December 28, 1999 $ 841 $ 449,840 $ (47,132) $ 564,953
Stock issued in connection with bonus plans - - 358 693
Comprehensive income:
Net loss - (12,130) - (12,130)
Foreign currency translation adjustment (723) - - (723)
---------------
Total comprehensive loss (12,853)
Change in redemption value of common
stock held by benefit plan - 2,737 - 2,737
--------------- ---------- ---------- ---------------
Balances at March 21, 2000 $ 118 $ 440,447 $ (46,774) $ 555,530
=============== ========== ========== ===============
See accompanying condensed notes to consolidated financial statements.
4
ClubCorp, Inc.
Consolidated Statement of Cash Flows
(Dollars in thousands)
(Unaudited)
Twelve Weeks Ended
------------------------
March 23, March 21,
1999 2000
----------- -----------
Cash flows from operations:
Net loss $ (2,382) $ (12,130)
Adjustments to reconcile net loss to cash flows provided from operations:
Depreciation and amortization 13,508 19,184
Equity in earnings of joint ventures (643) (110)
Amortization of discount on membership deposits 2,244 2,033
Deferred income taxes (72) (5,449)
Decrease in real estate held for sale 268 2,156
Decrease in membership and other receivables, net 14,159 12,883
Decrease in accounts payable and accrued liabilities (12,904) (12,261)
Net change in deferred membership revenues (1,142) 592
Other 8,427 10,397
----------- -----------
Cash flows provided from operations 21,463 17,295
Cash flows from investing activities:
Additions to property and equipment (26,130) (27,948)
Development of new facilities (914) (11,964)
Development of real estate ventures (736) (6,386)
Acquisition of facilities (22,210) -
Investment in affiliates (23,002) (1,436)
Other 2,354 (99)
----------- -----------
Cash flows used by investing activities (70,638) (47,833)
Cash flows from financing activities:
Borrowings of long-term debt 33,167 92,105
Repayments of long-term debt (7,463) (38,952)
Membership deposits received, net 232 689
Treasury stock transactions, net 152 -
----------- -----------
Cash flows provided from financing activities 26,088 53,842
----------- -----------
Total net cash flows (23,087) 23,304
----------- -----------
Cash and cash equivalents at beginning of period 75,342 36,606
----------- -----------
Cash and cash equivalents at end of period $ 52,255 $ 59,910
=========== ===========
See accompanying condensed notes to consolidated financial statements.
5
ClubCorp, Inc.
Condensed Notes to Consolidated Financial Statements
Note 1. Summary of significant accounting policies
- ---------------------------------------------------
Consolidation
- -------------
The Consolidated Financial Statements include the accounts of ClubCorp, Inc.
(Parent) and its subsidiaries (collectively ClubCorp). All material
intercompany balances and transactions have been eliminated.
Interim presentation
- --------------------
The accompanying Consolidated Financial Statements have been prepared by
ClubCorp and are unaudited. Certain information and footnote disclosures
normally included in financial statements presented in accordance with generally
accepted accounting principles have been omitted from the accompanying
statements. ClubCorp's management believes the disclosures made are adequate to
make the information presented not misleading. However, the financial statements
should be read in conjunction with the Consolidated Financial Statements and
notes thereto of ClubCorp for the year ended December 28, 1999 which were a part
of ClubCorp's Form 10-K.
In the opinion of ClubCorp management, the accompanying unaudited Consolidated
Financial Statements reflect all adjustments necessary (consisting of normal
recurring accruals) to present fairly the consolidated financial position of
ClubCorp as of March 23, 1999 and March 21, 2000 and the consolidated results
of operations and cash flows for the twelve weeks ended March 23, 1999 and March
21, 2000, respectively. Interim results are not necessarily indicative of
fiscal year performance because of the impact of seasonal and short-term
variations and other factors such as timing of acquisitions and dispositions of
facilities.
Earnings per share
- ------------------
Earnings per share is computed using the weighted average number of shares
outstanding of 85,142,753 and 94,475,974 for basic for the twelve weeks ended
March 23, 1999 and March 21, 2000, respectively. The potential common stock
equivalents for options and warrants to purchase common stock of 1,484,707
shares for the twelve weeks ended March 23, 1999 and 1,329,567 shares for the
twelve weeks ended March 21, 2000 are antidilutive due to the net losses for the
quarters.
Recent pronouncements
- ---------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". It requires that all derivatives be
recognized as either assets or liabilities on the balance sheet and such
instruments be measured at their fair value. The Statement, as amended, is
effective for all quarters of years beginning after June 15, 2000. Based on
ClubCorp's current operations, the effect of implementation of this new
statement is not expected to have a significant effect on ClubCorp's balance
sheet or statement of operations. SFAS 133 will be reflected in ClubCorp's
first quarter 2001 Consolidated Financial Statements.
Reclassifications
- -----------------
Certain amounts previously reported have been reclassified to conform with the
current period presentation.
Note 2. Property and equipment
- -------------------------------
Property and equipment consists of the following (dollars in thousands):
March 23, December 28, March 21,
1999 1999 2000
----------- -------------- -----------
Land and land
improvements $ 326,103 $ 528,466 $ 544,853
Buildings and recreational
facilities 299,172 378,560 381,625
Leasehold improvements 97,188 112,570 111,106
Furniture and fixtures 97,753 118,107 119,847
Machinery and equipment 177,603 222,762 227,469
Construction in progress 73,395 104,050 112,678
----------- -------------- -----------
1,071,214 1,464,515 1,497,578
Accumulated depreciation
and amortization (294,141) (342,146) (358,618)
----------- -------------- -----------
$ 777,073 $ 1,122,369 $1,138,960
=========== ============== ===========
6
Note 3. Segment reporting
- ----------------------------
ClubCorp operations are organized into three principal business segments
according to the type of facility or service provided: Country club and golf
facilities, Business and sports clubs and Resorts. Financial information for
the segments is as follows (dollars in thousands):
Twelve Weeks Ended
------------------------
March 23, March 21,
1999 2000
----------- -----------
Operating revenues:
Country club and golf facilities $ 82,355 $ 100,254
Business and sports clubs 58,441 57,131
Resorts 33,228 29,937
----------- -----------
Total operating revenues
for reportable segments 174,024 187,322
Other operations 2,483 7,342
Corporate services and eliminations 5,744 4,733
----------- -----------
Consolidated operating revenues $ 182,251 $ 199,397
=========== ===========
Adjusted EBITDA:
Country club and golf facilities $ 17,841 $ 22,306
Business and sports clubs 5,774 5,932
Resorts (784) (4,655)
----------- -----------
Total Adjusted EBITDA
for reportable segments 22,831 23,583
Other operations (703) (396)
Corporate services and eliminations (6,896) (8,496)
----------- -----------
Consolidated Adjusted EBITDA 15,232 14,691
Depreciation and amortization (13,508) (19,184)
Net membership deposits and fees 2,047 (1,795)
Joint venture adjustment (248) (893)
----------- -----------
Consolidated operating income (loss) $ 3,523 $ (7,181)
=========== ===========
Note 4. Commitments and contingencies
- -------------------------------------
ClubCorp is subject to certain pending or threatened litigation and other
claims. Management, after review and consultation with legal counsel, believes
ClubCorp has meritorious defenses to these matters and that any potential
liability from these matters would not reasonably be expected to materially
affect ClubCorp's Consolidated Financial Statements.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
ClubCorp, Inc. (referred to as ClubCorp or the Company) is a holding
company incorporated under the laws of the State of Delaware that, through its
subsidiaries, owns, operates and/or manages country clubs, golf clubs, public
golf courses, business clubs, sports clubs, resorts, and certain related real
estate through sole ownership, partial ownership (including joint venture
interests) and management agreements. The Company's primary sources of revenue
include membership dues, fees and deposits, food and beverage sales, and
revenues from golf operations and lodging facilities. The Company also receives
management fees with respect to facilities that it manages for third parties.
The earliest predecessor corporation of ClubCorp was organized in 1957
under the name Country Clubs, Inc. All historical references herein to ClubCorp
include Country Clubs, Inc. and its successor corporations. For purposes of this
document, unless the context indicates otherwise, references to the Company
include ClubCorp and its subsidiaries. However, each of ClubCorp and its
subsidiaries is careful to maintain its separate legal existence, and general
references to the Company should not be interpreted to reduce in any way the
legal distinctions among the subsidiaries or among ClubCorp and its
subsidiaries.
The following discussion of the Company's financial condition and results
of operations for the twelve weeks ended March 23, 1999 and March 21, 2000
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 28, 1999, as filed with the Securities and Exchange
Commission.
Recent Developments
In April 2000, the Company announced the addition of Jeffrey P. Mayer to
its senior management team as Executive Vice President and Chief Financial
Officer. Prior to joining the Company, Mr. Mayer served as the Executive Vice
President and Chief Financial Officer of Bristol Hotels and Resorts since March
1998 and as Senior Vice President and Chief Financial Officer of Bristol Hotel
Company from January 1996 until July 1998. Prior to 1996, Mr. Mayer served as
Senior Vice President, Corporate Controller and Chief Accounting Officer of Host
Marriott Corporation (formerly Marriott Corporation) from 1993 to 1996; as Vice
President - Project Finance of Marriott from 1991 to 1993, and in various
positions with Marriott's finance department from 1986 to 1991. Prior to joining
Marriott, Mr. Mayer was an Audit Manager with Arthur Andersen & Co. in Atlanta,
Georgia.
Results of Operations
Twelve Weeks Ended March 23, 1999 Compared to Twelve Weeks Ended March 21, 2000
Consolidated Operations
Operating revenues increased 9.4% to $199.4 million for the twelve weeks
ended March 21, 2000 from $182.3 million for the twelve weeks ended March 23,
1999. The increase is due primarily to the addition of the revenues from the
Cobblestone facilities and increased membership revenue. The 22 Cobblestone
facilities were acquired on March 31, 1999. The increased membership revenue is
primarily associated with increased membership at same store country club and
golf facilities and business and sports clubs (i.e., those for which a
comparable period of activity exists, generally those owned for at least
eighteen months to two years). Operating revenues of same store facilities
increased 4.4% to $168.8 million for the twelve weeks ended March 21, 2000 from
$161.6 million for the twelve weeks ended March 23, 1999.
Operating costs and expenses, consisting of direct operating costs,
facility rentals, and maintenance, increased 13.5%, to $169.4 million for the
twelve weeks ended March 21, 2000 from $149.3 million for the twelve weeks ended
March 23, 1999. This increase is principally due to the addition of the
operating costs and expenses of the Cobblestone facilities and increases in
costs of sales related to increased real estate sales.
Depreciation and amortization expense for the twelve weeks ended March 21,
2000 increased $5.7 million primarily due to the addition of the Cobblestone
facilities, capital expansions at existing facilities and increases in
technology related assets.
8
Selling, general and administrative expenses increased 12.5% to $18.0
million for the twelve weeks ended March 21, 2000 from $16.0 million for the
twelve weeks ended March 23, 1999 primarily due to increases in payroll and
payroll related costs for information technology, marketing, and membership.
Net loss for the twelve weeks ended March 21, 2000 was $12.1 million
compared to a loss of $2.4 million for the twelve weeks ended March 23, 1999 due
primarily to decreases in operating income at country club and golf and resort
facilities, increases in general and administrative costs and increases in
interest expense. The increase in interest expense of $3.6 million for the
twelve weeks ended March 21, 2000 is primarily due to an increase in outstanding
debt. This increase in operating loss is partially offset by increases in the
federal income tax benefit.
Management uses Adjusted EBITDA to monitor the performance of the
Company and its facilities. Adjusted EBITDA consists of EBITDA, an industry
standard calculation of earnings before interest, taxes, depreciation and
amortization, adjusted for net membership deposits and fees, a joint venture
adjustment and excludes impairment loss from assets to be held and used. Net
membership deposits and fees represent the difference between current period
sales of initiation deposits and fees and the revenue recognized from initiation
deposits and fees, less incremental direct selling costs. Revenues from
membership deposits are calculated as the difference between the amount of the
membership deposits sold and the present value of the obligation. The joint
venture adjustment is comprised of depreciation, amortization, interest, income
taxes and net membership deposits and fees for joint venture entities at the
Company's ownership percentage. Adjusted EBITDA is not intended to represent
cash flow in accordance with generally accepted accounting principles and is not
necessarily a measure of the Company's ability to fund its cash needs. The
Company's Adjusted EBITDA from continuing operations may not be comparable to
similarly titled measures reported by other companies.
Adjusted EBITDA decreased $0.5 million to $14.7 million for the twelve
weeks ended March 21, 2000 from $15.2 million for the twelve weeks ended March
23, 1999, due primarily to decreases in operating income at resort facilities
and same store country club and golf facilities and sports and business clubs.
This decrease was partially offset by an increase in net membership deposits and
fees at same store country club and golf facilities and developing country club
and golf facilities acquired during the last three quarters of 1999 and
increases in initiation fees at a resort facility.
Segment and Other Information
Country Club and Golf Facilities
The following table presents certain summary financial data and other
operating data for the Company's country club and golf facilities segment for
the twelve week periods ended March 23, 1999 and March 21, 2000 (dollars in
thousands):
Same Store Total
Country Club and Country Club and
Golf Facilities Golf Facilities
------------------ -------------------
1999 2000 1999 2000
-------- -------- -------- ---------
Number of facilities 93 93 112 124
Operating revenues $ 78,305 $ 81,887 $ 82,355 $ 100,254
Operating costs and expenses 59,411 62,860 63,168 80,241
Depreciation and amortization 6,792 7,093 7,219 11,212
-------- -------- -------- ---------
Segment operating income $ 12,102 $ 11,934 $ 11,968 $ 8,801
======== ======== ======== =========
Adjusted EBITDA $ 17,511 $ 19,471 $ 17,841 $ 22,306
======== ======== ======== =========
9
Operating revenues from total country club and golf facilities increased
21.7% due primarily to the addition of the Cobblestone facilities and increased
membership revenue at same store facilities. The increase in membership revenue
at same store facilities is primarily associated with increased membership.
Operating costs and expenses from total country club and golf facilities
increased 27.0% due primarily to the addition of the operating costs and
expenses of the Cobblestone facilities and increased operating costs related to
increased revenues at same store facilities. The increase in depreciation and
amortization in total country club and golf facilities is primarily due to the
addition of the Cobblestone facilities. The decrease in gross margin at same
store country club and golf facilities from 15.4% to 14.6% is primarily due to
increases in payroll and payroll related costs. The decrease in gross margin at
total country clubs and golf facilities from 14.5% to 8.8% is primarily due to
the increase in the number of facilities in development in 2000 as these
facilities have historically experienced lower margins than same store
facilities.
The increase of 25.0% in Adjusted EBITDA at total country club and golf
facilities is primarily a result of the factors discussed in the preceding
paragraph coupled with increases in initiation fees at developing facilities
acquired in the last three quarters of 1999. The 11.2% increase in Adjusted
EBITDA at same store country club and golf facilities is primarily due to
increases in initiation deposits in the twelve week period ended March 21, 2000.
Business and Sports Clubs
The following table presents certain summary financial data and other
operating data for the Company's business and sports clubs segment for the
twelve week periods ended March 23, 1999 and March 21, 2000 (dollars in
thousands):
Same Store Total
Business Business
and Sports Clubs and Sports Clubs
------------------ ------------------
1999 2000 1999 2000
-------- -------- -------- --------
Number of facilities 82 82 94 82
Operating revenues $ 55,004 $ 57,131 $ 58,441 $ 57,131
Operating costs and expenses 48,678 50,965 52,309 50,965
Depreciation and amortization 2,701 2,954 2,966 2,954
--------- -------- -------- --------
Segment operating income $ 3,625 $ 3,212 $ 3,166 $ 3,212
======== ======== ======== ========
Adjusted EBITDA $ 5,918 $ 5,932 $ 5,774 $ 5,932
======== ======== ======== ========
The decrease in operating revenues at total business and sports clubs is
primarily due to divestitures occurring after March 23, 1999. Operating income
from same store business and sports clubs decreased $0.4 million from the twelve
weeks ended March 23, 1999 compared to the twelve weeks ended March 21, 2000
primarily due to increased payroll and payroll related costs at total business
and sports clubs.
10
Resorts
The following table presents certain summary financial data and other
operating data for the Company's resorts segment for the twelve week periods
ended March 23, 1999 and March 21, 2000 (dollars in thousands):
Same Store Resorts Total Resorts
-------------------- -------------------
1999 2000 1999 2000
--------- --------- -------- ---------
Number of facilities 4 4 5 5
Operating revenues $ 28,260 $ 29,781 $33,228 $ 29,937
Operating costs and expenses 30,772 34,662 33,877 34,761
Depreciation and amortization 2,124 2,848 2,218 2,883
--------- --------- -------- ---------
Segment operating loss $ (4,636) $ (7,729) $(2,867) $ (7,707)
========= ========= ======== =========
Adjusted EBITDA $ (2,647) $ (4,712) $ (784) $ (4,655)
========= ========= ======== =========
Lodging data:
Room nights available 104,130 105,705
Occupancy rate 44.7% 41.1%
Average daily room rate per occupied room $ 142 $ 154
Average daily revenue per occupied room $ 607 $ 696
Operating revenues from total resorts decreased 9.9% primarily due to the
divestiture of a resort facility during the third quarter of 1999. Operating
loss for same store resort facilities increased by 66.7% primarily due to
Pinehurst's decrease in operating income. During the twelve week period ended
March 21, 2000, Pinehurst experienced a decrease in operating income resulting
from decreases in room nights and golf operations income. The decrease in golf
operations income was partially due to inclement weather, increases in payroll
and payroll related costs and the recording of a $0.6 million inventory
writedown to net realizable value for pro shop merchandise. Pinehurst's
decrease in operating revenues is offset by increases in revenues at other
resort facilities, which resulted primarily from increased occupancy rates and
increased average daily revenue per occupied room for the twelve weeks ended
March 21, 2000 at these facilities. Operating costs at same store facilities
increased 12.6% primarily due to the items relating to Pinehurst mentioned in
the preceding sentences and increases in payroll and payroll related costs and
general and administrative costs at other resort facilities.
The decrease in Adjusted EBITDA at same store resorts is primarily
attributable to the decreased operating income at Pinehurst, as discussed in the
preceding paragraph, and is partially offset by increases in initiation fees at
Barton Creek related to the opening of a new golf course.
Other Operations
Realty operating revenues increased $4.0 million from $1.2 million for the
twelve weeks of 1999 to $5.2 million for the twelve weeks of 2000, due primarily
to real estate revenues associated with the Owners Club programs at several
locations. Revenues during the twelve week period ended March 23, 1999 were
primarily related to the sales of land held for resale in Colorado.
11
Seasonality Demand; Fluctuations in Quarterly Results
The Company's quarterly results fluctuate as a result of a number of
factors. Usage of the Company's country club and golf facilities and resorts
declines significantly during the first and fourth quarters, when colder
temperatures and shorter days reduce the demand for golf and golf-related
activities. The Company's business facilities generate a disproportionately
greater share of their yearly revenues in the fourth quarter, which includes the
holiday and year-end party season. In addition, the fourth quarter consists of
16 weeks of operations and the first, second and third quarters consist of
twelve weeks. As a result of these factors, the Company usually generates a
disproportionate share of its revenues in the second, third, and fourth quarters
of each year and has lower revenues in the first quarter. The timing of
purchases, sales, or leases of facilities, such as the purchase of the
Cobblestone facilities, also has caused and may cause the Company's results of
operations to vary significantly in otherwise comparable periods. In addition,
the Company's results can be affected by non-seasonal and severe weather
patterns.
Liquidity and Capital Resources
Historically, the Company has financed its operations and capital
expenditures primarily through cash flows from operations and long-term debt.
The Company distinguishes capital expenditures to refurbish and replace existing
property and equipment (i.e., capital replacements) from discretionary capital
expenditures such as the expansion of existing facilities (i.e., capital
expansions). Most capital expenditures other than capital replacements are
considered discretionary and could be curtailed in periods of low liquidity.
Capital replacements are planned expenditures made each year to maintain high
quality standards of facilities for the purpose of meeting existing members'
expectations and to attract new members. Capital replacements have ranged from
5.6% to 9.0% of operating revenues during the last three years. Capital
expansions are discretionary expenditures, which create new amenities or enhance
existing amenities at existing facilities. Development of the Company's new
facilities and planned expansions at existing facilities are expected to require
capital expenditures of approximately $69.0 and $78.4 million, respectively,
over the next two years to be financed with external financing of ClubCorp, Inc.
and cash flows from operations.
Factors That May Affect Future Operating Results and the Accuracy of Our
Forward-Looking Statements
Certain information in this Quarterly Report on Form 10-Q may contain
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are "forward-looking statements" for purposes of these
provisions, including projections of earnings, revenues or other financial
items, statements of the plans and objectives of management for future
operations (including statements regarding the expected restructuring of the
Company's credit agreements), statements concerning proposed new services,
statements regarding future economic conditions or performance and statements of
assumptions underlying any of the foregoing. In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "will,"
"expects," "plans," "anticipates," "estimates," "potential" or "continue," or
the negative thereof or other comparable terminology. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements. Forward-looking statements are subject to inherent
risks and uncertainties, some of which are summarized in this section and in the
Company's Form 10-K for the year ended December 28, 1999.
The Company's success depends on its ability to attract and retain
members at its clubs and maintain or increase usage of its facilities. The
Company has experienced varying levels of membership enrollment and attrition
rates and, in certain areas, decreased levels of usage of its facilities during
its operating history. Although management devotes substantial efforts to
ensuring that members and guests are satisfied, many of the factors affecting
club membership and facility usage are beyond the Company's control, including
weather conditions, general economic conditions, changes in demand for golf and
private club services and changes in the federal tax laws. There can be no
assurance that the Company will be able to maintain or increase membership or
facility usage. Significant periods where attrition rates exceed enrollment
rates, or where facilities' usage is below historical levels would have a
material adverse effect on the Company's business, operating results, and
financial condition. Other factors that may affect the Company's operating
results include, but are not limited to, the actions of our competitors, changes
in labor costs, the timing and success of acquisitions and dispositions and
changes in law.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to interest rate changes and foreign currency
fluctuations. The Company's interest rate exposure is principally attributable
to the Company's combined $650.0 million senior credit facility in which
interest is typically determined using a LIBOR-based pricing matrix as defined
in the agreement and was comprised of a $350.0 million revolving credit
facility, the Facility A Term Loan and the Facility B Term Loan ($198.1 million,
including letters of credit of $11.3 million, $98.1 million and $199.5 million,
respectively, outstanding on April 25, 2000). The Company uses financial
instruments, principally swaps, to manage its interest rate exposure primarily
from borrowings under its $650.0 million senior credit facility. The Company
has no material changes to these disclosures made in the report on Form 10-K for
the fiscal year ended December 28, 1999 regarding the use of financial
instruments.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - 2000 ClubCorp Comprehensive Compensation Plan
15.1 - Letter from KPMG LLP regarding unaudited interim financial statements
24.1 - Power of Attorney
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ClubCorp, Inc.
Date: May 4, 2000 By: /s/Charles A. Little
--------------- -------------------------
Charles A. Little
Senior Vice President and
Chief Accounting Officer
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