UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
__________________
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 11, 1997
Commission file numbers 33-89818, 33-96568 and 333-08041
CLUB CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
NEVADA 75-1311242
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3030 LBJ FREEWAY, SUITE 700 DALLAS, TEXAS 75234
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 243-6191
Former name, former address and former fiscal year,
if changed since last report: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No.
-----
The number of shares of the Registrant's Common Stock outstanding as of June
11, 1997 was 85,267,515.
<PAGE>
CLUB CORPORATION INTERNATIONAL
Index
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Auditors' Review Report
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Condensed Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. OTHER INFORMATION
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REVIEW REPORT
-----------------------------------
The Board of Directors
Club Corporation International:
We have reviewed the consolidated balance sheet of Club Corporation
International and subsidiaries (ClubCorp) as of June 11, 1997 and June 30,
1996 and the related consolidated statements of operations for the twelve
weeks and twenty four weeks ended June 11, 1997 and the three months and six
months ended June 30, 1996 and stockholders' equity and cash flows for the
twenty four weeks and six months ended June 11, 1997 and June 30, 1996,
respectively. These consolidated financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ClubCorp as of December 31, 1996
and the related consolidated statements of operations, stockholders' equity
and cash flows for the year then ended (not presented herein); and in our
report dated February 21, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1996, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Our report dated February 21, 1997 on the consolidated financial statements of
ClubCorp as of and for the year ended December 31, 1996 refers to a change in
1995 in its method of accounting for the impairment of long-lived assets and
for long-lived assets to be disposed of.
KPMG Peat Marwick LLP
Dallas, Texas
July 18, 1997
<PAGE>
<TABLE>
<CAPTION>
CLUB CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share amounts)
(Unaudited)
JUNE 11, December 31, June 30,
Assets 1997 1996 1996
- ------ ----------- -------------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 122,874 $ 74,454 $ 68,202
Membership and other receivables, net 74,802 73,139 69,461
Inventories 14,975 13,886 14,273
Other assets 12,401 14,501 17,449
----------- -------------- -----------
Total current assets 225,052 175,980 169,385
Property and equipment, net 669,560 663,387 626,824
Other assets 142,845 144,517 149,144
Financial services assets - 589,482 725,082
----------- -------------- -----------
$1,037,457 $ 1,573,366 $1,670,435
=========== ============== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 46,470 $ 54,933 $ 45,541
Long-term debt - current portion 82,879 120,694 90,982
Other liabilities 61,294 44,371 54,282
----------- -------------- -----------
Total current liabilities 190,643 219,998 190,805
Long-term debt 204,246 223,223 229,897
Other liabilities 52,423 44,030 50,539
Membership deposits 393,459 380,802 367,293
Financial services liabilities - 549,246 685,271
Redemption value of common stock held by benefit plan 44,879 43,233 37,560
Stockholders' equity:
Common stock, $.01 par value, 100,000,000 shares
authorized, 90,219,408 issued, 85,267,515 outstanding
at June 11, 1997, 85,393,241 at December 31, 1996
and 85,594,866 outstanding at June 30, 1996 902 902 902
Additional paid-in capital 10,589 10,380 10,379
Foreign currency translation adjustment (130) (54) (6)
Unrealized gains or losses on investments in debt and
equity securities - (46) (250)
Retained earnings 224,028 181,985 170,455
Treasury stock (38,703) (37,100) (34,850)
Redemption value of common stock held by benefit plan (44,879) (43,233) (37,560)
----------- -------------- -----------
Total stockholders' equity 151,807 112,834 109,070
----------- -------------- -----------
$1,037,457 $ 1,573,366 $1,670,435
=========== ============== ===========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLUB CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
Twelve and Twenty Four Weeks Ended June 11, 1997
and Three and Six Months Ended June 30, 1996
(Dollars in thousands, except per share amounts)
(Unaudited)
12 WEEKS 3 Months 24 WEEKS 6 Months
ENDED Ended ENDED Ended
JUNE 11, June 30, JUNE 11, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues $ 193,249 $ 186,173 $ 346,887 $ 333,016
Operating costs and expenses 160,395 157,185 303,120 292,696
Selling, general and administrative expenses 15,564 15,300 29,809 29,273
---------- ---------- ---------- ----------
Income from operations 17,290 13,688 13,958 11,047
Gain (loss) on divestitures 9,727 (1,234) 13,760 3,357
Interest and investment income 1,693 2,837 3,600 4,913
Interest expense (6,816) (6,348) (13,373) (13,184)
---------- ---------- ---------- ----------
Income from continuing operations before income
tax provision and minority interest 21,894 8,943 17,945 6,133
Income tax provision (489) (450) (1,048) (752)
Minority interest - 98 - 98
---------- ---------- ---------- ----------
Income from continuing operations 21,405 8,591 16,897 5,479
Discontinued operations:
Income from discontinued operations of financial services
segment, net of income tax provision of $137 for the three
months and $15 for the six months ended June 30, 1996 - 1,011 - 1,544
Gain (loss) on disposal of financial services segment, net of
income tax (provision) benefit of ($15,221) for the twenty
four weeks ended June 11, 1997 and $8,631 for the three
months and six months ended June 30, 1996 - (13,402) 25,146 (13,402)
---------- ---------- ---------- ----------
- (12,391) 25,146 (11,858)
---------- ---------- ---------- ----------
Net income (loss) $ 21,405 $ (3,800) $ 42,043 $ (6,379)
========== ========== ========== ==========
Earnings per share:
Income from continuing operations $ .25 $ .10 $ .20 $ .06
Discontinued operations - (.14) .29 (.13)
---------- ---------- ---------- ----------
Net income (loss) $ .25 $ (.04) $ .49 $ (.07)
========== ========== ========== ==========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLUB CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Twenty Four Weeks Ended June 11, 1997 and
Six Months Ended June 30, 1996
(Dollars in thousands, except share amounts)
(Unaudited)
Common stock (100,000,000 shares
authorized, par value $.01 per share)
--------------------------------------------
Foreign
Treasury Additional Currency
Shares Stock Shares Par Paid-in Translation
Issued Shares Outstanding Value Capital Adjustment
---------- ---------- ------------ ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 90,219,408 4,552,376 85,667,032 $ 902 $ 10,075 $ (51)
Net loss - - - - - -
Purchase of treasury stock - 206,392 (206,392) - - -
Reissuance of treasury stock - (24,258) 24,258 - 71 -
Stock issued in connection with bonus plans - (109,968) 109,968 - 233 -
Foreign currency translation adjustment - - - - - 45
Change in unrealized gains and losses - - - - - -
Change in redemption value - - - - - -
---------- ---------- ------------ ------ ----------- -------------
Balances at June 30, 1996 90,219,408 4,624,542 85,594,866 $ 902 $ 10,379 $ (6)
========== ========== ============ ====== =========== =============
Balances at December 31, 1996 90,219,408 4,826,167 85,393,241 $ 902 $ 10,380 $ (54)
NET INCOME - - - - - -
PURCHASE OF TREASURY STOCK - 179,431 (179,431) - - -
STOCK ISSUED IN CONNECTION WITH BONUS PLANS - (53,705) 53,705 - 209 -
FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - - - - (76)
CHANGE IN UNREALIZED GAINS AND LOSSES - - - - - -
CHANGE IN REDEMPTION VALUE - - - - - -
---------- ---------- ------------ ------ ----------- -------------
BALANCES AT JUNE 11, 1997 90,219,408 4,951,893 85,267,515 $ 902 $ 10,589 $ (130)
========== ========== ============ ====== =========== =============
Unrealized Redemption
Gains or Value of
Losses on Common
Investments in Stock Total
Debt and Retained Treasury Held by Stockholders'
Equity Securities Earnings Stock Benefit Plan Equity
------------------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $ (11,812) $ 176,834 $ (33,743) $ (35,414) $ 106,791
Net loss - (6,379) - - (6,379)
Purchase of treasury stock - - (2,103) - (2,103)
Reissuance of treasury stock - - 183 - 254
Stock issued in connection with bonus plans - - 813 - 1,046
Foreign currency translation adjustment - - - - 45
Change in unrealized gains and losses 11,562 - - - 11,562
Change in redemption value - - - (2,146) (2,146)
------------------- ---------- ---------- -------------- ---------------
Balances at June 30, 1996 $ (250) $ 170,455 $ (34,850) $ (37,560) $ 109,070
=================== ========== ========== ============== ===============
Balances at December 31, 1996 $ (46) $ 181,985 $ (37,100) $ (43,233) $ 112,834
NET INCOME - 42,043 - - 42,043
PURCHASE OF TREASURY STOCK - - (2,019) - (2,019)
STOCK ISSUED IN CONNECTION WITH BONUS PLANS - - 416 - 625
FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - - - (76)
CHANGE IN UNREALIZED GAINS AND LOSSES 46 - - - 46
CHANGE IN REDEMPTION VALUE - - - (1,646) (1,646)
------------------- ---------- ---------- -------------- ---------------
BALANCES AT JUNE 11, 1997 $ - $ 224,028 $ (38,703) $ (44,879) $ 151,807
=================== ========== ========== ============== ===============
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLUB CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
Twenty Four Weeks Ended June 11, 1997 and
Six Months Ended June 30, 1996
(Dollars in thousands)
(Unaudited)
JUNE 11, June 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ 42,043 $ (6,379)
Adjustments to reconcile net income (loss) to cash flows
provided from operations:
Depreciation and amortization 22,207 22,721
Gain on divestitures (13,760) (3,357)
Minority interest in net losses of subsidiary - (98)
Gain on disposal of financial services segment (25,146) -
Equity in (earnings) losses in partnerships and joint ventures (3,150) 364
Decrease in real estate held for sale 3,401 5,219
Increase in membership and other receivables, net (1,914) (2,146)
Decrease in accounts payable and accrued liabilities (8,210) (5,962)
Increase in deferred membership dues 6,365 4,565
Other 11,317 1,800
Net change in operating assets of discontinued operations - 11,869
---------- ----------
Cash flows provided from operations 33,153 28,596
Cash flows from investing activities:
Additions to property and equipment (28,516) (18,914)
Development of real estate ventures (4,027) (8,448)
Acquisition of facilities (2,960) (5,512)
Proceeds from disposition of assets and subsidiaries, net 11,129 -
Proceeds from disposal of financial services segment 89,968 -
Other 3,565 3,282
Investing activities of discontinued operations - 169,412
---------- ----------
Cash flows provided from investing activities 69,159 139,820
Cash flows from financing activities:
Borrowings of long-term debt 11,991 11,515
Repayments of long-term debt (62,501) (7,372)
Increase in membership deposits 14,290 11,005
Treasury stock transactions, net (2,019) (1,849)
Repayment of Federal Home Loan Bank advances (3,153) -
Dividends paid to minority shareholder of financial services segment (12,500) -
Financing activities of discontinued operations - (193,251)
---------- ----------
Cash flows used by financing activities (53,892) (179,952)
---------- ----------
Total net cash flows 48,420 (11,536)
Net cash flows from discontinued operations - (23,828)
---------- ----------
Net cash flows from continuing operations $ 48,420 $ 12,292
---------- ----------
</TABLE>
See accompanying condensed notes to consolidated financial statements.CLUB
<PAGE>
CORPORATION INTERNATIONAL
Condensed Notes to Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------
Consolidation
- -------------
The consolidated financial statements include the accounts of Club Corporation
International (Parent) and its subsidiaries (collectively ClubCorp) except for
certain subsidiaries of Franklin Federal Bancorp, a Federal Savings Bank
(Franklin). On January 2, 1997, Franklin sold certain assets and transferred
certain liabilities to Norwest Corporation (Norwest). Thus, Franklin is
classified as a discontinued operation (Note 2) and Franklin's assets,
liabilities, income from operations and cash flow activity are segregated in
the accompanying consolidated financial statements.
Interim presentation
- ---------------------
The accompanying consolidated financial statements have been prepared by
ClubCorp and are unaudited. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
generally accepted accounting principles have been omitted from the
accompanying statements. ClubCorp's management believes the disclosures made
are adequate to make the information presented not misleading. However, the
financial statements should be read in conjunction with the financial
statements and notes thereto of ClubCorp for the year ended December 31, 1996
which were a part of ClubCorp's Form 10-K.
In the opinion of ClubCorp management, the accompanying unaudited consolidated
financial statements reflect all adjustments necessary to present fairly the
consolidated financial position of ClubCorp as of June 11, 1997 and June 30,
1996 and the consolidated results of operations and cash flows for the interim
periods then ended. Interim results are not necessarily indicative of fiscal
year performance because of the impact of seasonal and short-term variations.
Fiscal periods
- ---------------
Effective January 1, 1997, ClubCorp changed its fiscal year from a calendar
year ending December 31 to a 52/53 week fiscal year ending on the last
Wednesday of December. Accordingly, the second quarter of 1997 includes the
twelve and twenty four weeks ended June 11, whereas the second quarter of 1996
includes the three and six months ended June 30. The hospitality segment
subsidiaries were previously reported on a 52/53 week fiscal year with
acquisitions, divestitures and other material transactions during the period
of June 12, 1996 and June 30, 1996 recorded in the consolidated financial
statements. The accounts of Franklin are included from December 31, 1995 to
June 30, 1996 and December 31, 1996 to May 31, 1997.
Earnings per share
- --------------------
Earnings per share is computed using the weighted average number of shares
outstanding of 85,352,087 and 85,639,419 for the twelve weeks and three months
ended, and 85,399,516 and 85,708,131 for the twenty four weeks and six months
ended June 11, 1997 and June 30, 1996, respectively.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". SFAS 128
establishes new standards for computing and presenting earnings per share and
is effective for financial statements issued for periods ending after December
15, 1997. Management expects the implementation of SFAS 128 to have minimal
impact on the consolidated financial statements.
Reclassifications
- -----------------
Certain amounts previously reported have been reclassified to conform with the
current period presentation.
NOTE 2. DISCONTINUED OPERATIONS
- ----------------------------------
On January 2, 1997, Franklin sold certain assets to Norwest for a cash payment
of $89,968,000 and assumption of certain liabilities. Sale proceeds of
$4,000,000 represent the maximum contractual obligation of Franklin arising
from any claims which could be asserted by Norwest against Franklin based on
the representations, warranties, and covenants provided in the agreement. The
contingency periods expire within one year of the closing date. Currently, no
claims have been asserted. On June 30, 1997, one contingency period expired
decreasing the obligation to $3,000,000. Management does not expect any
claims to be asserted; therefore, the $4,000,000 is included in the gain on
the disposal of financial services segment in the accompanying statement of
operations. ClubCorp's gain on the sale, net of taxes and minority interest
is $25,146,000 for the twenty four weeks ended June 11, 1997.
In January 1997, Franklin paid $62,500,000 in dividends to its shareholders.
ClubCorp used a majority of its dividend to repay long-term debt.
NOTE 3. ACQUISITIONS
- ----------------------
ClubCorp's acquisitions in 1997 and 1996 were accounted for using the purchase
method and, accordingly, the acquired assets and liabilities were recorded
based on their estimated fair values at the dates of acquisition.
During the first twenty four weeks of 1997, ClubCorp purchased the stock of a
golf club.
The following unaudited proforma financial information assumes the
acquisitions occurred at the beginning of their acquisition year and the
preceding year. This proforma summary does not necessarily reflect the results
of operations as they would have occurred or the results which may occur in
the future (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
June 30,
1996
----------
<S> <C>
Operating revenues $ 341,971
==========
Net loss $ (5,723)
==========
Net loss per share $ (.07)
==========
</TABLE>
ClubCorp's 1997 acquisition occurred at the beginning of the year; therefore,
no proforma information is shown for the current year.
NOTE 4. LONG-TERM DEBT
- -------------------------
At June 11, 1997 and subsequently, certain subsidiaries were not in compliance
with debt covenants due to non-payment of principal due on long-term debt and
covenants relating to financial ratios totaling $11,911,000. This amount is
included in the current portion of long-term debt in the accompanying balance
sheet.
NOTE 5. COMMITMENTS AND CONTINGENCIES
- -----------------------------------------
ClubCorp is subject to certain pending or threatened litigation and other
claims. Management, after review and consultation with legal counsel, believes
ClubCorp has meritorious defenses to these matters and that any potential
liability from these matters would not materially affect ClubCorp's
consolidated financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Club Corporation International ("ClubCorp" or the "Company") is a holding
company incorporated under the laws of the State of Nevada that, through its
subsidiaries, owns, operates and/or manages country clubs, city clubs,
city/athletic clubs, athletic clubs, resorts, golf clubs, public fee golf
courses and related real estate. Historically, the Company operated in the
financial services segment through Franklin Federal Bancorp, a Federal Savings
Bank ("Franklin"). On August 7, 1996, Franklin entered into an agreement to
sell certain assets and transfer certain liabilities of Franklin to Norwest
Corporation. The sale was consummated on January 2, 1997 for $90.0 million.
A gain of $25.1 million was recognized on the sale, net of taxes and minority
interest.
The predecessor corporation to ClubCorp was organized in 1957 under the
name Country Clubs, Inc. All references herein to ClubCorp shall also include
Country Clubs, Inc. and its successor corporations. For purposes of this
document, references to the "Company" include ClubCorp's various subsidiaries.
However, each of ClubCorp and its subsidiaries is careful to maintain its
separate legal existence, and general references to the Company should not be
interpreted in any way to reduce the legal distinctions between the
subsidiaries or between ClubCorp and its subsidiaries.
The following discussion of the Company's financial condition and results
of operations for the 24 and 12 weeks ended June 11, 1997 and June 12, 1996
should be read in conjunction with the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, as filed with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
12 WEEKS ENDED JUNE 11, 1997 COMPARED TO 12 WEEKS ENDED JUNE 12, 1996
Operating revenues increased by 3.8% to $193.3 million for the 12 weeks
ended June 11, 1997 from $186.2 million for the 12 weeks ended June 12, 1996.
Operating revenues of mature properties (i.e., those for which a comparable
period of activity exists, generally those owned for at least eighteen months
to two years) increased from $162.1 million to $168.3 million, an increase of
3.8%.
Operating revenues from mature private club properties increased from
$110.3 million for the 12 weeks ended June 12, 1996 to $113.2 million for the
same period in 1997, or 2.6%. Membership dues at mature private clubs
increased 2.9% to $50.4 million in 1997 from $49.0 million in 1996 due to
inflationary price increases and slightly improved membership trends. Usage
revenues for mature private club properties (i.e., food and beverage, golf,
lodging, and other recreation) increased 2.3% to $61.4 million in 1997 from
$60.0 million for the 12 weeks ended June 12, 1996.
Operating revenues from golf clubs (i.e., those clubs which offer both
private and public play) grew 16.9% from $6.5 million for the 12 weeks ended
June 12, 1996 to $7.6 million for the 12 weeks ended June 11, 1997 resulting
primarily from acquisitions in 1996 and volume and price increases at mature
properties. Operating revenues from mature golf clubs increased to $6.2
million for the 12 weeks ended June 11, 1997 from $5.7 million for the 12
weeks ended June 12, 1996 or 8.8%, reflecting an increase of 2.9% in rounds
played and an increase of 4.2% in revenue per round.
Operating revenues from public fee courses (i.e., those clubs which
exclusively offer public play) increased to $9.2 million for the 12 weeks
ended June 11, 1997 from $8.5 million for the 12 weeks ended June 12, 1996 or
8.2% due primarily to 1996 acquisitions. Mature public fee operating revenues
increased to $7.7 million from $7.1 million in 1996 or 8.5%, reflecting an
increase in rounds played of 9.4% partially offset by a 0.7% decrease in
revenue per round.
Resort operating revenues increased 11.0% from $39.0 million in 1996 to
$43.3 million in 1997 due to increases at mature properties and a 1996
acquisition. Operating revenues from mature resorts increased 5.9% from $39.0
million in 1996 to $41.3 million in 1997, reflecting an increase of 1.9% in
occupancy rates and an increase of 5.4% in the average daily revenue per
available room.
Realty operating revenues decreased from $6.4 million in 1996 to $4.4
million in 1997, or 31.3%, due to decreased real estate sales of land held for
resale in Colorado.
International operating revenues increased from $0.9 million for the 12
weeks ended June 12, 1996 to $2.7 million for the 12 weeks ended June 11, 1997
mainly due to equity in earnings from a city club joint venture in Singapore
and 1996 and 1997 acquisitions.
Direct operating costs increased 2.0% to $160.4 million in 1997 from
$157.2 million in 1996 principally reflecting increased variable costs at
mature properties. Direct operating costs at mature properties increased to
$116.3 million for the 12 weeks ended June 11, 1997 from $112.3 million for
the same period in 1996, or 3.6%. The increase in direct operating costs for
mature properties is due primarily to inflationary payroll cost increases and
incentive bonus accruals.
24 WEEKS ENDED JUNE 11, 1997 COMPARED TO 24 WEEKS ENDED JUNE 12, 1996
Operating revenues increased 4.2% to $346.9 million for the 24 weeks
ended June 11, 1997 from $333.0 million for the 24 weeks ended June 12, 1996,
resulting primarily from inflationary price increases on membership dues and
golf related revenues at mature properties and to slightly improved membership
trends. Operating revenues of mature properties (i.e., those for which a
comparable period of activity exists, generally those owned for at least
eighteen months to two years) increased from $293.6 million to $305.4 million,
an increase of 4.0%.
Operating revenues from mature private club properties increased 2.3%
from $210.1 million in 1996 to $214.9 million for the 24 weeks ended June 11,
1997. Membership dues at mature private clubs increased 3.0% to $102.8
million for the 24 weeks ended June 11, 1997 from $99.8 million for the 24
weeks ended June 12, 1996, due to inflationary price increases and slightly
improved membership trends. Membership enrollment at mature clubs for the 24
weeks ended June 11, 1997 was 19.0%, which is higher than attrition rates of
18.1% during the same period resulting in a 0.9% net enrollment rate. The net
enrollment at mature clubs for the 24 weeks ended June 12, 1996 was 0.8%.
Usage revenues for mature private club properties (i.e., food and beverage,
golf, lodging, and other recreation) increased 1.7% to $109.6 million for the
24 weeks ended June 11, 1997 from $107.7 million for the same period in 1996.
Operating revenues from golf clubs grew 21.8% from $12.4 million in 1996
to $15.1 million in 1997 resulting primarily from acquisitions in 1996.
Operating revenues from mature golf clubs increased 8.4% to $11.6 million from
$10.7 million in 1996, reflecting an increase of 2.4% in rounds played, due to
better weather conditions in markets served, and an increase of 5.0% in
revenue per round.
Resort operating revenues increased 13.0% from $62.9 million in 1996 to
$71.1 million in 1997 due to volume increases at mature properties and a 1996
acquisition. Operating revenues from mature resorts increased from $62.5
million for the 24 weeks ended June 12, 1996 to $67.6 million for the 24 weeks
ended June 11, 1997, an increase of 8.2%, reflecting an increase of 8.6% in
the average daily revenue per available room and an increase of 2.6% in
occupancy rates partially offset by a decrease of 2.5% in the average daily
room rate per occupied room.
Realty operating revenues decreased from $10.2 million in 1996 to $6.5
million in 1997, or 36.3%, primarily due to decreased real estate sales of
land held for resale in Colorado, Ohio, and South Carolina.
International operating revenues increased to $5.7 million for the 24
weeks ended June 11, 1997 from $1.1 million for the same period in 1996 due
primarily to equity in earnings from a city club joint venture in Singapore
and 1996 and 1997 acquisitions.
Direct operating costs increased 3.6% to $303.1 million from $292.7
million principally reflecting increased costs at mature properties. Direct
operating costs at mature properties increased to $218.9 million for the 24
weeks ended June 11, 1997 from $209.5 million for the same period in 1996 or
4.5%. The increase in direct operating costs for mature properties is due
primarily to increased health insurance premiums, an impairment loss for
assets to be disposed of, inflationary payroll cost increases, and incentive
bonus accruals.
SEASONALITY
The subsidiaries of the Company operate primarily on a 52/53 week fiscal
year. The first three quarters consist of 12 weeks each and the fourth quarter
includes 16 weeks. The timing of fiscal quarter ends, seasonal weather
conditions and other short-term variations cause financial performance to vary
by quarter. The Company has historically generated a disproportionate amount
of its operating revenue in the second, third and fourth quarters of each
year. The timing of purchases or leases of operating properties, divestitures
of operating properties, and investment gains and losses also cause the
Company's results of operations to vary significantly from quarter to quarter.
INFLATION
Inflation has not had a significant adverse impact on the Company. As
operating expenses increase, the Company, to the extent the value of services
rendered to members is not adversely impacted and as industry standards
dictate, recovers increased costs by increasing prices.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations and capital expenditures primarily
through cash flows from operations, membership deposits and long-term debt.
Most capital expenditures other than capital replacements are considered
discretionary and could be curtailed in periods of low liquidity. Capital
replacements are planned expenditures made each year to maintain high quality
standards of facilities for the purpose of meeting existing members'
expectations and to attract new members. Capital replacements have ranged from
3.9% to 6.1% of operating revenues during the last three years. The Company
distinguishes capital expenditures made to refurbish and replace existing
property and equipment (i.e., capital replacements) from other discretionary
capital expenditures such as the expansion of existing facilities (i.e.,
capital expansions) and acquisition or development of new facilities.
Commitments to fund future capital expenditures were not material as of June
11, 1997.
Long-term debt is generally incurred on a property specific basis and is
non-recourse to any corporations other than the subsidiary incurring the debt.
Membership deposits represent non-interest-bearing advance initiation deposits
paid by members when they join a club and are generally due and payable 30
years from the date of acceptance. Management does not consider maturities of
membership deposits over the next five years to be material. Due to the
utilization of long-term operating leases and membership deposits, the
Company's leverage ratio (i.e., long-term debt to total capital) has been
maintained at manageable levels which allow for adequate capability to finance
future growth with long-term debt.
The Company relies on its low leverage position and maintenance of
positive relationships with existing and potential lenders to arrange
financing as needed for general corporate purposes or for specific projects.
Consequently, the Company maintained no committed lines of credit at June 11,
1997. At June 11, 1997, certain subsidiaries of the Company were not in
compliance with outstanding loan agreements relating to long-term debt
totaling $11.9 million. The noncompliance relates both to financial ratio
covenants and to nonpayment of amounts due under the terms of such agreements.
The provisions of certain subsidiary lending and other agreements limit
the amount of dividends that may be paid to the parent. At June 11, 1997,
cash balances of $9.7 million were not available for dividends by subsidiaries
due to those restrictions.
At June 11, 1997, the Company's subsidiaries maintained $13.7 million of
unused letters of credit primarily to guarantee payment of potential insurance
claims paid under workers' compensation and general liability programs.
All of the assets of the ClubCorp Stock Investment Plan ("Plan") are
invested in shares of ClubCorp's common stock, $.01 par value per share
("Common Stock"), except for temporary investments of cash pending investment
in Common Stock. All distributions from the Plan are made in cash. As a
means of providing liquidity to the trustees of the Plan to meet their
fiduciary obligations to distribute cash to participants requesting
withdrawals, ClubCorp has provided the trustees the right ("Redemption Right")
to cause the Company to redeem Common Stock, held in trust on behalf of the
Plan, at the most recent appraised price as necessary to meet certain
requirements. Withdrawals by participants and terminations by and/or
resignations from the Company of participants in excess of anticipated levels
could give rise to the exercise of withdrawal rights in substantial amounts
and place significant demands on the liquidity of the Company. In such an
event, the resources available to meet business expansion or other working
capital needs could be adversely affected. As of June 11, 1997, the value of
the Redemption Right was $44.9 million. The most recent appraised price of
the Common Stock is $11.94 as of June 11, 1997. The aggregate market value of
the Common Stock at June 11, 1997, based on such appraised value, is $1,018.1
million. The Redemption Right has never been exercised by the Plan, although
the Company from time to time has repurchased Common Stock into treasury from
certain stockholders. The Company does not believe that the Redemption Right
will be exercised to any material extent by the Plan to meet any of its
fiduciary obligations.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Certain information in this Quarterly Report on Form 10-Q may contain
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
these provisions, including any projections of earnings, revenues or other
financial items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products or
services, any statements regarding future economic conditions or performance
and any statement of assumptions underlying any of the foregoing. In some
cases, forward-looking statements can be identified by the use of terminology
such as "may," "will," "expects," "plans," "anticipates," "estimates,"
"potential" or "continue," or the negative thereof or other comparable
terminology. Although the Company believes that the expectations reflected in
its forward-looking statements are reasonable, it can give no assurance that
such expectations or any of its forward-looking statements will prove to be
correct, and actual results could differ materially from those projected or
assumed in the Company's forward-looking statements. Forward-looking
statements are subject to inherent risks and uncertainties, some of which are
summarized in this section.
Over the last three years, attrition rates among members of the Company's
mature clubs have ranged from 17.5% to 20.5%. In certain geographic areas, the
Company has experienced decreased levels of usage of its private clubs, golf
clubs, and public golf facilities. Membership enrollment at mature clubs for
the 24 weeks ended June 11, 1997 was 19.0%, which is higher than attrition
rates of 18.1% during the same period. Attrition was primarily due to a
decrease of members at city clubs. The Company is currently analyzing the
existing demands of the city club market and modifying its existing product to
more closely match these needs. In addition, the Company continues to focus
its efforts on membership enrollment programs and quality service to reduce
attrition as one of its top priorities for 1997. For the last several years,
the Company has focused on efforts to retain existing members, attract new
members and increase club usage through various programs and membership
activities, including increasing member participation by implementing member
survey suggestions, increasing the involvement of member boards of governors
in planning club activities, and the alignment of club activities with member
needs. It is uncertain how trends in membership and club usage will develop
in the future, or whether any of the Company's efforts in this area will be
successful.
During 1996, the Company was successful in its efforts to control
expenses and increase revenues. While operating revenues increased 3.3%,
operating costs and expenses increased only 1.0%. It is uncertain if the
Company can continue to create operating efficiencies and thus decrease costs
in 1997 to the extent cost reductions were achieved in 1996. For the 24 weeks
ended June 11, 1997, the Company's operating revenues increased 4.2% while
operating costs and expenses increased 3.6%.
As of July 23, 1997, the Company was in the final stages of negotiations
to acquire three properties and to build one property. The Company is
considering several ownership structures for the properties including lease
arrangements, sole ownership, and partial ownership (including joint venture
interests). The consummation of the acquisition and construction of these
properties is expected to require approximately $8.0 to $10.0 million in
capital expenditures, to be funded primarily with cash flows from operations
and external bridge financing of Club Corporation of America ("CCA"). The
bridge financing arrangement is a "guidance line", styled as a promissory
note, with a bank and is due on a short-term basis up to a maximum of $75.0
million. Borrowings are generally renewed as they become due; therefore, CCA
does not expect to be required to repay the outstanding borrowings within the
next twelve months. As of June 11, 1997, $22.0 million was outstanding under
this financing arrangement. On June 19, 1997, a discretionary payment of
$6.3 million was made from cash flows from operations to repay outstanding
borrowings. Due to its short-term nature, the amount outstanding, excluding
letters of credit and loan guarantees, at June 11, 1997 is considered current
for financial reporting purposes. Additional credit arrangements could be made
if considered necessary. The eventual outcome of the acquisition negotiations
cannot be accurately predicted at this time.
The Company has acquired 63 properties since January 1, 1991 through
purchase, lease agreement or joint venture arrangements. Actual returns from
these properties have been significantly less than projected returns. The
success of each property depends on different factors; however, some of the
more common risk factors include a high dependency on real estate sales for
new membership growth, slower progress than anticipated in repositioning
properties and slower than anticipated turnarounds of prior operating
deficits. Additional purchase consideration was paid for premier properties,
strategically positioned properties, and properties in markets with
significant barriers to entry reflecting both the tangible and intangible
value of the property. The Company has also experienced greater than expected
development costs at certain properties built and opened since January 1,
1991. Under-performing and cash flow deficit properties recently acquired are
being carefully analyzed by executive management to determine an optimum
business plan allowing for the highest possible return to the Company. The
Company continually seeks to improve financial performance of existing
facilities and divest properties when management determines that properties
will be unable to provide a positive contribution to profitability. The
Company is currently evaluating several of its properties for ownership and/or
financial restructure or divestiture which could, depending on the outcome of
restructure or divestiture negotiations, limit its short-term ability to grow
revenues and cash flows at historical levels. Executive management believes
that its focus on, and investment in, training and development at the property
manager level could improve performance in the future. Executive management
has developed a risk and reward-based screening model to evaluate specific
risk and reward factors against projected yields for all proposed acquisitions
and certain other significant capital investments of the Company. In
addition, the Company has implemented a "team approach" to acquisitions
including all facets of operations, development, and regional support teams to
improve the transition of ownership.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Note 5 to Condensed Notes to Consolidated Financial
Statements.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Refer to Note 4 to Condensed Notes to Consolidated Financial
Statements.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - Second Amendment to ClubCorp Stock Investment Plan
10.2 - Third Amendment to ClubCorp Stock Investment Plan
10.3 - Fourth Amendment to ClubCorp Stock Investment Plan
10.4 - Fifth Amendment to ClubCorp Stock Investment Plan
10.5 - Sixth Amendment to ClubCorp Stock Investment Plan
15.1 - Letter from KPMG Peat Marwick LLP regarding
unaudited interim financial statements.
(b) Reports on Form 8-K
The Company filed a Form 8-K during the quarterly
period ended June 11, 1997 on April 3, 1997 which
included Item 8. Change in Fiscal Year.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLUB CORPORATION INTERNATIONAL
Date : July 24, 1997 By: /s/ John H. Gray
-------------------------------
John H. Gray
Executive Vice President and
Chief Administrative Officer
(chief accounting officer)
SECOND AMENDMENT TO THE
CLUBCORP STOCK INVESTMENT PLAN
Amendment made this 9th day of February, 1996, by Club Corporation
International (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the ClubCorp Stock Investment Plan (the
"Plan"); and
WHEREAS, the Company amended and restated the Plan effective January 1, 1995.
WHEREAS, the Company desires to amend the Plan to make certain technical
qualification changes in response to a request from the Internal Revenue
Service;
WHEREAS, the Company desires to make certain other technical changes to the
Plan; and
WHEREAS, the Plan may be amended by the Company pursuant to the provisions of
Article XV of the Plan, and the Company desires to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows, effective as of January 1,
1995.
1. Subsection 2.25(7) is deleted in its entirety, and the following is
substituted in its place:
"2.25(7) Uncompensated Leaves of Absence. Solely for purposes of
-----------------------------------
determining whether an Employee has a One-Year Break in Service, Hour of
Service shall include each hour (credited on the basis of the schedule of
equivalent hours set forth in Subsection 2.25(8)) for which an Employee is not
paid but is on a Leave of Absence."
2. Section 2.26 is deleted in its entirety, and the following is substituted
in its place:
"2.26 "Leave of Absence" means an absence from the active employment
of an Employer by reason of an approved absence granted by such Employer on
the basis of a uniform policy applied by such Employer without discrimination.
Such a Leave of Absence will not constitute a Termination of Employment
provided the Employee returns to the active employment of the Employer at or
prior to the expiration of his leave or, if not specified therein, within the
period of time which accords with such Employer's policy with respect to
permitted absences. If the Employee does not return to the active employment
of such Employer at or prior to the expiration of his Leave of Absence, his
employment will be considered terminated as of the date on which his leave
expires.Notwithstanding the foregoing provisions of this Section, absence from
the active service of the Employer because of military service will be
considered a Leave of Absence granted by an Employer and will not terminate
the employment of an Employee if he returns to the active employment of an
Employer within the period of time during which he has reemployment rights
under any applicable federal law or within sixty (60) days from and after
discharge or separation from such military service if no federal law is
applicable. However, no provision of this Section or of the remainder of the
Plan shall require reemployment of any Employee whose active service with an
Employer was terminated by reason of military service."
3. Section 2.32 is deleted in its entirety, and the following is substituted
in its place:
"2.32 "Pre-Tax Contribution Account" means the separate account of a
Participant consisting of the Pre-Tax Contributions made by the Employer in
accordance with Section 4.05(l), and including as applicable, a separate
subaccount for Qualified Nonelective Contributions, as adjusted in accordance
with the provisions of Article VI of the Plan."
4. Section 2.36 is deleted in its entirety, and the following is substituted
in its place:
"2.36 "Qualified Nonelective Contribution" shall mean a contribution
(other than Pre-Tax Contributions, After-Tax Contributions, Basic After-Tax
Matching Contributions, Basic Pre-Tax Matching Contributions, Discretionary
Matching Contributions, or any contribution required pursuant to Subsection
10.05(2)), if any, (i) made by the Employer in its sole and absolute
discretion for the benefit of Participants who are not Highly Compensated
Employees (and thus, satisfies the requirements of Section 401(a)(4) of the
Code), (ii) which are allocable to the subaccount within the Pre-Tax
Contribution Account in accordance with Subsection 6.04(4), and (iii) which
shall be nonforfeitable and treated for all purposes as Pre-Tax Contributions
(including for purposes of Section 4.11 but not for purposes of hardship
withdrawals as provided in Subsection 4.12(2)), as designated by the Plan
Administrator.
Qualified Nonelective Contributions shall, in accordance with Section 6.04(4)
and Treasury Regulation sections 1.401(k)-1(b)(5) and 1.401(m)-l(b)(5): (i)
be allocated to the Employee's Pre-Tax Contribution Account as of the last day
of the Plan Year, (ii) not be contingent upon the Employee's participation in
the Plan or performance of services on any date subsequent to the date as of
which Qualified Nonelective Contributions are allocated and (iii) shall be
actually paid to the Plan no later than the end of the twelve (12) month
period immediately following the Plan Year to which such contribution relates;
provided however, if that several plans are aggregated in accordance with
Section 410(b) of the Code and if the Plan Year of the Plan is changed to
satisfy the requirement that plans have the same plan year, the Qualified
Nonelective Contributions for the short Plan Year created must also (iv) be
treated as if they were Pre-Tax Contributions and,(v) be related to the Total
Compensation that would have been received by such Employee during that short
Plan Year but for such Employee's election under Section 3.04, or (vi) be
attributable to services performed by the Employee in that short Plan Year,
and but for the Employee's election to defer under Section 3.04, would have
been received by the Employee within two and one-half months after the close
of that short Plan Year."
5. The reference to "Actual Deferral Percentage" in Section 2.47 is deleted in
its entirety, and the following is substituted in its place:
"Actual Deferral Percentage" Subsection 4.06(5)(a)"
or "ADP"
6. The reference to "Compensation" in Section 2.47 is deleted in its entirety,
and the following is substituted in its place:
"Compensation" Subsection 4.09(6)(b)(4)"
7. The reference to "Highly Compensated Employee" in Section 2.47 is deleted
in its entirety, and the following is substituted in its place:
"Highly Compensated Employee" Subsection 4.06(5)(c);
Subsection 4.09(6)(b)"
8. The reference to "Non-Highly Compensated Employee" in Section 2.47 is
deleted in its entirety, and the following is substituted in its place:
"Non-Highly Compensated Subsection 4.09(6)(b)(4)"
Employee"
9. The following reference shall be inserted between the reference to "Plan
Administrator" and the reference to "Qualified Consent" in Section 2.47:
"Prior Plan" Section 1.01"
10. Subsection 4.06(2) is deleted in its entirety, and the following is
substituted in its place:
"4.06(2) If one or more Highly Compensated Employees are eligible to
make Pre-Tax Contributions and are also eligible for contributions that are
tested under section 401(m) of the Code, multiple use of the Actual Deferral
Percentage alternative limit set forth in Subsection 4.06(l)(b) shall be
limited so that the sum of Actual Deferral Percentage of all such Highly
Compensated Employees and the Actual Contribution Percentage of such Highly
Compensated Employees does not exceed the aggregate limit. For purposes of
this Section, the "aggregate limit" shall be the greater of:
(a) The sum of
(i) 1.25 multiplied by the greater of the Actual Deferral
Percentage or Actual Contribution Percentage of the group of Participants who
are not Highly Compensated Employees for the Plan Year, and
(ii) Two plus the lesser of the Actual Deferral Percentage or the
Actual Contribution Percentage of the group of Participants who are not Highly
Compensated Employees for the Plan Year; provided, however, that this amount
shall not exceed 2.0 multiplied by the lesser of the Actual Deferral
Percentage or the Actual Contribution Percentage of the group of Participants
who are not Highly Compensated Employees for the Plan Year; or
(b) The sum of
(i) 1.25 multiplied by the lesser of the Actual Deferral Percentage
or Actual Contribution Percentage of the group of Participants who are not
Highly Compensated Employees for the Plan Year; and
(ii) Two plus the greater of the Actual Deferral Percentage or
Actual Contribution Percentage of the group of Participants who are not Highly
Compensated Employees for the Plan Year; provided, however, that this amount
shall not exceed 2.0 multiplied by the greater of the Actual Deferral
Percentage or Actual Contribution Percentage of the group of Participants who
are not Highly Compensated Employees for the Plan Year.
Amounts in excess of the aggregate limit shall be treated as either Excess
Contributions or Excess Aggregate Contributions (or a combination of both) as
determined in the sole discretion of the Plan Administrator and adjusted as
provided in Subsection 4.06(3) or 4.09(3), whichever may be applicable. For
purposes of applying this multiple use limit, the Actual Contribution
Percentage and the Actual Deferral Percentage shall be determined after any
required distributions of Excess Contributions, Excess Aggregate Contributions
and Excess Deferrals under Subsections 4.06(3) and 4.09(3) and Section 4.07."
11. The first paragraph of Subsection 4.06(3) is deleted in its entirety and
the following is substituted in its place:
"4.06(3) If at any time during a Plan Year, the Actual Deferral
Percentage for the Highly Compensated Employees exceeds or is reasonably
expected by the Plan Administrator to exceed the amounts allowed tinder
Subsections 4.06(l) or 4.06(2), the Plan Administrator, in its sole and
absolute discretion, shall, as often as it elects, do one or more of the
following; provided, however, that if this Plan is aggregated with one or more
plans in accordance with section 401(a)(4), section 410(b) or 401(k) of the
Code, such Highly CompensatedEmployee shall have the right (in accordance with
procedures established by the Plan Administrator) to direct the Plan
Administrator with respect to whether correction of such excess (or expected
excess) will occur under this Section 4.06(3) or under the applicable
provisions of the other aggregated plans:"
12. Subsection 4.06(3)(b)(i) is deleted in its entirety and the following is
substituted in its place:
"(b) (i) Refund the portion of each Highly Compensated Employee's
Pre-Tax Contribution that constitutes a portion of the Excess Contribution for
the Plan Year, plus earnings (or less losses) on such amount for the Plan Year
until the Actual Deferral Percentage for the Highly Compensated Employees
equals (by rounding up) the greater of (a) or (b) of Subsection 4.06(l), as
limited by Subsection 4.06(2), with all refunds from a Participant's Pre-Tax
Contribution Account to be charged first against Pre-Tax Contributions for the
calendar year that includes the first day of the Plan Year, and then, to the
extent necessary, charged against Pre-Tax Contributions for the calendar year
that includes the last day of the Plan Year. All such refunds shall be
distributed by the Trustee to the Employee within two and one-half months
after the close of the Plan Year in which the Excess Contribution arose, if
administratively possible, and within twelve (12) months after the close of
such Plan Year at the latest.
The amount of Excess Contributions for each Highly Compensated Employee is to
be determined by the following leveling method, under which the Actual
Deferral Percentage of the Highly Compensated Employee with the highest Actual
Deferral Percentage is reduced to the extent required to (i) enable the Plan
to satisfy the limitations of Subsections 4.06(l) and 4.06(2), or (ii) cause
such Highly Compensated Employee's Actual Deferral Percentage to equal the
Actual Deferral Percentage of the Highly Compensated Employee with the next
highest Actual Deferral Percentage, whichever occurs first. This process must
be repeated until the Plan satisfies the limitations of Subsections 4.06(t)
and 4.06(2).
The provisions of this Section shall be applied after the provisions of
Section 4.07 are applied and the amount of any Excess Contributions refunded
under this Section shall be reduced by Excess Deferrals, if any, attributable
to such Plan Year previously distributed to the Employee. Any distribution
made pursuant to this Subsection 4.06(3)(b)(i) may be made notwithstanding any
other provision of this Plan.
Notwithstanding any Plan provision to the contrary, in no event shall Matching
Contributions remain allocated to a Highly Compensated Employee's Account and
such amounts shall be treated as Forfeitures (in the same manner as provided
in Subsection 4.09(3)(c)(ii)), if the Pre-Tax Contributions which were matched
by such Matching Contributions are refunded as Excess Contributions under this
Subsection 4.06(3)(b)."
13. Subsection 4.06(4) is deleted in its entirety, and the following is
substituted in its place:
"4.06(4) Special Rules For Family Members.
------------------------------------
(a) If an eligible Highly Compensated Employee is subject to the
family aggregation rules of Code section 414(q)(6) because such Employee is
either a five-percent owner or one of the ten most highly compensated
employees, the combined Actual Deferral Percentage for the Aggregated Family
Group (which is treated as one Highly Compensated Employee) shall be
determined by combining the Pre-Tax Contributions, Compensation and amounts
treated as Pre-Tax Contributions of all eligible Family Members.
(b) The Pre-Tax Contributions, Total Compensation and amounts
treated as Pre-Tax Contributions of all Family Members are disregarded for
purposes of determining the Actual Deferral Percentage for the group of
Employees that are not Highly Compensated Employees, except to the extent
taken into account under Subsection 4.06(4)(a) above.
(c) If an Employee is required to be aggregated as a member of more
than one Aggregated Family Group in the Plan, all Eligible Employees who are
members of those Aggregated Family Groups that include that Employee are
aggregated as one Aggregated Family Group in accordance with Subsections
4.06(4)(a) and 4.06(4)(b).
(d) The determination and correction of Excess Contributions of a
Highly Compensated Employee whose Actual Deferral Percentage is determined
under the family aggregation rules of this Section is accomplished as follows:
the Actual Deferral Percentage is reduced as required under Subsection
4.06(3), and the Excess Contributions for the family unit shall be allocated
among the Family Members in proportion to the Pre-Tax Contributions of each
Family Member that is combined to determine the Actual Deferral Percentage."
14. Subsection 4.06(5)(a) is deleted in its entirety, and the following is
substituted in its place:
(a) "Actual Deferral Percentage" (or "ADP") shall mean for Eligible
Employees the average (arithmetic mean) of the ratio (calculated separately
for each Eligible Employee to the nearest one-hundredth of one percent) of:
(i) the sum of the Pre-Tax Contributions actually contributed
to the Trust on behalf of such Employee and allocated to his Pre-Tax
Contribution Account for such Plan Year plus
(I) the Qualified Nonelective Contributions, if any, actually
contributed to the Trust on behalf of such Employee and allocated to his
Pre-Tax Contribution Account for such Plan Year, and
(II) the Matching Contributions (other than Qualified Nonelective
Contributions), if any, actually contributed to the Trust on behalf of such
Employee and allocated to his Pre-Tax Contribution Account for such Plan Year
that qualify for aggregation under section 401(k)(3)(D)(ii) of the Code and
are designated by the Administrator under this Plan as includible in this
computation for this Plan Year, to
(ii) the Total Compensation received by the Employee during the
Plan Year, such average of ratios being multiplied by one hundred (100).
Any Pre-Tax Contributions taken into account for purposes of the Actual
Deferral Percentage shall: (i) (but for the election which such Employee made
in accordance with Section 3.04) relate to Total Compensation that would have
been received by such Employee during the Plan Year, or (ii) be attributable
to services performed by the Employee in the Plan Year and (but for the
election which such Employee made in accordance with Section 3.04) would have
been received by the Employee within two and one-half months after the end of
the Plan Year; and be (iii) allocated to the Employee's Pre-Tax Contribution
Account as of a date within the Plan Year; and (iv) not be contingent upon the
Employee's participation in the Plan or performance of services on any date
subsequent to the date as of which such contributions are allocated; and (v)
shall be actually paid to the Plan no later than the end of the twelve (12)
month period immediately following the Plan Year to which such contribution
relates.
To the extent that the Administrator elects, pursuant to the above paragraph,
to take Matching Contributions (other than Qualified Nonelective
Contributions) for such Plan Year, that meet the requirements of the
applicable Regulations, into account in computing the Actual Deferral
Percentage, the Actual Contribution Percentage tests under Section 4.09 must
still be completed and satisfied separately, and in doing so the Employer
shall disregard the Matching Contributions used in computing the Actual
Deferral Percentage for such Plan Year. Any Matching Contribution taken into
account for purposes of determining the Actual Deferral Percentage shall be
(i) allocated only to the accounts of Participants who are not Highly
Compensated Employees, (ii) allocated to such Employee's Pre-Tax Contribution
Account (and at the discretion of the Plan Administrator to the subaccount for
Qualified Nonelective Contributions) and (iii) and shall be nonforfeitable and
treated for all purposes as Pre-Tax Contributions, including for purposes of
the directly preceding paragraph of this Subsection 4.06(5) (a) and Section 4.
1 1 but such amounts will be prohibited from being withdrawn as hardship
withdrawals as provided in Subsection 4.12(2).
For purposes of this Section, the ratio calculated for any eligible Employee
who is a Highly Compensated Employee for the Plan Year and who is eligible to
have Pre-Tax Contributions allocated to his account under two or more plans or
arrangements described in section 401(k) of the Code that are maintained by
the Employer shall be determined as if all such contributions were made under
a single arrangement. Further, in the event that this Plan satisfies the
requirements of sections 401(a)(4) and 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy the
requirements of sections 401(a)(4) and 410(b) of the Code only if aggregated
with this Plan, the Actual Deferral Percentage shall be determined by
calculating the ratio for each eligible Employee as ff all such plans were a
single plan. If the Plan is permissively aggregated with another plan in order
to comply with the limitations of Subsection 4.06(l), such aggregated plans
must also meet the requirements of Code Sections 401(a)(4) and 410(b) as a
single plan."
15. Subsection 4.07 is deleted in its entirety, and the following is
substituted in its place:
"4.07 Distribution of Excess Deferrals. If a Participant is required to
--------------------------------
include in his gross income for a calendar year elective deferrals (as defined
in section 402(g)(3) of the Code) which exceeded $7,000 (or such greater
amount as determined by the Secretary of the Treasury pursuant to
cost-of-living increases) for such year, such amounts shall be referred to as
"Excess Deferrals" and shall be distributed to the Participant. The
Administrator shall distribute such Excess Deferral, adjusted for any income
or losses allocable to such amount (determined in accordance with the
principles of Subsection 4.06(3)(b)), for the Plan Year in question not later
than the time determined under Subsection 4.06(3)(b); provided, however, that
the amount of Excess Deferrals to be distributed shall be reduced by Excess
Contributions previously distributed in accordance with Subsection 4.06(3)(b)
to the Employee from the Plan which are attributable to such Plan Year. Any
distribution made pursuant to this Section may be made notwithstanding any
other provision of this Plan."
16. Subsection 4.09(l) is deleted in its entirety, and the following is
substituted in its place:
"4.09(l) Notwithstanding any other provision of this Plan, the "Actual
Contribution Percentage" (or "ACP") of Matching Contributions and After-Tax
Contributions made to the Plan for Highly Compensated Employees during the
Plan Year shall not exceed the greater of the limitations indicated below:
(a) One hundred twenty-five percent (125%) of the ACP for all Non-Highly
Compensated Employees; or
(b) The lesser of (i) the sum of the ACP for all Non-Highly Compensated
Employees plus two percent (2%) or (ii) two hundred percent (200%) of the ACP
for all Non-Highly Compensated Employees.
If one or more Highly Compensated Employees are eligible for contributions
that are tested under both this Section and Section 4.06, the multiple use of
the Actual Contribution Percentage alternative limit set forth in Subsection
4.06(2) shall apply."
17. Subsection 4.09(3)(e) is deleted in its entirety, and the following is
substituted in its place:
"(e) In determining the character of Excess Aggregate Contributions
which are required to be corrected as either Matching Contributions or
After-Tax Contributions, in no event shall Matching Contributions remain
allocated to a Highly Compensated Employee's Account and such amounts shall be
treated as Forfeitures (in the same manner as provided in Subsection
4.09(3)(c)(ii)) if the After-Tax Contributions which were matched by such
Matching Contributions are distributed or forfeited as Excess Aggregate
Contributions."
18. Subsection 4.09(6)(a) is deleted in its entirety, and the following is
substituted in its place:
"4.09(6) (a) For purposes of this Section 4.09, "Actual Contribution
Percentage" (or "ACP") shall mean for Eligible Employees the average
(arithmetic mean) of the ratio (calculated separately for each Eligible
Employee to the nearest one-hundredth of one percent) of:
(i) the sum of Matching Contributions actually contributed to the
Trust on behalf of such Employee and allocated to his Company Contribution
Account for the Plan Year, plus
(ii) the Employee's After-Tax Contributions actually contributed to
the Trust on behalf of such Employee and allocated to his After-Tax
Contribution Account for the Plan Year, plus
(iii) the Qualified Nonelective Contributions actually contributed
to the Trust on behalf of such Employee and allocated to the Pre-Tax
Contribution Account for the Plan Year, plus
(iv) the Pre-Tax Contributions actually contributed to the Trust on
behalf of such Employee and allocated to the Pre-Tax Contribution Account for
the Plan Year, that qualify for aggregation under section 401(m)(3) of the
Code and are designated by the Administrator under this Plan as includible in
this computation for this Plan Year, to
(v) the Total Compensation, as defined in Subsection 4.09(6)(d),
received by the Employee during the Plan Year, such average of ratios being
multiplied by one hundred (100).
To the extent that the Administrator elects, pursuant to the above paragraph,
to take Pre-Tax Contributions (and other contributions) listed in Subsection
4.06(5)(a) into account in computing the Actual Contribution Percentage for
such Plan Year, the Actual Deferral Percentage test under Section 4.06 must be
satisfied separately, disregarding Pre-Tax Contributions (and other
contributions) listed in Subsection 4.06(5)(a) but used in computing the
Actual Contribution Percentage for such Plan Year.
In calculating ACP, all Pre-Tax Contributions taken into account for purposes
of determining the Actual Contribution Percentage shall: (i) (but for the
election which such Employee made in accordance with Section 3.04) relate to
Total Compensation that would have been received by such Employee during the
Plan Year, or (ii) be attributable to services performed by the Employee in
the Plan Year (but for the election which such Employee made in accordance
with Section 3.04) and would have been received by the Employee within two and
one-half months after the end of the Plan Year; and (iii) be allocated to the
Employee's Pre-Tax Contribution Account (and at the discretion of the Plan
Administrator to the subaccount for Qualified Nonelective Contributions) as of
a date within the Plan Year; and (iv) not be contingent upon the Employee's
participation in the Plan or performance of services on any date subsequent to
the date as of which such contributions are allocated; and (v) shall be
actually paid to the Plan no later than the end of the twelve (12) month
period immediately following the Plan Year to which such contribution relates;
and (vi) shall be considered for purposes of the ACP with respect to amounts
allocated only to the accounts of Participants who are not Highly Compensated
Employees.
In calculating ACP, an After-Tax Contribution shall be taken into account for
a Plan Year only if such After-Tax Contribution: (i) is paid to the Trust
during such Plan Year or (ii) is paid to an agent of the Plan and transmitted
to the Trust within a reasonable period after the end of the Plan Year. In
calculating ACP, a Matching Contribution shall be taken into account for a
Plan Year only if such Matching Contribution: (i) is made on account of the
Employee's After-Tax Contributions or Pre-Tax Contribution for the Plan Year,
(ii) is allocated to the Employee as of a date during such Plan Year, and
(iii) is paid to the Trust not later than the last day of the twelfth (12th)
month following the close of such Plan Year.
In calculating ACP, all employee contributions and employer matching
contributions (as defined in Section 401(m)(4) of the Code) of any Highly
Compensated Employee who participates in more than one plan maintained by an
Affiliated Company shall be aggregated for purposes of determining such
percentage.
In calculating ACP, all employee contributions and employer matching
contributions (as defined in Section 401(m)(4) of the Code) to any plan
required to be aggregated with the Plan for purposes of Code Section 401(a)(4)
or 410(b) shall be treated as if made under the Plan. If the Plan is
permissively aggregated with another plan in order to comply with the
limitations of Subsection 4.09(l), such aggregated plans must also meet the
requirements of Code Sections 401(a)(4) and 410(b) as a single plan."
19. Subsection 4.09(6)(c) is deleted in its entirety, and the following is
substituted in its place:
"(c) "Eligible Employee" for purposes of this Section 4.09 means for or
during a Plan year each Employee who is eligible to become a Participant,
including those Employees who are eligible to but fail to file to the election
required by Section 3.04."
20. The caption for Section 4.11 and Subsection 4.11(l)(a) are deleted in
their entirety, and the following are substituted in their place:
"4.11 General Withdrawal of Pre-Tax Contributions and Distribution
----------------------------------------------------------------
Restrictions.
------------
4.11(l) (a) Notwithstanding any Plan provisions to the contrary, and except
as provided in Section 4.12, amounts held in a Participant's Pre-Tax
Contributions Account are not distributable prior to the earliest of:
(i) his separation from service (as defined in Code section 401(k)
and the Treasury Regulations thereunder) pursuant to Article X;
(ii) his Disability pursuant to Article VIII;
(iii) his Death pursuant to Article IX;
(iv) his attainment of age 59 pursuant to Subsection 4.11(2);
(v) the termination of the Plan; provided, however, that a
distribution is allowable under this provision only if neither the Employer
nor another company in an Affiliated Group with the Company maintains a
successor plan (as defined in Treasury Regulation Section 1.401(k)-l(d)(3))
other than an employee stock ownership plan on the date of distribution;
(vi) the disposition, to a corporation that is not in an Affiliated
Group with the Employer, of substantially all (at least eighty-five percent
(85%)) of the assets (within the meaning of Code Section 409(d)(2)) used by
the Employer in a trade or business of the Employer, but only if the
Participant continues employment with the transferee corporation, the Employer
continues to maintainthe Plan and the distribution is in connection with the
disposition that causes the Participant's employment transfer; or
(vii) the disposition, to an entity or individual that is not in a
Affiliated Group with the Employer, of the Employer's interest in a subsidiary
(within the meaning of Code Section 409(d)(3)) in which the Participant is
employed, but only if the Participant continues employment with the
subsidiary, the Employer continues to maintain the Plan and the distribution
is in connection with the disposition that causes the Participant's employment
transfer."
21. Subsection 5.02(l)(d) is deleted in its entirety, and the following is
substituted in its place:
"(d) any amounts derived from contributions paid or accrued after
December 31, 1985, in the first taxable year for which a reserve is
established pursuant to Code Section 419A and each subsequent year, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained by an
Employer.
Provided, however, that the twenty-five percent (25%) limitation set forth in
this Subsection 5.02(l)(ii) shall not apply to amounts described in Subsection
5.02(l)(d).
Solely for purposes of this Section, the determination of a Participant's
Pre-Tax Contributions and After-Tax Contributions for a Limitation Year shall
exclude the items set forth in Sections 1.415-6(b)(3)(i)-(iv) of the Income
Tax Regulations, and the determination of a Participant's revocable share of
Matching Contributions for a Limitation Year shall exclude any Matching
Contributions allocated to such Participant for any of the reasons set forth
in Sections 1.4156(b)(2)(ii)-(iv) of the Income Tax Regulations (except as
otherwise provided in such Sections)."
22. Subsection 6.04(4) is deleted in its entirety, and the following is
substituted in its place:
"6.04(4) Allocation of Qualified Nonelective Contributions. If the
-----------------------------------------------------
Employer has made a Qualified Nonelective Contribution for the Plan Year, as
of the last day of the Plan Year the Employer shall allocate, for the Plan
Year, to a subaccount within the Pre-Tax Contribution Account of each
Participant who is not a Highly Compensated Employee the portion of the
Qualified Nonelective Contribution for the Plan Year which equals the maximum
amount which can be allocated to that Participant without causing the total
amount allocated to the Participant under the Plan to exceed the limitation of
Section 5.02; provided, however, that allocations under this Section 6.04(4)
shall be made first for the benefit of the Participant or Participants who are
not Highly Compensated Employees and who have the lowest Compensation for the
Plan Year, then as the Actual Deferral Percentages (or, if applicable, the
Actual Contribution Percentage)of those Participants increase, as a result of
these allocations, allocations shall be added to the accounts of Participants
who are not Highly Compensated Employees who have the next lowest individual
Compensation, and so on until the entire Qualified Nonelective Contribution
has been allocated."
23. The first sentence of Section 10.01 is deleted in its entirety, and the
following is substituted in its place:
"10.01 Vesting Upon Termination of Employment. Subject to the
-----------------------------------------
provisions of Sections 4.11 and 10.04 and Subsection 12.03(2), in the event of
the Termination of Employment of a Participant, such Participant shall be
entitled to receive distribution of the following percentage of his Company
Contribution Account, as of the Allocation Date coinciding with or immediately
following the date on which such Participant terminates employment:"
24. The first sentence of Subsection 11.01(1) is deleted in its entirety, and
the following is substituted in its place:
"11.01(i) Upon a Participant's: (i) retirement on or after his Normal
Retirement Date, (ii) retirement due to Disability, (iii) death, or (iv)
Termination of Employment (subject to Section 4.11), he or his Beneficiary
shall be entitled to payment in an amount determined in accordance with the
provisions of Article VII VIII, IX, or X."
25. Section 13.13 is deleted in its entirety, and the following is substituted
in its place:
"13.13 Indemnification. In the event and to the extent not insured
---------------
against under any contract of insurance with an insurance company, the
Employers shall indemnify and hold harmless each "Indemnified Person" as
defined below, against any and all claims, demands, suits, proceedings,
losses, damages, interest, penalties, expenses, (specifically including, but
not limited to reasonable counsel fees, court costs and other reasonable
expenses of litigation), and liability of every kind, including amounts paid
in settlement, with the approval of the Board, arising from any action or
cause of action related to the Indemnified Person's act or acts or failure to
act. Such indemnity shall apply regardless of whether such claims, demands,
suits, proceedings, losses, damages, interest, penalties, expenses, and
liability arise in whole or in part from (i) the negligence or other fault of
the Indemnified Person, except when the same is judicially determined to be
due to gross negligence, fraud, or willful or intentional misconduct of such
Indemnified Person or (ii) from the imposition on such Indemnified Person of
any penalties imposed by the Secretary of Labor, pursuant to Section 502(l) of
ERISA, relating, to any breaches of fiduciary responsibility under Part 4 of
Title I of ERISA. "Indemnified Person" shall mean each member of the Board of
Directors, each member of the Administrative Committee, each individual
Trustee, and each other Employee who is allocated fiduciary responsibility
hereunder. Upon request by theIndemnified Person, and at such other times as
may be determined by the Plan Administrator, any indemnification due under
this Section 13.13 shall be made as the loss or expense is incurred. Payments
under this Section 13.13 may be made directly to a third party at the
direction of the Board or the Indemnified Person. In the event the Plan
Administrator subsequently determines that a payment based upon an initial
determination of the applicability of this Section 13.13 was inadvertently
made, the Indemnified Person on whose behalf such payment was made shall
reimburse the Employers to the extent required to satisfy the terms of this
Section 13.13. The indemnification provisions of this Section 13.13 shall not
relieve any person from any liability he may have under ERISA for breach of
fiduciary duty."
26. Subsection 19.01(l) is deleted in its entirety, and the following is
substituted in its place:
"19.01(i) "Defined Benefit Plan" shall have the meaning set forth in
Subsection 5.05(2)."
27. Subsection 19.03(l) is deleted in its entirety, and the following is
substituted in its place:
"19.03(1) Vesting. Any Participant who is credited with an Hour of
-------
Service in the first Plan Year in which the Plan is a Top Heavy Plan, or in
any subsequent Plan Year after such first Plan Year (whether or not the Plan
is a Top Heavy Plan in such subsequent Plan Year) shall have his percentage of
vested benefits owing upon a Termination of Employment determined pursuant to
the following schedule, in lieu of the schedule set forth in Section 10.01:
<TABLE>
<CAPTION>
<S> <C>
VESTING YEARS OF SERVICE PERCENTAGE
- ----------------------------- -----------
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
</TABLE>
Notwithstanding the foregoing, for Participants hired before January 1, 1989,
their vested percentage shall be one percent (1%) rather than zero percent
(0%) prior to being credited with two (2) Vesting Years of Service."
28. Subsection 19.03(2) is amended to add the following two sentences to the
end of Subsection 19.03(2):
"Pre-Tax Contributions on behalf of Key Employee Participants are taken
into account in determining the minimum contribution under this Subsection. On
the other hand, Pre-Tax Contributions on behalf of Non-Key Employees may not
betreated as a Matching Contribution for purposes of the minimum contribution
or benefit requirement of section 416 of the Code."
IN WITNESS WHEREOF, this Amendment has been executed the day and year first
above written.
CLUB CORPORATION INTERNATIONAL
By: Kim S. Besse
THIRD AMENDMENT TO THE
CLUBCORP STOCK INVESTMENT PLAN
Amendment made this 13th day of May, 1996, by Club Corporation
International (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Company maintains the ClubCorp Stock Investment Plan (the
"Plan"); and
WHEREAS, the Company amended and restated the Plan effective January 1,
1995 and
subsequently amended the Plan to make certain technical qualification changes
in response to a request from the Internal Revenue Service; and
WHEREAS, the Company desires to amend the Plan to recognize the adoption
of the Plan by ClubCorp International Resource Company ("Resource") and to
permit nonresident aliens with no U.S. source earned income who are employed
by Resource to participate in the Plan; and
WHEREAS, the Plan may be amended by the Company pursuant to the
provisions of Article XV of the Plan, and the Company desires to amend the
Plan;
NOW, THEREFORE, the Plan is amended as follows, effective as of May 13,
1996:
1. The first paragraph of existing Section 2.12 is deleted in its entirety,
and the following two paragraphs are substituted in its place:
"2.12 "Compensation" means with respect to all Participants except for
those Participants employed by ClubCorp International Resource Company who are
nonresident aliens who receive no earned income (within the meaning of Code
Section 911(d)(2)) which is U.S. source income (within the meaning of Code
Section 861(a)(3)), a Participant's total compensation for services rendered
to an Employer during a Plan Year, as reported on Form W-2 or other federal
wage statement as taxable for federal income tax purposes; provided, however,
that Compensation shall not include any Compensation paid for any period prior
to participation in the Plan or any of the following forms of Compensation:
relocation allowances, geographic differentials, car allowances, income
imputed for use of a car, noncash compensation and stock appreciation rights.
Notwithstanding the foregoing, Compensation shall include the amount of a
Participant's elective salary reductions or salary deferrals under any
Employer's cafeteria plan established pursuant to Code Section 125 or an
Employer's plan established pursuant to Code Section 401(k).
Notwithstanding anything in this Section 2.12 to the contrary,
Compensation with respect to only those employees of ClubCorp International
Resource Company who are nonresident aliens who receive no earned income
(within the meaning of Code Section911(d)(2)) which is U.S. source income
(within the meaning of Code Section 861(a)(3)) shall mean (I) such
Participant's wages, salaries, earned income (only if an employee within the
meaning of section 401(c)(1) of the Code) which includes foreign earned income
(as defined in Section 911(b) of the Code) whether or not excludable from
gross income under Code Section 911, foreign earned income (as defined in
Section 911(b) of the Code) whether or not excludable from gross income under
Code Section 911, fees for professional services, and other amounts received
from an Employer for personal services actually rendered in the course of
employment with an Employer as an Employee to the extent that the amounts are
includible in gross income (including, but not limited to, commissions paid
salesmen, overtime pay, compensation for services on the basis of a percentage
of profits, commissions on insurance premiums, tips, bonuses, fringe benefits
and reimbursements or other expense allowances under a nonaccountable plan, as
described in Treasury Regulations section 1.62-2(c)), but determined without
regard to the exclusions found in Code Sections 931 and 933, (II) amounts
received by such Participant described in Sections 104(a)(3), 105(a) and
105(h) of the Code, but only to the extent that these amounts are includible
in the gross income of the Employee, (III) amounts paid or reimbursed by the
Employer to such Participant for moving expenses incurred by such Participant,
but only to the extent that at the time of payment it is reasonable to believe
that these amounts are not deductible by such Participant under Section 217 of
the Code, (IV) the value of nonqualified stock options granted to such
Participant, but only to the extent that the value of the option is includible
in the gross income of such Participant for the taxable year in which granted,
and (V) the amount includible in the gross income of such Participant upon
making the election described in Section 83(b) of the Code, but excluding the
following:
(A) Employer contributions to a plan of deferred compensation to the
extent contributions are not included in gross income of the Participant for
the taxable year in which contributed, and any distributions from a plan of
deferred compensation whether or not includible in the gross income of the
Participant when distributed;
(B) Employer contributions made on behalf of the Participant to a
simplified employee pension described in section 408(k) of the Code;
(C) amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Participant becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(D) amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(E) amounts that receive special tax benefits, or contributions made by
the Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in section 403(b) of the
Code(whether or not the contributions are excludable from the gross income of
the Participant); provided, however, that Compensation shall not include any
Compensation paid for any period prior to participation in the Plan or any of
the following forms of Compensation: relocation allowances, geographic
differentials, car allowances, income imputed for use of a car, noncash
compensation and stock appreciation rights. Notwithstanding the directly
preceding sentence, Compensation shall include the amount of a Participant's
elective salary reductions or salary deferrals under any Employer's cafeteria
plan established pursuant to Code Section 125 or an Employer's plan
established pursuant to Code Section 401(k)."
2. Existing Section 2.19 is deleted in its entirety, and the following is
substituted in its place:
"2.19 "Eligible Employee" means any Employee except the following
individuals: (i) any Employee who is included in a unit of employees covered
by a collective bargaining agreement between employee representatives and one
(1) or more Employers if retirement benefits were the subject of good faith
bargaining between such representatives and employees, unless the collective
bargaining agreement expressly provided for the inclusion of such Employees as
Eligible Employees under this Plan, (ii) except as provided in this Section
2.19, a nonresident alien who receives no earned income within the meaning of
Code Section 911(d)(2)) which is U.S. source income (within the meaning of
Code Section 861(a)(3)), and (iii) except as provided in Section 3.03, any
person who is not treated as an employee on the payroll of an Employer,
regardless of whether such person is considered a leased employee within the
meaning of Code Sections 414(n) and 414(o). Notwithstanding anything in the
Plan to the contrary, all employees of ClubCorp International Resource Company
shall be classified and treated as Eligible Employees regardless of whether
such Employees are nonresident aliens who receive no earned income (within the
meaning of Code Section 911(d)(2)) which is U.S. source income (within the
meaning of Code Section 861(a)(3))."
3. Existing Section 2.20 is deleted in its entirety, and the following is
substituted in its place:
"2.20 "Employee" means any person who is employed by one or more
Affiliated Companies, and whose remuneration from an Affiliated Company is
subject to FICA withholding; provided, however, that a person employed by
ClubCorp International Resource Company who is a nonresident alien who
receives no earned income (within the meaning of Code Section 911(d)(2)) which
is U.S. source income (within the meaning of Code Section 861(a)(3)) shall be
deemed to be an Employee regardless of whether such person's remuneration is
subject to FICA withholding. Any leased employee shall be considered an
"Employee" under the Plan to the extent required by Sections 414(n) or 414(o)
of the Code, but shall not be eligible to participate in the Plan unless and
until heactually becomes employed on the payroll of an Employer and otherwise
meets the eligibility criteria of Article III."
4. Existing Subsection 4.09(6)(c) is deleted in its entirety, and the
following is substituted in its place:
"(c) Eligible Employee" for purposes of this Section 4.09 means for or
during a Plan year each Employee who is eligible to become a Participant,
including those Employees who are eligible to but fail to file to the election
required by Section 3.04; provided, however, that those Employees of ClubCorp
International Resource Company who are nonresident aliens who receive no
earned income (within the meaning of Code Section 911(d)(2)) which is U.S.
source income (within the meaning of Code Section 861(a)(3)) shall not be
treated as Eligible Employees for purposes of this Section 4.09."
5. Existing Subsection 5.05(7) is deleted in its entirety, and the following
is substituted in its place:
"5.05(7) "Limitation Year Compensation" means a Participant's total
compensation for services rendered to an Employer during a Plan Year, as
reported on Form W-2 or other federal wage statement as taxable for federal
income tax purposes, except that for only those Employees of ClubCorp
International Resource Company who are nonresident aliens who receive no
earned income (within the meaning of Code Section 911(d)(2)) which is U.S.
source income (within the meaning of Code Section 861(a)(3), Limitation Year
Compensation shall mean (I) such Participant's wages, salaries, earned income
(only if an employee within the meaning of section 401(c)(1) of the Code)
which includes foreign earned income (as defined in Section 911(b) of the
Code) whether or not excludable from gross income under Code Section 911,
foreign earned income (as defined in Section 911(b) of the Code) whether or
not excludable from gross income under Code Section 911, fees for professional
services, and other amounts received from an Employer for personal services
actually rendered in the course of employment with an Employer as an Employee
to the extent that the amounts are includible in gross income (including, but
not limited to, commissions paid salesmen, overtime pay, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits and reimbursements or other expense
allowances under a nonaccountable plan, as described in Treasury Regulations
section 1.62-2(c)), but determined without regard to the exclusions found in
Code Sections 931 and 933, (II) amounts received by such Participant described
in Sections 104(a)(3), 105(a) and 105(h) of the Code, but only to the extent
that these amounts are includible in the gross income of the Employee, (III)
amounts paid or reimbursed by the Employer to such Participant for moving
expenses incurred by such Participant, but only to the extent that at the time
of payment it is reasonable to believe that these amounts are not deductible
by such Participant under Section 217 of the Code, (IV) the value of
nonqualified stock options granted to such Participant, but only to the extent
that the value of the option is includible in the gross income of such
Participant for the taxable year in which granted, and (V) the amount
includible in the gross income of such Participant upon making the election
described in Section 83(b) of the Code, but excluding the following:
(A) Employer contributions to a plan of deferred compensation to the
extent contributions are not included in gross income of the Participant for
the taxable year in which contributed, and any distributions from a plan of
deferred compensation whether or not includible in the gross income of the
Participant when distributed;
(B) Employer contributions made on behalf of the Participant to a
simplified employee pension described in section 408(k) of the Code;
(C) amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Participant becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(D) amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(E) amounts that receive special tax benefits, or contributions made by
the Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in section 403(b) of the Code
(whether or not the contributions are excludable from the gross income of the
Participant)."
IN WITNESS WHEREOF, this Amendment has been executed the day and year
first above written.
CLUB CORPORATION INTERNATIONAL
By: John Gray
FOURTH AMENDMENT TO THE
CLUBCORP STOCK INVESTMENT PLAN
Amendment made this 23rd day of July, 1997, by Club Corporation
International (the "Company").
W I T N E S S E T H:
- ----------------------------
WHEREAS, the Company maintains the ClubCorp Stock Investment Plan (the
"Plan"); and
WHEREAS, the Company amended and restated the Plan effective January 1,
1995 and subsequently amended the Plan to make certain technical qualification
changes in response to a request from the Internal Revenue Service; and
WHEREAS, the Company amended the Plan effective May 13, 1996 to recognize
the adoption of the Plan by ClubCorp International Resource Company
("Resource") and to permit nonresident aliens with no U.S. source earned
income who are employed by Resource to participate in the Plan effective May
13, 1996; and
WHEREAS, the Company now desires to amend the Plan to allow for
electronic administration and to make certain technical changes; and
WHEREAS, the Plan may be amended by the Company pursuant to the
provisions of Article XV of the Plan, and the Company desires to amend the
Plan:
NOW, THEREFORE, the Plan is amended as follows, effective as of September
1, 1996:
1. Existing Section 2.17 is deleted in its entirety, and the following is
substituted in its place:
"2.17 "Election Period" means two (2) enrollment periods, each
approximately one month in duration, to be held during the Plan Year as
determined annually and announced by the Plan Administration."
2. Existing Section 4.05(2) is amended to delete the word "written" from both
paragraphs thereof, wherever it may appear.
3. Existing Section 4.06(3)(b) is amended by adding the following paragraph
to the end of that Section:
"Notwithstanding any Plan provision to the contrary, in no event shall
Pre-Tax Matching Contributions remain allocated to a Highly Compensated
Employee's Account, and such amounts shall be treated as Forfeitures (in the
same manner as provided in Subsection ___), if the Pre-Tax Contributions
which were matched by such Pre-Tax Matching Contributions are refunded as
Excess Contributions under this Subsection 4.06(3)(b)."
4. Existing Section 4.07 is amended by adding the following paragraph as a
second paragraph at the end of that section:
"Notwithstanding any Plan provision to the contrary, in no event shall
Pre-Tax Matching Contributions remain allocated to a Highly Compensated
Employee's Account, and such amounts shall be treated as Forfeitures (in the
same manner as provided in Subsection ___), if the Pre-Tax Contributions
which were matched by such Pre-Tax Matching Contributions are refunded as
Excess Contributions under this Subsection 4.07."
5. Existing Section 4.10 is deleted in its entirety, and the following is
substituted in its place:
"4.10 General Withdrawals from After-Tax Contribution Account. Upon
---------------------------------------------------------
application by the Participant, in such form as prescribed by the Plan
Administrator, received by the Plan Administrator, a Participant may, in
accordance with Section 4.13, withdraw all or a portion of the value of such
Participant's After-Tax Contribution Account; provided, however, that (i)
a withdrawal of the entire amount of such account shall terminate such
Participant's right to make any After-Tax Contributions until the payday
coincident with or next following the first January 1 or July 1 which
commences twelve (12) months following such complete withdrawal and (ii) a
partial withdrawal from such account shall terminate such Participant's right
to make any After-Tax Contributions until the payday coincident with or next
following the first January 1 or July 1 which commences six (6) months
following such partial withdrawal."
6. The first sentence of existing Section 4.11(2) is deleted in its entirety,
and the following is substituted in its place:
"4.11(2) A Participant who has attained age 59-1/2, may withdraw all or
any portion of the balance of his previously unwithdrawn Pre-Tax Contributions
as of the Allocation Date coincident with or next following the date such
request for withdrawal, in such form as prescribed by the Plan Administrator,
is received by the Plan Administrator.
7. Existing Section 4.12(1) is amended to delete the word "written"
therefrom.
8. Existing Section 4.12(2) is amended to delete the word "written"
therefrom.
9. Existing Section 4.12(4) is deleted in its entirety, and the following is
substituted in its place:
"4.12(4) Application for withdrawal must be made in such form as
prescribed by the Plan Administrator, and must set out in detail the
circumstances establishing that the proposed withdrawal is for a Permitted
Purpose."
10. Existing Section 4.12(5) is deleted in its entirety, and the following is
substituted in its place:
"4.12(5) Before the Plan Administrator will permit a Participant to make
a hardship withdrawal pursuant to this Section, the Participant must submit a
representation, in such form as prescribed by the Plan Administrator, that his
financial need cannot be relieved: (i) through reimbursement or compensation
by insurance or otherwise, (ii) by reasonable liquidation of the Participant's
assets, to the extent such liquidation would not itself cause an immediate and
heavy financial need, (iii) by cessation of After-Tax Contributions and of
Pre-Tax Contributions under the Plan, (iv) by other distributions or
nontaxable (at the time of the loan) loans from plans maintained by the
Employer or by any other employer, or (v) by borrowing from commercial sources
on reasonable commercial terms."
11. Existing Section 4.12(8) is amended to delete the word "written"
therefrom.
12. Existing Section 4.12(9) is amended to delete the word "written"
therefrom.
13. Existing Section 5.02(4) is deleted in its entirety, and the following is
substituted in its place:
"5.02(4) If the amount allocated to any Participant's Pre-Tax
Contribution Account and/or After-Tax Contribution Account (adjusted for
earnings, losses, appreciation or depreciation) are refunded in accordance
with Subsection 5.02(2), the amount of such refund shall be disregarded for
purposes of the $7,000 limitation set forth in Subsection 4.05(1)(b) and
Sections 4.06 and 4.09."
14. The first sentence of existing Section 10.04(6) is deleted in its
entirety and the following is substituted in its place:
"10.04(6) All amounts forfeited as provided in this Section 10.05 and
Sections 4.06, 4.07 are herein referred to as Forfeitures.'"
15. A new Subsection, Subsection 10.04(7) is added to the end of Section
10.04 to provide as follows:
"In the case of any participant who receives a refund of Excess
Contributions pursuant to Section 4.05(3)(b) for the Plan Year, such
Participant shall forfeit for such Plan Year all Matching Contributions
(whether or not vested pursuant to Section 10.01) which relate to and were
made on account of amounts refunded under Section 4.05(3)(b)."
14. Existing Section 11.02(3) is deleted in its entirety, and the following
is substituted in its place:
"11.02(3) Notwithstanding the provisions of Subsection 11.02(1), and
subject to Section 11.03, if a Participant has a Termination of Employment or
retires due to Disability and his vested Account at such time exceeds
Three Thousand Five Hundred Dollars ($3,500), the amounts owing to such
Participant shall be distributed in a single lump sum as soon as
administratively possible after such Participant attains age sixty-five (65)
or dies, unless such Participant has delivered to the Plan Administrator his
consent, in such form as prescribed by the Plan Administrator, to a
distribution at an earlier time."
15. Existing Section 11.05 is deleted in its entirety, and the following is
substituted in its place:
"11.05 Notwithstanding any other provision of the Plan to the
contrary, immediate distribution of benefits payable to an Alternate Payee
pursuant to a Qualified Domestic Relations Order shall be permitted even
though the Participant whose benefits have been assigned to the Alternate
Payee would not be entitled to receive a distribution at such time, if all of
the following requirements are met: (i) the Participant's Account is one
hundred percent (100%) vested, (ii) the entire amount payable to the Alternate
Payee does not exceed Three Thousand Five Hundred Dollars ($3,500) or the
Alternate Payee has requested immediate distribution in such form as
prescribed by the Plan Administrator, (iii) allocation pursuant to Section
6.04 of all amounts required to be paid to the Alternate Payee has been
completed, (iv) the Qualified Domestic Relations Order requires or permits
immediate distribution, and (v) the conditions of Subsection 11.01(1) as to
form of payment are met."
16. Existing Section 12.01(3) shall be deleted in its entirety, and the
following substituted in its place:
"12.01(3) Any election, notice, or information which according to the
terms of the Plan or the rules of the Plan Administrator must be filed with
the Plan Administrator, shall be deemed so filed if addressed and either
delivered in person, delivered by electronic transmission, or mailed, postage
fully prepaid, to the Plan Administrator. Whenever a provision herein
requires that a Participant (or the Participant's Beneficiary) give notice to
the Plan Administrator or make an election within a specified number of days
or by a certain date, and the last day of such period, or such date, falls on
a Saturday, Sunday or Employer holiday, the Participant (or the Participant's
Beneficiary) will be deemed in compliance with such provision if notice is
delivered in person to the Plan Administrator, delivered by electronic
transmission, or is mailed, properly addressed, postage prepaid, and
postmarked on or before the business day next following such Saturday, Sunday
or Employer holiday. The Plan Administrator may, in its sole discretion,
modify or waive any specified notice requirement; provided, however, that such
modification or waiver must be administratively feasible, must be in the
bestinterest of the Participant, and must be made on the basis of the rules of
the Plan Administrator which are applied uniformly to all Participants.
17. Existing Section 12.05 is deleted in its entirety, and the following is
substituted in its place:
12.05 Address of Mailing Benefit
--------------------------------------
12.05(1) Each Participant and each other person entitled to benefits
hereunder shall file with the Plan Administrator from time to time in such
form as prescribed by the Plan Administrator such Participant's post office
address and each change of address. Any check representing payment hereunder
and any communication addressed to a Participant, an Employee or Beneficiary,
at such person's last address filed with the Plan Administrator, or if no such
address has been filed, then at such person's last address as indicated on the
records of an Employer, shall be deemed to have been delivered to such person
on the date on which such check or communication is deposited, postage
prepaid, in the United States mail."
IN WITNESS WHEREOF, this Amendment has been executed the day and year
first above written.
CLUB CORPORATION INTERNATIONAL
By: Kim S. Besse
Its:
FIFTH AMENDMENT TO THE
CLUBCORP STOCK INVESTMENT PLAN
Amendment made this 14th day of March, 1997, by Club Corporation
International (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Company maintains the ClubCorp Stock Investment Plan (the
"Plan"); and
WHEREAS, the Company amended and restated the Plan effective January 1,
1995 and subsequently amended the Plan to make certain technical qualification
changes in response to a request from the Internal Revenue Service; and
WHEREAS, the Company subsequently amended the Plan on several occasions
to make other changes desired by the Company; and
WHEREAS, the Company now desires to amend the Plan to allow for
trust-to-trust transfers in the event an Employer withdraws from the Plan, as
permitted by Section 14.03 of the Plan, because it is no longer affiliated
with the Company; and
WHEREAS, the Plan may be amended by the Company pursuant to the
provisions of Article XV of the Plan, and the Company desires to amend the
Plan:
NOW, THEREFORE, the Plan is amended as follows, effective as of March 14,
1997:
1. Existing Section 16.02 is amended to add a paragraph to the end
thereof:
"The Plan Administrator is empowered to direct the Trustee to transfer
assets and liabilities from the Plan relating to such participant accounts as
the Plan Administrator designates to another plan, such transfer must meet the
requirements of section 414 of the Code. Any trust-to-trust transfer under
this Section 16.02 shall only be made in cash."
IN WITNESS WHEREOF, this Amendment has been executed the day and year
first above written.
CLUB CORPORATION INTERNATIONAL
By: Kim S. Besse
Its: Vice President Human Rescources
SIXTH AMENDMENT TO THE
CLUBCORP STOCK INVESTMENT PLAN
Amendment made this 22nd day of April, 1997, by Club Corporation
International (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Company maintains the ClubCorp Stock Investment Plan,
effective January 1, 1995 (the "Plan"); and
WHEREAS, the Company now desires to amend the Plan to provide that
Matching Contributions may also be made in the form of cash; and
WHEREAS, the Plan may be amended by the Company pursuant to the
provisions of Article XV of the Plan, and the Company desires to amend the
Plan:
NOW, THEREFORE, the Plan is amended as follows, effective as of April 22,
1997:
1. Existing Section 4.01 is amended by deleting the fourth sentence in its
entirety and substituting the following in its place:
"All Matching Contributions shall be made in the form of cash or shares of
Company Stock."
IN WITNESS WHEREOF, this Amendment has been executed the day and year
first above written.
CLUB CORPORATION INTERNATIONAL
By: Terry A. Taylor
Its: Secretary
EXHIBIT 15.1
Club Corporation International
Dallas, Texas
Ladies and Gentlemen:
Re: Registration Statement Nos. 33-89818, 33-96568 and 333-08041
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated July 18, 1997 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
KPMG Peat Marwick LLP
Dallas, Texas
July 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-11-1997
<CASH> 122,874
<SECURITIES> 0
<RECEIVABLES> 83,814
<ALLOWANCES> 2,773
<INVENTORY> 14,975
<CURRENT-ASSETS> 225,052
<PP&E> 954,641
<DEPRECIATION> 285,081
<TOTAL-ASSETS> 1,037,457
<CURRENT-LIABILITIES> 190,643
<BONDS> 0
0
0
<COMMON> 902
<OTHER-SE> 150,905
<TOTAL-LIABILITY-AND-EQUITY> 1,037,457
<SALES> 102,859
<TOTAL-REVENUES> 346,887
<CGS> 90,722
<TOTAL-COSTS> 332,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,057
<INTEREST-EXPENSE> 13,373
<INCOME-PRETAX> 17,945
<INCOME-TAX> 1,048
<INCOME-CONTINUING> 16,897
<DISCONTINUED> 25,146
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,043
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
