UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1999
--------------
CLUBCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-89818, 33-96568, 333-08041, AND 333-57107 75-2778488
(State or other (Commission (I.R.S. Employer
jurisdiction of File Numbers) Identification No.
incorporation)
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
NONE
(Former name or former address, if changed since last report)
Item 7 is hereby amended to reflect changes in profroma adjustments for the year
ended December 29, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/James P. McCoy, Jr.
-----------------------------
James P. McCoy, Jr.
Executive Vice President and
Chief Financial Officer
(chief accounting officer)
Date: September 8, 1999
COBBLESTONE GOLF
COMBINING CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 29, 1999
AND FOR THE PERIOD FROM
MAY 29, 1998 TO MARCH 29, 1999
Contents
Report of Independent Accountants F-3
Combining Consolidated Balance Sheets F-4
Combining Consolidated Statements of Operations F-5
Combining Consolidated Statements of Division Equity F-6
Combining Consolidated Statements of Cash Flows F-7
Notes to Combining Consolidated Financial Statements F-8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Meditrust Corporation and
Meditrust Operating Company:
In our opinion, the accompanying combining consolidated balance sheets, and the
related combining consolidated statements of operations, division equity and of
cash flows present fairly, in all material respects, the combining consolidated
financial position of Cobblestone Golf and its operating divisions, as defined
in Note 1, as of March 29, 1999, and the results of their operations and their
cash flows for the period beginning May 29, 1998 and ending March 29, 1999 in
conformity with generally accepted accounting principles. These combining
consolidated financial statements are the responsibility of the Meditrust
Companies' management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Las Vegas, Nevada
May 7, 1999
COBBLESTONE GOLF
COMBINING CONSOLIDATED BALANCE SHEETS
March 29, 1999
(in thousands)
Courses Courses Courses
Acquired Acquired Acquired Eliminating
Corporate by ClubCorp by NGP by AGC Entries
---------- ------------ --------- ---------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,011 $ 281 $ 184 $ 7 $ -
Accounts receivable (net of allowance of $359) 555 2,331 1,562 - -
Inventory - 1,943 1,967 63 -
Current portion of notes receivable - 2,388 1,132 - -
(net of allowance of $184)
Prepaid expenses and other current assets 243 410 353 2 -
---------- ------------ --------- ---------- -------------
Total current assets 2,809 7,353 5,198 72 -
Property, equipment and leasehold interests, net 2,172 223,134 169,752 3,031 -
Tradename (net of accumulated amortization of $357) - 4,606 3,550 57 -
Notes receivable (net of allowance of $166) - 2,016 1,140 - -
Other assets 5 723 555 27 -
Intercompany receivables 42,913 - - - (42,913)
---------- ------------ --------- ---------- -------------
Total assets $ 47,899 $ 237,832 $ 180,195 $ 3,187 $ (42,913)
========== ============ ========= ========== =============
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable $ 557 $ 1,277 $ 1,102 $ 45 $ -
Accrued payroll and related expenses 2,131 329 290 8 -
Accrued property taxes 3 411 432 (5) -
Other current liabilities 1 230 350 - -
Deferred revenue - 1,733 1,491 7 -
Current portion of long-term debt - - 647 - -
Current portion of capital lease obligations - 1,007 1,101 17 -
Current portion of deferred purchase price - 222 - - -
Minority interest - 314 - - -
---------- ------------ --------- ---------- -------------
Total current liabilities 2,692 5,523 5,413 72 -
---------- ------------ --------- ---------- -------------
Long-term debt, less current portion - - 5,538 - -
Capital lease obligations, less current portion - 2,223 2,301 20 -
Long-term deferred revenue - 6,489 4,218 - -
Deferred purchase price, less current portion - 86 - - -
Other long-term liabilities - - 148 - -
Intercompany payables - 25,868 16,414 631 (42,913)
---------- ------------ --------- ---------- -------------
Total liabilities 2,692 40,189 34,032 723 (42,913)
Commitments and contingencies
Division equity 45,207 197,643 146,163 2,464 -
---------- ------------ --------- ---------- -------------
Total liabilities and division equity $ 47,899 $ 237,832 $ 180,195 $ 3,187 $ (42,913)
========== ============ ========= ========== =============
COBBLESTONE GOLF
COMBINING CONSOLIDATED BALANCE SHEETS
March 29, 1999
(in thousands)
Combined
Consolidated
Total
-------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,483
Accounts receivable (net of allowance of $359) 4,448
Inventory 3,973
Current portion of notes receivable 3,520
(net of allowance of $184)
Prepaid expenses and other current assets 1,008
-------------
Total current assets 15,432
Property, equipment and leasehold interests, net 398,089
Tradename (net of accumulated amortization of $357) 8,213
Notes receivable (net of allowance of $166) 3,156
Other assets 1,310
Intercompany receivables -
-------------
Total assets $ 426,200
=============
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable $ 2,981
Accrued payroll and related expenses 2,758
Accrued property taxes 841
Other current liabilities 581
Deferred revenue 3,231
Current portion of long-term debt 647
Current portion of capital lease obligations 2,125
Current portion of deferred purchase price 222
Minority interest 314
-------------
Total current liabilities 13,700
-------------
Long-term debt, less current portion 5,538
Capital lease obligations, less current portion 4,544
Long-term deferred revenue 10,707
Deferred purchase price, less current portion 86
Other long-term liabilities 148
Intercompany payables -
-------------
Total liabilities 34,723
Commitments and contingencies
Division equity 391,477
-------------
Total liabilities and division equity $ 426,200
=============
The accompanying notes are an integral part of these combining consolidated
financial statements.
COBBLESTONE GOLF
COMBINING CONSOLIDATED STATEMENTS OF OPERATIONS
For the period May 29, 1998 to March 29, 1999
(In thousands)
Courses Courses Courses Combined
Acquired Acquired Acquired Eliminating Consolidated
Corporate by ClubCorp by NGP by AGC Entries Total
----------- ------------- ---------- ---------- ------------- --------------
Revenue:
Golf $ - $ 32,890 $ 33,288 $ 1,056 $ - $ 67,234
Food and beverage - 8,139 8,947 82 - 17,168
Other - 6,378 4,069 184 - 10,631
----------- ------------- ---------- ---------- ------------- --------------
Total revenue - 47,407 46,304 1,322 - 95,033
----------- ------------- ---------- ---------- ------------- --------------
Expenses:
Golf course operations - 33,206 32,390 765 - 66,361
Food and beverage - 2,804 3,017 29 - 5,850
Depreciation and amortization 108 9,030 7,003 175 (108) 16,208
Amortization of goodwill - 2,964 2,284 37 - 5,285
General and administrative 5,646 2,884 2,781 79 (5,646) 5,744
Costs associated with 1,867 - - - - 1,867
unsuccessful acquisition
Interest 9 326 1,014 3 - 1,352
Allocation of corporate expenses (5,754) - - - 5,754 -
Goodwill impairment charge - 82,057 63,208 1,016 - 146,281
----------- ------------- ---------- ---------- ------------- --------------
Total expenses 1,876 133,271 111,697 2,104 - 248,948
----------- ------------- ---------- ---------- ------------- --------------
Loss before income taxes (1,876) (85,864) (65,393) (782) - (153,915)
Provisions for income taxes - - - - - -
----------- ------------- ---------- ---------- ------------- --------------
Net loss $ (1,876) $ (85,864) $ (65,393) $ (782) $ - $ (153,915)
=========== ============= ========== ========== ============= ==============
The accompanying notes are an integral part of these combing consolidated
financial statements.
COBBLESTONE GOLF
COMBINING CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period May 29, 1998 to March 29, 1999
(In thousands)
Courses Courses Courses
Acquired Acquired Acquired
Corporate by ClubCorp by NGP by AGC
----------- ------------- ---------- ----------
Operating activities:
Net loss $ (1,876) $ (85,864) $ (65,393) $ (782)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 108 11,940 9,235 210
Goodwill impairment charge - 82,057 63,208 1,016
Changes in assets and liabilities:
Notes and accounts receivable (214) (860) (88) 1
Inventory - (105) (15) 13
Prepaid expenses and other assets (206) (917) (416) 3
Accounts payable, accrued liabilities and deferred revenue (3,671) 5,447 2,159 (24)
----------- ------------- ---------- ----------
Net cash provided by (used in) operating activities (5,859) 11,698 8,690 437
----------- ------------- ---------- ----------
Investing activities:
Payments to minority interest holders - (661) - -
Acquisitions, net of cash acquired - (141,883) (100,750) -
Additions to property, equipment and leasehold interests (1,688) (10,858) (4,973) (247)
----------- ------------- ---------- ----------
Net cash provided by (used in) investing activities (1,688) (153,402) (105,723) (247)
----------- ------------- ---------- ----------
Financing activities:
Cash contributions from Meditrust Companies 17,785 162,296 72,033 (2,509)
Principal payments on long term debt and capital leases - (1,439) (1,426) (8)
Payments on deferred purchase price - (154) - -
Intercompany (8,227) (18,753) 24,646 2,334
----------- ------------- ---------- ----------
Net cash provided by (used in) financing activities 9,558 141,950 95,253 (183)
----------- ------------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 2,011 246 (1,780) 7
Cash and cash equivalents at beginning of period - 35 1,964 -
----------- ------------- ---------- ----------
Cash and cash equivalents at end of period $ 2,011 $ 281 $ 184 $ 7
=========== ============= ========== ==========
COBBLESTONE GOLF
COMBINING CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period May 29, 1998 to March 29, 1999
(In thousands)
Combined
Consolidated
Total
--------------
Operating activities:
Net loss $ (153,915)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 21,493
Goodwill impairment charge 146,281
Changes in assets and liabilities:
Notes and accounts receivable (1,161)
Inventory (107)
Prepaid expenses and other assets (1,536)
Accounts payable, accrued liabilities and deferred revenue 3,911
--------------
Net cash provided by (used in) operating activities 14,966
--------------
Investing activities:
Payments to minority interest holders (661)
Acquisitions, net of cash acquired (242,633)
Additions to property, equipment and leasehold interests (17,766)
--------------
Net cash provided by (used in) investing activities (261,060)
--------------
Financing activities:
Cash contributions from Meditrust Companies 249,605
Principal payments on long term debt and capital leases (2,873)
Payments on deferred purchase price (154)
Intercompany -
--------------
Net cash provided by (used in) financing activities 246,578
--------------
Net increase (decrease) in cash and cash equivalents 484
Cash and cash equivalents at beginning of period 1,999
--------------
Cash and cash equivalents at end of period $ 2,483
==============
The accompanying notes are an integralpart of these combining consolidated
financial statements.
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. BASIS OF PRESENTATION:
The accompanying combining consolidated financial statements are comprised of
the financial statements of The Cobblestone Golf Companies, Inc., Meditrust Golf
Group, Inc., and Meditrust Golf Group II, Inc. (collectively these companies are
referred to as "Cobblestone Golf"). Cobblestone Golf is engaged in the
ownership, leasing, operation and management of golf course properties and
related facilities. As of March 29, 1999, Cobblestone Golf owned 35 courses,
one of which was under development, had leasehold interests in nine courses, one
of which was under development and operated one course under a management
agreement.
Meditrust Operating Company and Meditrust Corporation (together, the "Meditrust
Companies") are two separate companies, the stocks of which trade on the New
York Stock Exchange as a single unit under a stock pairing arrangement. The
Cobblestone Golf Companies, Inc. is a wholly owned subsidiary of Meditrust
Operating Company. Meditrust Golf Group, Inc. is a wholly owned subsidiary of
Meditrust Corporation. Meditrust Golf Group II, Inc. is 99% owned by Meditrust
Corporation, with the remaining 1% balance owned by Meditrust Operating Company.
The accompanying combining consolidated financial statements present the
"carved-out" financial position, results of operations and cash flows of
Cobblestone Golf and three operating divisions thereof as if Cobblestone Golf
operated as a separate unit of the Meditrust Companies, and the divisions
operated as separate units of Cobblestone Golf. The courses included in each
operating division are grouped based on the ultimate acquiring entity as a
result of the sale of Cobblestone Golf by the Meditrust Companies (see Note 13).
The divisional abbreviations represent the following ultimate acquiring
companies: "ClubCorp": ClubCorp, Inc. and subsidiaries, "NGP": National Golf
Properties, and "AGC": American Golf Corporation. Amounts presented under
"Corporate" represent the net assets and operating results of the administrative
function of the combined operations.
The assets and liabilities contained herein are presented at historical cost,
based upon "push-down" accounting afforded to the Meditrust Companies as a
result of their acquisition of Cobblestone Holdings, Inc. on May 29, 1998 and
eleven courses acquired subsequent to May 29, 1998, as more fully described in
Note 3. The accompanying carved out financial statements reflect only debt
obligations to third parties and do not include an allocation of the Meditrust
Companies' general corporate indebtedness (see Note 8). The financial
statements presented may not be indicative of the financial position, results of
operations and cash flows had Cobblestone Golf or the divisions presented
operated as non-affiliated entities.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The combining consolidated financial statements include the accounts of
Cobblestone Golf and its subsidiaries. All significant inter-company and
inter-entity balances and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and investments with original
maturities of less than 90 days.
The Meditrust Companies utilize a centralized cash management system to provide
financing for their operations, including those of Cobblestone Golf.
Cobblestone Golf's cash requirements are satisfied by the results of golf
operations, as well as transactions with the Meditrust Companies (see Note 8).
As of March 29, 1999, cash balances of $428 (all from NGP) were restricted under
lease agreements for use towards capital improvements.
CONCENTRATION OF CREDIT RISK
Cobblestone Golf's cash equivalents are held by what management considers to be
high credit-quality financial institutions. Management believes no significant
concentration of credit risk exists with respect to these investments.
Cobblestone Golf's concentration of credit risk with respect to its accounts
receivable is limited due to the geographic dispersion of golf courses and the
large number of golf course members and others from whom the receivables are to
be collected.
INVENTORIES
Inventories are carried at the lower of cost (first-in, first-out) or market.
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS
Property and equipment are recorded at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the related assets
which are generally as follows:
Depreciable land improvements 20 years
Buildings and improvements 30 years
Equipment, furniture and fixtures 3 to 10 years
Leasehold improvements, equipment recorded under capital leases and property and
equipment related to leased facilities are depreciated and amortized using the
straight-line method over the shorter of the lease term or the estimated useful
lives of the related assets. Costs associated with the acquisition of leasehold
interests in golf facilities have been capitalized and are amortized over the
remaining life of the related lease (2 to 27 years). Golf course facility
construction in progress is carried at cost. Interest associated with, or
allocable to golf course facility construction in progress is capitalized until
construction is completed. The amount capitalized is based upon a rate of
interest which approximates the Meditrust Companies' weighted average rate of
borrowing.
INTANGIBLE ASSETS
Goodwill represents the excess of cost over the fair value of assets acquired
and is amortized usin the straight-line method over 20 years (see Note 13).
In connection with the acquisition of Cobblestone Holdings, Inc. and
subsidiaries by the Meditrust Companies, the Cobblestone trade name was recorded
at its fair value of $8,570. This intangible asset is being amortized using the
straight-line method over 20 years.
IMPAIRMENT OF LONG - LIVED ASSETS AND INTANGIBLES
The Meditrust Companies assess the recoverability of long-lived assets and
certain identifiable intangibles whenever adverse events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the expected future cash flows (undiscounted and without
interest charges) are less than the carrying value of the recorded asset, an
impairment would be recognized to reduce the carrying value to its net
realizable value (see Note 13).
REVENUE AND DEFERRED REVENUE
Operating revenue is recognized when received except from dues and fees paid in
advance which are recognized over the period during which the dues and fees
allow the members access to the facilities. Cobblestone Golf recognizes revenue
on non-refundable initiation fees using the straight-line method over the
average life of an active membership. As of March 29, 1999, the estimated
average life of an active membership was 7 years. In addition, the incremental
direct selling costs incurred in connection with initiation fees are deferred
and amortized in a manner consistent with the related revenue.
INCOME TAXES
Meditrust Corporation has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended, and believes it has met all the requirements
for qualification as such. Accordingly, Meditrust Corporation will not be
subject to federal income taxes on amounts distributed to shareholders, provided
it distributes at least 95% of its REIT taxable income annually and meets other
requirements for qualifying as a REIT. Therefore, no provision for federal
income taxes is believed necessary for the activity of Meditrust Golf Group,
Inc.
Meditrust Operating Company provides for taxes in accordance with the provisions
of SFAS No. 109, Accounting for Income Taxes. Under this method, the Meditrust
Operating Company recognizes deferred tax assets and liabilities for the
expected future tax effects of temporary differences between the carrying
amounts and the tax bases of assets and liabilities, as well as net operating
loss carry-forwards.
3. ACQUISITIONS:
During March and May 1998, Meditrust Golf Group, Inc. purchased seven golf
courses for an aggregate purchase price of approximately $56,000. The
operations were then contributed to the Cobblestone Golf Companies, Inc. upon
completion of the transaction described below.
On May 29, 1998 the Meditrust Companies completed their merger with Cobblestone
Holdings, Inc. Under the terms of the merger agreement, Cobblestone Holdings,
Inc. merged into Meditrust Corporation, with Meditrust Corporation being the
surviving corporation. Prior to the merger, Meditrust Operating Company entered
into an asset transfer agreement with Cobblestone Golf Group, Inc., a wholly
owned subsidiary of Cobblestone Holdings, Inc. whereby Cobblestone Golf Group,
Inc. transferred certain non-real estate assets to Meditrust Operating Company.
In order to consummate the transaction, the Meditrust Companies issued paired
common stock with an aggregate market value of approximately $230,000 and issued
options valued at $10,863. In addition, Meditrust Corporation assumed and paid
approximately $170,000 of Cobblestone Golf's long-term debt and associated
costs. The total consideration paid in connection with the Cobblestone Golf
merger was approximately $420,000. The excess of the purchase price over the
fair value of the net assets acquired was approximately $151,500.
During the period from May 29, 1998 to March 29, 1999, Cobblestone Golf acquired
the golf courses listed below. Each property was purchased from an unaffiliated
party. The cash portions of the acquisitions were funded by the Meditrust
Companies.
PROPERTY DATE LOCATION
Deercreek Country Club June, 1998 Florida
Devil's Ridge July, 1998 North Carolina
Lochmere July, 1998 North Carolina
The Neuse July, 1998 North Carolina
Oak Valley July, 1998 North Carolina
Kiskiack July, 1998 Virginia
Nag's Head July, 1998 North Carolina
The Currituck Club July, 1998 North Carolina
Champions Club of Atlanta August, 1998 Georgia
Whitestone August, 1998 Texas
Blackstone June, 1998 Texas
The effect on operations had these courses been acquired as of the beginning of
the period would not have been significant.
4. PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS:
Property, equipment and leasehold interests consisted of the following at March
29, 1999:
CORPORATE CLUBCORP NGP AGC TOTAL
----------- ---------- --------- ------- ---------
Land $ - $ 26,964 $ 19,599 $ - $ 46,563
Land improvements - 139,598 89,992 147 229,737
Buildings and improvements 1,030 43,907 31,349 15 76,301
Equipment, furniture and fixtures 1,249 16,670 12,270 526 30,715
Leasehold interests - - 20,945 2,696 23,641
Construction in progress - 4,743 2,439 - 7,182
----------- ---------- --------- ------- ---------
2,279 231,882 176,594 3,384 414,139
Less accumulated
depreciation and amortization (107) (8,748) (6,842) (353) (16,050)
----------- ---------- --------- ------- ---------
Property, equipment and
leasehold interests, net $ 2,172 $ 223,134 $169,752 $3,031 $398,098
=========== ========== ========= ======= =========
Land improvements included $69,593 ($42,221, ClubCorp; $27,369, NGP; $3, AGC) of
non-depreciable golf course improvements consisting of tees, fairways, roughs,
trees, greens, bunkers and sand traps at March 29, 1999.
In connection with the purchase of The Hills of Lakeway, the ClubCorp division
of Cobblestone Golf is required to pay a deferred purchase price equal to the
greater of approximately $4 per membership or 25% of Initiation Fees collected
for the first three hundred memberships sold.
The outstanding balance of the deferred purchase price of $308 is scheduled to
be paid in monthly installments through fiscal 2000.
5. NOTES RECEIVABLE:
Notes receivable consists of promissory notes made by golf club members for the
payment of initiation fees. The notes carry below market or no interest rates,
are amortized monthly or annually and generally have a term of three to five
years. Management periodically assesses the collectibility of the notes
receivable and reserves for the portion that is doubtful of being collected. The
notes are collateralized by the underlying golf club membership and Cobblestone
Golf has full recourse against the member. Cobblestone Golf's notes receivable
balance as of March 29, 1999 was comprised of the following:
CLUBCORP NGP TOTAL
---------- -------- --------
Gross notes receivables $ 5,246 $ 2,726 $ 7,972
Less allowance for uncollectible accounts (232) (118) (350)
Less allowance for imputed interest (610) (336) (946)
---------- -------- --------
Net notes receivable 4,404 2,272 6,676
Less current portion (2,388) (1,132) (3,520)
---------- -------- --------
$ 2,016 $ 1,140 $ 3,156
========== ======== ========
6. LONG-TERM DEBT:
Long-term debt consisted of the following at March 29, 1999:
NGP
-------
5% uncollateralized note payable, due October 1999 $ 245
8% uncollateralized note payable, due monthly through 2007 238
Variable rate note payable, effective interest rate 10.47%,
due monthly through 2014, collateralized by the assets of
The Vineyard at Escondido 5,472
10% imputed interest note payable, due January 2000, uncollateralized 230
-------
6,185
Less current portion (647)
-------
Total long-term debt $5,538
=======
Scheduled payments of principal on long-term debt for each of the next five
years and thereafter were as follows at March 29, 1999:
NGP
------
2000 $ 647
2001 190
2002 210
2003 232
2004 258
Thereafter 4,648
------
$6,185
======
7. LEASES:
Cobblestone Golf leases nine golf facilities. The leases expire in various years
through 2025. Rent expense for the period May 29, 1998 to March 29, 1999 were
as follows:
CORPORATE CLUBCORP NGP AGC TOTAL
---------- --------- ------ ---- ------
Rent expense $ 359 $ 611 $2,299 $197 $3,466
Cobblestone Golf leases certain golf carts and maintenance equipment under
capital leases with terms of two to five years. Included in equipment, furniture
and fixtures in the accompanying combining consolidated balance sheet is
equipment under capital leases that totaled $8,066 at March 29, 1999.
Accumulated amortization of equipment under capital leases totaled $1,324 as of
the balance sheet date.
Scheduled payments of lease obligations for each of the next five years and
thereafter, were as follows at March 29, 1999:
CORPORATE CLUBCORP NGP AGC TOTAL
---------- ---------- -------- ----- --------
2000 $ - $ 1,392 $ 1,471 $ 19 $ 2,882
2001 - 1,230 1,345 18 2,593
2002 - 761 774 2 1,537
2003 - 606 448 1 1,055
2004 - 67 147 - 214
Thereafter - - - - -
---------- ---------- -------- ----- --------
Total minimum lease payments - 4,056 4,185 40 8,281
Amount representing interest - (826) (783) (3) (1,612)
---------- ---------- -------- ----- --------
Present value of net minimum lease payments - 3,230 3,402 37 6,669
Current portion - (1,007) (1,101) (17) (2,125)
---------- ---------- -------- ----- --------
Capital lease obligations, less current portion $ - $ 2,223 $ 2,301 $ 20 $ 4,544
========== ========== ======== ===== ========
OPERATING LEASES:
CORPORATE CLUBCORP NGP AGC TOTAL
---------- --------- ------- ---- -------
2000 $ 444 $ 648 $ 2,261 $ 54 $ 3,407
2001 444 639 2,261 54 3,398
2002 444 639 2,261 54 3,398
2003 444 639 2,261 54 3,398
2004 444 639 2,261 54 3,398
Thereafter 623 1,447 22,077 630 24,777
---------- --------- ------- ---- -------
Total minimum lease payments $ 2,843 $ 4,651 $33,382 $900 $41,776
========== ========= ======= ==== =======
8. RELATED PARTY TRANSACTIONS:
The Meditrust Companies provide certain services to Cobblestone Golf primarily
related to general tax preparation and consulting, legal, accounting, and
certain aspects of human resources. In the opinion of management, the costs
associated with these services were not material and have been excluded from
these financial statements. However, this is not necessarily indicative of the
level of expenses which may have been incurred had the financial results of
Cobblestone Golf been presented on a stand-alone basis. The amounts that would
have or will be incurred on a stand-alone basis could differ significantly from
the estimated amounts due to economies of scale, differences in management
and/or operational practices or other factors.
Interest expense associated with the Meditrust Companies' general corporate debt
has not been allocated to Cobblestone Golf in these financial statements. An
allocation of interest charges on general corporate debt to Cobblestone Golf
would have resulted in approximately $16,739 of interest expense for the period
ended March 29, 1999. An allocation of the debt would have resulted in an
increase of $181,163 in long-term debt at March 29, 1999. The allocation
methodology is based on applying the Meditrust Companies' total debt to total
capitalization and a weighted average interest rate of approximately 8.39% to
the Meditrust Companies' weighted average investment in Cobblestone Golf.
Management believes this allocation is reasonable.
In connection with the sale of Cobblestone Golf described in Note 13, the
Meditrust Companies have accrued a liability of $5,624 for bonuses paid to
Cobblestone employees as an incentive to stay with Cobblestone Golf through the
closing date of the sale. As such amount is an obligation of the Meditrust
Companies, no liability has been reflected in the combining consolidated
financial statements of Cobblestone Golf.
9. EMPLOYEE BENEFIT PLAN:
Cobblestone Golf maintains an employee savings plan (the "Plan") that qualifies
as a deferred salary arrangement under Section 401(k) of the Internal Revenue
Code. Under the Plan, which covers employees who have met certain eligibility
requirements, participating employees may defer up to 17% of their pretax
earnings, up to $9,500. Cobblestone Golf matches up to 20% of the employee's
contributions, up to a maximum of 4% of the employee's earnings.
10. STOCK OPTION PLAN:
As an operating unit of the Meditrust Companies, Cobblestone Golf does not have
an employee stock option plan; however, certain employees of Cobblestone Golf
participate in the Meditrust Companies' stock option plans.
These plans provide for the grant of incentive and nonqualified options at an
exercise price that is 100% of the fair market value on the date of grant. The
Meditrust Companies apply Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for stock options. Accordingly, no compensation
expense is reflected in the financial statements.
As of March 29, 1999, the employees of Cobblestone Golf held a total of 7,495
options to purchase the Meditrust Companies' stock, all of which were
exercisable at the balance sheet date. The option prices ranged from $3.95 to
$4.42 per share at March 29, 1999. Compensation costs related to such options
would have been approximately $5 for the period from May 29, 1998 to March 29,
1999 had the Meditrust Companies followed the fair value method at the grant
date of option awards.
11. COMMITMENTS AND CONTINGENT LIABILITIES:
Cobblestone Golf has certain obligations to provide partial credit on certain
future memberships, at agreed upon terms, to residential developers of
properties adjacent to certain golf facilities.
Cobblestone Golf is party to various commitments, claims and routine litigation
arising in the ordinary course of business. Management does not believe that
the result of such commitments, claims and litigation, individually or in the
aggregate, will have a material effect on the business or its income, cash flows
or financial condition.
The Meditrust Corporation's equity interests in Cobblestone Golf have been
pledged to Meditrust Corporation's lenders under their senior credit facility
and to entitled bondholders.
Certain subsidiaries of Cobblestone Golf have guaranteed Meditrust Corporation's
obligations, or Meditrust Operating Company's guaranty thereof, under Meditrust
Corporation's senior credit facility.
These guarantee obligations were terminated upon completion of the sale
described in Note 13.
Meditrust Corporation's senior credit facility contains a notice provision
applicable to transfer transactions.
12. INCOME TAXES:
The income tax provision consists of the following:
CORPORATE CLUBCORP NGP AGC TOTAL
----------- ---------- -------- ----- --------
Federal
Current $ 3,485 $ 1,530 $ 2,165 $ 85 $ 7,265
Deferred (3,485) (1,530) (2,165) (85) (7,265)
----------- ---------- -------- ----- --------
$ - $ - $ - $ - $ -
=========== ========== ======== ===== ========
The difference between income taxes computed using the U.S. statutory Federal
income tax rate of 35% and actual tax provision as reflected in the accompanying
statements of operations is as follows:
CORPORATE CLUBCORP NGP AGC TOTAL
----------- ---------- --------- ------ ---------
Expected income tax benefit $ 656 $ 30,052 $ 22,888 $ 274 $ 53,870
Net income (loss) from REIT activities 631 (26,994) (20,466) (235) (47,064)
Operating losses not available for
tax benefit (1,287) (3,058) (2,422) (39) (6,806)
----------- ---------- --------- ------ ---------
$ - $ - $ - $ - $ -
=========== ========== ========= ====== =========
The components of Cobblestone Golf's deferred tax assets and liabilities as of
March 29, 1999 are as follows:
CORPORATE CLUBCORP NGP AGC TOTAL
----------- ---------- -------- ----- --------
Deferred tax assets
Net operating loss carryforward $ 1,220 $ 535 $ 758 $ 30 $ 2,543
Long term deferred revenue - 2,271 1,476 - 3,747
Other, net 67 252 188 9 516
----------- ---------- -------- ----- --------
Gross deferred tax assets 1,287 3,058 2,422 39 6,806
Valuation allowance (1,287) (3,058) (2,422) (39) (6,806)
----------- ---------- -------- ----- --------
$ - $ - $ - $ - $ -
=========== ========== ======== ===== ========
A valuation allowance has been established due to the uncertainty of realizing
the net operating loss carryforward and deferred tax assets.
13. SALE OF COBBLESTONE GOLF:
On February 10, 1999 the Meditrust Companies entered into an agreement (the
"Purchase Agreement") to sell Cobblestone Golf to Golf Acquisitions LLC, an
entity controlled by ClubCorp, NGP and AGC. The sale transaction closed based
on balances as of March 29, 1999. Proceeds to the Meditrust Companies were
$391,278, subject to a closing adjustment as defined in the Purchase Agreement.
As a result of the significant difference between the selling price in the stock
purchase agreement and the amount invested in Cobblestone Golf by the Meditrust
Companies, Cobblestone Golf determined that the goodwill recorded at the time of
the Meditrust Companies' acquisition would not be realized. As such, the
remaining unamortized balance of the goodwill was written off and charged to
earnings on February 10, 1999.
14. SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
CORPORATE CLUBCORP NGP AGC TOTAL
---------- --------- ------ ---- ----------
Cash paid during the period
for interest $ 9 $ 326 $1,014 $ 3 $ 1,352
========== ========= ====== ==== ==========
Non-cash investing and
financing activities:
Capital leases entered into
for new equipment $ - $ 3,062 $2,487 $ - $ 5,549
========== ========= ====== ==== ==========
In connection with golf course
acquisitions:
Fair value of assets acquired, exclusive
of goodwill $ 368,457
==========
Goodwill $ 151,404
==========
Fair value of liabilities assumed $ (36,053)
==========
Value of paired shares issued to
purchase Cobblestone Holdings, Inc. $(241,175)
==========
Cash, net $(242,633)
==========
CLUBCORP, INC.
Proforma Consolidated Financial Statements (unaudited)
Proforma Consolidated Balance Sheet as of December 29, 1998 P-3
Proforma Consolidated Statement of Operations for the
year ended December 29, 1998 P-4
Notes to Proforma Consolidated Financial Statements P-5
CLUBCORP, INC.
PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Effective March 31, 1999, ClubCorp, Inc. ("ClubCorp"), American Golf Corporation
and National Golf Operating Partnership, L.P. purchased Meditrust Golf Group,
Inc., Meditrust Golf Group II, Inc. and The Cobblestone Golf Companies, Inc.
(collectively these companies are referred to as "Cobblestone Golf") from
Meditrust Corporation and Meditrust Operating Company (collectively these
companies are referred to as "Meditrust") pursuant to a Stock Purchase Agreement
dated February 10, 1999 for a total purchase price of approximately $391 million
in cash. The following unaudited proforma consolidated financial statements
have been prepared to reflect the acquisition of 23 courses or approximately 53%
of the net assets of Cobblestone Golf by ClubCorp for approximately $210 million
in cash plus closing costs and closing adjustments as defined in the Stock
Purchase Agreement. The acquisition was accounted for using the purchase
method. ClubCorp principally financed this acquisition with the proceeds of a
$200 million Credit Agreement with NationsBank, N.A., dated March 29, 1999.
The proforma consolidated balance sheet as of December 29, 1998 has been
prepared using the historical consolidated balance sheet of ClubCorp as of
December 29, 1998 and the unaudited historical balance sheets of the Cobblestone
Golf courses acquired by ClubCorp as of December 31, 1998 as if the transaction
had occurred on December 29, 1998. The proforma consolidated statement of
operations for the year ended December 29, 1998 has been prepared using the
historical consolidated statement of operations of ClubCorp for the year ended
December 29, 1998, and the unaudited historical consolidated statement of
operations of the Cobblestone courses acquired by ClubCorp before depreciation,
amortization and interest expense for the year ended December 31, 1998 as
adjusted to reflect certain proforma adjustments, as if the acquisition had been
consummated on January 1, 1998. Historical depreciation, amortization
(including a goodwill impairment charge of approximately $82 million) and
interest expense for Cobblestone Golf were not included as Meditrust acquired
Cobblestone on May 29, 1998 and applied purchase accounting on that date.
Therefore, such information would not be meaningful.
The proforma adjustments are based upon available information and contain
assumptions that management believes are reasonable under the circumstances.
The unaudited proforma consolidated financial statements are provided for
informational purposes only and are not necessarily indicative of ClubCorp's
financial condition or the results of its operations that would have been
realized had such transactions been completed for the dates presented, or that
may be realized in the future. The determination of the allocation of the
purchase price and the closing adjustments are still being evaluated and final
amounts could differ significantly from amounts included in these proforma
consolidated financial statements.
CLUBCORP, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
December 29, 1998
(Dollars in thousands, except share amounts)
Cobblestone
Golf Courses
Acquired by Proforma
Assets ClubCorp ClubCorp Adjustments Proforma
------ ----------- ------------- ------------- -----------
Current assets:
Cash and cash equivalents $ 72,423 $ 354 $ (1,109) (1) $ 71,668
Membership and other receivables, net 84,915 4,165 - 89,080
Inventories 18,082 1,608 - 19,690
Other assets 17,587 468 - 18,055
----------- ------------- ------------- -----------
Total current assets 193,007 6,595 (1,109) 198,493
Property and equipment, net 751,070 221,370 (9,279) (2) 963,161
Other assets 166,081 7,160 (4,684) (3) 168,557
----------- ------------- ------------- -----------
$1,110,158 $ 235,125 $ (15,072) $1,330,211
=========== ============= ============= ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 58,826 $ 1,005 $ 3,361 (4) $ 63,192
Long-term debt - current portion 18,633 996 - 19,629
Other liabilities 97,127 4,039 - 101,166
----------- ------------- ------------- -----------
Total current liabilities 174,586 6,040 3,361 183,987
Long-term debt 255,917 2,125 207,500 (5) 465,542
Other liabilities 109,880 6,040 (5,013) (6) 110,907
Membership deposits 95,460 - - 95,460
Redemption value of common stock held by benefit plan 65,279 - - 65,279
Stockholders' equity:
Common stock, $.01 par value, 250,000,000 shares
authorized, 90,219,408 issued, 84,629,809 outstanding 902 - - 902
Additional paid-in capital 11,205 - - 11,205
Accumulated other comprehensive income (119) - - (119)
Retained earnings 445,770 - - 445,770
Treasury stock (48,722) - - (48,722)
Division equity - 220,920 (220,920) (7) -
----------- ------------- -------------
Total stockholders' equity 409,036 220,920 (220,920) 409,036
----------- ------------- ------------- -----------
$1,110,158 $ 235,125 $ (15,072) $1,330,211
=========== ============= ============= ===========
See accompanying notes to the proforma consolidated financial statements.
CLUBCORP, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 29, 1998
(Dollars in thousands, except per share amounts)
Cobblestone
Golf Courses
Acquired by Proforma
ClubCorp ClubCorp Adjustments Proforma
---------- ------------- ------------- ----------
Operating revenues $ 851,336 $ 51,079 $ - $ 902,415
Operating costs and expenses 658,932 38,312 - 697,244
Depreciation and amortization 54,161 - 13,007 (8) 67,168
Selling, general and administrative expenses 71,422 - - 71,422
---------- ------------- ------------- ----------
Operating income 66,821 12,767 (13,007) 66,581
Loss on divestitures (5,718) - - (5,718)
Interest and investment income 12,092 - - 12,092
Interest expense (28,901) - (14,971) (9) (43,872)
Other income 1,025 - - 1,025
---------- ------------- ------------- ----------
Income from operations before income taxes and
extraordinary item 45,319 12,767 (27,978) 30,108
Income tax (provision) benefit (5,807) - 6,723 (10) 916
---------- ------------- ------------- ----------
Income from operations before extraordinary item 39,512 12,767 (21,255) 31,024
========== ============= ============= ==========
Basic earnings per share - income from
operations before extraordinary item $ .46 $ .15 $ (.25) $ .36
========== ============= ============= ==========
Diluted earnings per share - income from
operations before extraordinary item $ .45 $ .15 $ (.25) $ .35
========== ============= ============= ==========
See accompanying notes to the proforma consolidated financial statements.
CLUBCORP, INC.
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 1998
(Unaudited)
Proforma Adjustments
- ---------------------
The following notes describe the proforma adjustments made to ClubCorp's
proforma consolidated financial statements:
(1) To reflect the cash used to fund the purchase price plus estimated
closing costs as of December 29, 1998.
(2) To reflect the estimated fair value of property and equipment in
connection with the acquisition.
(3) To record debt issuance costs capitalized related to the financing of
the Cobblestone Golf acquisition and to eliminate (i) Cobblestone Golf
tradename capitalized by Meditrust and not acquired by ClubCorp and (ii)
deferred selling costs associated with sales of membership initiation fees.
(4) To reflect the accrual of severance costs to be paid to former
Cobblestone Golf employees.
(5) To reflect the borrowing of $200 million under the long-term credit
agreement used to fund the acquisition and the borrowing of an additional $7.5
million under ClubCorp's existing credit facility agreement.
(6) To eliminate deferred revenue associated with membership initiation
fees.
(7) To eliminate the division equity of Cobblestone Golf properties acquired
by ClubCorp.
(8) To reflect depreciation on property and equipment acquired by ClubCorp.
Depreciation on property and equipment was computed using the estimated
remaining useful lives, ranging from five to 37 years, of the assets acquired on
a straight-line basis.
(9) To reflect interest expense on the $200 million credit agreement and the
$7.5 million draw on ClubCorp's existing credit facility agreement used to fund
the Cobblestone Golf acquisition. An annual interest rate of LIBOR plus 1.25%
to 1.75% (an average of 7.08%) was used to compute interest expense related to
the credit agreement. An annual interest rate of LIBOR plus 1.00% or 6.46% was
used to compute interest expense related to the draw on the existing credit
facility agreement. In addition to interest expense on the credit agreement,
the adjustment to interest expense reflects the historical interest expense on
capital leases assumed in the acquisition. The interest rates on the capital
leases assumed approximate current market rates.
(10) To reflect the proforma income tax benefit for the operations acquired
using an effective income tax rate of 44.2%.
INDEX TO EXHIBIT
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23.1 Consent of PricewaterhouseCoopers LLP