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 September 5, 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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No.
---
The number of shares of the Registrant's Common Stock outstanding as of October
3, 2000 was 94,216,333.
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 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
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 September 5, 2000, and the related consolidated
statements of operations for the twelve weeks and thirty six weeks ended
September 5, 2000 and September 7, 1999 and cash flows for the thirty six weeks
ended September 5, 2000 and September 7, 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 auditing standards generally accepted in the United States of
America, 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 accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, 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
October 13, 2000
1
CLUBCORP, INC.
- --------------
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share amounts)
(Unaudited)
December 28, SEPTEMBER 5,
Assets 1999 2000
------ -------------- --------------
Current assets:
Cash and cash equivalents $ 36,606 $ 31,241
Membership and other receivables, net 109,391 123,213
Inventories 22,937 23,410
Other assets 16,213 27,547
-------------- --------------
Total current assets 185,147 205,411
Property and equipment, net 1,122,369 1,271,709
Other assets 239,014 255,946
-------------- --------------
$ 1,546,530 $ 1,733,066
============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 76,063 $ 74,944
Long-term debt - current portion 57,867 65,181
Other liabilities 106,120 124,961
-------------- --------------
Total current liabilities 240,050 265,086
Long-term debt 454,258 601,661
Other liabilities 118,069 136,464
Membership deposits 96,365 103,476
Redemption value of common stock held by benefit plan 72,835 70,936
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 94,216,333
outstanding at September 5, 2000 996 996
Additional paid-in capital 160,408 161,065
Accumulated other comprehensive income (loss) 841 (1,906)
Retained earnings 449,840 447,232
Treasury stock, 5,157,505 shares at December 28, 1999
and 5,378,075 shares at September 5, 2000 (47,132) (51,944)
-------------- --------------
Total stockholders' equity 564,953 555,443
-------------- --------------
$ 1,546,530 $ 1,733,066
============== ==============
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 36 Weeks Ended
-------------------------------- -------------------------------
September 7, SEPTEMBER 5, September 7, SEPTEMBER 5,
1999 2000 1999 2000
---------------- -------------- ---------------- --------------
Operating revenues $ 266,809 $ 254,020 $ 706,741 $ 721,241
Operating costs and expenses 206,848 196,263 551,961 570,648
Depreciation and amortization 17,600 21,732 47,497 60,772
Selling, general and administrative expenses 19,483 19,002 55,894 57,923
Impairment loss from assets to be held and used - - 13,483 -
---------------- -------------- ---------------- --------------
Operating income 22,878 17,023 37,906 31,898
Gain (loss) on divestitures and sales of assets (1,193) 118 1,746 134
Interest and investment income 1,021 666 2,547 1,959
Interest expense (11,878) (13,615) (29,349) (36,265)
---------------- -------------- ---------------- --------------
Income (loss) from operations before income tax
provision and minority interest 10,828 4,192 12,850 (2,274)
Income tax provision (4,123) (3,060) (6,744) (3,421)
Minority interest - 189 - 1,188
---------------- -------------- ---------------- --------------
Net income (loss) $ 6,705 $ 1,321 $ 6,106 $ (4,507)
================ ============== ================ ==============
Basic and diluted income (loss) per share $ .08 $ .01 $ .07 $ (.05)
================ ============== ================ ==============
See accompanying condensed notes to consolidated financial statements.
3
CLUBCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
36 Weeks Ended
--------------------------------
September 7, SEPTEMBER 5,
1999 2000
---------------- --------------
Cash flows from operations:
Net income (loss) $ 6,106 $ (4,507)
Adjustments to reconcile net income (loss) to cash flows provided from operations:
Depreciation and amortization 47,497 60,772
Impairment loss from assets to be held and used 13,483 -
Gain on divestitures and sales of assets (1,746) (134)
Minority interest in net loss of subsidiaries - (1,188)
Equity in earnings of joint ventures (2,233) (593)
Amortization of discount on membership deposits 7,113 6,787
Deferred income taxes 5,605 1,299
Decrease in real estate held for sale 7,728 10,536
Increase in membership and other receivables, net (12,497) (13,774)
Increase (decrease) in accounts payable and accrued liabilities 6,781 (2,922)
Net change in deferred membership revenues 8,235 11,118
Other (12,531) 11,944
---------------- --------------
Cash flows provided from operations 73,541 79,338
Cash flows from investing activities:
Additions to property and equipment (96,349) (113,815)
Development of new facilities (14,862) (35,225)
Development of real estate held for sale (9,620) (20,989)
Acquisition of facilities (248,185) (32,598)
Investment in affiliates (41,886) (5,272)
Proceeds from disposition of subsidiaries and assets, net 2,921 10,303
Other (175) (1,478)
---------------- --------------
Cash flows used by investing activities (408,156) (199,074)
Cash flows from financing activities:
Borrowings of long-term debt 343,352 133,695
Repayments of long-term debt (36,274) (16,131)
Membership deposits received, net 1,904 1,632
Treasury stock transactions, net (1,924) (4,825)
---------------- --------------
Cash flows provided from financing activities 307,058 114,371
---------------- --------------
Total net cash flows (27,557) (5,365)
---------------- --------------
Cash and cash equivalents at beginning of period 75,342 36,606
---------------- --------------
Cash and cash equivalents at end of period $ 47,785 $ 31,241
================ ==============
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
accounting principles generally accepted in the United States of America 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 September 5, 2000, the consolidated results of operations for the
twelve weeks and thirty six weeks ended September 7, 1999 and September 5, 2000,
and the consolidated cash flows for the thirty six weeks ended September 7, 1999
and September 5, 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. Based on
management's preliminary review of ClubCorp's derivative instruments, the effect
of these new pronouncements is 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 was 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.
Reclassifications
- -----------------
Certain amounts previously reported have been reclassified to conform with the
current period presentation.
5
NOTE 2. ACQUISITIONS
- ---------------------
ClubCorp's acquisitions in 1999 and 2000 were accounted for using the purchase
method and, accordingly, the acquired assets and liabilities were recorded based
on their estimated fair values at the dates of acquisition.
During the first thirty six weeks of 1999, ClubCorp purchased the minority
interest in a previously consolidated resort property and substantially all the
assets of 26 golf facilities, including 22 from The Cobblestone Golf Group. The
26 facilities include ten country clubs, 14 golf clubs and two public golf
courses.
During the first thirty six weeks of 2000, ClubCorp purchased the remaining
interest in a previously non-consolidated joint venture and substantially all
the assets of two public golf courses, one golf club under construction and one
sports club.
The following unaudited proforma financial information assumes the acquisitions
occurred at the beginning of their acquisition year and the preceding year. This
proforma summary does not necessarily reflect the results of operations as they
would have occurred or the results which may occur in the future (dollars in
thousands, except per share data):
36 Weeks Ended
-------------------------------
September 7, SEPTEMBER 5,
1999 2000
--------------- --------------
Operating revenues $ 732,897 $ 728,954
=============== ==============
Net income (loss) $ 1,686 $ (5,870)
=============== ==============
Diluted income (loss) per share $ .02 $ (.06)
=============== ==============
NOTE 3. INCOME TAX PROVISION
- -----------------------------
The income tax provisions for the twelve weeks and thirty six weeks ended
September 7, 1999 and September 5, 2000 differ from amounts computed by applying
the U.S. Federal tax rate of 35% to Income (loss) from operations before income
taxes and minority interest primarily due to foreign and state income taxes, net
of Federal benefit, and the effect of consolidated operations of foreign and
other entities not consolidated for Federal tax purposes.
6
NOTE 4. 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 36 Weeks Ended
---------------------------- ----------------------------
September 7, SEPTEMBER 5, September 7, SEPTEMBER 5,
1999 2000 1999 2000
-------------- ------------ -------------- ------------
Weighted average shares outstanding 85,118,307 94,216,333 85,166,184 94,339,198
Incremental shares from assumed conversions:
Options 1,378,857 1,259,205 1,334,332 -
Warrants - 7,096 - -
-------------- ------------ -------------- ------------
Diluted weighted average shares 86,497,164 95,482,634 86,500,516 94,339,198
============== ============ ============== ============
Diluted weighted average shares for the twelve weeks ended September 5, 2000
excludes the assumed conversion of 1,034,500 options due to their antidilutive
effect. Diluted weighted average shares for the thirty six weeks ended
September 5, 2000 excludes incremental shares from assumed conversion of
1,284,079 shares due to the net loss for the period.
NOTE 5. PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consists of the following (dollars in thousands):
December 28, SEPTEMBER 5,
1999 2000
-------------- --------------
Land and land improvements $ 528,466 $ 612,998
Buildings and recreational facilities 378,560 426,603
Leasehold improvements 112,570 112,805
Furniture and fixtures 118,107 128,740
Machinery and equipment 222,762 264,848
Construction in progress 104,050 109,131
-------------- --------------
1,464,515 1,655,125
Accumulated depreciation and amortization (342,146) (383,416)
-------------- --------------
$ 1,122,369 $ 1,271,709
============== ==============
NOTE 6. COMPREHENSIVE INCOME (LOSS)
- ------------------------------------
The following summarizes the components of comprehensive income (loss) (dollars
in thousands):
12 Weeks Ended 36 Weeks Ended
-------------------------------- --------------------------------
September 7, SEPTEMBER 5, September 7, SEPTEMBER 5,
1999 2000 1999 2000
---------------- -------------- ---------------- --------------
Net income (loss) $ 6,705 $ 1,321 $ 6,106 $ (4,507)
Foreign currency translation adjustment (831) (730) (212) (2,747)
---------------- -------------- ---------------- --------------
Total comprehensive income (loss) $ 5,874 $ 591 $ 5,894 $ (7,254)
================ ============== ================ ==============
7
NOTE 7. 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 36 Weeks Ended
--------------------------------- --------------------------------
September 7, SEPTEMBER 5, September 7, SEPTEMBER 5,
1999 2000 1999 2000
----------------- -------------- ---------------- --------------
Operating revenues:
Country club and golf facilities $ 118,090 $ 125,107 $ 316,451 $ 350,428
Business and sports clubs 55,026 52,344 177,594 171,226
Resorts 78,243 53,653 174,151 145,228
----------------- -------------- ---------------- --------------
Total operating revenues for reportable segments 251,359 231,104 668,196 666,882
Other operations 12,847 20,372 26,503 40,739
Corporate services 2,603 2,544 12,042 13,620
----------------- -------------- ---------------- --------------
Consolidated operating revenues $ 266,809 $ 254,020 $ 706,741 $ 721,241
================= ============== ================ ==============
Adjusted EBITDA:
Country club and golf facilities $ 28,234 $ 30,642 $ 82,887 $ 88,909
Business and sports clubs 3,020 3,974 15,825 17,689
Resorts 19,443 11,210 33,080 25,738
----------------- -------------- ---------------- --------------
Total Adjusted EBITDA for reportable segments 50,697 45,826 131,792 132,336
Other operations 4,114 8,747 3,792 9,831
Corporate services (10,210) (10,453) (27,212) (32,276)
----------------- -------------- ---------------- --------------
Consolidated Adjusted EBITDA 44,601 44,120 108,372 109,891
Depreciation and amortization (17,600) (21,732) (47,497) (60,772)
Impairment loss from assets to be held and used - - (13,483) -
Net membership deposits and fees (1,717) (2,542) (7,059) (12,583)
Joint venture adjustment (2,406) (2,823) (2,427) (4,638)
----------------- -------------- ---------------- --------------
Consolidated operating income $ 22,878 $ 17,023 $ 37,906 $ 31,898
================= ============== ================ ==============
NOTE 8. 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.
8
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 12 and 36 weeks ended September 7, 1999 and September 5,
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
12 WEEKS ENDED SEPTEMBER 7, 1999 COMPARED TO 12 WEEKS ENDED SEPTEMBER 5, 2000
Consolidated Operations
Operating revenues decreased $12.8 million to $254.0 million for the 12
weeks ended September 5, 2000 from $266.8 million for the 12 weeks ended
September 7, 1999. This decrease is primarily due to operating revenues at
Pinehurst for the 12 weeks ended September 7, 1999 of approximately $28.0
million related to the hosting of the 1999 U.S. Open during the first five days
of the period. This decrease is partially offset by increases in operating
revenues at same store facilities (i.e., those for which a comparable period of
activity exists, generally those owned for at least eighteen months to two
years).
Operating costs and expenses, consisting of direct operating costs,
facility rentals, and maintenance, decreased 5.1% to $196.3 million for the 12
weeks ended September 5, 2000 from $206.8 million for the 12 weeks ended
September 7, 1999 primarily as a result of operating costs and expenses of
approximately $19.0 million incurred during the 12 weeks ended September 7, 1999
as a result of hosting the 1999 U.S. Open at Pinehurst partially offset by
increases in the current period operating costs and expenses incurred at same
store facilities resulting from increased revenues at these facilities.
Depreciation and amortization for the 12 weeks ended September 5, 2000
increased $4.1 million or 23.3% primarily due to capital expansions at existing
facilities and increases in technology related assets.
The income tax provisions for the 12 weeks ended September 7, 1999 and
September 5, 2000 differ from amounts computed by applying the U.S. Federal tax
rate of 35% to pretax net income primarily due to foreign and state income
taxes, net of Federal benefit, and the effect of consolidated operations of
foreign and other entities not consolidated for Federal tax purposes.
Net income for the 12 weeks ended September 5, 2000 was $1.3 million
compared to $6.7 million for the 12 weeks ended September 7, 1999, due primarily
to the current period decrease in operating income of approximately $9.0 million
relating to the hosting of the 1999 U.S. Open at Pinehurst for the period ended
September 7, 1999. Also impacting net income was the $1.7 million increase in
interest expense. The increase in interest expense for the 12 week period ended
September 5, 2000 is primarily due to both the increase in the outstanding debt
balance and the increase in the interest rate on the majority of the debt
outstanding of approximately 225 basis points.
9
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
from consolidated entities, 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.
Consolidated Adjusted EBITDA decreased to $44.1 million for the 12 weeks
ended September 5, 2000 from $44.6 million for the 12 weeks ended September 7,
1999. This decrease is primarily due to decreased operating income due to the
hosting of the U.S. Open, which resulted in Adjusted EBITDA of approximately
$9.0 million. Excluding the impact of the U.S. Open, Adjusted EBITDA would have
increased approximately 24.0% from $35.6 million to $44.1 million due to
increases in operating income before depreciation and amortization as discussed
in the following paragraphs and increased net membership deposits and fees at
developing country club and golf facilities.
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 12 weeks ended September 7, 1999 and September 5, 2000 (dollars in
thousands):
Same Store Total
Country Club and Country Club and
Golf Facilities Golf Facilities
------------------- -------------------
1999 2000 1999 2000
-------- --------- -------- ---------
Number of facilities 90 90 127 127
Operating revenues $ 94,401 $ 96,966 $118,090 $ 125,107
Operating costs and expenses 71,995 75,396 91,693 97,732
Depreciation and amortization 6,383 7,417 11,190 11,929
-------- --------- -------- ---------
Segment operating income $ 16,023 $ 14,153 $ 15,207 $ 15,446
======== ========= ======== =========
Adjusted EBITDA $ 22,546 $ 19,968 $ 28,234 $ 30,642
======== ========= ======== =========
Operating revenues from total country club and golf facilities increased
5.9% primarily due to increased golf operations revenue at developing
facilities. Increased golf operations revenue at developing facilities is
primarily attributable to facilities acquired or opened after September 7, 1999.
Operating costs and expenses from total country club and golf facilities
increased 6.6% due primarily to the increased operating costs related to
increased revenues, increased general and administrative costs and the addition
of the costs at facilities acquired or opened after September 7, 1999.
Adjusted EBITDA for total country club and golf facilities increased 8.5%
primarily due to an increase in net membership deposits and fees at developing
clubs partially offset by a decrease in net membership deposits and fees at same
store facilities.
10
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 12
weeks ended September 7, 1999 and September 5, 2000 (dollars in thousands):
Same Store Business Total Business
and Sports Clubs and Sports Clubs
-------------------- --------------------
1999 2000 1999 2000
--------- --------- --------- ---------
Number of facilities 79 79 90 80
Operating revenues $ 51,952 $ 52,229 $ 55,026 $ 52,344
Operating costs and expenses 47,699 47,683 51,431 48,061
Depreciation and amortization 2,358 2,853 2,515 2,868
--------- --------- --------- ---------
Segment operating income $ 1,895 $ 1,693 $ 1,080 $ 1,415
========= ========= ========= =========
Adjusted EBITDA $ 3,635 $ 4,231 $ 3,020 $ 3,974
========= ========= ========= =========
Adjusted EBITDA for total business and sports clubs increased 31.6% due to
an increase in net membership deposits and fees at same store facilities and a
slight increase in gross margin resulting from the prior year divestitures of
underperforming facilities and the positive impact of lease buyouts at two
facilities.
Resorts
The following table presents certain summary financial data and other
operating data for the Company's resorts segment for the 12 weeks ended
September 7, 1999 and September 5, 2000 (dollars in thousands):
Same Store Resorts Total Resorts
-------------------- -----------------
1999 2000 1999 2000
--------- --------- ------- --------
Number of facilities 4 4 5 5
Operating revenues $ 78,036 $ 53,461 $78,243 $ 53,653
Operating costs and expenses 59,590 43,003 60,022 43,131
Depreciation and amortization 2,479 3,643 2,550 3,684
--------- --------- ------- --------
Segment operating income $ 15,967 $ 6,815 $15,671 $ 6,838
========= ========= ======= ========
Adjusted EBITDA $ 19,615 $ 11,146 $19,443 $ 11,210
========= ========= ======= ========
Lodging data:
Room nights available 114,445 126,269
Occupancy rate 61.9% 64.5%
Average daily room rate per occupied room $ 178 $ 183
Average daily revenue per occupied room $ 701 $ 657
11
For the 12 weeks ended September 7, 1999, operating revenues included
approximately $28.0 million of merchandise sales, ticket sales and corporate
hospitality tent revenue related to the hosting of the U.S. Open at Pinehurst
during the first five days of the period. Excluding the impact of this event,
operating revenues from same store resorts would have increased approximately
7.0% from approximately $50.0 million to $53.5 million for the 12 week period
ended September 5, 2000. This increase is attributable to increased lodging and
food and beverage revenues at same store facilities. Also included in the 12
weeks ended September 7, 1999 same store resorts results are the operating costs
and expenses related to the hosting of the U.S. Open of approximately $19.0
million. Excluding the impact of this event, operating costs and expenses
during the 12 weeks ended September 5, 2000 would have increased approximately
$2.4 million due to increased operating costs related to increased revenues.
The increase of 47.0% in depreciation and amortization at same store facilities
is due to capital expansions and renovations at all same store resorts which
occurred during the previous year.
Excluding the $9.0 million impact of the U.S. Open on same store
facilities, the change in Adjusted EBITDA would have been an increase of
approximately 5.0% due to increased operations as discussed in the preceding
paragraph.
Other Operations
Realty operating revenues increased from $8.3 million for the 12 weeks
ended September 7, 1999 to $15.1 million for the 12 weeks ended September 5,
2000, due primarily to increased real estate revenues at the Owner's Club
programs at several locations. Operating income (loss) for realty increased
from ($0.5) million for the 12 weeks ended September 7, 1999 to $4.0 million for
the 12 weeks ended September 5, 2000.
36 WEEKS ENDED SEPTEMBER 7, 1999 COMPARED TO 36 WEEKS ENDED SEPTEMBER 5, 2000
Consolidated Operations
Operating revenues increased to $721.2 million for the 36 weeks ended
September 5, 2000 from $706.7 million for the 36 weeks ended September 7, 1999
due primarily to the addition of the revenues from the Cobblestone facilities
which were acquired on March 31, 1999, increased membership revenue at total
country club and golf facilities, increased lodging revenue at same store
resorts and increased real estate sales. This increase exceeds the offsetting
decrease of approximately $37.0 million of revenues associated with hosting the
1999 U.S. Open at Pinehurst during the 36 weeks ended September 7, 1999. The
increase in lodging revenue is attributable to increased occupancy percentages
at two same store resorts and the increase in real estate sales is primarily a
result of increased sales at Owner's Club properties. Operating revenues of
same store facilities decreased to $591.2 million for the 36 weeks ended
September 5, 2000 from $599.8 million for the 36 weeks ended September 7, 1999,
primarily due to hosting the U.S. Open at Pinehurst during the 36 weeks ended
September 7, 1999 which is offset by increased revenues at all segments during
the 36 weeks ended September 5, 2000.
Operating costs and expenses, consisting of direct operating costs,
facility rentals, and maintenance, increased to $570.6 million for the 36 weeks
ended September 5, 2000 from $552.0 million for the 36 weeks ended September 7,
1999. This change is comprised of approximately $27.0 million at same store
resorts due to operating costs and expenses incurred during the 36 weeks ended
September 7, 1999 as a result of hosting the 1999 U.S. Open at Pinehurst. The
decrease is offset by an increase in operating costs and expenses at same store
facilities resulting from increased revenues at these facilities and the
addition of the operating costs and expenses of the Cobblestone facilities.
Depreciation and amortization for the 36 weeks ended September 5, 2000
increased 28.0% or $13.3 million primarily due to the addition of the
Cobblestone facilities, capital expansions at existing facilities and increases
in technology related assets.
For the 36 weeks ended September 7, 1999, an impairment loss of $13.5
million relating to long-lived assets at a resort facility was recorded. The
Company assessed the recoverability of the assets by determining whether such
assets could be recovered over their remaining estimated life through estimated
future cash flows. This loss is reported separately as a component of operating
income in the Company's Consolidated Financial Statements.
The income tax provisions for the 36 weeks ended September 7, 1999 and
September 5, 2000 differ from amounts computed by applying the U.S. Federal tax
rate of 35% to pretax net income primarily due to foreign and state income
taxes, net of Federal benefit, and the effect of consolidated operations of
foreign and other entities not consolidated for Federal tax purposes.
12
Net income (loss) for the 36 weeks ended September 5, 2000 decreased to
($4.5) million compared to $6.1 million for the 36 weeks ended September 7,
1999, due primarily to an increase in depreciation and amortization, an increase
in interest expense and the impact of approximately $10.0 million in operating
income from the U.S. Open at Pinehurst for the period ended September 7, 1999.
This is partially offset by the impact of the $13.5 million impairment loss
recognized in the 36 weeks ended September 7, 1999. The $6.9 million increase
in interest expense for the 36 weeks ended September 5, 2000 is primarily due to
both the increase in the outstanding debt balance and the increase in the
interest rate on the majority of the debt outstanding of approximately 225 basis
points.
As discussed previously, the U.S. Open had a significant impact on the 36
weeks ended September 7, 1999. ClubCorp recognized total profit of $7.0 million
for the marketing, preparation and hosting of the event which is reflected in
the results of operations for 1999 and prior years.
Consolidated Adjusted EBITDA increased $1.5 million to $109.9 million for
the 36 weeks ended September 5, 2000 from $108.4 million for the 36 weeks ended
September 7, 1999. Excluding the $10.0 million impact of the U.S. Open,
Adjusted EBITDA would have increased approximately 12.0% from approximately
$98.0 million due to increases in operating income before depreciation and
amortization and increases in net membership deposits and fees. The increase in
net membership deposits and fees is due to the acquisition and opening of
developing country club and golf facilities and increased initiation fees at a
same store resort facility.
SEGMENT AND OTHER INFORMATION - 36 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 facilities segment for
the 36 weeks ended September 7, 1999 and September 5, 2000 (dollars in
thousands):
Same Store Total
Country Club and Country Club and
Golf Facilities Golf Facilities
1999 2000 1999 2000
-------- --------- -------- ---------
Number of facilities 90 90 127 127
Operating revenues $266,343 $ 277,883 $316,451 $ 350,428
Operating costs and expenses 199,944 210,092 242,411 272,060
Depreciation and amortization 20,151 21,513 28,459 34,526
-------- --------- -------- ---------
Segment operating income $ 46,248 $ 46,278 $ 45,581 $ 43,842
======== ========= ======== =========
Adjusted EBITDA $ 67,912 $ 67,426 $ 82,887 $ 88,909
======== ========= ======== =========
Operating revenues from total country club and golf facilities increased
10.7% due primarily to the addition of the Cobblestone properties on March 31,
1999 and other developing facilities and increased membership revenues at same
store facilities. Operating costs and expenses from total country club and golf
facilities increased 12.2% due primarily to the addition of the operating costs
and expenses of the Cobblestone facilities and other developing facilities. The
slight decrease in gross margin at same store facilities is due to increased
maintenance and repair expenses and depreciation and amortization at these
facilities. The addition of the Cobblestone facilities is responsible for the
majority of the additional increased depreciation and amortization for total
country club and golf facilities.
The 7.3% increase in Adjusted EBITDA for total country club and golf
facilities is primarily due to increased operating income before depreciation
and amortization and increased net membership deposits and fees at developing
facilities for the 36 weeks ended September 5, 2000.
13
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 36
weeks ended September 7, 1999 and September 5, 2000 (dollars in thousands):
Same Store Business Total Business
and Sports Clubs and Sports Clubs
-------------------- --------------------
1999 2000 1999 2000
--------- --------- --------- ---------
Number of facilities 79 79 90 80
Operating revenues $ 165,545 $ 168,891 $ 177,594 $ 171,226
Operating costs and expenses 147,046 150,228 159,867 152,766
Depreciation and amortization 7,754 8,602 8,425 8,717
--------- --------- --------- ---------
Segment operating income $ 10,745 $ 10,061 $ 9,302 $ 9,743
========= ========= ========= =========
Adjusted EBITDA $ 16,631 $ 17,877 $ 15,825 $ 17,689
========= ========= ========= =========
The slight decrease in segment gross margin for same store business and
sports clubs is due to increased depreciation and amortization, resulting from
increased technology related assets, decreased membership deposits and fees
revenue partially offset by the positive impact of lease buyouts at two
facilities. The increase in segment gross margin for total business and sports
clubs is due to the divestiture of underperforming facilities during 1999.
Resorts
The following table presents certain summary financial data and other
operating data for the Company's resorts segment for the 36 weeks ended
September 7, 1999 and September 5, 2000 (dollars in thousands):
Same Store Resorts Total Resorts
-------------------- -----------------
1999 2000 1999 2000
--------- --------- -------- --------
Number of facilities 4 4 5 5
Operating revenues $167,973 $144,394 $174,151 $145,228
Operating costs and expenses 138,006 121,423 142,966 121,866
Depreciation and amortization 6,574 9,577 6,839 9,716
--------- --------- -------- --------
Segment operating income
before impairment loss 23,393 13,394 24,346 13,646
--------- --------- -------- --------
Impairment loss from assets
to be held and used 13,483 - 13,483 -
--------- --------- -------- --------
Segment operating income $ 9,910 $ 13,394 $ 10,863 $ 13,646
========= ========= ======== ========
Adjusted EBITDA $ 31,862 $ 25,345 $ 33,080 $ 25,738
========= ========= ======== ========
Lodging data:
Room nights available 332,861 349,849
Occupancy rate 55.8% 59.6%
Average daily room rate per occupied room $ 179 $ 184
Average daily revenue per occupied room $ 702 $ 693
14
For the 36 weeks ended September 7, 1999, operating revenues included
approximately $37.0 million of merchandise sales, ticket sales and corporate
hospitality tent revenue related to the hosting of the U.S. Open at Pinehurst.
Excluding the impact of this event, operating revenues from same store resorts
would have increased approximately 10.2% from approximately $131.0 million to
$144.4 million for the 36 weeks ended September 5, 2000. This increase is
attributable to increased membership, lodging and food and beverage revenues at
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 lodging and food and beverage revenues are
primarily attributable to increased occupancy rates at The Homestead and
Daufuskie. Also included in the 36 weeks ended September 7, 1999 same store
resorts results are the operating costs and expenses related to the hosting of
the U.S. Open of approximately $27.0 million. Excluding the impact of this
event, operating costs and expenses in the 36 weeks ended September 5, 2000
would have increased approximately 9.4% from approximately $111.0 million to
$121.4 million due to increased lodging and food and beverage costs resulting
from increased revenues in these areas and increased marketing costs at same
store resorts. Also included in 1999 same store resorts segment operating
income is an impairment loss of $13.5 million related to long-lived assets at
Daufuskie.
The decrease in Adjusted EBITDA at same store resorts of 20.5% is primarily
attributable to the impact of the U.S. Open. Excluding the impact of the U.S.
Open, the change would have been an increase of approximately 15.0% from
approximately $22.0 million to $25.3 million due to increased segment operating
income as discussed in the preceding paragraph and an increase in initiation
fees at Barton Creek related to the opening of a new golf course. Typically,
the volume of initiation deposits and fees is higher during the initial
marketing of memberships for a new course. Within the first year of the course
opening, these tend to stabilize at a lower level.
Other Operations
Realty operating revenues increased 57.2% from $18.7 million for the 36
weeks ended September 7, 1999 to $29.4 million for the 36 weeks ended September
5, 2000, due primarily to increased real estate revenues of the Owner's Club
programs at several locations. Revenues during the 36 weeks ended September 7,
1999 were primarily comprised of the sales of land held for sale in Colorado.
Operating income for realty increased from $0.8 million for the 36 weeks ended
September 7, 1999 to $2.0 million for the 36 weeks ended September 5, 2000.
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 12
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 $80.0 million and
$87.0 million, respectively, over the next two years to be financed with
external financing of ClubCorp, Inc. and cash flows from operations.
15
The total debt outstanding for the Company increased $154.7 million during
the 36 weeks ended September 5, 2000 due to borrowings for development of new
facilities and real estate held for sale, expansion at existing facilities,
borrowings of $32.6 million for acquisitions and the assumption of long-term
debt of $27.8 million in conjunction with the purchase of the remaining interest
in a previously non-consolidated joint venture.
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, 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.
During 2000, the Company invested approximately $9.0 million in Internet
related ventures as an opportunity to further expand the offering of its
services and products to its members and to create synergies with other
companies in the marketplace to decrease operating expenses. As with any
venture, the expected financial impact of these developing enterprises is unsure
and equity in the earnings and losses of such ventures could have a significant
impact on the results of operations of the Company. For the 36 weeks ended
September 5, 2000, the Company recorded an equity loss of $1.8 million on these
ventures.
16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Fourth Amendment to ClubCorp, Inc. Executive Stock Option Plan
10.2 - Second Amendment to ClubCorp, Inc. Omnibus Stock 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
17
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: October 20, 2000 By: /s/Charles A. Little
---------------- ------------------------
Charles A. Little
Chief Accounting Officer