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 June 13, 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 July 11,
2000 was 94,161,282.
CLUBCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Independent Auditors' Review Report 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Cash Flows 4
Condensed Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REVIEW REPORT
-----------------------------------
The Board of Directors and Shareholders
ClubCorp, Inc.:
We have reviewed the consolidated balance sheet of ClubCorp, Inc. and
subsidiaries (ClubCorp) as of June 13, 2000 , and the related consolidated
statements of operations for the twelve weeks and twenty four weeks ended June
13, 2000 and June 15, 1999 and cash flows for the twenty four weeks ended June
13, 2000 and June 15, 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 reviews, 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 stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
KPMG LLP
Dallas, Texas
July 21, 2000
1
CLUBCORP, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share amounts)
(Unaudited)
December 28, JUNE 13,
Assets 1999 2000
------ -------------- -----------
Current assets:
Cash and cash equivalents $ 36,606 $ 40,257
Membership and other receivables, net 109,391 114,493
Inventories 22,937 24,148
Other assets 16,213 23,982
-------------- -----------
Total current assets 185,147 202,880
Property and equipment, net 1,122,369 1,187,843
Other assets 239,014 253,883
-------------- -----------
$ 1,546,530 $1,644,606
============== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 76,063 $ 71,007
Long-term debt - current portion 57,867 58,335
Other liabilities 106,120 118,725
-------------- -----------
Total current liabilities 240,050 248,067
Long-term debt 454,258 547,299
Other liabilities 118,069 122,118
Membership deposits 96,365 101,852
Redemption value of common stock held by benefit plan 72,835 70,363
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, 99,594,408 issued, 94,436,903
outstanding at December 28, 1999 and 94,161,282
outstanding at June 13, 2000 996 996
Additional paid-in capital 160,408 160,817
Accumulated other comprehensive income (loss) 841 (1,176)
Retained earnings 449,840 446,484
Treasury stock, 5,157,505 shares at December 28, 1999
and 5,433,126 shares at June 13, 2000 (47,132) (52,214)
-------------- -----------
Total stockholders' equity 564,953 554,907
-------------- -----------
$ 1,546,530 $1,644,606
============== ===========
See accompanying condensed notes to consolidated financial statements.
2
CLUBCORP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
12 Weeks Ended 24 Weeks Ended
--------------------- ----------------------
June 15, JUNE 13, June 15, JUNE 13,
1999 2000 1999 2000
---------- ---------- ---------- ---------
Operating revenues $ 254,995 $ 267,824 $ 437,246 $467,221
Operating costs and expenses 193,156 204,994 342,427 374,385
Depreciation and amortization 16,389 19,856 29,897 39,040
Selling, general and administrative expenses 20,781 21,746 36,732 39,749
Impairment loss from assets to be held and used 13,483 - 13,483 -
---------- ---------- ---------- ---------
Operating income 11,186 21,228 14,707 14,047
Gain (loss) on divestitures and sales of assets 2,650 (233) 2,939 16
Interest and investment income 374 751 1,526 1,293
Interest expense (9,997) (11,031) (17,150) (21,822)
---------- ---------- ---------- ---------
Income (loss) from operations before income tax
provision and minority interest 4,213 10,715 2,022 (6,466)
Income tax provision (2,430) (5,347) (2,621) (361)
Minority interest - 934 - 999
---------- ---------- ---------- ---------
Net income (loss) $ 1,783 $ 6,302 $ (599) $ (5,828)
========== ========== ========== =========
Basic and diluted income (loss) per share $ .02 $ .07 $ (.01) $ (.06)
========== ========== ========== =========
See accompanying condensed notes to consolidated financial statements.
3
CLUBCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
24 Weeks Ended
----------------------
June 15, JUNE 13,
1999 2000
---------- ----------
Cash flows from operations:
Net loss $ (599) $ (5,828)
Adjustments to reconcile net loss to cash flows provided from operations:
Depreciation and amortization 29,897 39,040
Impairment loss from assets to be held and used 13,483 -
Gain on divestitures and sales of assets (2,939) (16)
Minority interest in net loss of subsidiaries - (999)
Equity in earnings of joint ventures (1,046) (223)
Amortization of discount on membership deposits 4,532 4,441
Deferred income taxes 1,607 (770)
Decrease in real estate held for sale 2,465 6,221
Increase in membership and other receivables, net (17,497) (5,414)
Increase (decrease) in accounts payable and accrued liabilities 6,283 (4,280)
Net change in deferred membership revenues 6,752 4,260
Other 7,712 2,880
---------- ----------
Cash flows provided from operations 50,650 39,312
Cash flows from investing activities:
Additions to property and equipment (60,658) (82,363)
Development of new facilities (7,680) (20,392)
Development of real estate held for sale (2,804) (11,784)
Acquisition of facilities (226,986) (1,010)
Investment in affiliates (35,886) (5,101)
Proceeds from disposition of subsidiaries and assets, net 2,921 2,360
Other 139 (865)
---------- ----------
Cash flows used by investing activities (330,954) (119,155)
Cash flows from financing activities:
Borrowings of long-term debt 273,117 97,847
Repayments of long-term debt (14,122) (10,185)
Membership deposits received, net 1,202 1,198
Treasury stock transactions, net (1,753) (5,366)
---------- ----------
Cash flows provided from financing activities 258,444 83,494
---------- ----------
Total net cash flows (21,860) 3,651
---------- ----------
Cash and cash equivalents at beginning of period 75,342 36,606
---------- ----------
Cash and cash equivalents at end of period $ 53,482 $ 40,257
========== ==========
See accompanying condensed notes to consolidated financial statements.
4
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 June 13, 2000 and the consolidated results of operations and cash
flows for the twelve weeks and twenty four weeks ended June 15, 1999 and June
13, 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.
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. In June
2000, SFAS 133 was further amended with the issuance of SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities"
which clarified certain accounting and reporting issues of SFAS 133. ClubCorp's
management is continuing to determine the effect of these new pronouncements,
however, they are not expected to have a significant impact on the balance sheet
or statement of operations. SFAS 133 will be reflected in ClubCorp's first
quarter 2001 Consolidated Financial Statements.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation: an Interpretation of APB
Opinion No. 25", which is effective July 1, 2000. This interpretation clarifies
various accounting issues for stock compensation plans. ClubCorp's management
has determined that the interpretation will not have an effect on its financial
statements.
Impairment of long-lived assets
- -------------------------------
Long-lived assets used by an entity are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
As a result of historical operating losses, ClubCorp evaluated the
recoverability of the long-lived assets at a resort and recorded an impairment
loss for the 12 weeks ended June 15, 1999. ClubCorp assessed the recoverability
of these long-lived assets by determining whether the fixed asset balance could
be recovered over its remaining life through estimated future cash flows. Fair
value, for purposes of calculating impairment, was measured based on discounted
estimated future cash flows using a risk-adjusted discount rate. Impaired
assets identified were property and equipment including land improvements and
buildings.
Reclassifications
- -----------------
Certain amounts previously reported have been reclassified to conform with the
current period presentation.
5
NOTE 2. WEIGHTED AVERAGE SHARES
- --------------------------------
The following table summarizes the weighted average number of shares used to
calculate basic and diluted earnings per share:
12 Weeks Ended 24 Weeks Ended
---------------------- ----------------------
June 15, JUNE 13, June 15, JUNE 13,
1999 2000 1999 2000
---------- ---------- ---------- ----------
Weighted average shares outstanding 85,137,904 94,291,570 85,190,123 94,383,772
Incremental shares from assumed conversions:
Options 1,365,570 1,343,530 1,442,733 1,421,674
Warrants - 5,037 - 13,661
---------- ---------- ---------- ----------
Diluted weighted average shares 86,503,474 95,640,137 86,632,856 95,819,107
========== ========== ========== ==========
The incremental common stock equivalents are antidilutive for the twenty four
weeks ended June 15, 1999 and June 13, 2000 due to the net losses for the
periods.
NOTE 3. PROPERTY AND EQUIPMENT
- ----------------------------------
Property and equipment consists of the following (dollars in thousands):
December 28, JUNE 13,
1999 2000
-------------- -----------
Land and land improvements $ 528,466 $ 557,008
Buildings and recreational facilities 378,560 389,625
Leasehold improvements 112,570 112,599
Furniture and fixtures 118,107 119,726
Machinery and equipment 222,762 235,920
Construction in progress 104,050 140,426
-------------- -----------
1,464,515 1,555,304
Accumulated depreciation and amortization (342,146) (367,461)
-------------- -----------
$ 1,122,369 $1,187,843
============== ===========
NOTE 4. COMPREHENSIVE INCOME (LOSS)
- ------------------------------------
The following summarizes the components of comprehensive income (loss) (dollars
in thousands):
12 Weeks Ended 24 Weeks Ended
--------------------- ----------------------
June 15, JUNE 13, June 15, JUNE 13,
1999 2000 1999 2000
--------- ---------- ---------- ----------
Net income (loss) $ 1,783 $ 6,302 $ (599) $ (5,828)
Foreign currency translation adjustment 960 (1,294) 619 (2,017)
--------- ---------- ---------- ----------
Total comprehensive income (loss) $ 2,743 $ 5,008 $ 20 $ (7,845)
========= ========== ========== ==========
6
NOTE 5. 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. 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. Financial information for the segments is as
follows (dollars in thousands):
12 Weeks Ended 24 Weeks Ended
---------------------- ----------------------
June 15, JUNE 13, June 15, JUNE 13,
1999 2000 1999 2000
---------- ---------- ---------- ----------
Operating revenues:
Country club and golf facilities $ 116,006 $ 125,067 $ 198,361 $ 225,321
Business and sports clubs 61,441 61,751 119,882 118,882
Resorts 62,680 61,638 95,908 91,575
---------- ---------- ---------- ----------
Total operating revenues for reportable segments 240,127 248,456 414,151 435,778
Other operations 11,819 14,359 14,302 22,106
Corporate services and eliminations 3,049 5,009 8,793 9,337
---------- ---------- ---------- ----------
Consolidated operating revenues $ 254,995 $ 267,824 $ 437,246 $ 467,221
========== ========== ========== ==========
Adjusted EBITDA:
Country club and golf facilities $ 36,812 $ 35,961 $ 54,653 $ 58,267
Business and sports clubs 7,031 7,783 12,805 13,715
Resorts 14,421 19,183 13,637 14,528
---------- ---------- ---------- ----------
Total Adjusted EBITDA for reportable segments 58,264 62,927 81,095 86,510
Other operations 414 1,385 (322) 1,084
Corporate services and eliminations (10,460) (14,060) (17,323) (22,651)
---------- ---------- ---------- ----------
Consolidated Adjusted EBITDA 48,218 50,252 63,450 64,943
Depreciation and amortization (16,389) (19,856) (29,897) (39,040)
Impairment loss from assets to be held and used (13,483) - (13,483) -
Net membership deposits and fees (7,389) (8,246) (5,342) (10,041)
Joint venture adjustment 229 (922) (21) (1,815)
---------- ---------- ---------- ----------
Consolidated operating income $ 11,186 $ 21,228 $ 14,707 $ 14,047
========== ========== ========== ==========
NOTE 6. 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 and 24 weeks ended June 15, 1999 and June 13, 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.
RESULTS OF OPERATIONS
TWELVE WEEKS ENDED JUNE 15, 1999 COMPARED TO TWELVE WEEKS ENDED JUNE 13, 2000
Consolidated Operations
Operating revenues increased 5.0% to $267.8 million for the twelve weeks
ended June 13, 2000 from $255.0 million for the twelve weeks ended June 15,
1999. The increase is due primarily to the increased membership revenue at same
store country club and golf facilities (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 3.8% to
$223.3 million for the twelve weeks ended June 13, 2000 from $215.2 million for
the twelve weeks ended June 15, 1999.
Operating costs and expenses, consisting of direct operating costs,
facility rentals, and maintenance, increased 6.1% to $205.0 million for the
twelve weeks ended June 13, 2000 from $193.2 million for the twelve weeks ended
June 15, 1999 primarily as a result of increased operating costs related to
increased revenue at same store facilities and an increase of $3.5 million in
insurance expense primarily due to increases in the accrual for estimated
insurance claims.
Depreciation and amortization expense for the twelve weeks ended June 13,
2000 increased $3.5 million or 21.2% primarily due to capital expansions at
existing facilities and increases in technology related assets.
Selling, general and administrative expenses increased 4.3% to $21.7
million for the twelve weeks ended June 13, 2000 from $20.8 million for the
twelve weeks ended June 15, 1999 primarily due to increases in marketing
expenses, compensation costs, bank facility fees and corporate facility rent
expense.
Net income for the twelve weeks ended June 13, 2000 was $6.3 million
compared to $1.8 million for the twelve weeks ended June 15, 1999, which
included an impairment loss on long-lived assets of $13.5 million. Excluding
the after-tax impact of this impairment loss, net income would have decreased by
$4.2 million from $10.5 million from the twelve weeks ended June 15, 1999 due
primarily to increases in interest expense resulting from an increase in the
outstanding long-term debt balance and the recognition of a gain on divestitures
and sales of assets of $2.7 million for the twelve weeks ended June 15, 1999 as
compared to a loss on divestitures and sales of assets of $0.2 million in the
twelve weeks ended June 13, 2000.
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.
8
Consolidated Adjusted EBITDA increased 4.4% to $50.3 million for the
twelve weeks ended June 13, 2000 from $48.2 million for the twelve weeks ended
June 15, 1999, due primarily to increases in net membership deposits and fees at
a same store resort, partially offset by decreases in operating income for
corporate services and eliminations resulting from increases in the Company's
accrual for estimated insurance claims.
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 June 15, 1999 and June 13, 2000 (dollars in
thousands):
Same Store Total
Country Club and Country Club and
Golf Facilities Golf Facilities
----------------- ------------------
1999 2000 1999 2000
------- -------- -------- --------
Number of facilities 91 91 126 125
Operating revenues $95,710 $100,665 $116,006 $125,067
Operating costs and expenses 70,529 73,529 87,550 94,087
Depreciation and amortization 6,939 7,128 10,050 11,385
------- -------- -------- --------
Segment operating income $18,242 $ 20,008 $ 18,406 $ 19,595
======= ======== ======== ========
Adjusted EBITDA $28,114 $ 28,858 $ 36,812 $ 35,961
======= ======== ======== ========
Operating revenues from total country club and golf facilities increased
7.8% due primarily to increased membership revenue at same store and developing
facilities along with increases in golf operations revenues at developing
facilities. Increased golf operations revenues at developing facilities are
primarily attributable to facilities acquired or opened after June 15, 1999.
Operating costs and expenses from total country club and golf facilities
increased 7.5% due primarily to the increased operating costs at developing
facilities related to increased revenues and increased payroll and payroll
related costs. The increase in depreciation and amortization in total country
club and golf facilities is primarily due to expansions at existing facilities
and increases in technology related assets.
Adjusted EBITDA for total country club and golf facilities decreased
slightly as a result of increased operating income for the twelve week period
ended June 13, 2000 offset by a greater decrease in net membership deposits and
fees at developing clubs.
9
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 June 15, 1999 and June 13, 2000 (dollars in
thousands):
Same Store Total Business
Business and Business and
Sports Clubs Sports Clubs
------------------ ------------------
1999 2000 1999 2000
-------- -------- -------- --------
Number of facilities 79 79 92 80
Operating revenues $ 57,746 $ 61,526 $ 61,441 $ 61,751
Operating costs and expenses 49,753 53,484 53,441 53,740
Depreciation and amortization 2,765 2,884 2,944 2,895
-------- -------- -------- --------
Segment operating income $ 5,228 $ 5,158 $ 5,056 $ 5,116
======== ======== ======== ========
Adjusted EBITDA $ 7,153 $ 7,805 $ 7,031 $ 7,783
======== ======== ======== ========
Segment operating income at total business and sports clubs remained
consistent despite the divestiture of ten business and sports clubs in the last
half of 1999 due to increased revenues and expenses at remaining facilities.
Adjusted EBITDA at same store business and sports clubs increased 9.1% due
to an increase in net membership deposits and fees.
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 June 15, 1999 and June 13, 2000 (dollars in thousands):
Same Store Resorts Total Resorts
-------------------- ------------------
1999 2000 1999 2000
--------- --------- -------- --------
Number of facilities 4 4 5 5
Operating revenues $ 61,705 $ 61,150 $62,680 $ 61,638
Operating costs and expenses 47,693 43,758 49,067 43,974
Depreciation and amortization 1,973 3,086 2,071 3,149
--------- --------- -------- --------
Segment operating income
before impairment loss 12,039 14,306 11,542 14,515
--------- -------- -------- --------
Impairment loss from assets
to be held and used 13,483 - 13,483 -
--------- --------- -------- --------
Segment operating income (loss) $ (1,444) $ 14,306 $(1,941) $ 14,515
========= ========= ======== ========
Adjusted EBITDA $ 14,821 $ 18,911 $14,421 $ 19,183
========= ========= ======== ========
Lodging data:
Room nights available 120,551 105,972
Occupancy rate 53.3% 69.6%
Average daily room rate per occupied room $ 175 $ 186
Average daily revenue per occupied room $ 840 $ 824
For the twelve week period ended June 15, 1999, operating revenues included
approximately $9.0 million of merchandise sales, ticket sales and corporate
hospitality tent revenue related to the hosting of the U.S. Open at Pinehurst
during the last two days of the period. Excluding the impact of this event,
operating revenues from same store resorts would have increased approximately
15.0% from approximately $53.0 million to $61.2 million for the twelve week
period ended June 13, 2000. This increase is attributable to increases in food
and beverage and lodging revenues at other same store resorts. Also included in
the twelve week period ended June 15, 1999 same store resorts results are the
operating costs and expenses related to the hosting of the U.S. Open of
approximately $8.0 million. Excluding the impact of this event, operating costs
and expenses in the twelve week period ended June 13, 2000 would have increased
approximately 10.0% from approximately $40.0 million to $43.8 million due to
increases in food and beverage and lodging costs resulting from increased
revenues in these areas and increased marketing costs at same store resorts.
Also included in the twelve week period ended June 15, 1999 same store resorts
results is an impairment loss of $13.5 million related to the long lived assets
at Daufuskie.
10
Excluding the impact of the U.S. Open and the impairment loss, gross margin
at same store resorts increased from approximately 21.0% for the twelve weeks
ended June 15, 1999 to 23.4% for the twelve weeks ended June 13, 2000 primarily
resulting from the increase in the average daily room rate per occupied room at
all same store resorts.
The increase in Adjusted EBITDA of 33.0% at total resorts is primarily
attributable to the increased segment operating income before impairment loss at
same store resorts, as discussed in the preceding paragraphs, and increases in
initiation fees at Barton Creek related to the opening of a new golf course.
Due to strong initial demand for membership at Barton Creek, management does not
expect that this growth rate will be sustained.
24 WEEKS ENDED JUNE 15, 1999 COMPARED TO 24 WEEKS ENDED JUNE 13, 2000
Consolidated Operations
Operating revenues increased 6.9% to $467.2 million for the 24 weeks ended
June 13, 2000 from $437.2 million for the 24 weeks ended June 15, 1999 due
primarily to the addition of the revenues from the Cobblestone facilities,
increased membership revenue at total country club and golf facilities,
increased lodging revenue at same store resorts and increased real estate sales.
The Cobblestone facilities were acquired on March 31, 1999. The increase in
lodging revenue is primarily due to increased occupancy percentages at three
same store resorts and increases in real estate sales is primarily a result of
increased sales at Owners Club properties. Operating revenues of same store
facilities increased 4.2% to $391.4 million for the 24 week period ended June
13, 2000 from $375.8 million for the 24 week period ended June 15, 1999.
Operating costs and expenses, consisting of direct operating costs,
facility rentals, and maintenance, increased 9.4% to $374.4 million for the 24
weeks ended June 13, 2000 from $342.4 million for the 24 week period ended June
15, 1999 primarily as a result of the addition of the Cobblestone facilities on
March 31, 1999, increased operating costs relating to increased revenues at same
store country club and golf facilities and same store resorts and increased
costs of real estate sales.
Depreciation and amortization expense for the 24 week period ended June 13,
2000 increased 30.4% or $9.1 million primarily due to the addition of the
Cobblestone facilities, capital expansions at existing facilities and increases
in technology related assets.
Selling, general and administrative expenses increased 8.2% to $39.7
million for the 24 weeks ended June 13, 2000 from $36.7 million for the 24 weeks
ended June 15, 1999 primarily due to increases in marketing expenses,
compensation costs, bank facility fees and corporate facility rent expense.
Also included in the 24 week period ended June 15, 1999 is $0.9 million in costs
incurred for Year 2000 readiness efforts.
Net loss for the 24 week period ended June 13, 2000 increased to $5.8
million from $0.6 million for the 24 week period ended June 15, 1999. Included
in the net loss for the 24 weeks ended June 15, 1999 is an impairment loss of
$13.5 million on long-lived assets. Excluding the after-tax impact of this
impairment loss, net income would have been $8.2 million for the 24 week period
ended June 15, 1999. The decrease for the 24 weeks ended June 13, 2000 would
have been $14.0 million as a result of the items discussed in the preceding
paragraphs as well as the decrease in gain on divestitures and sales of assets,
increased interest expense and decreases in the income tax provision. The
increase in interest expense of $4.7 million for the 24 week period ended June
13, 2000 is primarily due to both the increase in the outstanding debt balance
and the increase in the interest rate on the outstanding debt for 24 week
period.
Consolidated Adjusted EBITDA increased $1.5 million to $64.9 million for
the 24 week period ended June 13, 2000 from $63.4 million for the 24 week period
ended June 15, 1999 due primarily to increases in net membership deposits and
fees for the addition of the Cobblestone facilities on March 31, 1999 and
increased initiation fees at a resort. The increase in net membership deposits
and fees is partially offset by decreases in corporate services and eliminations
due to increased selling, general and administrative expenses and increases in
the Company's accrual for estimated insurance claims.
11
SEGMENT AND OTHER INFORMATION - 24 WEEKS
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 facility segment for the
24 week periods ended June 15, 1999 and June 13, 2000 (dollars in thousands):
Same Store Total
Country Club and Country Club and
Golf Facilities Golf Facilities
------------------ ------------------
1999 2000 1999 2000
-------- -------- -------- --------
Number of facilities 91 91 126 125
Operating revenues $173,553 $182,422 $198,361 $225,321
Operating costs and expenses 129,320 136,028 150,718 174,328
Depreciation and amortization 13,884 14,198 17,269 22,597
-------- -------- -------- --------
Segment operating income $ 30,349 $ 32,196 $ 30,374 $ 28,396
======== ======== ======== ========
Adjusted EBITDA $ 45,604 $ 48,560 $ 54,653 $ 58,267
======== ======== ======== ========
Operating revenues from total country club and golf facilities increased
13.6% due primarily to the addition of the Cobblestone properties on March 31,
1999 and increases in membership revenues at same store facilities. Operating
costs and expenses from total country club and golf facilities increased 15.7%
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 addition of the Cobblestone facilities
is responsible for the majority of the increase in depreciation and amortization
for total country club and golf facilities. The decrease in gross margin on
total country club and golf facilities from 15.3% at June 15, 1999 to 12.6% at
June 13, 2000 is primarily a result of an increase in payroll related expenses,
member relations expenses and golf course maintenance.
The 6.6% increase in Adjusted EBITDA for total country club and golf
facilities is primarily due to increases in operating income before depreciation
and amortization and consistent levels of net initiation deposits and fees for
the 24 week period ended June 13, 2000 and June 15, 1999.
Business and Sports Clubs
The following table presents certain summary financial data and other
operating data for the Company's business and sports club segment for the 24
week periods ended June 15, 1999 and June 13, 2000 (dollars in thousands):
Same Store Total Business
Business and Business and
Sports Clubs Sports Clubs
-------------------- --------------------
1999 2000 1999 2000
--------- --------- --------- ---------
Number of facilities 79 79 92 80
Operating revenues $ 112,280 $ 118,068 $ 119,882 $ 118,882
Operating costs and expenses 97,923 103,993 5,750 104,705
Depreciation and amortization 5,439 5,809 5,910 5,849
--------- --------- --------- ---------
Segment operating income $ 8,918 $ 8,266 $ 8,222 $ 8,328
========= ========= ========= =========
Adjusted EBITDA $ 13,109 $ 13,605 $ 12,805 $ 13,715
========= ========= ========= =========
Segment operating income at total business and sports clubs remained
consistent despite the divestiture of ten business and sports clubs in the last
half of 1999 due to increased revenues and expenses at remaining facilities.
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Resorts
The following table presents certain summary financial data and other
operating data for the Company's resort segment for the 24 week period ended
June 15, 1999 and June 13, 2000 (dollars in thousands):
Same Store Resorts Total Resorts
-------------------- ------------------
1999 2000 1999 2000
--------- --------- -------- --------
Number of facilities 4 4 5 5
Operating revenues $ 89,938 $ 90,932 $95,908 $ 91,575
Operating costs and expenses 78,417 78,421 82,944 78,735
Depreciation and amortization 4,095 5,934 4,289 6,032
--------- --------- -------- --------
Segment operating income
before impairment loss 7,426 6,577 8,675 6,808
========= ========= ======== ========
Impairment loss from assets
to be held and used 13,483 - 13,483 -
--------- --------- -------- --------
Segment operating income (loss) $ (6,057) $ 6,577 $(4,808) $ 6,808
--------- --------- -------- --------
Adjusted EBITDA $ 12,194 $ 14,199 $13,637 $ 14,528
========= ========= ======== ========
Lodging data:
Room nights available 218,866 211,677
Occupancy rate 50.7% 55.4%
Average daily room rate per occupied room $ 175 $ 188
Average daily revenue per occupied room $ 742 $ 777
For the 24 week period ended June 15, 1999, operating revenues included
approximately $9.0 million of merchandise sales, ticket sales and corporate
hospitality tent revenue related to the hosting of the U.S. Open at Pinehurst
during the last two days of the period. Excluding the impact of this event,
operating revenues from same store resorts would have increased approximately
12.0% from approximately $81.0 million to $90.9 million for the 24 week period
ended June 13, 2000. This increase is attributable to increases in membership,
food and beverage and lodging revenues at other same store resorts. The
increase in membership revenues is primarily attributable to increased
membership at Barton Creek in relation to the opening of a new golf course.
Increased food and beverage and lodging revenues are primarily attributable to
increased occupancy rates at Barton Creek, Daufuskie and The Homestead. Also
included in the 24 week period ended June 15, 1999 same store resorts results
are the operating costs and expenses related to the hosting of the U.S. Open of
approximately $8.0 million. Excluding the impact of this event, operating costs
and expenses in the 24 week period ended June 13, 2000 would have increased
approximately 12.0% from approximately $70.0 million to $78.4 million due to
increases in food and beverage and lodging costs resulting from increased
revenues in these areas and increased marketing costs at same store resorts.
The difference between same store and total resorts segment operating income
(loss) for 1999 is primarily due to a resort which was divested during the third
quarter of 1999. Also included in 1999 same store resorts is an impairment loss
of $13.5 million related to long-lived assets at Daufuskie.
Excluding the impact of the U.S. Open and the impairment loss, gross margin
at same store resort decreased from approximately 8.5% for the 24 week period
ended June 15, 1999 to 7.3% for the 24 week period ended June 13, 2000 primarily
due to lower first quarter margins at Pinehurst and first quarter increases in
general and administrative costs at same store resorts. For the 24 week period
this is partially offset by the improved performance of all same store resorts
for the twelve week period ended June 13, 2000.
The increase in Adjusted EBITDA of 16.4% at same store resorts is comprised
of decreased segment operating income before impairment loss at same store
resorts and the increase in initiation fees at Barton Creek related to the
opening of a new golf course. Due to strong initial demand for membership at
Barton Creek, management does not expect that this growth rate will be
sustained.
13
Other Operations
Realty operating revenues increased $5.1 million from $11.0 million for the
24 weeks ended June 15, 1999 to $16.1 million for the 24 week period ended June
13, 2000, due primarily to real estate revenues associated with the Owners Club
programs at several locations. Revenues during the 24 week period ended June
15, 1999 were primarily related to the sales of land held for sale in Colorado.
Segment operating income (loss) for realty decreased from income of $1.3 million
for the 24 week period ended June 15, 1999 to a loss of $2.0 million for the 24
weeks ended June 13, 2000 due primarily to the increased marketing costs at
Owners Club properties including a property acquired during the fourth quarter
of 1999.
SEASONALITY OF 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, long-term debt and,
in a 1999 transaction, through the sale of common stock for total consideration
of $150.0 million to an investor group. 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, which has grown in the last year due to
the information technology initiative which the Company has substantially
completed. 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 $70.0 million and
$85.0 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.
14
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.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Sale of Unregistered Securities
During the second quarter of 2000 the Company sold unregistered securities.
The issuance by the Company of the securities sold in this transaction was not
registered under the Securities Act of 1933, pursuant to the exemption
contemplated by Section 4(2) for transactions not involving a public offering.
On May 1, 2000, the Company sold 10,000 shares of treasury stock to an officer
at $17.05 per share for aggregate consideration of $170,500.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 3, 2000, the shareholders of ClubCorp, Inc., held their annual
meeting to elect directors. The following directors were elected:
Robert H. Dedman, Sr., Robert H. Dedman, Jr., Patricia Dedman Dietz, James M.
Hinckley, James L. Singleton and Bahram Shirazi.
There were no other matters submitted to a vote of stockholders at the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Executive Liability and Indemnification Policy Endorsements No. 15
through No. 25
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
15
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: July 28, 2000 By: /s/Jeffrey P. Mayer
------------- -----------------------
Jeffrey P. Mayer
Chief Financial Officer
16