1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 31, 1997
Date of Report
(Date of earliest event reported)
NASHVILLE COUNTRY CLUB, INC.
(Exact name of registrant as specified in its charter)
Tennessee 0-22582 62-1535897
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
402 Heritage Plantation Way
Hickory Valley, Tennessee
(Address of principal executive offices)
38042
(Zip Code)
(901) 764-2300
(Registrant's telephone number, including area code)
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 31, 1997, Nashville Country Club, Inc. (the "Company")
acquired a fifty-one percent interest in a group of affiliated entertainment
companies (collectively, the "Avalon West Coast Companies"). The Avalon West
Coast Companies include New Avalon, Inc., a California corporation, TBA Media,
Inc., a California corporation, Eric/Chandler, Ltd., Inc., a Texas
corporation, Eric Chandler Merchandising, Inc., a California corporation, West
Coast Amphitheater Corp., a California corporation, and Irvine Meadows
Amphitheater, a California general partnership ("IMA Partners"). The
acquisition of the interests in the Avalon West Coast Companies was
consummated pursuant to a Purchase Agreement among the Company, AWC
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the
Company, the Robert E. Geddes Family Trust (the "Geddes Trust"), the
Miserendino Family Trust (the "Miserendino Trust"), Brian F. Murphy ("Murphy")
and Audrey & Jane, Inc., a California corporation ("A&J" and collectively with
the Geddes Trust, the Miserendino Trust and Murphy, the "Sellers").
Pursuant to the Purchase Agreement, the Company delivered to the
Sellers a total of $7,000,000 in cash. The source of the cash consideration was
a portion of the proceeds from the Company's contemporaneous registered
direct offering of common stock (the "Offering"). The Purchase Agreement also
provides for the potential issuance of a number of shares of the Company's
common stock to be determined by the financial performance of the Avalon West
Coast Companies for the years 1996, 1997 and 1998.
Pursuant to the Offering, the Company issued 2,600,000 shares of its
common stock, no par value. Proceeds from the offering were approximately
$9,100,000.
Prior to the acquisition, Robert E. Geddes ("Geddes") and Thomas
Miserendino ("Miserendino") were appointed to the Board of Directors of the
Company in connection with the acquisition of Avalon Entertainment Group,
Inc. in April 1997. In connection with the Purchase Agreement, Geddes and
Miserendino terminated consulting agreements with the Company and entered
into employment agreements with the Company.
The Avalon West Coast Companies generally hold and produce concerts,
coordinate advertising and sponsorships for concerts, and manage merchandising
for concerts and sporting events. IMA Partners owns and, through
a joint venture, operates the Irvine Meadows Amphitheater in Orange County,
California.
The foregoing description of the terms of the acquisition does not
purport to be complete and is qualified in its entirety by reference to the
Purchase Agreement relating to the acquisition, a copy of which is attached
hereto and incorporated herein by reference.
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Filed herewith as a part of this report are the audited combined
financial statements and related notes of the Avalon West Coast
Companies, and the separate financial statements of IMA Partners, for
the years ended December 31, 1995 and December 31, 1996, and as of
December 31, 1996, and unaudited combined financial statements of the
Avalon West Coast Companies for the three month periods ended March 31,
1996 and 1997, and as of March 31, 1997.
(b) RESTATED AND PRO FORMA FINANCIAL INFORMATION.
Filed herewith as a part of this report is the pro forma financial
information required by Article 11 of Regulation S-X including:
Unaudited Pro Forma Consolidated Balance Sheet of the Company
as of March 31, 1997 and related Notes.
Unaudited Pro Forma Consolidated Statement of Operations of
the Company for the year ended December 31, 1996 and related
Notes.
Unaudited Pro Forma Consolidated Statement of Operations of
the Company for the three months ended March 31, 1997 and
related Notes.
(c) EXHIBITS.
2.1 Purchase Agreement, dated as of July 31, 1997, among Nashville
Country Club, Inc., AWC Acquisition Corp., Inc., the Robert E.
Geddes Family Trust, the Miserendino Family Trust, Brian F.
Murphy and Audrey & Jane, Inc.
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SIGNATURE
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 hereunto duly authorized.
NASHVILLE COUNTRY CLUB, INC.
Date: August 12, 1997 By: /s/ Thomas J. Weaver III
--------------------------------
Thomas J. Weaver III
Chief Executive Officer
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5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Avalon West Coast:
We have audited the accompanying combined balance sheet of Avalon West
Coast (an affiliated group of one Texas and three California corporations) as of
December 31, 1996, and the related combined statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
Avalon West Coast's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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 statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Avalon West Coast as
of December 31, 1996, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
May 9, 1997
F-1
6
AVALON WEST COAST
COMBINED BALANCE SHEETS
ASSETS
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
(UNAUDITED)
CURRENT ASSETS:
Cash............................................................. $ 478,197 $ 500,177
Accounts receivable.............................................. 368,060 244,275
Prepaid expenses................................................. 135,454 92,495
Notes receivable................................................. 52,500 14,400
Loans to related parties......................................... 5,088 --
------------ -----------
Total current assets..................................... 1,039,299 851,347
------------ -----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and fixtures........................................... 228,831 229,368
Computer and other equipment..................................... 94,618 94,618
Leasehold improvements........................................... 16,548 16,548
------------ -----------
339,997 340,534
Less -- accumulated depreciation and amortization................ (81,353) (98,352)
------------ -----------
258,644 242,182
------------ -----------
INVESTMENT IN IRVINE MEADOWS AMPHITHEATER.......................... 1,030,845 909,220
------------ -----------
DEPOSITS AND OTHER ASSETS.......................................... 126,063 126,063
------------ -----------
Total assets............................................. $2,454,851 $ 2,128,812
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit................................................... $ 175,000 $ 275,000
Accounts payable................................................. 614,445 193,835
Accrued expenses and other....................................... 477,767 324,593
Advance ticket receipts.......................................... 169,306 570,228
Current portion of loans from stockholders....................... 240,000 240,000
Loans from related parties....................................... -- 92,876
------------ -----------
Total current liabilities................................ 1,676,518 1,696,532
LOANS FROM STOCKHOLDERS, net of current portion.................... 134,000 74,000
------------ -----------
Total liabilities........................................ 1,810,518 1,770,532
------------ -----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock..................................................... 18,500 18,500
Retained earnings................................................ 625,833 339,780
------------ -----------
Total stockholders' equity............................... 644,333 358,280
------------ -----------
Total liabilities and stockholders' equity............... $2,454,851 $ 2,128,812
========== ===========
The accompanying notes are an integral part of these combined balance sheets.
F-2
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AVALON WEST COAST
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------- -----------------------
1995 1996 1996 1997
----------- ----------- ---------- ---------
(UNAUDITED)
REVENUES................................... $16,470,709 $18,011,481 $1,869,307 $ 598,957
COSTS OF REVENUES.......................... 14,525,673 15,665,720 1,568,185 362,721
----------- ----------- ---------- ---------
1,945,036 2,345,761 301,122 236,236
OPERATING EXPENSES:
General and administrative expenses...... 2,394,916 2,065,631 428,136 382,573
Selling and marketing expenses........... 44,599 56,810 14,873 21,159
----------- ----------- ---------- ---------
(Loss) income from operations............ (494,479) 223,320 (141,887) (167,496)
OTHER INCOME (EXPENSE):
Equity income (loss) from investments.... 38,699 11,912 (101,883) (121,625)
Interest expense, net.................... (109,266) (111,491) (28,792) (11,943)
Consulting income........................ 14,543 67,641 5,479 15,811
Fire insurance gain, net of expenses..... 429,342 -- -- --
----------- ----------- ---------- ---------
(Loss) income before provision for income
taxes................................. (121,161) 191,382 (267,083) (285,253)
(BENEFIT) PROVISION FOR TAXES.............. (3,846) 10,725 800 800
----------- ----------- ---------- ---------
NET (LOSS) INCOME.......................... $ (117,315) $ 180,657 $ (267,883) $(286,053)
========== ========== ========= =========
The accompanying notes are an integral part of these combined statements.
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AVALON WEST COAST
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1997 (UNAUDITED)
COMMON STOCK (NOTES 1 AND 3) TOTAL
---------------------------------------------- RETAINED STOCKHOLDERS'
AVA ECL TBA ECM TOTAL EARNINGS EQUITY
------- ------ ------ ---- ------- --------- -------------
BALANCES, December 31,
1994................... $12,500 $1,000 $5,000 $ -- $18,500 $ 562,491 $ 580,991
Net loss............... -- -- -- -- -- (117,315) (117,315)
------- ------ ------ ---- ------- --------- -------------
BALANCES, December 31,
1995................... 12,500 1,000 5,000 -- 18,500 445,176 463,676
Net income............. -- -- -- -- -- 180,657 180,657
------- ------ ------ ---- ------- --------- -------------
BALANCES, December 31,
1996................... 12,500 1,000 5,000 -- 18,500 625,833 644,333
Net loss (unaudited)... -- -- -- -- -- (286,053) (286,053)
------- ------ ------ ---- ------- --------- -------------
BALANCES, March 31, 1997
(unaudited)............ $12,500 $1,000 $5,000 $ -- $18,500 $ 339,780 $ 358,280
======= ====== ====== ===== ======= ========= ==========
The accompanying notes are an integral part of these combined statements.
F-4
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AVALON WEST COAST
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------- ----------------------
1995 1996 1996 1997
--------- ---------- --------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income............................ $(117,315) $ 180,657 $(267,883) $(286,053)
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating
activities --
Depreciation and amortization............. 17,649 65,451 16,362 16,999
Fire insurance gain....................... (591,422) -- -- --
Provision for doubtful accounts........... 217,080 195,082 42,616 --
Equity in loss (income) from IMA
Partners................................ 21,967 (36,025) 80,624 121,625
Equity in (income) loss from other
investments............................. (60,666) 24,113 -- --
Changes in assets and liabilities --
(Increase) decrease in assets --
Accounts receivable..................... 398,434 379,314 372,527 123,785
Prepaid expenses........................ 277,316 (31,726) (56,070) 42,959
Deposits and other assets............... (335,381) 316,573 16,950 --
Loans to related parties................ 247,824 26,833 14,421 5,088
Increase (decrease) in liabilities --
Accounts payable........................ 239,545 22,108 (299,510) (420,610)
Accrued expenses and other.............. (24,313) (40,575) 152,927 (153,174)
Advance ticket receipts................. (241,401) (54,566) (149,383) 400,922
Loans from related parties.............. -- -- 55,232 92,876
--------- ---------- --------- ---------
Net cash provided by (used in) operating
activities................................ 49,317 1,047,239 (21,187) (55,583)
--------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases of) proceeds from investments..... 302,255 (293,005) -- --
Advances made on notes receivable............ -- (52,500) -- --
Payments received on notes receivable........ -- -- -- 38,100
Expenditures for property and equipment...... (219,900) (124,496) (87,867) (537)
Insurance proceeds from fire gain............ 635,287 -- -- --
--------- ---------- --------- ---------
Net cash provided by (used in) investing
activities.............................. 717,642 (470,001) (87,867) 37,563
--------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt................... (204,000) (487,000) (34,000) (60,000)
Proceeds from line of credit................. -- 310,000 310,000 100,000
Payments on line of credit................... (350,000) (135,000) -- --
--------- ---------- --------- ---------
Net cash (used in) provided by financing
activities.............................. (554,000) (312,000) 276,000 40,000
--------- ---------- --------- ---------
NET INCREASE IN CASH........................... 212,959 265,238 166,946 21,980
CASH, beginning of period...................... -- 212,959 212,959 478,197
--------- ---------- --------- ---------
CASH, end of period............................ $ 212,959 $ 478,197 $ 379,905 $ 500,177
========= ========= ========= =========
The accompanying notes are an integral part of these combined statements.
F-5
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AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INCLUDING INFORMATION AS OF MARCH 31, 1997, AND FOR THE
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND MARCH 31, 1997, WHICH IS UNAUDITED)
1. NATURE OF BUSINESS
Avalon West Coast consists of the combined accounts of New Avalon, Inc.
("Avalon Attractions"), Eric/Chandler Ltd., Inc. ("ECL"), Eric Chandler
Merchandising, Inc. ("ECM") and TBA Media, Inc. ("TBA") (collectively, "AWC")
and the minority equity investment in Irvine Meadows Amphitheater, a California
general partnership ("IMA Partners").
Ownership and incorporation
Avalon Attractions, a California corporation, was incorporated on October
21, 1982 and is owned by Robert Geddes, Brian Murphy, and Thomas Miserendino.
ECL, a Texas corporation, was incorporated on August 16, 1982 and is owned by
Robert Geddes and Thomas Miserendino. ECM, an S corporation, was incorporated on
June 5, 1995 and is owned by Robert Geddes and Thomas Miserendino. TBA, a
California corporation, was incorporated on March 4, 1983 and is owned by Robert
Geddes, Brian Murphy and Thomas Miserendino. Robert Geddes, through Audrey &
Jane, Inc., owns a 25% interest in IMA Partners.
Business operations
Avalon Attractions signs contracts with talent, venues and advertising
organizations relating to concert events held in Southern California. ECL and
ECM provide "merchandising operations" consulting services and authors
sponsorship contracts with companies interested in promoting their products
and/or services at concert events held in Southern California. ECL,
historically, has also managed the manufacture and sale of merchandise at
stadium concerts and occasionally at other events. TBA primarily advertises
concert events promoted by Avalon Attractions. Concert events occur year round
with the majority occurring between March and November.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of combination
The accompanying combined financial statements include the combined
accounts of AVA, ECL, ECM, and TBA. The companies are combined because of common
ownership. All significant intercompany accounts and transactions have been
eliminated. AWC's investment in IMA Partners is accounted for under the equity
method. (Note 7)
Revenue recognition
AWC recognizes revenues as concert events occur. Expenses are properly
matched to the period in which related revenues are recognized.
Property and Equipment
Property and equipment are stated at cost and related depreciation and
amortization is provided using the straight-line method over the following
estimated useful lives:
Furniture and fixtures................................... 5 years
Computer and other equipment............................. 3-5 years
Leasehold improvements................................... The lesser of 15 years or the
remaining term of the lease
F-6
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AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
AWC follows the policy of capitalizing expenditures that materially
increase asset lives and charges ordinary maintenance and repairs to operations
as incurred.
Income taxes
AVA and TBA are taxed as C corporations.
ECL and ECM have elected to be taxed as S corporations under provisions of
the Internal Revenue Code. As long as ECL continues to qualify for S corporation
tax treatment, no federal income taxes are payable. Accordingly, there is no
provision for federal income taxes reflected in the accompanying combined
financial statements. California has conformed to the federal provisions
recognizing S corporations and requires a tax of 1.5 percent of income for an S
corporation at the entity level. The proposed sale of the majority interest in
the combined companies discussed in Note 9 will automatically terminate the S
corporation elections.
Deferred income taxes are provided for the tax effect of temporary
differences in the recognition of income and expenses for financial reporting
and tax purposes.
Statements of cash flows
AWC prepares its statements of cash flows using the indirect method as
defined under Statement of Financial Accounting Standards No. 95. Supplemental
cash flow disclosures are as follows:
DECEMBER 31,
------------------- MARCH 31,
1995 1996 1997
-------- ------- -----------
(UNAUDITED)
Cash paid during the period for:
Income taxes....................................... $ 10,678 $ 2,400 $ --
======== ======= =========
Interest........................................... $151,907 $95,267 $13,653
======== ======= =========
Payments to stockholders
AWC has made payments to its stockholders, who are all employees of AWC,
based in part on the profitability of AWC and availability of cash. These
payments can cause significant variations in the results as they are included in
cost of revenues and general and administrative expenses in the period paid.
These payments totaled $320,000 and $1,233,000 for the years ended December 31,
1995 and 1996, respectively, and $30,000 and $30,000 for the three month periods
ended March 31, 1996 and 1997, respectively.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Unaudited quarterly information
Information with respect to the three month periods ended March 31, 1996
and 1997, and as of March 31, 1997 included in these combined financial
statements and notes thereto, is unaudited; however, in the opinion of AWC's
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the combined financial position and results
of operations of AWC for such period have been included.
F-7
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AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. COMMON STOCK
The combined entities have one class of voting common stock. The number of
shares issued and outstanding summarized in the following table remained
consistent between 1995 and 1996.
ISSUED AND
ENTITY AUTHORIZED OUTSTANDING PAR VALUE
------------------------------------- ---------- ----------- ---------
AVA.................................. 100,000 12,500 No par
ECL.................................. 100,000 1,000 $ .01
ECM.................................. 100,000 3,000 No par
TBA.................................. 50,000 12,500 No par
---------- -----------
Total...................... 350,000 29,000
======== =========
4. COMMITMENTS
AWC leases one facility under an 80 month lease agreement ending June 30,
2002. Rent expense under operating leases was $109,000 and $151,000 for the
years ended December 31, 1995 and 1996, respectively. The minimum lease
commitments as of December 31, 1996 are as follows:
1997...................................................... $164,000
1998...................................................... 165,000
1999...................................................... 165,000
2000...................................................... 165,000
2001...................................................... 165,000
Thereafter................................................ 83,000
--------
$907,000
========
5. RELATED PARTIES
AWC is affiliated, through common ownership, with several companies
involved in the music and entertainment industries. The following represents a
summary of activity with these affiliates.
As of December 31, 1995 and 1996, AWC had loans from stockholders of
$861,000 and $374,000, bearing interest at 11.5% and 11.25%, and loans to
related parties of $14,421 and $5,088, respectively. AWC also had a $52,500 note
receivable from a stockholder at December 31, 1996. In 1995 and 1996, Audrey &
Jane, Inc., received management fees of $140,000 and $143,100 from IMA Partners.
Eric Chandler Merchandising Partners ("ECMP"), an affiliate established in 1996
to coordinate merchandising at the 1996 Atlanta Summer Olympics, utilized the
services of AWC beginning in 1996. ECMP paid $531,000 to AWC in connection with
the services provided. AWC, also a 40% owner of ECMP, reported a loss in 1995
and income in 1996 of approximately $316,000 and $830,000, respectively.
AWC received from Avalon Entertainment Group, Inc. ("AEG"), an affiliate
involved in the entertainment and music industries, $60,000 and $93,000 in 1995
and 1996, respectively, for financial and accounting services and $104,000 in
1996 for assistance with business development. Accounts receivable from AEG for
payroll paid on behalf of AEG was approximately $21,000 and $32,000 in 1995 and
1996, respectively. In 1995, AWC received interest income of $15,908 from AEG
for interest on a loan with a principal amount of $253,390. All interest and
principal payments were received in June 1995.
In 1995, AWC invested $50,000 in Avalon Entertainment Partners, a
California limited liability company. The purpose of the entity was to promote
concerts in the San Diego market. AWC, a 50% owner, reported income in 1995 and
a loss in 1996 of $60,666 and $24,113, respectively. The entity ceased
operations in April 1996.
F-8
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AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. SIGNIFICANT CONCENTRATIONS
AVA generated 55% of revenues in 1996 through concert events held at one
venue and contracted artists through one major agency, which accounted for 10%
of total cost of revenues. In 1995, 30%, 25%, 19% and 11% of AVA's revenues were
generated at four venues. A single customer accounted for 34% and 51% of ECL's
revenues in 1995 and 1996, respectively. TBA generated 50% and 58% of revenues
from AVA in 1995 and 1996, respectively. Two vendors accounted for 23% and 11%
of cost of revenues in 1995, and the same two vendors accounted for 22% and 16%
of cost of revenues in 1996. All revenues and expenses generated and incurred by
ECM in 1996 related to the operations of ECMP.
7. INVESTMENT IN IMA PARTNERS
IMA Partners owns the Irvine Meadows Amphitheater, a 15,000 seat outdoor
facility in Southern California. IMA Partners generates revenue through ticket
sales, concessions, parking and service fees and merchandise sales. AWC promotes
all concert events held at the facility for a fee specified in contracts signed
with the artists and pays IMA Partners a percentage of sponsorship income
generated as the facility is used by AWC to perform sponsor related obligations.
IMA Partners primarily utilizes Ticketmaster to sell tickets, Service America
Corporation to manage concessions and parking, and Events Merchandising to
manage merchandise sales. Ticketmaster, Service America Corporation and Events
Merchandising are not related parties.
The investment in IMA Partners is accounted for using the equity method of
accounting. Audrey & Jane, Inc.'s share of the IMA Partners' loss in 1995 and
income in 1996 was $21,967 and $36,025, respectively. Condensed financial
information of IMA Partners is summarized below:
Condensed Financial Information:
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
Current assets....................................... $ 217,970 $ 487,876
Non-current assets................................... 5,220,677 5,463,577
Current liabilities.................................. 898,303 1,930,940
Non-current liabilities.............................. 416,963 383,631
Partners' capital.................................... 4,123,381 3,636,882
Income for the year -- 1996.......................... 144,101
Loss for the year -- 1995............................ (87,867)
Loss for the three months ended March 31, 1997....... (486,499)
In April 1997, IMA Partners entered into a joint venture, Western
Amphitheater Partners ("WAP"), with Pavilion Partners, a Delaware general
partnership. Each partner owns a 50% interest in the revenues and direct show
related expenses of WAP, and contributed an irrevocable, exclusive right to use
and operate their respective amphitheaters and related assets. Certain facility
expenses, as defined in the joint venture agreement, will be recorded separately
on each partners' respective books. Pavilion Partners is the sole owner of the
Glen Helen Amphitheater, which seats 65,000, located in Devore, California. The
purpose of WAP is to improve operational efficiencies at the two amphitheaters.
In connection with the venture, Avalon Attractions, for a fee, will carry out
booking and logistical production of all events until November 2016, when the
venture agreement ends.
8. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
In April 1997, Audrey & Jane, Inc. signed a letter of intent to purchase an
additional 50% interest in IMA Partners. In June 1997, Audrey & Jane, Inc. then
agreed in principle to sell a 51% interest in IMA Partners to Nashville Country
Club, Inc. ("NCCI").
F-9
14
AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the stockholders of AWC entered into an agreement to sell a
51% controlling interest in all entities to NCCI, a public company involved in
the development, ownership and operations of restaurants, hotels and other
entertainment related business assets.
F-10
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Irvine Meadows Amphitheater:
We have audited the accompanying balance sheet of Irvine Meadows
Amphitheater (a California general partnership) as of December 31, 1996, and the
related statements of operations, partners' capital and cash flows for each of
the two years in the period ended December 31, 1996. These financial statements
are the responsibility of Irvine Meadows Amphitheater's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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 statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Irvine Meadows Amphitheater
as of December 31, 1996, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
May 9, 1997
F-11
16
IRVINE MEADOWS AMPHITHEATER
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 180,237
Accounts receivable........................................................... 13,214
Prepaid expenses.............................................................. 24,519
-----------
Total current assets.................................................. 217,970
-----------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements........................................................ 10,396,874
Capitalized lease equipment................................................... 458,941
-----------
10,855,815
Less -- accumulated depreciation and amortization............................. (5,635,138)
-----------
5,220,677
-----------
Total assets.......................................................... $ 5,438,647
==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 254,790
Accrued expenses and other.................................................... 230,479
Season tickets and deferred income............................................ 107,950
Loans from related parties.................................................... 5,088
Loan from partners............................................................ 200,000
Current portion of capital lease obligation................................... 99,996
-----------
Total current liabilities............................................. 898,303
CAPITAL LEASE OBLIGATION, net of current portion................................ 416,963
-----------
Total liabilities..................................................... 1,315,266
COMMITMENTS
PARTNERS' CAPITAL............................................................... 4,123,381
-----------
Total liabilities and partners' capital............................... $ 5,438,647
==========
The accompanying notes are an integral part of this balance sheet.
F-12
17
IRVINE MEADOWS AMPHITHEATER
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996
---------- -----------
REVENUES........................................................... $9,722,368 $10,306,418
COST OF REVENUES................................................... 7,270,122 7,603,947
OPERATING EXPENSES:
General and administrative expenses.............................. 2,142,713 2,153,556
Selling and marketing expenses................................... 27,677 61,437
Depreciation and amortization.................................... 301,623 305,648
---------- -----------
(Loss) income from operations................................. (19,767) 181,830
INTEREST EXPENSE, net.............................................. 68,100 37,729
---------- -----------
NET (LOSS) INCOME.................................................. $ (87,867) $ 144,101
========= ==========
The accompanying notes are an integral part of these statements.
F-13
18
IRVINE MEADOWS AMPHITHEATER
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
PARTNERS (NOTE 1)
-------------------------------------------
IMA TOTAL
AUDREY & SHELLI INVESTMENT PARTNERS'
JANE, INC. MEADOWS, INC. CORP. CAPITAL
---------- ------------- ---------- ----------
BALANCES, December 31, 1994.............. $1,016,787 $ 1,016,787 $2,033,573 $4,067,147
Net loss............................... (21,967) (21,967) (43,933) (87,867)
---------- ------------- ---------- ----------
BALANCES, December 31, 1995.............. 994,820 994,820 1,989,640 3,979,280
Net income............................. 36,025 36,025 72,051 144,101
---------- ------------- ---------- ----------
BALANCES, December 31, 1996.............. $1,030,845 $ 1,030,845 $2,061,691 $4,123,381
========= ========== ========= =========
The accompanying notes are an integral part of these statements.
F-14
19
IRVINE MEADOWS AMPHITHEATER
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------
1995 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................................................ $ (87,867) $ 144,101
Adjustments to reconcile net (loss) income to net cash provided
by operating activities --
Depreciation and amortization................................. 301,623 305,648
Changes in assets and liabilities --
(Increase) decrease in assets --
Accounts receivable...................................... (101,912) 54,579
Prepaid expenses......................................... 22,407 (9,456)
Deposits and other assets................................ 1,312 --
Increase (decrease) in liabilities --
Accounts payable......................................... 108,999 97,112
Accrued expenses and other............................... 92,333 (175,394)
Season tickets and deferred income....................... (43,175) (98,935)
Loans from related parties............................... (265,324) (9,333)
--------- ---------
Net cash provided by operating activities.............. 28,396 308,322
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES;
Expenditures for property and equipment.......................... (10,037) (65,654)
--------- ---------
Net cash used in investing activities.................. (10,037) (65,654)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation............................. (99,996) (99,996)
Proceeds from debt............................................... -- 200,000
Proceeds from line of credit..................................... 990,000 170,000
Payments on line of credit....................................... (925,000) (360,000)
--------- ---------
Net cash used in financing activities.................. (34,996) (89,996)
--------- ---------
NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS............... (16,637) 152,672
CASH AND CASH EQUIVALENTS, beginning of year....................... 44,202 27,565
--------- ---------
CASH AND CASH EQUIVALENTS, end of year............................. $ 27,565 $ 180,237
========= =========
The accompanying notes are an integral part of these statements.
F-15
20
IRVINE MEADOWS AMPHITHEATER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF BUSINESS
Irvine Meadows Amphitheater, a California general partnership ("IMA
Partners"), was formed on January 1, 1981. IMA Partners is owned 50% by IMA
Investment Corp., 25% by Shelli Meadows, Inc., and 25% by Audrey & Jane, Inc.
IMA Partners owns the Irvine Meadows Amphitheater (the "IMA"), a 15,000
seat outdoor facility in Irvine, California. IMA Partners generates revenue
through ticket sales, concessions, parking and service fees and merchandise
sales. Affiliates of IMA Partners promote all concert events held at the
facility for a fee specified in contracts signed with the artists and also pay
IMA Partners a percentage of sponsorship income generated as the facility is
used by the affiliated companies to fulfill sponsor related obligations.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
IMA Partners recognizes revenues as concert events occur. Expenses are
properly matched to the period in which related revenues are recognized.
Property and equipment
Property and equipment are recorded at cost and related depreciation and
amortization is provided using the straight-line method over the following
useful lives:
Leasehold improvements.................................. The lesser of 5-35 years or
the remaining term of the lease
Capitalized lease equipment............................. 15 years
IMA Partners follows the policy of capitalizing expenditures that
materially increase asset lives and charges ordinary maintenance and repairs to
operations as incurred.
Statements of cash flows
IMA Partners has a cash management program that invests excess cash in
money market funds. Cash balances not required to meet daily checks clearing the
banks are temporarily invested. For purposes of the statements of cash flows,
IMA Partners considers all highly liquid investments with original maturities of
less than three months to be cash equivalents.
IMA Partners prepares its statements of cash flows using the indirect
method as defined under Statement of Financial Accounting Standards No. 95.
Supplemental cash flow disclosures are as follows:
1995 1996
------- -------
Cash paid during the year for:
Interest....................................................... $81,389 $60,001
======= =======
Payments to partners
IMA Partners has made payments to its partners, one of whom is an employee
of IMA Partners, based in part on the profitability of IMA Partners and the
availability of cash. These payments can cause significant variations in IMA
Partners results of operations as they are included in general and
administrative expenses in the period paid. These payments totaled $280,000 and
$286,000 for the years ended December 31, 1995 and
F-16
21
IRVINE MEADOWS AMPHITHEATER
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996, respectively, and $37,500 and $50,000 for the three month period ended
March 31, 1996 and 1997, respectively.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income taxes
In accordance with Internal Revenue Service regulations, IMA Partners is
not an income tax paying entity. Its income or losses are reported in the tax
returns of its partners.
Impairment of property and equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of," which requires IMA Partners to review for impairment
of long-lived assets, certain identifiable intangibles, and goodwill related to
those assets whenever events or changes in circumstances indicate the carrying
amount of an asset might not be recoverable. In certain situations, an
impairment loss would be recognized. IMA Partners has reviewed property and
equipment and does not believe they have been impaired as of December 31, 1996.
3. FINANCING ARRANGEMENTS
IMA Partners utilizes various forms of short-term debt to finance
operations. At December 31, 1996 IMA Partners had a $200,000 non-interest
bearing note payable to the partners, due in 1997, and a line of credit with a
maximum borrowing limit of $500,000 at 9.25% with no outstanding balance, which
expires in December 1997. At December 31, 1995, IMA Partners had a line of
credit with a maximum borrowing limit of $500,000 and $190,000 outstanding
bearing 9.75% interest.
4. COMMITMENTS
IMA Partners leases the land on which the amphitheater is located and in
February 1997, entered into a new 20 year lease agreement ending February 28,
2017. The new lease agreement specifies annual payments of the greater of
$700,000, 5% of gross amphitheater sales, or 25% of net cash flow from
operations. Rent expense under operating leases was approximately $544,000 and
$507,000 for the years ended December 31, 1995 and 1996, respectively. The
minimum lease commitments as of December 31, 1996 are as follows:
1997.................................................... $ 608,000
1998.................................................... 700,000
1999.................................................... 700,000
2000.................................................... 700,000
2001.................................................... 700,000
Thereafter.............................................. 10,617,000
-----------
$14,025,000
==========
F-17
22
IRVINE MEADOWS AMPHITHEATER
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. RELATED PARTIES
IMA Partners is affiliated, through common ownership with Robert Geddes,
with several companies involved in the music and entertainment industries. The
following represents a summary of activity with these affiliates.
As of December 31, 1995 and 1996, IMA Partners had loans from related
parties, consisting mainly of short-term payables, of $14,421 and $5,088,
respectively. In 1995 and 1996, Audrey & Jane, Inc., received management fees of
$140,000 and $143,100 from IMA Partners. IMA Partners received $257,000 and
$325,000 in sponsorship income from Eric/Chandler Ltd., Inc. in 1995 and 1996,
respectively.
6. SIGNIFICANT CONCENTRATIONS
IMA Partners primarily utilizes Ticketmaster to sell tickets, Service
America Corporation to manage concessions and parking, and Events Merchandising
to manage merchandise sales. Ticketmaster, Service America Corporation and
Events Merchandising are not related parties. IMA Partners has multi-year
contracts with these companies to provide services at Irvine Meadows
Amphitheater.
7. WESTERN AMPHITHEATER PARTNERS
In April 1997, IMA Partners entered into a joint venture, Western
Amphitheater Partners ("WAP"), with Pavilion Partners, a Delaware general
partnership. Each partner owns a 50% interest in the revenues and direct show
related expenses of WAP and contributed an irrevocable, exclusive right to use
and operate their respective amphitheaters and related assets. Certain facility
expenses, as defined in the joint venture agreement, will be recorded separately
on each partners' respective books. Pavilion Partners is the sole owner of the
Glen Helen Amphitheater, which seats 65,000, located in Devore, California. The
purpose of WAP is to improve operational efficiencies at the two amphitheaters.
In connection with the venture, an affiliate, for a fee, will carry out booking
and logistical production of all events until November 2016, when the venture
agreement ends.
8. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
In April 1997, Audrey & Jane, Inc. signed a letter of intent to purchase
IMA Investment Corp.'s 50-percent interest in IMA Partners. In June 1997, Audrey
& Jane, Inc. then agreed in principle to sell a 51-percent interest in IMA
Partners to Nashville Country Club, Inc. ("NCCI") in conjunction with NCCI's
acquisition of certain other affiliated companies. NCCI is a public company
involved in the development, ownership and operations of restaurants, hotels and
other entertainment related business assets.
F-18
23
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data (the "Pro
Forma Financial Data") of the Company has been prepared utilizing the historical
Financial Statements and related notes thereto of each of the Company and AEG
not included herein, AWC and IMA Partners appearing elsewhere herein and the
unaudited financial statements of the Village at Breckenridge Resort (the
"Breckenridge Resort") for the period from January 1, 1996 to April 29, 1996 not
included herein. The Pro Forma Financial Data gives pro forma effect to the
consummation of the Offering, the acquisition of AEG and the acquisition of a
fifty one percent (51%) interest in AWC (the "Acquisitions") as if they had
occurred on March 31, 1997 for balance sheet purposes and as of January 1, 1996
and January 1, 1997 for purposes of the pro forma statements of operations and
to the consummation of the Breckenridge Resort acquisition (the "Breckenridge
Resort Acquisition") as though such transaction had occurred as of April 29,
1996 for balance sheet purposes and as of January 1, 1996 for statement of
operations purposes. As a result of the Acquisitions, the Company has
reconfigured its financial reporting segments into Entertainment and Resort to
separate the operations of its two primary business divisions.
The Breckenridge Resort Acquisition has been accounted for, and the
Acquisitions are being accounted for, under the purchase method of accounting
and the Pro Forma Financial Data has been prepared on such basis of accounting
utilizing estimates and assumptions as set forth below and in the notes thereto.
The Pro Forma Financial Data is presented for informational purposes and is not
necessarily indicative of the future financial position or results of operations
of the combined businesses that would have resulted had the Breckenridge Resort
Acquisition and the Acquisitions been consummated on the dates or as of the
periods described above. The purchase price allocations reflected in the Pro
Forma Financial Data have been based on preliminary estimates of the respective
fair value of assets and liabilities, which may differ from the actual
allocations, and are subject to revision. The Pro Forma Financial Data should be
read in conjunction with the Financial Statements and the related notes thereto
of each of the Company, AEG, AWC and IMA Partners.
F-19
24
NASHVILLE COUNTRY CLUB, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA
AS OF MARCH 31, 1997
(IN THOUSANDS)
HISTORICAL
-------------------------- ACQUISITION OFFERING PRO FORMA
COMPANY AEG AWC ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
------- ----- ------ ----------- ----------- ------------
ASSETS
Cash and cash equivalents.................. $ 2,620 $ 194 $ 500 $ (700)(a) $ 8,000(e)
(7,300)(b)
285(c) $ 3,599
Accounts receivable........................ 1,235 103 244 (92)(d) 1,490
Inventories................................ 431 -- -- 431
Prepaid expenses and other current
assets................................... 135 293 107 203(c) 738
------- ----- ------ ------------
Total current assets............. 4,421 590 851 6,258
Property and equipment, net................ 33,870 59 242 5,464(c) 39,635
Intangible and other assets................ 357 (84) 1,036 7,728(a)
5,726(b)
(909)(d) 13,854
------- ----- ------ ------------
Total assets..................... $38,648 $ 565 $2,129 $ 59,747
======= ===== ====== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt and current portion of
long-term debt........................... $ 2,683 -- $ 515 $ 400(c)
2,480(a) $ 6,078
Accounts payable and accrued liabilities... 3,681 $ 793 1,182 1,531(c)
(92)(d) 7,095
------- ----- ------ ------------
Total current liabilities........ 6,364 793 1,697 13,173
Long-term debt:
Capital lease obligation, net of current
portion............................... 733 -- -- 384(c) 1,117
Long-term debt, net of current portion... 17,559 -- 74 17,633
------- ----- ------ ------------
Total liabilities................ 24,656 793 1,771 31,923
Minority interest.......................... -- -- -- (270)(b)
1,782(c) 1,512
Stockholders' equity:
Preferred stock.......................... 10 -- -- 10
Stockholders' and partners' capital...... 16,770 19 18 (19)(a)
(18)(b)
4,320(a) 8,000(e) 29,090
Accumulated (deficit) earnings........... (2,788) (247) 340 247(a)
(340)(b) (2,788)
------- ----- ------ ------------
Total stockholders' equity....... 13,992 (228) 358 26,312
------- ----- ------ ------------
Total liabilities and
stockholders' equity........... $38,648 $ 565 $2,129 $ 59,747
======= ===== ====== =========
See notes to unaudited pro forma consolidated financial data.
F-20
25
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(a) This entry reflects the acquisition (the "AEG Acquisition") of Avalon
Entertainment Group Inc. ("AEG") and the related elimination of AEG's
historical stockholders' deficit. The AEG Acquisition will result in the net
liabilities of AEG being revalued to reflect the purchase price of the
transaction. The purchase price of AEG will be calculated as the sum of (i)
the fair value of the Company's Common Stock that was issued to the former
owners of AEG, (ii) the fair value of notes payable issued by the Company to
the former owners of AEG, (iii) the cash payment made to the former owners
of AEG, (iv) AEG's net liabilities as of March 31, 1997 and (v) transaction
costs. Under the purchase accounting method, the acquisition cost is
allocated to the assets and liabilities acquired based on their relative
fair values. The Company has not completed any appraisals or other valuation
studies, nor has it made a final determination of the useful lives of the
assets acquired. Based on the foregoing, the Company has established a
purchase price for AEG of approximately $7,728,000. For purposes of the pro
forma consolidated financial data, the entire purchase price amount has been
allocated to goodwill. Amortization expense in the pro forma consolidated
financial data has been calculated assuming an amortization period of 20
years. The Company believes the final allocation of the purchase price (and
related amortization period) will not differ materially from the pro forma
amounts included herein. The Company expects the final allocation to be
completed no later than March 31, 1998.
The following table summarizes the components of the purchase price:
Fair value of Common Stock issued................................ $4,320,000
Fair value of notes payable issued............................... 2,480,000
Cash payments.................................................... 400,000
Transaction costs................................................ 300,000
AEG's net liabilities at March 31, 1997.......................... 228,000
----------
Purchase price................................................... $7,728,000
=========
The Merger Agreement relating to the AEG Acquisition (the "Merger
Agreement") provides for an adjustment to the purchase price based on AEG's
net income before taxes for the year ending December 31, 1997 (the "1997
Pre-Tax Net Income"). In the event AEG's 1997 Pre-Tax Net Income equals or
exceeds $1.2 million, the purchase price is not adjusted. In the event that
AEG's 1997 Pre-Tax Net Income is less than $1.2 million, the purchase price
is adjusted downward in an amount equal to six times the difference between
the 1997 Pre-Tax Net Income and $1.2 million. The former owners of AEG may
satisfy the adjusted purchase price, if any, by delivering to the Company
either cash or shares of Common Stock valued based on the average closing
prices of the Common Stock for the 30 trading days ending 5 days prior to
the calculation of the 1997 Pre-Tax Net Income. Management does not
anticipate that the purchase price will be adjusted materially.
(b) This entry reflects the acquisition of a fifty one percent (51%) interest
in AWC ("AWC Acquisition") and the related elimination of AWC's historical
stockholders' equity. The AWC Acquisition will result in the net assets of
AWC being revalued to reflect the purchase price of the transaction. The
purchase price of AWC will be calculated as the sum of (i) the cash payment
made to the former owners of AWC and (ii) transaction costs. Under the
purchase accounting method, the acquisition cost is allocated to the assets
and liabilities acquired based on their relative fair values. In addition,
the Company will record a minority interest equal to the 49% of AWC's net
assets not acquired by the Company. The Company has not completed any
appraisals or other valuation studies, nor has it made a final determination
of the useful lives of the assets acquired. The Company's preliminary
allocation of the acquisition cost resulted in an excess purchase price over
the fair value of the net tangible assets acquired of approximately
$5,726,000. For purposes of the pro forma consolidated financial data, this
excess has been allocated to goodwill. Amortization expense in the pro forma
consolidated financial data has been calculated assuming an amortization
period of 20 years. In consideration for the 51% interest in AWC, the
Company has agreed to pay an aggregate purchase price
F-21
26
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF MARCH 31, 1997
equal to the greater of (i) $7,000,000 or (ii) 51% of the sum of (a) six
times the average of EBITDA (as defined elsewhere herein) from the
operations of the AWC entities which will own and operate amphitheaters
("AWC's Amphitheater Operations") for the years 1996, 1997 and 1998 (the
"Computation Period") and (b) six times the average of the net income before
taxes of the remaining business entities constituting AWC ("AWC's
Non-amphitheater Operations") for the Computation Period. The Company
believes the final allocation of the purchase price (and related
amortization period) will not differ materially from the pro forma amounts
included herein. The Company expects the final allocation to be completed no
later than June 30, 1998.
The following table summarizes the purchase price in excess of fair value
basis:
Cash payments.................................................... $7,000,000
Transaction costs................................................ 300,000
----------
Purchase price................................................... 7,300,000
51% of AWC's net assets at March 31, 1997 after giving effect to
the consolidation of IMA Partners.............................. 1,574,000
----------
Purchase price in excess of fair value basis..................... $5,726,000
=========
The Purchase Agreement (the "Purchase Agreement") relating to the AWC
Acquisition provides for an aggregate purchase price equal to the greater of
(i) $7,00,000 or (ii) 51% of the sum of (a) six times the average of EBITDA
for AWC's Amphitheater Operations for the Computation Period and (b) six
times the average of the net income before taxes of AWC's Non-amphitheater
Operations for the Computation Period. To the extent the aggregate purchase
price exceeds $7,000,000, the difference will be payable by the Company in
shares of Common Stock valued at the average closing price of the Common
Stock for each day in the Computation Period. Management does not anticipate
that any adjustment in the purchase price would result in the issuance of a
material amount of Common Stock.
(c) At March 31, 1997, AWC held a 25% interest in IMA Partners which results in
the use of the equity method of accounting for AWC's investment in IMA
Partners. Upon completion of the AWC Acquisition, the Company will hold a
51% interest in IMA Partners. As a result, the operations of IMA Partners
will be presented using the consolidated method of accounting. This
adjustment is presented to show the impact of including all assets,
liabilities, partners' capital and minority interest of IMA Partners as if
IMA Partners were consolidated.
The following table provides summary balance sheet data for IMA Partners as
of March 31, 1997:
Current assets................................................... $ 488,000
Property and equipment........................................... 5,464,000
Current portion of capital lease obligation...................... 400,000
Other current liabilities........................................ 1,531,000
Capital lease obligation, net of current portion................. 384,000
Partners' capital................................................ 3,637,000
(d) As a result of the consolidation of IMA Partners as discussed in (c) above,
the investment in IMA Partners and all related intercompany accounts are
eliminated in consolidation.
(e) Reflects the application of the net proceeds of the Company's registered
direct offering of common stock (the "Offering").
F-22
27
NASHVILLE COUNTRY CLUB, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BRECKENRIDGE
HISTORICAL RESORT
-------------------------- ACQUISITION ACQUISITION OFFERING PRO FORMA
COMPANY AEG AWC ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS(1) CONSOLIDATED
------- ------ ------- ------------ ----------- -------------- ------------
Revenues:
Entertainment......................... $ -- $5,570 $18,011 $10,306(f) $ 33,887
Resort................................ 10,809 -- -- $9,915(a) 20,724
------- ------ ------- ------------
Total revenues................ 10,809 5,570 18,011 54,611
Operating expenses:
Entertainment......................... -- 6,013 17,723 (635)(e)
9,818(f)
(304)(c)
(150)(e) 32,465
Resort................................ 11,823 -- -- 7,368(a) 19,191
Depreciation and amortization......... 599 25 65 225(a) 386(b)
286(d)
306(f) 1,892
Corporate expenses.................... 347 -- -- 347
------- ------ ------- ------------
Total operating expenses...... 12,769 6,038 17,788 53,895
(Loss) income from operations........... (1,960) (468) 223 716
Interest (expense) income, net.......... (1,167) 5 (111) (595)(a) (38)(f)
(248)(j) (2,154)
Other income, net....................... -- 452 80 (36)(g) 496
Minority interest....................... -- -- -- (479)(i)
(71)(f) (550)
------- ------ ------- ------------
(Loss) income before taxes.............. (3,127) (11) 192 (1,492)
Provision for taxes..................... -- 1 11 (12)(h) --
------- ------ ------- ------------
Net (loss) income....................... $(3,127) $ (12) $ 181 $ (1,492)
======= ====== ======= =========
Net (loss) per share.................... $ (.19)
=========
Weighted average shares outstanding..... 8,000
=========
- ---------------
(1) There were no pro forma offering adjustments to the Statement of Operations
Data other than the inclusion of the 2,600,000 shares of Common Stock being
offered pursuant to the Offering in the weighted average number of shares
outstanding for the year ended December 31, 1996.
See notes to unaudited pro forma consolidated financial data.
F-23
28
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(a) The Breckenridge Resort was acquired on April 29, 1996 and, accordingly, the
results of operations of the Breckenridge Resort for the period from January
1, 1996 to April 29, 1996 are not included in the historical consolidated
financial statements of the Company for the year ended December 31, 1996.
This adjustment is presented to show the impact of including the revenues
and expenses of the Breckenridge Resort as if the Breckenridge Resort
Acquisition had occurred on January 1, 1996.
(b) The AEG Acquisition results in recording goodwill of approximately
$7,728,000. The Company expects to amortize this amount over a period of 20
years. This results in annual amortization of approximately $386,000.
(c) In 1996, AEG paid salaries and made ownership distributions based primarily
on the profitability of AEG and the availability of cash to fund such
payments. These payments were charged to entertainment expenses. Under the
terms of the Merger Agreement, these individuals have been provided with
employment/consulting agreements which specifically define salaries,
consulting fees and bonuses. The adjustment results from the net change in
expense as if the employment/consulting agreements had been in effect in
1996.
(d) The AWC Acquisition results in recording goodwill of approximately
$5,726,000. The Company expects to amortize this amount over a period of 20
years. This results in annual amortization of approximately $286,000.
(e) In 1996, AWC paid salaries and made ownership distributions based primarily
on the profitability of AWC and the availability of cash to fund such
payments. These payments were charged to entertainment expenses. Under the
terms of the definitive agreement relating to the AWC Acquisition, these
individuals will be provided with employment/consulting agreements which
specifically define salaries, consulting fees and bonuses. The adjustment
results from the net change in expense as if the employment/consulting
agreements had been in effect in 1996.
(f) At March 31, 1997, AWC held a 25% interest in IMA Partners which results in
the use of the equity method of accounting for AWC's investment in IMA
Partners. Upon completion of the AWC Acquisition, the Company will hold a
51% interest in IMA Partners. As a result, the operations of IMA Partners
will be presented using the consolidated method of accounting. This
adjustment is presented to show the impact of including all revenues,
expenses and minority interest of IMA Partners as if IMA Partners were
consolidated.
In April 1997, IMA Partners entered into a joint venture with Pavilion
Partners known as Western Amphitheater Partners ("WAP") for the operation
of the IMA and the GHA. Pursuant to the WAP joint venture, IMA Partners
will participate in the net operations of WAP.
The following table provides summary statement of operations data of IMA
Partners for the year ended December 31, 1996:
Revenues................................ $10,306,000
Cost of revenues........................ 7,604,000
Operating expenses...................... 2,214,000
Depreciation and amortization........... 306,000
Interest expense........................ 38,000
Net income.............................. 144,000
(g) As a result of the consolidation of IMA Partners as discussed in (f) above,
the equity income (loss) from IMA Partners is eliminated.
F-24
29
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
(h) As a result of the expected utilization of net operating loss carryforwards,
the tax provisions have been removed as a pro forma adjustment.
(i) Reflects the 49% minority interest in AWC, after considering the earnings
effect of pro forma adjustments discussed in (e) and (h) above.
(j) The Company anticipates repaying the promissory notes issued to the former
AEG shareholders (the "AEG Promissory Notes") with proceeds from a new $15
million credit facility (the "Concurrent Financing"). This adjustment
reflects pro forma interest expense assuming the AEG Promissory Notes were
outstanding as of January 1, 1996 and a 10% interest rate, the contractual
interest rate of the AEG Promissory Notes.
F-25
30
NASHVILLE COUNTRY CLUB, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
-------------------------- ACQUISITION OFFERING PRO FORMA
COMPANY AEG AWC ADJUSTMENTS ADJUSTMENTS(1) CONSOLIDATED
------- ------ ----- ----------- -------------- ------------
Revenues:
Entertainment............... $ -- $1,544 $ 599 $74(e) $ 2,217
Resort...................... 10,102 -- -- 10,102
------- ------ ----- ------------
Total revenues...... 10,102 1,544 599 12,319
Operating expenses:
Entertainment............... -- 1,555 749 470(e)
88(b)
120(d) 2,982
Resort...................... 7,523 -- -- 7,523
Depreciation and
amortization............. 256 6 17 97(a)
72(c)
77(e) 525
Corporate expense........... 133 -- -- 133
------- ------ ----- ------------
Total operating
expenses.......... 7,912 1,561 766 11,163
Income (loss) from
operations.................. 2,190 (17) (167) 1,156
Interest expense, net......... (411) -- (12) (13)(e)
(62)(h) (498)
Other income, net............. -- 8 (106) 121(f) 23
Minority interest............. -- -- -- 199(g)
238(e) 437
------- ------ ----- ------------
Income (loss) before taxes.... 1,779 (9) (285) 1,118
Provision for taxes........... -- -- 1 1
------- ------ ----- ------------
Net income (loss)............. $ 1,779 $ (9) $(286) $ 1,117
======= ====== ===== =========
Net income per share.......... $ .14
=========
Weighted average shares
outstanding................. 8,000
=========
- ---------------
(1) There were no pro forma offering adjustments to the Statement of Operations
Data other than the inclusion of the 2,600,000 shares of Common Stock being
offered pursuant to the Offering in the weighted average number of shares
outstanding for the three months ended March 31, 1997.
See notes to unaudited pro forma consolidated financial data.
F-26
31
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(a) The AEG Acquisition results in recording goodwill of approximately
$7,728,000. The Company expects to amortize this amount over a period of 20
years. This results in quarterly amortization of approximately $97,000.
(b) For the three months ended March 31, 1997, AEG paid salaries and made
ownership distributions based primarily on the profitability of AEG and the
availability of cash to fund such payments. These payments were charged to
entertainment expenses. Under the terms of the Merger Agreement, these
individuals have been provided with employment/consulting agreements which
specifically define salaries, consulting fees and bonuses. The adjustment
results from the net change in expense as if the employment/consulting
agreements had been in effect in the first quarter of 1997.
(c) The AWC Acquisition results in recording goodwill of approximately
$5,726,000. The Company expects to amortize this amount over a period of 20
years. This results in quarterly amortization of approximately $72,000.
(d) For the three months ended March 31, 1997, AWC paid salaries and made
ownership distributions based primarily on the profitability of AWC and the
availability of cash to fund such payments. These payments were charged to
entertainment expenses. Under the terms of the definitive agreement relating
to the AWC Acquisition, these individuals will be provided with
employment/consulting agreements which specifically define salaries,
consulting fees and bonuses. The adjustment results from the net change in
expense as if the employment/consulting agreements had been in effect in the
first quarter 1997.
(e) At March 31, 1997, AWC held a 25% interest in IMA Partners which results in
the use of the equity method of accounting for AWC's investment in IMA
Partners. Upon completion of the AWC Acquisition, the Company will hold a
51% interest in IMA Partners. As a result, the operations of IMA Partners
will be presented using the consolidated method of accounting. This
adjustment is presented to show the impact of including all revenues,
expenses and minority interest of IMA Partners as if IMA Partners were
consolidated.
In April 1997, IMA Partners entered into the WAP joint venture with
Pavilion Partners for the operation of the IMA and GHA. Pursuant to the WAP
joint venture, IMA Partners will participate in the net operations of WAP.
The following table provides summary statement of operations data of IMA
Partners for the three months ended March 31, 1997:
Revenue.......................................................... $ 74,000
Operating expenses............................................... 470,000
Depreciation and amortization.................................... 77,000
Interest expense................................................. 13,000
Net loss......................................................... (486,000)
(f) As a result of the consolidation of IMA Partners as discussed in (e) above,
the equity in losses from IMA Partners is eliminated.
(g) Reflects the 49% minority interest in AWC, after considering the earnings
effect of pro forma adjustment discussed in (d) above.
(h) The Company anticipates repaying the AEG Promissory Notes with proceeds from
the Concurrent Financing. This adjustment reflects pro forma interest
expense assuming the AEG Promissory Notes were outstanding as of January 1,
1997 and a 10% interest rate, the contractual interest rate of the AEG
Promissory Notes.
F-27
32
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description of Document Page
------- ----------------------- ------------
2.1 Purchase Agreement, dated as of July 31, 1997,
among Nashville Country Club, Inc., AWC
Acquisition Corp., Inc., the Robert E. Geddes
Family Trust, the Miserendino Family Trust, Brian F.
Murphy and Audrey & Jane, Inc.