<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-QSB
Quarterly report under Section 13 or 15(d)of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
Commission file number 0-22582
NASHVILLE COUNTRY CLUB, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Tennessee 62-1535897
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
402 Heritage Planation Way, Hickory Valley, Tennessee 38042
(Address of Principal Executive Offices)
(901) 764-2300
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report)
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days: Yes X No
--- ---
As of March 31, 1997, the Registrant had outstanding 4,590,435 shares of Common
Stock, no par value per share.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE> 2
NASHVILLE COUNTRY CLUB, INC., AND SUBSIDIARIES
FORM 10-QSB
TABLE OF CONTENTS
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets .................................... 1
Consolidated Statements of Operations .......................... 2
Consolidated Statements of Cash Flow (Unaudited) ............... 3
Notes to Consolidated Financial Statements ..................... 4
Item 2. Management's Discussion and Analysis or Plan of Operation ..... 6
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K .............................. 9
Signatures............................................................... 10
<PAGE> 3
NASHVILLE COUNTRY CLUB, INC., AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,659,921 $ 2,619,879
Accounts receivable 611,279 1,235,276
Inventories 429,987 430,597
Prepaid expenses and other current assets 139,771 134,850
------------ ------------
Total current assets 3,840,958 4,420,602
Property and equipment, net 34,043,605 33,870,263
Other assets, net of accumulated amortization 223,544 357,166
------------ ------------
Total assets $ 38,108,107 $ 38,648,031
============ ============
Current liabilities:
Current portion of long-term debt $ 884,311 $ 2,682,653
Accounts payable 1,282,723 910,735
Advance deposits 1,739,839 520,161
Accrued expenses 1,733,170 2,250,109
------------ ------------
Total current liabilities 5,640,043 6,363,658
Capital lease obligation 733,000 733,000
Long-term debt, net of current portion 19,521,739 17,559,436
------------ ------------
Total liabilities 25,894,782 24,656,094
------------ ------------
Stockholders' equity:
Preferred stock, no par value; authorized 1,000,000
shares, 334,285 of Series A convertible preferred stock
issued and outstanding, $10,029 liquidation preference 10,000 10,000
Common stock, no par value; authorized 20,000,000 shares,
4,590,435 shares issued and outstanding 16,770,423 16,770,423
Accumulated deficit (4,567,098) (2,788,486)
------------ ------------
Total stockholders' equity 12,213,325 13,991,937
------------ ------------
Total liabilities and stockholders' equity $ 38,108,107 $ 38,648,031
============ ============
</TABLE>
See notes to financial statements.
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<PAGE> 4
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Revenues:
Rooms $ -- $ 5,795,591
Food and beverage 501,841 2,453,426
Other 13,401 1,852,512
------------ ------------
Total revenue 515,242 10,101,529
------------ ------------
Departmental expenses:
Rooms -- 3,339,459
Food and beverage 444,400 1,823,015
Other -- 1,226,460
------------ ------------
Total departmental expenses 444,400 6,388,934
------------ ------------
Departmental profit 70,842 3,712,595
------------ ------------
Undistributed operating expenses:
General and administrative 54,660 585,830
Sales and marketing 38,408 238,482
Property operation and maintenance 49,729 442,157
Depreciation 29,105 256,109
------------ ------------
Total operating expenses 171,902 1,522,578
------------ ------------
Gross operating (loss) profit (101,060) 2,190,017
------------ ------------
Other income (expenses):
Interest income 1,601 23,559
Interest expense -- (434,964)
Total other income (expenses) 1,601 (411,405)
------------ ------------
Net (loss) income $ (99,459) $ 1,778,612
============ ============
Weighted average common and equivalent shares
outstanding 1,470,000 4,924,720
============ ============
Earnings (loss) per common and equivalent common share (.07) .36
============ ============
</TABLE>
See notes to financial statements.
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<PAGE> 5
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (99,459) $ 1,778,612
------------ ------------
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 29,105 253,805
Changes in assets and liabilities:
Increase in accounts receivable (25,074) (623,997)
Increase in inventory (355) (610)
(Increase) decrease in prepaid expenses and other current
assets (20,185) 4,921
Increase in other assets (139,063) (43,105)
Increase (decrease) in accounts payable 27,216 (371,988)
Decrease in advance deposits -- (1,219,678)
Increase in accrued expenses -- 516,939
------------ ------------
Total adjustments 10,707 (143,713)
------------ ------------
Net cash (used in) provided by operating activities (88,752) 294,899
------------ ------------
Cash flows from investing activities:
Expenditures for property and equipment (2,304) (74,202)
Increase in other assets (139,063) (96,778)
------------ ------------
Net cash used in investing activities (141,367) (170,980)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings 50,000 --
Repayments of borrowings -- (163,961)
Net cash provided by (used in) financing activities 50,000 (163,961)
------------ ------------
Net decrease in cash and cash equivalents (180,119) (40,042)
Cash and cash equivalents - beginning of period 235,711 2,659,921
------------ ------------
Cash and cash equivalents - end of period $ 55,592 $ 2,619,879
============ ============
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid for interest was $0 and $1,779,000 for the three months
ended March 31, 1996 and 1997, respectively.
See notes to financial statements.
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<PAGE> 6
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements of
Nashville Country Club, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B
under the Securities Exchange Act of 1934. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.
The operations of The Village at Breckenridge Resort (the "Resort")
are subject to significant seasonal variations with substantially all of the
Resort's operating profits generated in the first quarter and in the months of
November and December, which periods correspond to the winter ski season.
Generally, the Resort reports a loss for the spring, summer and fall periods.
In addition, the operations of the Resort may fluctuate significantly due to a
number of factors, including weather. Such fluctuations may materially affect
the Company's revenues and profitability.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form
10-KSB for the year ended December 31, 1996.
Certain prior period amounts have been reclassified to conform with
the 1997 presentation. Such reclassifications had no impact on the Company's
net loss.
2. EARNINGS (LOSS) PER COMMON SHARE:
The computation of earnings per share was based on the weighted
average number of common and common equivalent shares outstanding. The
preferred stock is a common stock equivalent and is included in the weighted
average number of common and common equivalent shares outstanding. Outstanding
warrants and stock options were not included as their exercise price exceeded
the market price for the Company's Common Stock during the period.
The Company is required to adopt Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") in the fourth quarter of
1997. The adoption of SFAS No. 128 is not expected to have a material effect on
the Company's consolidated financial statements. Therefore, pro forma results
for SFAS No. 128 have not been presented.
3. INCOME TAXES:
The Company calculates and records the amounts of income taxes payable
or refundable currently or in future years for temporary differences between
the financial statement basis and income tax basis based on the current enacted
tax laws. No provision for income taxes has been provided in the accompanying
consolidated financial statements as the Company has net operating loss
carryforwards to offset future net income. The deferred tax asset for the
remaining net operating losses would be fully impaired as a result of the
uncertainty as to their ultimate utilization.
4. SUBSEQUENT EVENTS:
On April 21, 1997, the Company acquired 100% of the common stock of
Avalon Entertainment Group, Inc. ("AEG"). The purchase price for AEG is based
on the 1997 net income of AEG, not to exceed approximately $7.2 million. The
estimated purchase price of $7.2 million was satisfied by the issuance of
809,840 shares of Common
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<PAGE> 7
Stock of the Company, the payment of $400,000 cash and the issuance of
$2,480,000 of notes payable. The shares of Common Stock will be held in escrow
until a final determination of the purchase price is made. The notes payable
accrue interest at the rate of 5% per annum and become due and payable on July
31, 1997. The acquisition will be accounted for using the purchase method of
accounting and, accordingly, the purchase price will be allocated to the assets
and liabilities of AEG based on the fair values on the date of acquisition.
-5-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO MARCH 31,
1996
The Company acquired the Resort on April 29, 1996. Accordingly, the
operating results of the Company for the three-month period ended March 31,
1996, were those of the Nashville Country Club restaurant and corporate
activities. The operating results of the Company as of, and for the three-month
period ended March 31, 1997, include the operations of the Resort, the
restaurant and corporate activities. Accordingly, the results for the
three-month periods ended March 31, 1996 and March 31, 1997 are not readily
comparable.
Components of Income
Revenues. The Company's revenues are derived primarily from room
rentals, food and beverage sales, commercial leasing, travel services,
entertainment events and ancillary departments at the Resort, and from food and
beverage sales at the Nashville Restaurant.
Departmental Expenses. Departmental expenses include those costs
directly attributable to the operations of a revenue department, including
rental fees paid to the owners of living units managed by the Resort, payroll
and related expenses, cost of goods sold (food and beverage and travel
services) and other operating expenses. Other operating expenses generally
include guest supplies, travel agent commissions, linen, cleaning supplies,
guest supplies, equipment costs, restaurant entertainment costs and special
promotions.
Administrative and General Expenses. Administrative and general
expenses include all corporate overhead expenses related to the Company's
headquarters such as payroll and related expenses, occupancy, administrative,
shareholder services and other operating expenses, as well as those expenses
typically categorized as administrative and general expenses in a resort
environment, including payroll and related expenses, office supplies and travel
expenses of management, human resources, purchasing and accounting.
Administrative and general expenses also include credit card commissions,
accounting and legal fees, insurance costs and bad debt expenses.
Sales and Marketing Expenses. Sales and marketing expenses include
those expenses incurred for the sales and marketing staff, including payroll
and related expenses, travel expenses, advertising campaigns and promotional
materials.
Property Operation and Maintenance Expenses. Property operation and
maintenance expenses include payroll and related expenses for maintenance
personnel, cost of repairs and maintenance, energy costs for gas, electricity
and water, trash removal and property taxes.
Depreciation and Amortization Expense Depreciation and amortization
expense consists of the depreciation of the Company's property and equipment
and amortization of deferred loan fees.
Interest Expense. Interest expense consists primarily of the interest
costs associated with long-term debt recorded on the books of the Resort.
General
The Resort operations provided approximately 95% of the Company's
consolidated revenues and all of the consolidated gross operating profit for
the three-month period ended March 31, 1997. As a result of the inclusion of
the Resort in the three-month period ended March 31, 1997, the Company's
consolidated revenues increased to $10,102,000 compared to $515,000 for the
three-month period ended March 31, 1996. The Company recorded net income of
$1,779,000 for the three-month period ended March 31, 1997 compared to a net
loss of $99,000 for the three-month period ended March 31, 1996. Net loss from
the Nashville Country Club restaurant and corporate activities increased from a
net loss of $99,000 for the three-month period ended March 31, 1996, to a net
loss of
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<PAGE> 9
$168,000 for the three-month period ended March 31, 1997. The increase in net
loss between periods resulted primarily from an increase in corporate
activities as the Company continues its significant growth, including the
acquisition of the Resort.
Nashville Country Club Restaurant and Corporate Activities
Revenues at the Nashville Country Club restaurant were $533,000 for
the three-month period ended March 31, 1997 compared to $515,000 for the
three-month period ended March 31, 1996. Food and beverage departmental
expenses, as a percent of revenue, remained relatively constant between
periods.
Administrative and general expenses and sales and marketing increased
57% to $146,000 for the three-month period ended March 31, 1997 compared to
$93,000 for the three-month period ended March 31, 1996. The increase is
primarily due to the waiver of executive compensation attributable to services
rendered in 1996, an increase in shareholder service expenses and an overall
increase in other corporate related operating expenses as the Company continues
its significant growth, including the acquisition of the Resort in April 1996.
All other expenses related to the Nashville Country Club restaurant
and corporate activities, including property operation and maintenance, and
depreciation and amortization, remained relatively constant between periods.
The Village at Breckenridge Resort
Total revenues for the Resort were $9,569,000 for the three-month
period ended March 31, 1997. Rooms revenue from the Resort's 131 owned units
and approximately 318 managed units was $5,796,000 for the period, representing
an average occupancy of approximately 73% and an average daily rate of
approximately $195. Food and beverage revenues from the Resort's eight food and
beverage operations and banquet facilities were $1,929,000. The remaining
$1,844,000 of revenues were generated from other sources, including travel
services, commercial leasing and ancillary departments.
Total departmental expenses for the Resort were $5,917,000 for the
three-month period ended March 31, 1997. Rooms departmental expenses were
$3,339,000 or 58% of rooms revenue. Of this total $2,630,000, or 45% of total
rooms revenue, represents fees paid to the owners of units managed by the
Resort. Food and beverage departmental expenses were $1,351,000 or 70% of food
and beverage revenue. Other departmental expenses were $1,226,000 or 66% of
other departmental revenue. Of this total, travel services departmental
expenses, consisting of the cost of travel services, labor costs of travel
agents and operating supplies were $1,036,000 or 93% of travel services
revenue. The cost of travel services provided ranges from 85% - 90% of the
revenue recognized.
Undistributed operating expenses for the Resort were $1,293,000 for
the three-month period ended March 31, 1997. General and administrative
expenses were $468,000 or 4.9% of total Resort revenues. Sales and marketing
expenses were $210,000 or 2.2% of total Resort revenues. Property operation and
maintenance expenses were $388,000 or 4.1% of total Resort revenues.
Depreciation and amortization expense was $227,000 for the three-month period
ended March 31, 1997.
Interest expense on the Resort's outstanding long-term indebtedness
was $435,000 for the three-month period ended March 31, 1997.
The Resort has recognized a profit before income taxes of $1,947,000
for the three-month period ended March 31, 1997. No provision for income taxes
was necessary for the Company due to availability of net operating loss
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had cash and cash equivalents of
$2,620,000 and a working capital deficit of $1,943,000, including $2,683,000 of
current maturities of long-term debt. The Company's primary requirements for
capital are the satisfaction of current liabilities, the servicing of the
Company's short-and long-term indebtedness and the acquisition of businesses
and assets in connection with the Company's growth strategy.
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<PAGE> 10
The Company is currently highly leveraged. In connection with the
acquisition of the Resort, the Company became subject to certain long-term debt
secured by liens on substantially all of the assets of the Resort. The
long-term debt of the Resort totaled $20,242,000 as of March 31, 1997, of which
$2,683,000 represents current maturities The long-term debt consists of five
notes payable to banks or unaffiliated third parties, totaling $19,860,000,
which are secured by deeds of trust on Resort property and equipment and
security agreements on substantially all of the other assets of the Resort, and
various other equipment and other notes payable totaling $382,000. The Company
has entered into discussions with certain of the holders of its mortgage notes
payable to modify the terms of the mortgage notes payable to reduce scheduled
principal payments in 1997 and to extend the maturity dates. There can be no
assurance that the Company will be able to modify the terms of these mortgage
notes payable.
In November 1996, the Company entered into a revolving credit facility
that provides up to a maximum of $300,000 of unsecured borrowings through
November 5, 1997. As of March 31, 1997, no amounts were outstanding under this
revolving credit facility.
In April 1997, the Company acquired AEG for approximately $7.2
million. The purchase price was satisfied through a combination of $4,320,000
of the Company's Common Stock, the payment of $400,000 in cash and the delivery
of $2,480,000 in notes payable. The Company is also planning to construct a
107-room all-suites hotel adjacent to the Nashville Country Club restaurant in
Nashville, Tennessee. This development, which the Company estimates will cost
approximately $10,300,000, includes the acquisition of an existing, multi-story
parking facility, the purchase of land currently leased by the Company, and the
construction of a hotel with guest suites and meeting space.
The Company intends to finance its cash requirements for the repayment
of the notes issued to acquire AEG and the development of the Nashville hotel
project from the proceeds of public and/or private issuances of its equity and
debt securities and form short and long-term bank indebtedness. There can be no
assurances that the Company will be able to obtain financing from these sources
or that such financing will be on terms that are favorable to the Company. To
the extent that the Company is able to finance its growth through external
sources of capital, the Company intends to continue to grow its operations
through additional acquisitions. Even if the Company is able to secure external
financing sources for its growth plans, there can be no assurance that the
Company will be able to acquire any additional businesses or assets or that any
businesses or assets that are acquired will be or will become profitable.
In connection with the acquisition of the Resort, the Company agreed
to repurchase shares of the Company's Common Stock owned by certain prior
owners of the Resort in an aggregate amount of up to $413,170 and agreed to pay
$97,000 to one of the former owners of the Resort.
Management believes that cash flow from operations, the proceeds of
future issuances of its equity and debt securities and the use of short-term
bank debt will be adequate to fund the operations and expansion plans of the
Company during 1997. In addition, to provide any additional funds necessary for
the continued pursuit of the Company's growth strategies, the Company may
incur, from time to time, additional short- and long-term bank indebtedness.
The availability and attractiveness of any outside sources of financing will
depend on a number of factors, some of which will relate to the financial
condition and performance of the Company, and some of which will be beyond the
Company's control, such as prevailing interest rates and general economic
conditions. There can be no assurance that such additional financing will be
available or, if available, will be on terms acceptable to the Company.
Seasonality
The Resort's operations are subject to significant seasonal variations
with substantially all of the Resort's operating profits generated in the first
quarter and in the months of November and December, which periods correspond to
the winter ski season. Generally, the Resort reports a loss for the spring,
summer and fall periods. In addition, the operations of the Resort may
fluctuate significantly due to a number of factors, including weather. Such
fluctuations may materially affect the Company's revenues and profitability.
-8-
<PAGE> 11
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 -- Financial Data Schedule
(b) Form 8-K's filed during the quarterly period ended March 31,
1997:
None
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<PAGE> 12
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized in the city
of Hickory Valley, Tennessee, on the 14th day of May, 1997.
NASHVILLE COUNTRY CLUB, INC.
By: /s/ Thomas Jackson Weaver III
---------------------------------
Thomas Jackson Weaver III
Chairman of the Board,
Chief Executive Officer
and President
By: /s/ Bryan J. Cusworth
---------------------------------
Bryan J. Cusworth,
Chief Financial Officer
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<PAGE> 13
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,619,879
<SECURITIES> 0
<RECEIVABLES> 1,327,876
<ALLOWANCES> 92,600
<INVENTORY> 430,597
<CURRENT-ASSETS> 4,420,602
<PP&E> 34,819,787
<DEPRECIATION> 949,524
<TOTAL-ASSETS> 38,648,031
<CURRENT-LIABILITIES> 6,363,658
<BONDS> 18,292,436
0
10,000
<COMMON> 16,770,423
<OTHER-SE> (2,778,486)
<TOTAL-LIABILITY-AND-EQUITY> 38,648,031
<SALES> 0
<TOTAL-REVENUES> 10,101,529
<CGS> 0
<TOTAL-COSTS> 6,388,934
<OTHER-EXPENSES> 1,522,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 434,964
<INCOME-PRETAX> 1,778,612
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,778,612
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,778,612
<EPS-PRIMARY> .36
<EPS-DILUTED> 0
</TABLE>
