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 15, 1999
Commission file numbers 33-89818, 33-96568, 333-08041 and 333-57107
CLUBCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2778488
(State or other jurisdiction 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 July 13,
1999 was 85,118,543.
<PAGE>
CLUBCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Independent Accountants' Review Report
Consolidated Balance Sheet
Consolidated Statement of Operations3
Consolidated Statement of Stockholders'
Equity and Comprehensive Income
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
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
The Board of Directors
ClubCorp, Inc.
We have reviewed the consolidated balance sheet of ClubCorp, Inc. and
subsidiaries (ClubCorp) as of June 15, 1999 and June 17, 1998 and the related
consolidated statements of operations for the twelve weeks and twenty four weeks
ended June 15, 1999 and June 17, 1998 and stockholders' equity and comprehensive
income and cash flows for the twenty four weeks ended June 15, 1999 and June 17,
1998. These consolidated financial statements are the responsibility of
ClubCorp's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with 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 29, 1998
and the related consolidated statements of operations, stockholders' equity and
comprehensive income and cash flows for the year then ended (not presented
herein); and in our report dated February 26, 1999 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 29, 1998 is fairly presented, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
KPMG LLP
Dallas, Texas
July 23, 1999
<PAGE>
CLUBCORP, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 17, December 29, JUNE 15,
Assets 1998 1998 1999
------ ----------- -------------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 81,863 $ 72,423 $ 53,482
Membership and other receivables, net 80,677 84,915 100,093
Inventories 17,609 18,082 28,997
Other assets 13,032 17,587 17,435
----------- -------------- -----------
Total current assets 193,181 193,007 200,007
Property and equipment, net 706,213 751,070 1,034,685
Other assets 153,492 166,081 204,159
----------- -------------- -----------
$1,052,886 $ 1,110,158 $1,438,851
=========== ============== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 50,193 $ 58,826 $ 64,729
Long-term debt - current portion 16,467 18,633 492,264
Other liabilities 98,113 97,127 127,684
----------- -------------- -----------
Total current liabilities 164,773 174,586 684,677
Long-term debt 240,794 255,917 61,470
Other liabilities 106,365 109,880 113,010
Membership deposits 88,328 95,460 97,193
Redemption value of common stock held by benefit plan 56,786 65,279 66,655
Stockholders' equity:
Common stock, $.01 par value, 250,000,000 shares
authorized, 90,219,408 issued, 84,975,103
outstanding at June 17, 1998, 84,629,809
outstanding at December 29, 1998 and 85,128,410
outstanding at June 15, 1999 902 902 902
Additional paid-in capital 10,987 11,205 15,943
Accumulated other comprehensive income (loss) (94) (119) 500
Retained earnings 427,069 445,770 443,795
Treasury stock (43,024) (48,722) (45,294)
----------- -------------- -----------
Total stockholders' equity 395,840 409,036 415,846
----------- -------------- -----------
$1,052,886 $ 1,110,158 $1,438,851
=========== ============== ===========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
CLUBCORP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended 24 Weeks Ended
---------------------- ----------------------
June 17, JUNE 15, June 17, JUNE 15,
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues $ 211,496 $ 253,638 $ 383,344 $ 435,109
Operating costs and expenses 164,816 209,545 318,015 372,324
Selling, general and administrative expenses 16,582 20,180 30,328 36,131
Impairment loss from assets to be held and used - 13,483 - 13,483
---------- ---------- ---------- ----------
Operating income 30,098 10,430 35,001 13,171
Gain (loss) on divestitures and sales of assets (2,408) 2,650 (2,062) 2,939
Interest and investment income 1,837 1,130 3,986 3,062
Interest expense (7,376) (9,997) (14,871) (17,150)
---------- ---------- ---------- ----------
Income from operations before income tax
provision, minority interest and extraordinary item 22,151 4,213 22,054 2,022
Income tax provision (8,728) (2,430) (9,022) (2,621)
Minority interest (443) - (714) -
---------- ---------- ---------- ----------
Income (loss) from operations before extraordinary item 12,980 1,783 12,318 (599)
Extraordinary item - loss on extinguishment of debt,
net of income taxes of $634 (1,176) - (1,176) -
---------- ---------- ---------- ----------
Net income (loss) $ 11,804 $ 1,783 $ 11,142 $ (599)
========== ========== ========== ==========
Basic and diluted earnings per share:
Income (loss) from operations before extraordinary item $ .15 $ .02 $ .14 $ (.01)
Extraordinary item - loss on extinguishment of debt (.01) - (.01) -
---------- ---------- ---------- ----------
Net income (loss) $ .14 $ .02 $ .13 $ (.01)
========== ========== ========== ==========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
CLUBCORP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Twenty Four Weeks Ended June 17, 1998 and June 15, 1999
(Dollars in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Common stock (250,000,000 shares
authorized, par value $.01 per share)
--------------------------------------------
Accumulated
Treasury Additional Other
Shares Stock Shares Par Paid-in Comprehensive
Issued Shares Outstanding Value Capital Income (Loss)
---------- ---------- ------------ ------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 90,219,408 5,215,569 85,003,839 $ 902 $ 10,607 $ 260
Purchase of treasury stock - 90,885 (90,885) - - -
Stock issued in connection with bonus plans - (62,149) 62,149 - 380 -
Comprehensive income:
Net income - - - - - -
Foreign currency translation adjustment - - - - - (354)
Total comprehensive income
Change in redemption value of common
stock held by benefit plan - - - - - -
---------- ---------- ------------ ------ ----------- ---------------
Balances at June 17, 1998 90,219,408 5,244,305 84,975,103 $ 902 $ 10,987 $ (94)
========== ========== ============ ====== =========== ===============
Balances at December 29, 1998 90,219,408 5,589,599 84,629,809 $ 902 $ 11,205 $ (119)
PURCHASE OF TREASURY STOCK - 113,932 (113,932) - - -
STOCK ISSUED IN CONNECTION WITH:
ACQUISITION - (597,533) 597,533 - 4,717 -
EXERCISE OF STOCK OPTIONS - (15,000) 15,000 - 21 -
COMPREHENSIVE INCOME:
NET LOSS - - - - - -
FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - - - - 619
TOTAL COMPREHENSIVE INCOME
CHANGE IN REDEMPTION VALUE OF COMMON
STOCK HELD BY BENEFIT PLAN - - - - - -
---------- ---------- ------------ ------ ----------- ---------------
BALANCES AT JUNE 15, 1999 90,219,408 5,090,998 85,128,410 $ 902 $ 15,943 $ 500
========== ========== ============ ====== =========== ===============
Total
Retained Treasury Stockholders'
Earnings Stock Equity
---------- ---------- ---------------
<S> <C> <C> <C>
Balances at December 31, 1997 $ 419,061 $ (42,215) $ 388,615
Purchase of treasury stock - (1,312) (1,312)
Stock issued in connection with bonus plans - 503 883
Comprehensive income:
Net income 11,142 - 11,142
Foreign currency translation adjustment - - (354)
---------------
Total comprehensive income 10,788
Change in redemption value of common
stock held by benefit plan (3,134) - (3,134)
---------- ---------- ---------------
Balances at June 17, 1998 $ 427,069 $ (43,024) $ 395,840
========== ========== ===============
Balances at December 29, 1998 $ 445,770 $ (48,722) $ 409,036
PURCHASE OF TREASURY STOCK - (1,905) (1,905)
STOCK ISSUED IN CONNECTION WITH:
ACQUISITION - 5,202 9,919
EXERCISE OF STOCK OPTIONS - 131 152
COMPREHENSIVE INCOME:
NET LOSS (599) - (599)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - 619
---------------
TOTAL COMPREHENSIVE INCOME 20
CHANGE IN REDEMPTION VALUE OF COMMON
STOCK HELD BY BENEFIT PLAN (1,376) - (1,376)
---------- ---------- ---------------
BALANCES AT JUNE 15, 1999 $ 443,795 $ (45,294) $ 415,846
========== ========== ===============
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
CLUBCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
24 Weeks Ended
----------------------
June 17, JUNE 15,
1998 1999
---------- ----------
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ 11,142 $ (599)
Adjustments to reconcile net income (loss) to cash flows provided from operations:
Depreciation and amortization 24,367 29,897
Impairment loss from assets to be held and used - 13,483
(Gain) loss on divestitures and sales of assets 2,062 (2,939)
Minority interest in net income of subsidiaries 714 -
Extraordinary item - loss on extinguishment of debt 1,810 -
Equity in (earnings) losses of affiliates 188 (1,046)
Amortization of discount on membership deposits 3,175 3,586
Deferred income taxes 7,310 1,607
Decrease in real estate held for sale 4,590 2,465
Increase in membership and other receivables, net (9,527) (17,497)
Increase (decrease) in accounts payable and accrued liabilities (3,659) 6,283
Net change in deferred membership revenues 9,963 9,776
Other 1,600 6,314
---------- ----------
Cash flows provided from operations 53,735 51,330
Cash flows from investing activities:
Additions to property and equipment (35,907) (60,658)
Development of new facilities (5,708) (7,680)
Development of real estate ventures (6,919) (2,804)
Acquisition of facilities (9,038) (226,986)
Investment in affiliates (15,687) (35,886)
Proceeds from disposition of subsidiaries and assets, net 4,697 2,921
Other 484 343
---------- ----------
Cash flows used by investing activities (68,078) (330,750)
Cash flows from financing activities:
Borrowings of long-term debt 221,535 273,117
Repayments of long-term debt (222,469) (14,122)
Membership deposits received, net 1,210 3,237
Treasury stock transactions, net (1,312) (1,753)
Dividend paid to minority shareholder of financial services segment (4,177) -
---------- ----------
Cash flows provided from (used by) financing activities (5,213) 260,479
---------- ----------
Total net cash flows (19,556) (18,941)
---------- ----------
Cash and cash equivalents at beginning of period 101,419 72,423
---------- ----------
Cash and cash equivalents at end of period $ 81,863 $ 53,482
========== ==========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
CLUBCORP, INC.
Condensed Notes to Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Consolidation
- -------------
The Consolidated Financial Statements include the accounts of ClubCorp, Inc.
(Parent) and its subsidiaries (collectively ClubCorp). All material
intercompany balances and transactions have been eliminated.
Interim presentation
- --------------------
The accompanying Consolidated Financial Statements have been prepared by
ClubCorp and are unaudited. Certain information and footnote disclosures
normally included in financial statements presented in accordance with 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 Consolidated Financial Statements and
notes thereto of ClubCorp for the year ended December 29, 1998 which were a part
of ClubCorp's Form 10-K.
In the opinion of ClubCorp management, the accompanying unaudited Consolidated
Financial Statements reflect all adjustments necessary (consisting of normal
recurring accruals) to present fairly the consolidated financial position of
ClubCorp as of June 17, 1998 and June 15, 1999 and the consolidated results of
operations and cash flows for the twelve weeks and twenty four weeks ended June
17, 1998 and June 15, 1999, respectively. Interim results are not necessarily
indicative of fiscal year performance because of the impact of seasonal and
short-term variations and other factors such as timing of acquisitions and
dispositions of facilities. Operations for the first three quarters consist of
12 weeks each and the fourth quarter consists of 16 weeks.
Impairment of long-lived assets
- -------------------------------
Long-lived assets used by an entity are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.
As a result of current and historical operating losses, ClubCorp evaluated the
recoverability of the long-lived assets at a resort and recorded an impairment
loss for the 12 weeks ended June 15, 1999. ClubCorp assessed the recoverability
of these long-lived assets by determining whether the fixed asset balance could
be recovered over its remaining life through estimated future cash flows. Fair
value, for purposes of calculating impairment, was measured based on discounted
estimated future cash flows using a risk-adjusted discount rate. Impaired
assets identified were property and equipment including land improvements and
buildings.
Earnings per share
- ------------------
Earnings per share for the twelve weeks ended June 17, 1998 and June 15, 1999
are computed using the weighted average number of shares outstanding of
85,005,398 and 85,137,904 for basic and 86,100,933 and 86,503,474 for diluted,
respectively. For the twenty four weeks ended June 17, 1998 and June 15, 1999,
earnings per share are computed using the weighted average number of shares
outstanding of 85,035,693 and 85,190,123 for basic and 86,461,292 and 86,632,856
for diluted, respectively. The weighted average shares outstanding used in the
calculation of diluted earnings per share includes the effect of options to
purchase common stock.
Comprehensive income
- --------------------
Total other comprehensive income consisted of foreign currency translation
adjustments of $(224,000) and $960,000 for the twelve weeks ended June 17, 1998
and June 15, 1999 and $(354,000) and $619,000 for the twenty four weeks ended
June 17, 1998 and June 15, 1999, respectively. Total comprehensive income was
$11,580,000 and $2,743,000 for the twelve weeks ended June 17, 1998 and June 15,
1999 and $10,788,000 and $20,000 for the twenty four weeks ended June 17, 1998
and June 15, 1999, respectively.
Recent pronouncements
- ---------------------
Effective fiscal year 1999, ClubCorp implemented the American Institute of
Certified Public Accountants Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities". SOP 98-5 requires that the costs of start-up
activities, including organizational costs, be expensed as incurred. Due to the
nature of the operations, the effect of the implementation of SOP 98-5 did not
have a significant impact on ClubCorp's Consolidated Statement of Operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". It requires
that all derivatives be recognized as either assets or liabilities on the
balance sheet and such instruments be measured at their fair value. The
Statement is effective for all quarters of years beginning after June 15, 2000.
Based on ClubCorp's current operations, the effect of implementation of this new
statement is not expected to have a significant effect on ClubCorp's balance
sheet or statement of operations. SFAS 133 will be reflected in ClubCorp's
first quarter 2001 Consolidated Financial Statements.
Reclassifications
- -----------------
Certain amounts previously reported have been reclassified to conform with the
current period presentation.
NOTE 2. NONCOMPLIANCE OF DEBT COVENANT
- ---------------------------------------
The $300,000,000 and $200,000,000 credit facilities each contain an identical
covenant that fixes a maximum leverage ratio allowable at the end of each
quarter based on a debt to cash flow measure as defined in the agreements. At
June 15, 1999, ClubCorp exceeded the maximum leverage ratio allowable by this
covenant. The lenders under each credit facility have waived compliance with
this covenant for the 12 weeks ended June 15, 1999. However, because ClubCorp's
management does not believe it is probable that they will be in compliance with
this covenant at the end of the next quarter, all $455,900,000 of the debt
outstanding under these facilities is classified as current in the accompanying
Consolidated Balance Sheet. ClubCorp's noncompliance with this covenant is
attributable to increased discretionary spending, including capital expenditures
at existing facilities and acquisitions. ClubCorp is currently negotiating a
comprehensive restructuring of its bank financing arrangements with the lead
lenders under its existing credit agreements. ClubCorp expects that this
restructuring will permit increased leverage and provide increased borrowing
capacity. ClubCorp expects this restructuring to be complete in late September
1999.
NOTE 3. ACQUISITIONS
- ---------------------
ClubCorp's acquisitions in 1998 and 1999 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 six periods of 1998, ClubCorp purchased substantially all the
assets of one country club and one golf club.
During the first six periods of 1999, ClubCorp purchased substantially all the
assets of 25 golf facilities, including 22 from The Cobblestone Golf Group (Note
4). The 25 facilities include ten country clubs, 13 golf clubs and two public
golf courses.
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 17, JUNE 15,
1998 1999
--------- ----------
<S> <C> <C>
Operating revenues $ 420,832 $ 449,429
========= ==========
Net income (loss) $ 11,266 $ (2,530)
========= ==========
Diluted earnings per share $ .13 $ (.03)
========= ==========
</TABLE>
NOTE 4. SIGNIFICANT TRANSACTIONS
- ---------------------------------
On March 31, 1999, ClubCorp, along with American Golf Corporation ("AGC") and
National Golf Operating Partnership, L.P. ("NGP"), consummated the purchase of
Meditrust Golf Group, Inc., Meditrust Golf Group II, Inc. and the Cobblestone
Golf Companies, Inc., known collectively as The Cobblestone Golf Group, pursuant
to a stock purchase agreement, for a total purchase price of approximately
$391,000,000. ClubCorp and AGC completed the acquisition through a two member
LLC formed for the sole purpose of acquiring the properties. Upon the closing
of the purchase, substantially all of the assets and liabilities that were
acquired were divided between certain subsidiaries of ClubCorp and NGP and
transferred out of the LLC. ClubCorp purchased 22 golf facilities, including
two remaining in the LLC, for approximately $210,000,000. The acquisition was
financed principally with a new $200,000,000 credit agreement guaranteed by
certain subsidiaries of ClubCorp, Inc. The purchase price was allocated
substantially to property and equipment and working capital.
On April 7, 1999, ClubCorp through its participation in a rights offering by
ClubLink Corporation of Ontario, Canada (ClubLink), increased its equity
investment in ClubLink to approximately 24.99% of ClubLink's outstanding common
stock. ClubCorp invested approximately $10,300,000 in the ClubLink rights
offering.
NOTE 5. SEGMENT REPORTING
- --------------------------
ClubCorp operations are organized into three principal business segments
according to the type of facility or service provided: Country club and golf
facilities, Business and sports clubs (formerly City Clubs) and Resorts.
Financial information for the segments is as follows (dollars in thousands):
<TABLE>
<CAPTION>
12 Weeks Ended 24 Weeks Ended
------------------------ ------------------------
June 17, JUNE 15, June 17, JUNE 15,
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues:
Country club and golf facilities $ 95,986 $ 115,537 $ 169,233 $ 197,892
Business and sports clubs 60,161 60,395 117,450 118,836
Resorts 45,743 62,680 73,252 95,908
----------- ----------- ----------- -----------
Total operating revenues for reportable segments 201,890 238,612 359,935 412,636
Other operations 5,611 11,002 13,306 14,305
Corporate services and eliminations 3,995 4,024 10,103 8,168
----------- ----------- ----------- -----------
Consolidated operating revenues 211,496 253,638 383,344 435,109
=========== =========== =========== ===========
Operating income:
Country club and golf facilities 19,173 17,937 27,515 29,905
Business and sports clubs 8,307 4,010 10,691 7,176
Resorts 9,059 (1,941) 5,152 (4,808)
----------- ----------- ----------- -----------
Total operating income for reportable segments 36,539 20,006 43,358 32,273
Other operations (618) 1,195 1,101 (38)
Corporate services and eliminations (5,823) (10,771) (9,458) (19,064)
----------- ----------- ----------- -----------
Consolidated operating income $ 30,098 $ 10,430 $ 35,001 $ 13,171
=========== =========== =========== ===========
Total assets:
Country club and golf facilities 653,030 965,215 653,030 965,215
Business and sports clubs 187,169 194,394 187,169 194,394
Resorts 166,472 224,378 166,472 224,378
----------- ----------- ----------- -----------
Total assets for reportable segments 1,006,671 1,383,987 1,006,671 1,383,987
Other operations 108,050 109,351 108,050 109,351
Corporate services and eliminations (61,835) (54,487) (61,835) (54,487)
----------- ----------- ----------- -----------
Consolidated total assets $1,052,886 $1,438,851 $1,052,886 $1,438,851
=========== =========== =========== ===========
</TABLE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
- --------------------------------------
ClubCorp is subject to certain pending or threatened litigation and other
claims. Management, after review and consultation with legal counsel, believes
ClubCorp has meritorious defenses to these matters and that any potential
liability from these matters would not reasonably be expected to materially
affect ClubCorp's Consolidated Financial Statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
ClubCorp, Inc. ("ClubCorp" or the "Company") is a holding company
incorporated under the laws of the State of Delaware that, through its
subsidiaries, owns, operates and/or manages country clubs, golf clubs, public
golf courses, business clubs, sports clubs, resorts, and certain related real
estate, through sole ownership, partial ownership (including joint venture
interests) and management agreements. The Company's primary sources of revenue
include membership dues, fees and deposits, food and beverage sales, revenues
from golf operations and lodging facilities. The Company also receives
management fees with respect to facilities that it manages for third parties.
The earliest predecessor corporation of ClubCorp was organized in 1957
under the name Country Clubs, Inc. All historical references herein to ClubCorp
include Country Clubs, Inc. and its successor corporations. For purposes of this
document, unless the context indicates otherwise, references to the "Company"
include ClubCorp and its subsidiaries. However, each of ClubCorp and its
subsidiaries is careful to maintain its separate legal existence, and general
references to the Company should not be interpreted to reduce in any way the
legal distinctions among the subsidiaries or among ClubCorp and its
subsidiaries.
The following discussion of the Company's financial condition and results
of operations for the 12 and 24 weeks ended June 17, 1998 and June 15, 1999
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 29, 1998, as filed with the Securities and Exchange
Commission.
RECENT DEVELOPMENTS
On March 31, 1999, ClubCorp, along with American Golf Corporation ("AGC")
and National Golf Partnership, L.P. ("NGP"), purchased Meditrust Golf Group,
Inc., Meditrust Golf Group II, Inc. and The Cobblestone Golf Companies, Inc.,
collectively known as the Cobblestone Golf Group, for an aggregate of $391.0
million. ClubCorp and AGC completed the acquisition through a two member LLC
formed for the sole purpose of acquiring the properties. Upon the closing of
the purchase, substantially all of the assets and liabilities that were acquired
by the special purpose LLC were transferred out of the special purpose LLC and
divided between subsidiaries of ClubCorp and NGP. Remaining in the LLC are two
facilities to be acquired by ClubCorp and one facility to be acquired by NGP.
These facilities are expected to be transferred out of the LLC upon resolution
of certain tax and legal issues. As a result of these transactions, ClubCorp
acquired 22 golf facilities, including the two remaining in the LLC, located in
Texas, Georgia, Florida, California and North Carolina, referred to as "the
Cobblestone properties", for approximately $210.0 million. ClubCorp financed
this acquisition with a new $200.0 million five-year credit agreement that is
guaranteed by certain of its subsidiaries.
On April 7, 1999, ClubCorp through its participation in a planned rights
offering by ClubLink Corporation of Ontario, Canada, known as "ClubLink",
increased its equity investment in ClubLink stock to approximately 24.99% of
ClubLink's outstanding common stock. ClubCorp invested approximately $10.3
million in the ClubLink rights offering.
<PAGE>
RESULTS OF OPERATIONS
12 WEEKS ENDED JUNE 17, 1998 COMPARED TO 12 WEEKS ENDED JUNE 15, 1999
Consolidated Operations
Operating revenues increased 19.9% to $253.6 million for the 12 weeks ended
June 15, 1999 from $211.5 million for the 12 weeks ended June 17, 1998. The
increase is due primarily to the acquisition of the Cobblestone properties,
increased revenues at Pinehurst related to the hosting of the 1999 United States
Golf Association Open Championship, which is commonly referred to as the "1999
U.S. Open", which began the last two days of the period, increased membership
revenue and increased golf operations revenues. The golf operations revenue
increase is primarily attributable to merchandise sales from pro shops the
Company purchased during 1998 at mature facilities. 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 12.3%
to $216.5 million for the 12 weeks ended June 15, 1999 from $192.8 million for
the 12 weeks ended June 17, 1998.
Operating costs and expenses, consisting of direct operating costs,
facility rentals, maintenance, and depreciation and amortization, increased
27.1%, to $209.5 million for the 12 weeks ended June 15, 1999 from $164.8
million for the 12 weeks ended June 17, 1998. This increase is principally due
to the addition of the operating costs and expenses of the Cobblestone
properties, costs associated with preparing and producing the 1999 U.S. Open,
and an increase in operating costs at mature country clubs and golf facilities
and resorts related to the increases in revenues at these facilities.
Selling, general and administrative expenses increased 21.7% to $20.2
million for the 12 weeks ended June 15, 1999 from $16.6 million for the 12 weeks
ended June 17, 1998 primarily due to increases in expenses for information
systems staffing, the company-wide upgrade of technology, and other
administrative costs.
Income (loss) from operations before extraordinary item for the 12 weeks
ended June 15, 1999 decreased to $1.8 million from $13.0 million due to the
recognition of a $13.5 million impairment loss, before tax effect, on long-lived
assets. Without the effect of this impairment loss, income (loss) from
operations before extraordinary item would have decreased to $10.5 million for
the 12 weeks ended June 15, 1999 due to increased operating costs and expenses
and interest expense. This increase in expenses is partially offset by a gain
from the divestiture of properties for the 12 weeks ended June 15, 1999. The
increase in interest expense of $2.6 million for the 12 weeks ended June 15,
1999 is due to the increase in outstanding debt, primarily the new $200.0
million credit facility, offset by a lower interest rate on the $200.0 million
and $300.0 million credit facilities than was applicable on long-term borrowings
during the same period in 1998.
SEGMENT AND OTHER INFORMATION - 12 WEEKS
Resorts
The following table presents certain summary financial data and other
operating data for the Company's resort segment for the 12 week periods
ended June 17, 1998 and June 15, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Mature Resorts Total Resorts
------------------ ------------------
1998 1999 1998 1999
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Number of facilities 5 5 6 5
Operating revenues $44,068 $ 62,680 $45,743 $ 62,680
Operating costs and expenses 34,257 51,138 36,684 51,138
Impairment loss from assets
to be held and used - 13,483 - 13,483
------- --------- ------- ---------
Segment operating income (loss) $ 9,811 $ (1,941) $ 9,059 $ (1,941)
======= ========= ======= =========
</TABLE>
Operating revenues from total resorts increased 37.0% primarily due to the
increased revenues from Pinehurst which are attributable to the higher occupancy
and improved pricing prior to and during the hosting of the 1999 U.S. Open,
which began the last two days of the quarter.
Included in 1999 mature resorts' segment operating income (loss) is the
impairment of long-lived assets at Daufuskie Island Club and Resort, referred to
as "Daufuskie". In 1996, ClubCorp purchased Daufuskie for assumption of its
liabilities of $4.5 million and has invested an additional $13.4 million in
capital expenditures as of June 15, 1999. Daufuskie had operating losses of
approximately $1.1 million and $1.3 million for the 12 weeks ended June 17, 1998
and June 15, 1999, respectively. ClubCorp assessed the recoverability of the
long-lived assets by determining whether they could be recovered over their
remaining life through estimated future cash flows. Fair value, for purposes of
calculating any impairment, was measured based on discounted estimated future
cash flows using a risk-adjusted discount rate. An impairment loss of $13.5
million was recognized for the 12 weeks ended June 15, 1999 related to these
long-lived assets. These losses are reported separately as a component of
operating income in the Company's Consolidated Financial Statements. If events
or circumstances change in the future, additional impairment losses could be
recognized.
Country Club and Golf Facilities
The following table presents certain summary financial data and other
operating data for the Company's country club and golf facility segment for the
12 week periods ended June 17, 1998 and June 15, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Mature Total
Country Club Country Club
and Golf and Golf
Facilities Facilities
-------------------- ---------------------
1998 1999 1998 1999
----------- ------- ----------- --------
<S> <C> <C> <C> <C>
Number of facilities 95 95 110 126
Operating revenues $ 91,593 $96,492 $ 95,986 $115,537
Operating costs and expenses 72,253 78,700 76,813 97,600
----------- ------- ----------- --------
Segment operating income $ 19,340 $17,792 $ 19,173 $ 17,937
=========== ======= =========== ========
</TABLE>
Operating revenues from total country club and golf facilities increased
20.4% due primarily to the addition of the Cobblestone properties and an
increase in revenues at mature facilities. Operating revenues from mature
country club and golf facilities increased 5.4% for the 12 weeks ended June 15,
1999 from the 12 weeks ended June 17, 1998 due to increases in golf operations
revenue and membership revenue. The golf operations revenue increase is
primarily attributable to merchandise sales from pro shops the Company purchased
during 1998 at mature properties. Operating costs and expenses from total
country club and golf facilities increased 27.1% due primarily to the addition
of the operating costs and expenses of the Cobblestone properties and increased
operating costs related to increased revenues at mature properties.
Business and Sports Clubs (formerly City Clubs)
The following table presents certain summary financial data and other
operating data for the Company's business and sports club segment for the 12
week periods ended June 17, 1998 and June 15, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Mature Business Total Business
and Sports Clubs and Sports Clubs
---------------------- ----------------------
1998 1999 1998 1999
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Number of facilities 87 87 94 92
Operating revenues $ 57,140 $ 57,370 $ 60,161 $ 60,395
Operating costs and expenses 49,819 53,109 51,854 56,385
----------- --------- ----------- ---------
Segment operating income $ 7,321 $ 4,261 $ 8,307 $ 4,010
=========== ========= =========== =========
</TABLE>
Operating income from mature business and sports clubs decreased from $7.3
million from June 17, 1998 to $4.3 million at June 15, 1999, primarily due to a
nonrecurring adjustment of $4.0 million during the 12 weeks ended June 17, 1998.
Excluding the effect of this item, operating income from mature business and
sports clubs would have increased $0.9 million from the 12 weeks ended June 17,
1998 or 28.3% for the 12 weeks ended June 15, 1999 due to increased membership
revenue.
Other Operations
Realty operating revenues increased $4.2 million from $5.5 million for the
12 weeks of 1998 to $9.6 million for the 12 weeks of 1999, due primarily to the
sale of land held for resale in Colorado during the 12 weeks ended June 15,
1999. The increase in sales resulted in an approximately $1.7 million increase
in operating income for the 12 weeks ended June 15, 1999.
24 WEEKS ENDED JUNE 17, 1998 COMPARED TO 24 WEEKS ENDED JUNE 15, 1999
Consolidated Operations
Operating revenues increased 13.5% to $435.1 million for the 24 weeks ended
June 15, 1999 from $383.3 million for the 24 weeks ended June 17, 1998 due
primarily to the acquisition of the Cobblestone properties, increased revenues
at Pinehurst related to the hosting of the 1999 U.S. Open, increased membership
revenue and increased golf operations revenues. The golf operations revenue
increase is primarily attributable to merchandise sales from pro shops the
Company purchased during 1998. 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 11.0% to $386.6 million for
the 24 weeks ended June 15, 1999 from $348.4 million for the 24 weeks ended June
17, 1998.
Operating costs and expenses, consisting of direct operating costs,
facility rentals, maintenance, and depreciation and amortization, increased
17.1%, to $372.3 million for the 24 weeks ended June 15, 1999 from $318.0
million for the 24 weeks ended June 17, 1998. This increase is primarily due to
the addition of the operating costs and expenses from the Cobblestone
properties, costs incurred to prepare and produce the 1999 U. S. Open, and
increased operating costs at mature country clubs and golf facilities and
resorts related to the increases in revenues at thes facilities.
Selling, general and administrative expenses increased 19.1% to $36.1
million for the 24 weeks ended June 15, 1999 from $30.3 million for the 24 weeks
ended June 17, 1998 primarily due to increases in expenses for information
systems staffing, the company-wide upgrade of technology, and other
administrative costs.
Income (loss) from operations before extraordinary item for the 24 weeks
ended June 15, 1999 decreased to ($0.6) million from $12.3 million due to the
recognition of a $13.5 million impairment loss, before tax effect, on long-lived
assets. Without the effect of this impairment loss, income (loss) from
operations before extraordinary item would have decreased to $8.1 million for
the 24 weeks ended June 15, 1999 due to increased operating costs and expenses
and interest expense. This increase in expenses is partially offset by a gain
from the divestiture of properties for the 24 weeks ended June 15, 1999. The
increase in interest expense of $2.3 million for the 24 weeks ended June 15,
1999 is due to the increase in outstanding debt, primarily the new $200.0
million credit facility, offset by a lower interest rate on the $200.0 million
and $300.0 million credit facilities than was applicable on long-term borrowings
during the same period in 1998.
SEGMENT AND OTHER INFORMATION - 24 WEEKS
Resorts
The following table presents certain summary financial data and other
operating data for the Company's resort segment for the 24 week periods ended
June 17, 1998 and June 15, 1999 (dollar in thousands):
<TABLE>
<CAPTION>
Mature Resorts Total Resorts
-------------------- ------------------
1998 1999 1998 1999
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
Number of facilities 5 5 6 5
Operating revenues $ 71,480 $ 95,908 $73,252 $ 95,908
Operating costs and expenses 65,700 87,233 68,100 87,233
Impairment loss from assets
to be held and used - 13,483 - 13,483
--------- --------- ------- ---------
Segment operating income (loss) $ 5,780 $ (4,808) $ 5,152 $ (4,808)
========= ========= ======= =========
Lodging data (4 resorts) (1):
Room nights available 215,374 224,680
Occupancy rate 43.7% 49.3%
Average daily room rate per occupied room $ 161 $ 175
Average daily revenue per occupied room $ 725 $ 742
</TABLE>
(1) Lodging data is comprised of data from Pinehurst, The Homestead, Daufuskie
and Barton Creek
Operating revenues from total resorts increased 30.9% primarily due to the
increased revenues from Pinehurst which are attributable to higher occupancy and
improved pricing prior to and during the hosting of the 1999 U.S. Open, which
began the last two days of the quarter, an increase of 5.6 percentage points in
the occupancy rate, primarily at Homestead and Pinehurst, and an 8.7% increase
in the average daily room rate per occupied room.
Included in 1999 mature resorts' segment operating income (loss) is an
impairment of long-lived assets at Daufuskie. In 1996, ClubCorp purchased
Daufuskie for assumption of its liabilities of $4.5 million and has invested an
additional $13.4 million in capital expenditures as of June 15, 1999. Daufuskie
had operating losses of approximately $2.6 million and $3.1 million for the 24
weeks ended June 17, 1998 and June 15, 1999, respectively. ClubCorp assessed
the recoverability of the long-lived assets by determining whether they could be
recovered over their remaining life through estimated future cash flows. Fair
value, for purposes of calculating any impairment, was measured based on
discounted estimated future cash flows using a risk-adjusted discount rate. An
impairment loss of $13.5 million was recognized for the 24 weeks ended June 15,
1999 related to these long-lived assets. These losses are reported separately
as a component of operating income in the Company's Consolidated Financial
Statements. If events or circumstances change in the future, additional
impairment losses could be recognized.
Country Club and Golf Facilities
The following table presents certain summary financial data and other
operating data for the Company's country club and golf facility segment for the
24 week periods ended June 17, 1998 and June 15, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Mature Total
Country Club Country Club
and Golf and Golf
Facilities Facilities
--------------------- ---------------------
1998 1999 1998 1999
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Number of facilities 95 95 110 126
Operating revenues $ 164,846 $176,769 $ 169,233 $197,892
Operating costs and expenses 136,674 147,431 141,718 167,987
----------- -------- ----------- --------
Segment operating income $ 28,172 $ 29,338 $ 27,515 $ 29,905
=========== ======== =========== ========
</TABLE>
Operating revenues from total country club and golf facilities increased
16.9% due primarily to the addition of the Cobblestone properties and an
increase in revenues at mature facilities. Operating revenues from mature
country club and golf facilities increased 7.2% for the 24 weeks ended June 15,
1999 from the 24 weeks ended June 17, 1998 due to increases in golf operations
revenue and membership revenue. The golf operations revenue increase is due
primarily to merchandise sales from pro shops the Company purchased during 1998.
Operating costs and expenses from total country club and golf facilities
increased 18.5% due primarily to the addition of the operating costs and
expenses of the Cobblestone properties and increased operating costs related to
increased revenues at mature facilities.
Business and Sports Clubs (formerly City Clubs)
The following table presents certain summary financial data and other
operating data for the Company's business and sports club segment for the 24
week periods ended June 17, 1998 and June 15, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Mature Business Total Business
and Sports Clubs and Sports Clubs
---------------------- ----------------------
1998 1999 1998 1999
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Number of facilities 87 87 94 92
Operating revenues $ 112,087 $ 113,894 $ 117,450 $ 118,836
Operating costs and expenses 101,488 106,598 106,759 111,660
----------- --------- ----------- ---------
Segment operating income $ 10,599 $ 7,296 $ 10,691 $ 7,176
=========== ========= =========== =========
</TABLE>
Operating income from mature business and sports clubs decreased from $10.6
million from June 17, 1998 to $7.3 million at June 15, 1999, primarily due to a
nonrecurring adjustment of $4.0 million during the 24 weeks ended June 17, 1998.
Excluding the effect of this item, operating income from mature business and
sports clubs would have increased $0.7 million or 10.5% for the 24 weeks ended
June 15, 1999 from the 24 weeks ended June 17, 1998 due to increased membership
revenue.
SEASONALITY OF DEMAND; FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results fluctuate as a result of a number of
factors. Usage of the Company's country club and golf facilities and resorts
declines significantly during the first and fourth quarters, when colder
temperatures and shorter days reduce the demand for golf and golf-related
activities. The Company's business facilities generate a disproportionately
greater share of their yearly revenues in the fourth quarter, which includes the
holiday and year-end party season. In addition, the fourth quarter consists of
16 weeks of operations and the first, second and third quarters consist of 12
weeks. As a result of these factors, the Company usually generates a
disproportionate share of its revenues in the second, third, and fourth quarters
of each year and has lower revenues in the first quarter. The timing of
purchases, sales, or leases of facilities, such as the purchase of the
Cobblestone properties, also has caused and may cause the Company's results of
operations to vary significantly in otherwise comparable periods. In addition,
the Company's results can be affected by non-seasonal and severe weather
patterns.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations and capital
expenditures primarily through cash flows from operations and long-term debt.
The Company distinguishes capital expenditures to refurbish and replace existing
property and equipment (i.e., capital replacements) from discretionary capital
expenditures such as the expansion of existing facilities (i.e., capital
expansions) and acquisition or development of new facilities and investments in
joint ventures. 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
3.8% to 7.1% of operating revenues during the last three years. Capital
expansions are discretionary expenditures which create new amenities or enhance
existing amenities at facilities. Development of the Company's new facilities
and planned expansions at existing properties are expected to require capital
expenditures of approximately $67.6 and $76.2 million, respectively, over the
next two years to be financed with external financing of ClubCorp, Inc. and cash
flows from operations.
As of July 28, 1999, the Company had $473.2 million outstanding of its
$500.0 million of available bank debt, consisting of $273.2 million outstanding
under its $300.0 million revolving credit facility, including $14.3 million in
letters of credit, and a $200.0 million five-year credit facility entered into
to finance the acquisition of the Cobblestone properties. Each of these credit
facilities contains an identical covenant regarding the Company's maximum
leverage ratio at the end of each quarter based on a debt to cash flow measure.
At June 15, 1999, the ClubCorp exceeded the maximum leverage ratio allowable by
this covenant. The lenders under each credit facility have waived compliance
with this covenant for the 12 weeks ended June 15, 1999. However, because
ClubCorp's management does not believe it is probable that they will be in
compliance with this covenant at the end of the next quarter, all $455.9 million
of debt outstanding under these facilities is classified as current in the
Company's unaudited Consolidated Balance Sheet at June 15, 1999. ClubCorp's
noncompliance with this covenant is attributable to increased discretionary
spending, including capital expenditures at existing facilities and
acquisitions, that management believes are appropriate in light of the Company's
growth strategy. The Company is currently in negotiations with its lead lenders
under the credit facilities regarding a comprehensive restructuring of its bank
financing that is expected to permit increased leverage and provide an increased
borrowing capacity. ClubCorp expects this restructuring to be complete in late
September 1999.
YEAR 2000 READINESS DISCLOSURE
As is more fully described in the Company's Form 10-K for the fiscal year
ended December 29, 1998, the Company is modifying or replacing significant
portions of its software as well as hardware to enable operations beyond
December 31, 1999. In the current year, the Company has incurred costs of $0.9
million for the Year 2000. Management's assessment of the risks associated with
the Year 2000, estimates of the costs involved and timeframes for the completion
of this project are substantially unchanged from that described in the 1998 Form
10-K for the year ended December 29, 1998. For a complete description of the
Company's Year 2000 readiness plans, see the Form 10-K.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS AND THE ACCURACY OF OUR
FORWARD-LOOKING STATEMENTS
Certain information in this Quarterly Report on Form 10-Q may contain
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are "forward-looking statements" for purposes of these
provisions, including projections of earnings, revenues or other financial
items, statements of the plans and objectives of management for future
operations (including statements regarding the expected restructuring of the
Company's credit agreements), statements concerning proposed new services,
statements regarding future economic conditions or performance and statements of
assumptions underlying any of the foregoing. In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "will,"
"expects," "plans," "anticipates," "estimates," "potential" or "continue," or
the negative thereof or other comparable terminology. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements. Forward-looking statements are subject to inherent
risks and uncertainties, some of which are summarized in this section and in the
Company's Form 10-K for the year ended December 29, 1998.
The Company's success depends on its ability to attract and retain
members at its clubs and maintain or increase usage of its facilities. The
Company has experienced varying levels of membership enrollment and attrition
rates and, in certain areas, decreased levels of usage of its facilities during
its operating history. Although management devotes substantial efforts to
ensuring that members and guests are satisfied, many of the factors affecting
club membership and facility usage are beyond the Company's control, including
weather conditions, general economic conditions, changes in demand for golf and
private club services and tax changes, and there can be no assurance that the
Company will be able to maintain or increase membership or facility usage.
Significant periods where attrition rates exceed enrollment rates, or where
facilities' usage is below historical levels would have a material adverse
effect on the Company's business, operating results, and financial condition.
Other factors that may affect the Company's operating results include, but are
not limited to, the actions of our competitors, changes in labor costs, the
timing and success of acquisitions and dispositions and changes in law.
The Financial Accounting Standards Board issued SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". SFAS 121 requires, among other things, that long-lived assets to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company routinely reviews all long-lived assets for potential
impairment by determining whether they could be recovered over their remaining
life through estimated future cash flows. Fair value, for purposes of
calculating any impairment, was measured based on discounted estimated future
cash flows using a risk-adjusted discount rate. For the 24 weeks ended June 15,
1999, an impairment loss of $13.5 million relating to the long-lived assets at
Daufuskie was recognized. This impairment loss is reported separately as a
component of operating income in the Company's Consolidated Financial
Statements. If events or circumstances change in the future, additional
impairment losses could be recognized.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to interest rate changes and foreign currency
fluctuations. The interest rate exposure is principally attributable to (i) the
Company's $300.0 million revolving credit facility ($273.2 million outstanding
at July 28, 1999) used to fund capital replacements and discretionary capital
expenditures and (ii) the $200 million five-year credit facility entered into on
March 29, 1999 to fund the acquisition of the Cobblestone properties. The
Company uses financial instruments, principally swaps, to manage its interest
rate exposure primarily from borrowings under its $300.0 million revolving
credit facility. The Company has no material changes to these disclosures made
in the report on Form 10-K for the fiscal year ended December 29, 1998 regarding
the use of financial instruments.
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 4. Submission of Matters to a Vote of Security Holders
On May 17, 1999, the shareholders of ClubCorp, Inc. held their annual meeting to elect directors. The following
directors were elected: Robert H. Dedman, Sr., Robert H. Dedman, Jr., Patricia Dedman Dietz and
James M. Hinckley. There were no other matters submitted to a vote of stockholders at the meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
15.1 - Letter from KPMG LLP regarding unaudited interim financial statements
24.1 - Power of Attorney
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed Form 8-K/A Amendment No. 1, dated June 9, 1999, which included Item 7. Financial
Statements and Exhibits.
</TABLE>
<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.
ClubCorp, Inc.
Date: July 30, 1999 By: /s/James P. McCoy, Jr.
--------------- ----------------------
James P. McCoy, Jr.
Chief Financial Officer
(chief accounting officer)
EXHIBIT 15.1
ClubCorp, Inc.
Dallas, Texas
Ladies and Gentlemen:
Re: Registration Statement Nos. 33-89818, 33-96568, 333-08041 and 333-57107
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated July 23, 1999, 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 LLP
Dallas, Texas
July 30, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints James P. McCoy, Jr. and Charles A. Little, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the Quarterly Report on Form 10-Q of ClubCorp,
Inc. for the period ended June 15, 1999, together with any amendments thereto,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, as amended, this
Power of Attorney has been signed by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------ ------------------------------------------------ -------------
<S> <C> <C>
/s/Robert H. Dedman, Sr.
- ------------------------
Robert H. Dedman, Sr. Chairman of the Board July 28, 1999
/s/Robert H. Dedman, Jr.
- ------------------------
Robert H. Dedman, Jr. Chief Executive Officer, President and Director
(Principal Executive Officer) July 28, 1999
/s/James M. Hinckley
- ------------------------
James M. Hinckley Chief Operating Officer and Director July 28, 1999
/s/Patricia Dedman Dietz
- ------------------------
Patricia Dedman Dietz Director July 28, 1999
</TABLE>
<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> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1999
<PERIOD-END> JUN-15-1999
<CASH> 53,482
<SECURITIES> 0
<RECEIVABLES> 132,209
<ALLOWANCES> 5,676
<INVENTORY> 28,997
<CURRENT-ASSETS> 200,007
<PP&E> 1,344,105
<DEPRECIATION> 309,420
<TOTAL-ASSETS> 1,438,851
<CURRENT-LIABILITIES> 684,677
<BONDS> 0
0
0
<COMMON> 902
<OTHER-SE> 414,944
<TOTAL-LIABILITY-AND-EQUITY> 1,438,851
<SALES> 120,327
<TOTAL-REVENUES> 435,109
<CGS> 105,647
<TOTAL-COSTS> 421,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,898
<INTEREST-EXPENSE> 17,150
<INCOME-PRETAX> 2,022
<INCOME-TAX> 2,621
<INCOME-CONTINUING> (599)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (599)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
