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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
__________________
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _________
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
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: 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.
---------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant at December 31, 1996 (the most recent date on
which an appraisal was performed), based on the most recent appraised price of
the Registrant's Common Stock, was $47,623,498.
The number of shares of the Registrant's Common Stock outstanding as of
February 28, 1997 was 85,393,241.
TABLE OF CONTENTS
PART I
Item 1 Business 3
Item 2 Properties 11
Item 3 Legal Proceedings 12
Item 4 Submission of Matters to a Vote of Security Holders 13
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters 14
Item 6 Selected Financial Data 15
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 8 Financial Statements and Supplementary Data 29
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 29
PART III
Item 10 Directors and Executive Officers of the Registrant 30
Item 11 Executive Compensation 32
Item 12 Security Ownership of Certain Beneficial Owners and Management 36
Item 13 Certain Relationships and Related Transactions 38
PART IV
Item 14 Exhibits, Financial Statement Schedule, and Reports on Form 8-K 39
PART I
ITEM 1. BUSINESS
GENERAL
Club Corporation International ("ClubCorp" or the "Company") is a holding
company incorporated under the laws of the State of Nevada that, through its
subsidiaries, has operated in two distinct business segments, hospitality and
financial services. The hospitality segment involves the operation of private
clubs (including city, city/athletic, athletic and country clubs), resorts,
golf clubs, and public golf facilities through sole ownership, partial
ownership (including joint venture interests) and management agreements. The
Company's primary sources of revenue in its hospitality segment include
membership dues and fees, 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. See "Hospitality
Operations-Management Services".
Historically, the Company has operated in the financial services segment
through Franklin Federal Bancorp, a Federal Savings Bank ("Franklin"). On
February 16, 1996, the Board of Directors of Franklin, passed a resolution to
solicit offers to sell the financial services segment. On August 7, 1996,
Franklin entered into an agreement to sell certain assets and transfer certain
liabilities of Franklin to Norwest Corporation pending regulatory approval.
The sale was consummated on January 2, 1997 for $90.0 million; therefore, this
segment is presented as discontinued operations in the accompanying
Consolidated Financial Statements. Sales proceeds of $4.0 million were
escrowed representing the maximum contractual obligation of Franklin arising
from any claims which could be asserted by Norwest Corporation against
Franklin based on the representations, warranties, and covenants provided in
the agreement. As the contingency periods expire, within one year of the
closing date, Franklin will receive the remaining balance of the escrowed
funds. Due to the contingencies involved, management cannot determine the
ultimate amount of the gain to be recognized; however, the Company's estimated
net gain on this transaction, net of taxes and minority interest, is expected
to be approximately $23.0 million.
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.
STOCK INVESTMENT PLAN
The Company is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, pursuant to Section 15(d) thereof, because
the Company has filed a registration statement on Form S-1, which became
effective October 24, 1994 pursuant to the Securities Act of 1933 (the
"Registration Statement"). The Registration Statement registered participation
interests in the ClubCorp Stock Investment Plan (the "Plan"), which became
effective on January 1, 1993, and the Company's common stock, $.01 par value
per share (the "Common Stock"), to be sold to the Plan. Employees eligible to
participate in the Plan may invest in participation interests in the Common
Stock through payroll deductions of 1% to 6% of their pre-tax compensation,
subject to certain limitations. Prior to July 1, 1995, eligible employees
invested through payroll deductions of 1% to 6% of their after-tax
compensation, subject to certain limitations. The Company contributes an
amount on such employee's behalf of at least 20% and up to an additional 30%,
for a maximum potential total of 50%, of the eligible employee's contributions
to the Plan, and Company contributions vest over time. Any contributions by
the Company over the 20% minimum are within the discretion of the Board of
Directors of ClubCorp, and are based on improvement in the value of the Common
Stock during the 12-month period ending on September 30 of each year in
accordance with a schedule approved by the Board of Directors, which is
subject to change.
All contributions to the Plan are invested in Common Stock (except for
contributions temporarily invested pending investment in Common Stock). The
Plan purchases Common Stock from ClubCorp and certain of its stockholders at
fair market value, which is determined quarterly by the Company using a
formula based on certain financial measures (the "Formula Price") and
confirmed as within the range of fair market value by Houlihan, Lokey, Howard
and Zukin, an independent financial advisory firm (the "Financial Advisor").
See Item 5, "Market for Registrant's Common Equity and Related Stockholder
Matters". Because the Plan invests primarily in Common Stock, the value of
each eligible employee's participation interests in the Plan depends on the
value of the Common Stock from time to time, which in turn is dependent on the
financial success of the Company. No employee participating in the Plan,
however, has any right to vote the Common Stock or to receive a distribution
of Common Stock from the Plan.
HOSPITALITY OPERATIONS
Background and Philosophy
- ---------------------------
Robert H. Dedman, Sr. founded the Company in 1957 under the name Country
Clubs, Inc. to develop Brookhaven Country Club in the north Dallas area.
During the succeeding 15 years, the Company expanded its country club
operations and began to develop city, city/athletic and athletic clubs. In the
early 1980s, the Company further expanded its operations by entering the
resort industry, and in 1986 the Company began operating public golf
facilities.
The Company conducts its business through various subsidiaries of
ClubCorp, including the following:
- Club Corporation of America ("CCA"), which conducts the Company's
private club, golf club, and public golf operations; and
- Club Resorts Holding, Inc. ("Club Resorts"), which conducts the
Company's resort operations.
Mr. Dedman founded the Company based upon his belief that an opportunity
existed for any company that could provide quality services and professional
management to private clubs. Management believes that the Company's
opportunities have grown as a result of a general trend in the private club
industry toward professionally managed clubs and that this trend will continue
in the future.
In directing the Company's growth since its formation, Mr. Dedman has
emphasized quality service and facilities, endeavoring to exceed the
expectations of the Company's members and guests. Senior management believes
that the Company's success depends greatly upon the motivation, training and
experience of its employees. See "-Employees".
From the beginning of the Company, Mr. Dedman focused on assembling an
experienced management team to lead the Company. ClubCorp's 13 executive
officers possess an average of 21 years of experience with the Company. The
Company has also attempted to attract and retain qualified, dedicated managers
for its clubs, resorts, golf clubs, and public golf facilities, and these
managers possess an average of eight years of experience with the Company. The
Company provides an extensive, proprietary system of in-house training and
education for all of its employees that is designed to improve the quality of
services provided to members and guests.
The Company's commitment to value is also reflected in its policy of
monitoring satisfaction levels through frequent surveys of members and guests.
In addition, employees are regularly surveyed to help management develop
appropriate training and education programs, increase job satisfaction levels
and improve the quality of service.
Nature of Operations
- ----------------------
The Company operates private clubs, resorts, golf clubs, and public golf
facilities through sole ownership, partial ownership and management
agreements. In addition, the Company performs various corporate services
internally and for third parties and sells real estate. See "-Corporate
Services and Other". With respect to its wholly owned operations, in some
cases the Company owns the real property where the club, resort, golf club, or
public golf facility is operated, and in other cases the Company leases the
real property from third parties.
The Company operated 227 private club, resort, golf club, and public golf
facilities at December 31, 1996, serving approximately 240,000 members.
Management believes that the Company's existing club, resort and other
property locations, and its base of club members, represent a significant
value to the Company. For example, certain of the Company's country clubs that
were developed many years ago are now located in highly populated areas where
development of a new facility would be prohibitively expensive.
The Company's primary sources of revenue include membership dues and
fees, 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 Company receives membership deposits that constitute an important
source of cash flows for developing new clubs and expanding or improving
existing clubs. Upon joining a private club operated by the Company, new
members are required to pay a membership deposit, which is generally
refundable after 30 years. Membership deposits are included in cash flows and
are accounted for as obligations of the Company.
The success of the Company's private clubs and golf clubs business is
dependent on the Company's ability to attract new members, retain existing
members and maintain or increase levels of club usage. For a tabular
presentation of certain statistical information relating to memberships in the
Company's private clubs, see Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations-General-Regional Information;
Other Operating Information". The success of the Company's resorts, golf
clubs, and public golf operations is also dependent on levels of usage by the
Company's guests and customers. For a tabular presentation of certain
statistical information relating to the Company's resorts and public golf
operations, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations-General-Regional Information; Other
Operating Information". Although the Company devotes a large amount of
resources to promote its facilities and services, many of the factors
affecting club membership and usage are beyond the control of the Company.
Local and federal government laws, including income tax regulations applicable
to the Company and its club members and guests, can adversely influence
membership activity. See "-Government Regulation". Changes in consumer tastes
and preferences, local, regional and national economic conditions, including
levels of disposable income, weather, and demographic trends can also have an
adverse impact on club membership and usage. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Seasonality".
Private Clubs
- --------------
The Company's private clubs generally fall into one of four categories:
city, athletic, country and city/athletic clubs. The Company's private city,
city/athletic and athletic clubs are primarily located in city business
centers or in downtown areas.
City clubs typically include dining rooms and lounge areas and meeting
and board room facilities. Some of the notable city clubs operated by the
Company include The Metropolitan Club in Chicago, Illinois, The Columbia Tower
Club in Seattle, Washington, The Tower Club in Dallas, Texas and The City Club
of San Francisco in California.
The Company's athletic clubs generally include a combination of the
following facilities: racquetball and squash courts, jogging tracks, exercise
areas, weight machines, aerobic studios, swimming pools, saunas and
whirlpools, eating facilities and, occasionally, tennis and basketball courts.
Some of the notable athletic clubs operated by the Company include The
Athletic and Swim Club at Equitable Center in New York and The San Francisco
Tennis Club in California.
The country clubs operated by the Company span a broad range of size,
price, prestige and facilities. Generally, the Company's country clubs include
a combination of one or more of the following facilities: dining rooms and
lounge areas, meeting and board room facilities, grills and ballrooms, golf,
tennis, swimming and fitness facilities and pro shops. Some of the notable
country clubs operated by the Company include Gleneagles Country Club in
Dallas, Texas, Kingwood Country Club in Houston, Texas, Mission Hills Country
Club and Indian Wells Country Club in Palm Springs, California, and Firestone
Country Club in Akron, Ohio.
The Company's city/athletic clubs combine various facilities offered by
its city clubs and athletic clubs, described above. Some of the notable
city/athletic clubs operated by the Company include The Rivers Club in
Pittsburgh, Pennsylvania and The University Club in Houston, Texas.
The private club industry is highly competitive, but management believes
that the Company's size and substantial experience allow it to compete
effectively. The Company's private clubs compete primarily on the basis of
featured facilities, memberships, quality and comprehensiveness of services,
management experience, geographic breadth and financial resources. The number
and quality of private clubs and other facilities with similar types of
recreation in a particular area could have a material effect on the revenue of
a private club. In addition, revenue will be affected by a number of factors,
including the demand for golf and the availability of other forms of
recreation.
Golf Clubs
- -----------
The Company's golf clubs generally include a combination of the following
facilities: golf courses, driving ranges, and food and beverage concessions.
Generally, these clubs offer both private and public play. Some of the notable
golf clubs operated by the Company include Timarron Golf Club and Oakmont Golf
Club, both located in Dallas, Texas.
The private and public golf industries are highly fragmented. The Company
competes with a number of regional and national golf management companies.
With the rising popularity of golf, the Company expects the number of
competitors in the industry to increase over the next few years. The Company's
golf clubs compete on the basis of price, quality and comprehensiveness of
service, memberships, management experience, geographic breadth, featured
facilities and financial strength. The Company believes that its substantial
experience in operating golf facilities will enable it to compete effectively
in this area.
Public Golf
- ------------
The Company's public golf facilities generally include a combination of
the following facilities: golf courses, driving ranges, and food and beverage
concessions. Some of the public golf courses operated by the Company include
Kingwood Cove and Clear Lake in Houston, Texas, and Plantation Resort in
Dallas, Texas.
The public golf industry is highly fragmented. The Company competes with
a number of regional and national golf management companies. With the rising
popularity of golf, the Company expects the number of competitors in this
industry to increase over the next few years. The Company's public golf
operations compete on the basis of price, quality and comprehensiveness of
service, management experience, featured facilities and financial strength.
The Company believes that its substantial experience in operating golf
facilities at private country clubs will enable it to compete effectively in
the public golf market.
Resorts
- -------
The Company's resorts typically offer lodging facilities, dining and
lounge areas, meeting rooms and golf, tennis and other recreational activities
associated with resorts. The Company seeks to create and maintain a
significant golf component at its resorts. In some cases, memberships in a
resort's country club facilities are offered primarily to those living in the
surrounding community. Some of the notable resorts operated by the Company
include the Pinehurst Resort and Country Club in North Carolina, the Homestead
Resort in Virginia and the Barton Creek Country Club and Conference Resort in
Texas.
The resort industry is highly competitive, and the Company competes with
numerous hotel and resort companies engaged in the lodging, travel and resort
businesses, some of which have substantially greater financial and other
resources than the Company. The principal competitive factors in the resort
industry include featured facilities, quality of services, geographic breadth
and financial resources. The Company believes that its substantial experience
in providing quality services to both members and guests allow it to compete
effectively in the resort industry.
Management Services
- --------------------
In addition to operations that are solely or partially owned by the
Company, the Company provides professional management and consulting services
to third parties who own private clubs, resorts, golf clubs, and public golf
facilities. Fees for the Company's management and consulting services
accounted for $8.2 million of operating revenues (1.1% of the Company's total
operating revenues) during 1996, $10.3 million of operating revenues (1.4% of
the Company's total operating revenues) during 1995 and $9.2 million of
operating revenues (1.4% of the Company's total operating revenues) during
1994. In calculating revenues from management and consulting services, the
Company includes only the fees received by the Company for such services and
does not include revenues of the facilities under management.
For its services, the Company generally receives a monthly base
management fee, as well as one or more performance-related fees based upon
such factors as the facility's net operating income or operating cash flows,
gross receipts, membership sales or new member deposits. Generally, the owner
is responsible for all operating and other expenses.
Other terms of the Company's management agreements vary depending on the
nature and extent of the services provided. Management agreements generally
provide for an initial term of two to four years, with renewal options for
successive one to five year terms. In addition, most of the management
agreements may be terminated without cause upon advance written notice,
provided the terminating party pays a specified termination fee. The
agreements may be terminated for cause upon the occurrence of certain events,
including nonperformance of the obligations specified under such management
agreements.
Corporate Services and Other
- -------------------------------
Additional subsidiaries of ClubCorp provide operating and support
services within the organization and to third parties. These subsidiaries
include:
- Associate Clubs International, Inc., which is responsible for the
Company's Associate Clubs Program, a program that provides club members with
access to other clubs operated by the Company;
- ClubCorp Realty, which conducts real estate development and sales
operations and offers real estate marketing and brokerage services, zoning,
subdivision and platting services and other real estate consulting services;
- Associate Clubs Publications Inc., which publishes the Company's
Private Clubs magazine;
- ClubCorp Financial Management Company, which provides primarily
accounting and data processing services related to facility management; and
- ClubCorp Facilities Group, Inc., which negotiates and supervises
national purchasing contracts for the Company's clubs, resorts, golf clubs,
and public golf facilities and provides architecture, design and construction
management services.
During 1996, 1995 and 1994, these corporate services generated
approximately $37.4 million, $31.7 million and $14.6 million, respectively, in
operating revenues for the Company.
Expansion and Development
- ---------------------------
The Company is pursuing a strategy to increase the number of private
clubs, resorts, golf clubs and public golf facilities that it operates both
domestically and internationally. The Company evaluates specific growth
opportunities based upon existing market conditions and economic factors, and
intends to pursue opportunities that it perceives to be favorable as they
arise in all areas of its hospitality business.
The success of the Company's growth strategy will depend upon the
availability of suitable properties on acceptable terms, the availability of
adequate financing and other factors beyond the Company's control. The Company
has a permanent staff to evaluate development and acquisition opportunities.
The Company seeks to finance each project separately and anticipates that
sources of capital for new developments and acquisitions will include
membership deposits and internal funding, equity participations and owner and
third party financing.
The Company also intends to continue to pursue growth opportunities
related to city and city/athletic clubs through acquisitions, mergers between
the Company's clubs and those owned by third parties, management contracts
with ownership options, relocations of existing clubs and development of new
clubs.
Sales and Marketing
- ---------------------
The Company advertises and markets its clubs, resorts and public golf
facilities through diverse media. Among other things, the Company sponsors the
Associate Clubs Program, which provides members of clubs owned, leased or
managed by the Company with access to other clubs. In addition, the Company
publishes Private Clubs magazine, which reaches over 185,000 members at the
majority of the Company's clubs and resorts, and which advertises the
Company's other facilities. The Company also hosts a number of professional
golf tournaments, which are to provide community and charitable involvement
and publicity for the Company's facilities. Some of the most notable
tournaments the Company hosted during 1996 were the National Equipment
Corporation ("NEC") World Series of Golf at Firestone Country Club, the Bob
Hope Chrysler Classic at Indian Wells Country Club, the Nabisco Dinah Shore
Classic at Mission Hills Country Club, and the J.C. Penney's Ladies
Professional Golf Association Skins Game at Stonebriar Country Club. In
addition, Pinehurst Resort and Country Club will host the 1999 United States
Open.
Government Regulation
- ----------------------
The Company's operations are subject to numerous laws and government
regulations, including environmental, occupational health and safety, labor
and alcoholic beverage control laws and laws relating to access for disabled
persons. Changes to these laws or regulations could adversely affect the
Company. The Company has in place policies designed to bring its properties in
compliance with all current federal, state and local environmental laws.
Operations at the Company's golf courses involve the use and storage of
various hazardous materials such as herbicides, pesticides, fertilizers, motor
oil and gasoline. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real property may become liable for the
costs of removing such hazardous substances that are released on or in its
property and for remediation of its property. Such laws often impose liability
regardless of whether a property owner or operator knew of, or was responsible
for, the release of hazardous materials. In addition, the presence of such
hazardous substances, or the failure to remediate the surrounding soil when
such substances are released, may adversely affect the ability of a property
owner to sell such real estate or to pledge such property as collateral for a
loan. The Company has not been informed by the Environmental Protection Agency
or any state or local governmental authority of any non-compliance or
violation of any environmental laws, ordinances or regulations likely to be
material to the Company, and the Company believes that it is in substantial
compliance with all such laws, ordinances and regulations applicable to its
properties and operations. The Company estimates that capital expenditures in
connection with the above mentioned environmental matters will be
approximately $3.0 to $5.0 million over the next five years. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Factors That May Affect Future Operating Results".
The Company is also subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. A significant number of
the Company's personnel receive the federal minimum wage, and recently adopted
increases in the minimum wage will increase the Company's labor costs. In
addition, the Company is subject to certain state "dram-shop"laws, which
provide a person injured by an intoxicated individual the right to recover
damages from an establishment that wrongfully served alcoholic beverages to
the intoxicated individual. The Company is also subject to the Americans with
Disabilities Act of 1990, which, among other things, may require certain minor
renovations to various of the Company's properties to meet federally mandated
access and use requirements. The cost of these renovations is expected to be
approximately $3.0 million over the next five years. The Company believes it
is operating in substantial compliance with applicable laws and regulations
governing its operations.
Competition
- -----------
The Company competes with local fine dining establishments and other city
clubs in its city club business. The competition in the city club business is
largely fragmented, and no competitor is dominant in a material portion of the
Company's markets. The number and quality of city clubs and/or fine dining
establishments in a particular area can affect the revenue of a particular
city club.
The Company competes with other country clubs, golf clubs, public golf
courses and resorts in its country club, golf club, public golf and resort
business. Similarly, competition is fragmented and no competitor is dominant
in a significant portion of the markets where the Company maintains these
facilities. The number and quality of competing facilities in a particular
market can affect the revenue of a particular facility.
The Company also competes for the purchase, lease, and/or management of
golf courses with American Golf Corporation, a national golf course management
company. In addition, the Company competes for the purchase of golf courses
with regional golf course management companies that each own several golf
courses and, less frequently, with individuals and small ventures that
typically own one or more golf courses. In the acquisition of golf courses,
companies compete primarily on the basis of price and their reputation for
operating golf courses.
In the operation of its facilities, the Company competes on the basis of
its reputation to deliver value through the quality of the facility and
quality of services provided to its members and guests. The Company believes
it competes favorably with respect to these factors. The Company has a
program, known as "Associate Clubs", that allows members of a club in one
market to utilize Company clubs in different markets, thus enhancing the value
of the membership. Because of the large number of facilities maintained by the
Company, a member is provided access to a wide number of facilities. The
Company believes this program affords it a competitive advantage over
competitors that do not maintain similar programs and over other competitors
that have similar programs, but fewer facilities.
DISCONTINUED OPERATIONS
Franklin Federal Bancorp, a Federal Savings Bank ("Franklin") conducted
the Company's operations in the financial services industry during 1996.
ClubCorp owns Franklin through First Federal Financial Corporation, a wholly
owned subsidiary of ClubCorp ("FFFC").
The Company entered the financial services business in September 1988
through a government assisted acquisition of certain assets and liabilities of
three insolvent savings and loan institutions (the "Predecessor
Institutions"). ClubCorp formed FFFC to acquire Franklin and capitalized
Franklin with an investment of $25.0 million in order to engage in the
acquisition. Under the terms of the transaction, Franklin acquired certain
assets and assumed certain liabilities of the Predecessor Institutions,
including liabilities to depositors. The Federal Savings and Loan Insurance
Corporation (the "FSLIC") issued a promissory note to Franklin in an amount
equal to the negative net worth of the Predecessor Institutions at the time of
the acquisition. In addition, in connection with the acquisition, Franklin
issued warrants to the FSLIC to purchase up to 20.0% of the common stock of
Franklin for a nominal exercise price.
On February 16, 1996, the Board of Directors of Franklin, passed a
resolution to solicit offers to sell the financial services segment. On August
7, 1996, Franklin entered into an agreement to sell certain assets and
transfer certain liabilities of Franklin to Norwest Corporation pending
regulatory approval. The sale was consummated on January 2, 1997 for $90.0
million; therefore, this segment is presented as discontinued operations in
the accompanying Consolidated Financial Statements. Sales proceeds of $4.0
million were escrowed representing the maximum contractual obligation of
Franklin rising from any claims which could be asserted by Norwest Corporation
against Franklin based on the representations, warranties, and covenants
provided in the agreement. As the contingency periods expire, within one year
of the closing date, Franklin will receive the remaining balance of the
escrowed funds. Due to the contingencies involved, management cannot
determine the ultimate amount of the gain to be recognized; however, the
Company's estimated net gain on this transaction, net of taxes and minority
interest, is expected to be approximately $23.0 million.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 14,000
full-time, 6,000 part-time and 1,000 seasonal employees in its operations.
The success of the Company's business is dependent in part on the
Company's ability to attract and retain experienced management and other
employees on economical terms. Management believes that the Company's
employees represent an important asset; however, the Company is not dependent
upon any single employee, or a few employees, whose loss would have a material
adverse effect on the Company. Although the Company believes that its labor
relations are good, increased labor and benefit costs or a deterioration in
the Company's labor relations could adversely affect the Company's operating
results. As of December 31, 1996, approximately 800 of the employees engaged
in the Company's operations were covered by three collective bargaining
agreements, which will expire June 30, 1997, April 1, 1998 and December 31,
1999.
CUSTOMERS
The Company is not dependent upon a single customer, or a few customers,
whose loss would have a material adverse effect on the Company. In addition,
as of December 31, 1996, there is no customer to which the Company has sales
equal to 10.0% or more of the Company's consolidated revenues and whose loss
would have a material adverse effect on the Company as a whole.
INTELLECTUAL PROPERTY
The Company has registered various service marks, including the names
CLUBCORP, CCA, CLUB RESORTS and ASSOCIATE CLUBS, with the United States Patent
and Trademark Office, and has applied with the United States Patent and
Trademark Office for the registration of various other service marks. In
addition, the Company has registered certain of its service marks in a number
of foreign countries. The Company regards its service marks as valuable assets
and intends to protect such service marks vigorously against infringement.
ITEM 2. PROPERTIES
The Company operated 227 club, resort, golf club, and public golf
facilities as of December 31, 1996. The ownership of these facilities is
described under Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations-General". The Company leases its executive
offices in Dallas, Texas and an office in Singapore in connection with its
operations in Southeast Asia.
With respect to leased properties, the Company generally pays a monthly
base rent, as well as charges for real estate taxes, common area maintenance
and various other items. In some cases, the Company must also pay a percentage
of gross receipts or positive net cash flow. In most instances, the Company
has full authority over the operation of the leased facilities, operating on a
fully net basis, except in some cases where the owner remains responsible for
major structural repairs or for property insurance or real estate taxes.
Certain real and personal property and equipment of ClubCorp's
subsidiaries are pledged as collateral on their long-term debt. See Note 8 of
the Notes to Consolidated Financial Statements included under Item 8.
Item 3. Legal Proceedings
The Company is subject to certain pending or threatened litigation and
other claims. Management, after review and consultation with legal counsel,
believes the Company has meritorious defenses to these legal matters and that
any potential liability from these matters would not materially affect the
Company's financial condition and results of operations. See Note 10 of the
Notes to Consolidated Financial Statements included under Item 8.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public market for the Common Stock. In connection
with certain employee benefit plans (including the Plan), the Board of
Directors of ClubCorp has periodically established a formula price for the
Common Stock (the "Formula Price"). The Formula Price is based upon a multiple
of the Company's recurring cash flows from operations, with certain exceptions
for specific assets, including the following: (i) the Company's interest in
Franklin is based on the net proceeds received from the sale and (ii) certain
long-term investments are valued at the lower of cost or market.
The table below sets forth the quarterly Formula Price for the Common
Stock during the years ended December 31, 1995 and 1996, respectively.
FORMULA
1995 PRICE
- ---- --------
First Quarter $ 10.11
Second Quarter 9.98
Third Quarter 9.53
Fourth Quarter 10.01
1996
- ----
First Quarter $ 10.46
Second Quarter 11.12
Third Quarter 11.64
Fourth Quarter 12.04
The Financial Advisor has been engaged by the trustees of the Plan to
confirm the fairness of the Formula Price for purposes of the Plan. The
Financial Advisor performs an independent appraisal of the Company four times
each year, following delivery of the Company's financial statements after the
end of each quarter. Based upon such appraisals, the Financial Advisor
confirms that the Formula Price falls within the range of fair market value of
the Common Stock on the date of each appraisal and on each December 31. All
purchases of Common Stock by the Plan are made on or shortly after an
appraisal date at the Formula Price as confirmed by the Financial Advisor. If
there is any discrepancy between the Formula Price and the range of fair
market value of the Common Stock as determined by the Financial Advisor, the
Company will adjust the Formula Price so that it falls within the range of
fair market value as determined by the Financial Advisor. See Item 1,
"Business-Stock Investment Plan".
As of February 28, 1997, there were approximately 280 holders of record
of the Common Stock.
ClubCorp has never paid cash dividends on the Common Stock. Management
expects to continue its policy of retaining earnings for use in the Company's
business, and, accordingly, does not expect to pay cash dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
Set forth below are the selected consolidated financial and operating
data for each of the years in the five-year period ended December 31, 1996.
The table presented below should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", as well as Item 8, "Financial Statements and Supplementary Data"
(dollars in thousands, except per share data).
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 (1) 1995 (2) 1994 (3) 1993 (4)
----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
Operating revenues (5) $ 756,442 $ 732,464 $ 679,753 $ 602,713
Income (loss) from continuing operations (5) $ 16,453 $ (26,701) $ 14,503 $ 5,383
Income (loss) from continuing operations per share (5) $ 0.19 $ (0.31) $ 0.16 $ 0.06
Net income (loss) $ 5,151 $ (26,268) $ 6,402 $ 40,719
Net income (loss) per share $ 0.06 $ (0.31) $ 0.07 $ 0.47
BALANCE SHEET DATA:
Total assets $1,573,366 $1,843,561 $2,057,770 $2,367,526
Capitalization:
Financial services liabilities $ 549,246 $ 877,345 $1,118,937 $1,552,257
Long-term debt 343,917 313,461 285,128 194,398
Membership deposits 380,802 362,330 320,475 292,452
Redemption value of common stock held by benefit plan (6) 43,233 35,414 37,112 41,165
Stockholders' equity 112,834 106,791 145,006 141,169
----------- ----------- ----------- -----------
Total capitalization $1,430,032 $1,695,341 $1,906,658 $2,221,441
=========== =========== =========== ===========
1992
----------
INCOME STATEMENT DATA:
Operating revenues (5) $ 563,626
Income (loss) from continuing operations (5) $ 12,768
Income (loss) from continuing operations per share (5) $ 0.15
Net income (loss) $ 18,939
Net income (loss) per share $ 0.22
BALANCE SHEET DATA:
Total assets $2,273,562
Capitalization:
Financial services liabilities $1,599,297
Long-term debt 139,161
Membership deposits 267,578
Redemption value of common stock held by benefit plan (6) -
Stockholders' equity 142,382
----------
Total capitalization $2,148,418
==========
- -----------------
(1) The Company was successful in its efforts in 1996 to control expenses
and increase revenues. While operating revenues increased 3.3%, operating
costs and expenses increased only 1.0%. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
(2) The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 121 for the year ended December 31, 1995. In adopting SFAS 121, the
Company recorded an impairment loss of $23.0 million on long-lived assets
which is reported separately as a component of income (loss) from continuing
operations.
(3) The Company acquired Mission Hills Country Club and the Homestead
Resort in the last quarter of 1993. These properties significantly impacted
the Company's operating revenues in 1994, generating $11.6 and $30.8 million,
respectively, in operating revenues in 1994. Franklin had a net loss of $12.7
million in 1994 due to rising interest rates and lower of cost or market
adjustments on whole loan adjustable rate mortgages. In order to maintain
compliance with capital ratios, Franklin effected shrinkage chiefly through
the liquidation of assets designated as available for sale and the retirement
of short-term liabilities, primarily FHLB advances. Hospitality properties
acquired in 1994 represent the increase in long-term debt.
(4) The Company adopted SFAS 109 on January 1, 1993. In adopting SFAS 109,
the Company recorded a cumulative effect of the change in accounting for
income taxes, included in income, and a deferred tax asset, included in other
assets, equal to $27.0 million. The cumulative effect of the change in
accounting for income taxes is reported separately in the consolidated income
statement for the year ended December 31, 1993.
(5) The Company disposed of its financial services segment on January 2,
1997; therefore, the segment is presented as discontinued operations.
(6) As a means of providing liquidity to the trustees of the Plan, which
became effective January 1, 1993, to meet their fiduciary obligations to
distribute cash to Plan participants requesting withdrawals, ClubCorp has
provided a redemption right to the trustees to cause the Company to redeem
Common Stock at the most recent appraised price. The value (Redemption Value)
of this redemption right has been accounted for as a reduction of
stockholders' equity. The Redemption Value is calculated as the product of the
most recent appraised price multiplied by the number of shares of Common Stock
held by the benefit plan.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
Item 6, "Selected Financial Data" as well as Item 8, "Financial Statements and
Supplementary Data".
INTRODUCTION
The Company has operated in two distinct business segments, hospitality
and financial services. Hospitality operations include owning, operating and
managing country clubs, city clubs, city/athletic clubs, athletic clubs,
resorts, golf clubs, public golf courses and related real estate. On August 7,
1996, Franklin entered into an agreement in which Norwest Corporation would
purchase certain assets and assume certain liabilities of Franklin. As the
Company disposed of its financial services segment on January 2, 1997, this
segment is presented as discontinued operations for financial reporting
purposes. The following discussion for hospitality operations excludes the
Company's holding company activities which include corporate general and
administrative expenses, certain investment income (loss) items and the
consolidated provision for income taxes. Holding company activities are
discussed separately under the caption "-Holding Company Activities".
The Consolidated Financial Statements of the Company are presented on a
calendar year basis. The Company's subsidiaries operate primarily on a 52/53
week fiscal year, with the first three quarters consisting of 12 weeks each
and the fourth quarter consisting of 16 weeks.
GENERAL
The Company operates its business activities through sole ownership
(including lease arrangements), partial ownership (including joint venture
arrangements) and management agreements. The Company seeks to achieve growth
in revenues, earnings, and cash flows through effective management of existing
facilities and through the acquisition of new facilities via purchase, joint
venture, lease and management agreement.
During the past few years, the Company has pursued a growth strategy
resulting in an emphasis on the expansion of its golf related operations,
including country clubs, resorts, golf clubs, and public golf facilities. The
Company's access to adequate capital sources in addition to its own internally
generated cash flows has provided it an opportunity to compete effectively
with other hospitality related management companies in the acquisition of new
facilities.
The Company continually seeks to improve financial performance of
existing facilities by determining an optimum business plan allowing for the
highest possible return to the Company. Management attempts to create
operating efficiencies and maximize operating revenues and cash inflows
through member enhancement and utilization programs.
If efforts to improve the facility performance to acceptable financial
partners' and Company standards are not successful or financial partners' and
Company goals are not being achieved, then restructuring its ownership
position, leasing agreements, and borrowing arrangements are considered.
Properties are divested when management determines they will be unable to
provide a positive contribution to profitability, when they no longer
represent a strategic facility in the Company's network of affiliated clubs
and resorts, when members and financial partners no longer support the
property, or, in the case of leases, joint ventures and management agreements,
when their contractual terms expire without being renewed or are terminated.
Properties by Contract Type
- ------------------------------
The following table summarizes the number and changes in the Company's
properties operated for the periods indicated:
WHOLLY
OWNED OPERATIONS
--------------------
PARTIALLY
OWNED LEASED OWNED MANAGED UNDER
PROPERTY PROPERTY OPERATIONS (1) OPERATIONS CONSTRUCTION TOTAL
--------- --------- -------------- ----------- ------------- ------
At December 28, 1994 75 115 4 41 4 239
Properties added during 1995 2 1 1 8 - 12
Properties divested during 1995 (1) (7) - (6) (1) (15)
Changes during 1995 2 - 1 - (3) -
--------- --------- -------------- ----------- ------------- ------
At December 27, 1995 78 109 6 43 - 236
Properties added during 1996 4 - - 1 8 13
Properties divested during 1996 (1) (7) - (14) - (22)
Changes during 1996 2 (1) 1 (2) - -
--------- --------- -------------- ----------- ------------- ------
At December 25, 1996 83 101 7 28 8 227
========= ========= ============== =========== ============= ======
- -------------------
(1) The Company also serves as the manager of each of these properties.
Properties divested include expired or terminated lease arrangements or
management agreements which have shorter terms than leases, joint venture
agreements or other forms of ownership. The Company generally includes a
termination clause in its management agreements which imposes a financial
penalty, paid to the Company by the managed owner, to discourage early
termination of management agreements.
Properties by Property Type
- ------------------------------
The Company's private clubs generally fall into one of four categories:
city, city/athletic, athletic and country clubs. The following tables
summarize the number and changes in the type of private club, resort, golf
club, and public golf properties operated during the periods indicated:
TOTAL
PRIVATE GOLF PUBLIC
CITY CITY/ATHLETIC ATHLETIC COUNTRY CLUBS RESORTS CLUBS GOLF TOTAL
----- -------------- --------- -------- -------- ------- ----- ------- ------
At December 28, 1994 84 20 8 84 196 7 9 27 239
Properties added during 1995 - - - 10 10 2 1 5 18
Properties divested during 1995 (5) (2) (1) (11) (19) - - (2) (21)
----- -------------- --------- -------- -------- ------- ----- ------- ------
At December 27, 1995 79 18 7 83 187 9 10 30 236
Properties added during 1996 4 1 - 7 12 1 3 1 17
Properties divested during 1996 (7) (1) (2) (13) (23) - - (3) (26)
----- -------------- --------- -------- -------- ------- ----- ------- ------
At December 25, 1996 76 18 5 77 176 10 13 28 227
===== ============== ========= ======== ======== ======= ===== ======= ======
Facilities are leased or purchased at varying times throughout the year.
Depending on the length of the partial year for which a facility is operated
and the seasonality of operations, the results of operations of a facility for
a portion of a year may not be indicative of the results of operations at the
facility for an entire year. During 1996, the operations of one private
country club were transferred to golf clubs and the operations of one city
club were transferred to city/athletic clubs.
Regional Information; Other Operating Information
- -----------------------------------------------------
The success of the Company's operations in each region of the country is
dependent in part on economic and weather conditions in these areas. The
Company's largest concentrations of operations are in the states of Texas,
California, and Florida.
The Company operated nine foreign facilities at December 25, 1996 of
which one is located in Canada, two are located in Mexico, two are in South
Africa, one is in Ecuador, one is in Singapore, one is in China, and one is
located in Indonesia.
The following table presents certain information with respect to
membership in the Company's mature private clubs and golf clubs (i.e., those
properties for which a comparable period of activity exists, generally those
owned for at least eighteen months to two years) for fiscal years ended
December 25, 1996, December 27, 1995 and December 28, 1994. The table reflects
memberships at private clubs and golf clubs which were classified as mature as
of the end of the period indicated. Memberships at beginning of period do not
equal prior period memberships at end of period primarily due to the inclusion
of new properties added as mature, and deletions of properties sold or
divested. Management adjusts memberships at beginning of period to provide an
accurate mechanism for comparison and analysis of identical mature clubs
(i.e., same clubs compared to same clubs).
MEMBERSHIPS AT MATURE PROPERTIES
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 25, DECEMBER 27, DECEMBER 28,
1996 1995 1994
------------- ------------- -------------
Memberships at beginning of period 188,255 183,217 187,778
Memberships added during period 32,712 30,368 34,383
Memberships lost during period (attrition) (33,897) (33,045) (38,488)
------------- ------------- -------------
Memberships at end of period 187,070 180,540 183,673
============= ============= =============
The following table presents certain information regarding room nights
available, occupancy rate, average daily room rate per occupied room and
average daily revenue per available room at the Company's mature resorts
(i.e., those resorts for which a comparable period of activity exists,
generally those owned for at least eighteen months to two years). This
information for the Company's mature resorts owned as of December 23, 1996,
was as follows for the fiscal years ended December 23, 1996 and December 25,
1995:
MATURE 1996 RESORT PROPERTIES
FISCAL YEAR ENDED
------------------------------
DECEMBER 23, DECEMBER 25,
1996 1995
-------------- --------------
Room nights available 622,352 616,676
Occupancy rate 45.63% 48.00%
Average daily room rate per occupied room $ 127.38 $ 117.46
Average daily revenue per available room $ 226.56 $ 219.79
The room nights available, occupancy rate, average daily room rate per
occupied room and average daily revenue per available room at the Company's
mature resort properties owned as of December 25, 1995, were as follows for
the fiscal years ended December 25, 1995 and December 26, 1994:
MATURE 1995 RESORT PROPERTIES
FISCAL YEAR ENDED
------------------------------
DECEMBER 25, DECEMBER 26,
1995 1994
-------------- --------------
Room nights available 427,045 409,511
Occupancy rate 52.12% 55.72%
Average daily room rate per occupied room $ 117.46 $ 108.22
Average daily revenue per available room $ 236.50 $ 234.82
The rounds played and average revenues per round played at the Company's
mature public golf and golf club properties (i.e., those properties for which
a comparable period of activity exists, generally those owned for at least
eighteen months to two years) owned as of December 25, 1996, were as follows
for the fiscal years ended December 25, 1996 and December 27, 1995:
MATURE 1996 GOLF PROPERTIES
FISCAL YEAR ENDED
----------------------------
DECEMBER 25, DECEMBER 27,
1996 1995
------------- -------------
Rounds 1,379,756 1,342,507
Average revenue per round $ 35.50 $ 34.31
The rounds played and average revenues per round played at the Company's
mature public golf properties owned as of December 27, 1995, were as follows
for the fiscal years ended December 27, 1995 and December 31, 1994:
MATURE 1995 GOLF PROPERTIES
FISCAL YEAR ENDED
----------------------------
DECEMBER 27, DECEMBER 31,
1995 * 1994 *
------------- -------------
Rounds 1,191,547 1,203,250
Average revenue per round $ 28.08 $ 28.02
- -----------------
* Golf clubs became a product line in 1996. Rounds were not tabulated prior to
January 1, 1995 for properties transferred from private clubs to golf clubs;
thus, these rounds represent rounds for public golf properties classified by
management at December 27, 1995 as mature public golf facilities only.
RESULTS OF OPERATIONS
The following table sets forth operating revenues by product line and by
type and certain operating expenses and certain other income and expense items
(excluding holding company income and expense items) for the fiscal years
indicated with percentage change based on comparisons between years (dollars
in millions):
PERCENTAGE CHANGE
FISCAL YEARS ENDED FROM PRIOR YEAR
--------------------------------------------- --------------------
DECEMBER 25, DECEMBER 27, DECEMBER 28, 1996 VS. 1995 VS.
1996 1995 1994 1995 1994
-------------- -------------- -------------- --------- ---------
Operating revenues by product line:
Private clubs $ 510.3 $ 500.9 $ 485.2 1.9% 3.2%
Golf clubs 26.2 23.1 21.8 13.4 6.0
Public golf 29.3 30.3 27.7 (3.3) 9.4
Resorts 149.8 145.3 129.7 3.1 12.0
Realty 28.9 23.5 7.1 23.0 231.0
International 6.8 1.8 0.8 277.8 125.0
Corporate services and eliminations 5.1 7.6 7.5 (32.9) 1.3
-------------- -------------- -------------- --------- ---------
Total operating revenues $ 756.4 $ 732.5 $ 679.8 3.3% 7.8%
============== ============== ============== ========= =========
Operating revenues by type:
Membership dues and fees $ 255.3 $ 250.6 $ 242.4 1.9% 3.4%
Food and beverage 231.9 233.2 230.8 (0.6) 1.0
Golf and other recreation 157.9 144.1 127.7 9.6 12.8
Lodging 45.8 43.2 40.3 6.0 7.2
Other (1) 65.5 61.4 38.6 6.7 59.1
-------------- -------------- -------------- --------- ---------
Total operating revenues $ 756.4 $ 732.5 $ 679.8 3.3% 7.8%
============== ============== ============== ========= =========
Cost and expenses and general administrative
expenses:
Direct operating costs $ 496.0 $ 489.7 $ 453.4 1.3% 8.0%
Facility rentals, operation and maintenance 114.5 114.0 109.3 0.4 4.3
Selling, general and administrative 58.1 63.5 52.6 (8.5) 20.7
Depreciation and amortization 48.9 49.3 40.3 (0.8) 22.3
Impairment loss from assets to be held and used 2.8 23.0 - * *
-------------- -------------- -------------- --------- ---------
Total costs and expenses $ 720.3 $ 739.5 $ 655.6 (2.6)% 12.8%
Income (loss) from continuing operations 36.1 (7.0) 24.2 * *
Interest expense (net) (22.2) (20.3) (11.6) 9.4 75.0
Other (3.0) - 1.1 * *
Gain on divestitures 5.7 2.4 6.0 * *
-------------- -------------- -------------- --------- ---------
Income (loss) from continuing operations before
income tax provision and minority interest $ 16.6 $ (24.9) $ 19.7 166.7% (226.4)%
============== ============== ============== ========= =========
(1) Other operating revenues includes management fees, corporate services
revenues to third parties, resort telephone, transportation and audio-visual
revenues, club special events income, equity in earnings of primarily real
estate joint ventures, real estate sales, and rental income.
* Percentages not meaningful.
FISCAL YEAR ENDED DECEMBER 25, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 27,
1995
Operating revenues increased 3.3% to $756.4 million in 1996 from $732.5
million during 1995. 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 $632.2 million to $648.9
million, an increase of 2.6% due to improving membership trends and
inflationary price increases. Revenues from properties acquired, net of
revenues lost from properties divested, in 1996 and 1995, represent a decrease
of $1.9 million in operating revenues.
Operating revenues from mature private club properties increased 2.1% to
$458.6 million in 1996 from $449.1 million in 1995 due primarily to
inflationary price increases. Membership enrollment (i.e., members added) was
17.5% and membership attrition (i.e., members lost) was 18.2% for a net
decrease of 1,185 members in 1996 (0.7% of year-end 1995 membership). Mature
private clubs membership dues and usage revenues (i.e., food and beverage,
golf, lodging, and other recreation) increased 2.5% and 2.4%, respectively, to
$217.2 and $237.5 million from $211.9 and $232.0 million, respectively, also
due primarily to inflationary price increases.
Golf clubs' operating revenues increased from $23.1 million to $26.2
million or 13.4% resulting primarily from improved usage at golf clubs
including one property which recently opened its clubhouse and 1996
acquisitions. Mature golf clubs' operating revenues increased 4.9% to $23.5
million in 1996 from $22.4 million in 1995, reflecting an increase of 4.0% in
rounds played combined with an increase of 0.8% in revenue per round.
International operating revenues increased 277.8% from $1.8 million in
1995 to $6.8 million in 1996 primarily due to equity earnings from a recently
opened city club in Singapore and 1996 acquisitions.
Golf and other recreation income increased 9.6% from $144.1 million in
1995 to $157.9 million in 1996, primarily due to acquisitions in 1995 and 1996
and the opening of new golf courses at certain mature properties.
Selling, general and administrative expense, excluding corporate
expenses, represent primarily the costs of executive management and various
support services provided to properties from corporate and regional personnel.
These costs decreased 8.5% from $63.5 million to $58.1 million in 1996 due to
lower levels of relocation costs, severance, professional fees, rent, and
international new business and development costs.
Impairment loss on assets to be held and used is $2.8 million in 1996
representing an estimate of impairment on long-lived assets in accordance with
SFAS 121. SFAS 121 is discussed separately under the caption "-Liquidity and
Capital Resources".
Income (loss) from operations increased from ($7.0) million in 1995 to
$36.1 million in 1996 primarily due to the impairment loss on assets to be
held and used of $23.0 million in 1995 which decreased to $2.8 million in
1996. Also, 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%.
Interest expense (net) increased 9.4% to $22.2 million for 1996 from
$20.3 million in 1995, due in part to higher leveraged acquisition activity.
Interest expense related to properties added in 1995 and 1996 was $0.7
million. Mature properties' interest expense increased from $18.2 million in
1995 to $18.8 million in 1996.
Other expense of $3.0 million in 1996 is primarily due to an accrual for
pending litigation in the ordinary course of business.
FISCAL YEAR ENDED DECEMBER 27, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 28,
1994
Operating revenues increased 7.8% to $732.5 million in 1995 from $679.8
million, primarily due to 1995 and 1994 acquisitions. A real estate
development limited partnership, which is controlled and owned 51.0% by the
Company and began operating in late 1994, contributed $19.4 million to
revenues in 1995 due to its real estate sales. 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 $588.4 million to $595.8 million, an increase of only 1.3% due to a
declining membership base.
Operating revenues from mature private club properties remained static at
$461.2 million in 1995 from $458.5 million in 1994, due to adverse membership
trends resulting principally from limitations on the deductibility of dues and
business meals and entertainment expenses included in 1993 tax legislation.
Membership enrollment (i.e., members added) was 14.7% from beginning of the
year membership levels and member attrition (i.e., members lost) was 18.4% for
a net decrease of 2,677 members in 1995 (1.5% of year-end 1994 membership).
Mature private clubs membership dues remained static at $217.2 million in 1995
compared to $215.2 million in 1994, due to a shrinking membership base. Usage
revenues for mature private club properties (i.e., food and beverage, golf,
lodging, and other recreation) remained constant at $238.7 million in 1995
compared to $237.6 million in 1994, also due to a shrinking membership base.
Public golf revenues grew 9.4% from $27.7 million to $30.3 million
resulting primarily from acquisitions in 1995 and 1994. Operating revenues
from mature public golf facilities decreased slightly to $26.3 million in 1995
from $26.7 million in 1994, reflecting constant rounds played and revenue per
round.
Resort operating revenues increased 12.0% from $129.7 million to $145.3
million, due primarily to the acquisition of Mont Sainte-Anne Resort in Canada
in the last half of 1994 which represents $6.9 million of the increase in
1995. Operating revenues from mature owned resorts increased from $96.2
million in 1994 to $101.0 million in 1995, an increase of 5.0%, reflecting a
flat average daily revenue per available room combined with an increase of
8.5% in the average daily room rate per occupied room.
Other operating revenues increased 59.1% from $38.6 million in 1994 to
$61.4 million in 1995, primarily due to real estate sales of land held for
resale in Aspen, Colorado of $19.4 million during 1995 and an increase in
equity in earnings from the Company's 50.0% joint venture interest in
Stonebriar Country Club and related real estate held for resale in Texas
offset by a decrease in real estate sales in other locations. Also, the
Company received rental income of $2.5 million in 1995 under a sale-leaseback
transaction entered into in the last quarter of 1994.
Direct operating costs (which consist principally of property level
payroll related costs and other costs of services provided) increased 8.0%, to
$489.7 million in 1995 from $453.4 million in 1994, principally reflecting
increased costs related to acquisitions in 1995 and 1994. A real estate
development limited partnership incurred $17.3 million in costs directly
associated with its real estate sales in 1995.
Selling, general and administrative costs, excluding corporate expenses,
represent primarily the costs of executive management and of various support
services provided to properties from corporate and regional offices. These
costs increased 20.7%, to $63.5 million in 1995 from $52.6 million in 1994,
due primarily to higher levels of payroll costs, reversals of previously
anticipated incentive compensation for 1994, relocation, severance, and
certain transitional costs related to the reassessment of functions and
positions throughout the organization to enhance the overall effectiveness of
operations. In addition, professional fees, rent and foreign operating and new
business and development costs increased in 1995.
Depreciation and amortization expense increased 22.3%, to $49.3 million
from $40.3 million. The increase relates mainly to acquisitions in 1995 and
1994 and $2.0 million in expense from the depreciation and amortization of
hardware and software associated with an internally developed club management
system placed in service. Depreciation and amortization at mature facilities
increased from $33.9 million in 1994 to $36.4 million in 1995, a 7.4%
increase.
Impairment loss on assets to be held and used is $23.0 million in 1995
representing an estimate of impairment on long-lived assets in accordance with
SFAS 121. SFAS 121 is discussed separately under the caption "-Liquidity and
Capital Resources ".
Income (loss) from continuing operations decreased from $24.2 million in
1994 to ($7.0) million in 1995 primarily due to the impairment loss on assets
to be held and used of $23.0 million in 1995.
Interest expense (net) increased 75.0%, to $20.3 million in 1995 from
$11.6 million in 1994, reflecting higher leveraged acquisition activity and
increasing interest rates on variable-rate debt. Interest expense related to
properties added in 1995 and 1994 was $4.1 million. In addition, one of the
Company's subsidiaries began using an external bridge financing arrangement
with a bank in the last half of 1994 primarily for financing of acquisitions.
Interest expense related to this bridge financing increased $2.4 million in
1995. Mature properties' interest expense increased from $13.5 million to
$15.7 million, a 16.3% increase.
SEASONALITY
The Consolidated Financial Statements of the Company are presented on a
calendar year basis. 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 the
majority of its operating revenue in the second, third and fourth quarters of
each year. Acquisitions, divestitures and other material transactions
occurring between fiscal quarter end and calendar quarter end are included in
the Company's Consolidated Financial Statements. The timing of purchases or
leases of new 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 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 has financed 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.
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 December
31, 1996. At December 31, 1996, certain hospitality subsidiaries of the
Company were not in compliance with outstanding loan agreements relating to
long-term debt totaling $10.8 million. Such 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 December 31, 1996,
cash balances of $8.9 million were not available for dividends by subsidiaries
due to those restrictions.
At December 31, 1996, the Company's subsidiaries maintained $14.7 million
of unused letters of credit primarily to guarantee payment of potential
insurance claims paid under workers' compensation and general liability
programs. Commitments to fund future capital expenditures were not material as
of December 31, 1996.
All of the assets of the ClubCorp Stock Investment Plan (the "Plan") are
invested in shares of ClubCorp's common stock, $.01 par value per share (the
"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 (the "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 December 31, 1996, the value of the Redemption Right
was $43.2 million. The most recent appraised price of the Common Stock is
$12.04 as of December 31, 1996. The aggregate market value of the Common Stock
at December 31, 1996 is $1,028.1 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.
The Company maintains a first right of refusal with the majority of its
stockholders and, accordingly, it has historically purchased shares from
stockholders when offered for sale back to the Company. During the fiscal
years 1996, 1995 and 1994, treasury stock purchases of ClubCorp from
stockholders, sales of stock (which were primarily to the Plan), and other
shares issued were as follows (dollars in millions):
YEARS ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
Treasury stock purchases $(4.4) $(6.5) $(6.0)
Reissuance of treasury stock 0.3 0.3 0.2
Stock issued in connection with bonus plans 1.1 1.9 2.2
------ ------ ------
$(3.0) $(4.3) $(3.6)
====== ====== ======
See the Consolidated Statement of Stockholders' Equity located elsewhere
herein for a summary of stockholder equity transactions.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Certain information in this Annual Report on Form 10-K 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.
Several legislative proposals have been enacted into law which could
increase the Company's direct operating costs. The first proposal increased
the minimum wage to $4.75 per hour on October 1, 1996 with a second increase
in the minimum wage to $5.15 per hour occurring on September 1, 1997.
Management estimates that there will not be a significant increase in direct
operating costs as a result of this new law. Benefits legislation may impact
the cost of health coverage, in particular regarding coverage of pre-existing
conditions. Benefit mandates will have no significant financial impact on the
Company in 1997; however, management has not yet determined the financial
impact for 1998 when most requirements become effective.
Over the last three years, attrition rates among members of the Company's
mature clubs have ranged from approximately 17.5% to 22.4%. In certain areas,
the Company has experienced decreased levels of usage of its clubs and public
golf facilities. Membership attrition at mature clubs during 1996 was 18.2%,
which is higher than enrollment rates of 17.5% during the same period. The
Company continues to focus its efforts on membership enrollment programs to
increase membership levels and quality service to reduce attrition as 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 and increasing
the involvement of member boards of governors in planning day-to-day
activities. 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%. Total costs and expenses
(excluding holding company expenses) decreased 2.6%. 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.
The Company has policies in place designed to bring its properties in
substantial compliance with all current federal, state and local environmental
laws and laws relating to access for disabled persons. The Company estimates
that capital expenditures in connection with certain environmental matters
will be approximately $3.0 million to $5.0 million in the aggregate over the
next five years and that capital expenditures in connection with compliance
with the Americans with Disabilities Act of 1990 will be approximately $3.0
million over the next five years. The Company is not subject to any recurring
costs associated with managing hazardous materials or pollution. In addition,
management does not believe that the Company will incur expenses for
infrequent or non-recurring cleanup, based upon the Company's due diligence
inspection, employee training, standards of operations and on-site assessments
performed and maintained for each property. However, the Company is in the
process of replacing approximately 66 underground storage tanks with
aboveground contained storage systems. It is likely that some of those tanks
will be found to require remediation. The Company is permitted under various
state laws to recover a portion of its costs of remediation through various
state superfunds created to address environmental cleanups. The Company is not
subject to any remediation mandates related to previously contaminated sites.
See Item 1, "Business-Hospitality Operations-Government Regulation".
As of March 24, 1997, the Company was in the final stages of negotiations
to build two properties. The Company is considering several ownership
structures for the properties to be built including lease arrangements, sole
ownership, and partial ownership (including joint venture interests). The
consummation of the construction of these properties is expected to require
approximately $1.0 to $2.0 million in capital expenditures, to be funded
primarily with external bridge financing of Club Corporation of America (CCA)
and cash flows from operations. 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 December
31, 1996 and March 24, 1997, $74.5 and $25.0 million, respectively, was
outstanding under this financing arrangement. On January 3 and 6, 1997,
discretionary payments of $42.1 million and $7.4 million, respectively, were
made from proceeds on the sale of Franklin Federal Bancorp, a Federal Savings
Bank, to repay outstanding borrowings. Due to its short-term nature, the
amount outstanding, excluding letters of credit and loan guarantees, at
December 31, 1996 is considered current for financial reporting purposes. The
eventual outcome of the negotiations cannot be accurately predicted at this
time.
The Company has acquired 59 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 factors include a high dependency on real estate sales for new
membership growth, slower progress than anticipated in repositioning
properties, slower than anticipated turnarounds of prior operating deficits,
and extended periods of time to reach economies of scale. 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.
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 or 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.
In March of 1995, the Financial Accounting Standards Board (FASB) 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 and certain identifiable intangibles 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. ClubCorp assessed the recoverability of long-lived assets by
determining whether they could be recovered over their remaining life through
undiscounted future operating cash flows. Fair value, for purposes of
calculating any impairment, was measured based on discounted future operating
cash flows using a risk-adjusted discount rate. Events or changes in
circumstances identified indicating that the carrying amount of certain
long-lived assets may not be recoverable were primarily decreases in the
market values of assets and current period cash flow deficits combined with
historical cash flow deficits and forecasts of continuing deficits. Impairment
losses of $23.0 and $2.8 million for the years ended December 31, 1995 and
1996, respectively, were recognized related to long-lived assets. These losses
are reported separately as a component of income (loss) from continuing
operations in the Company's Consolidated Financial Statements. If events or
circumstances change in the future, additional impairment losses could be
recognized. The ability of certain subsidiaries to refinance present
obligations could be adversely impacted by the impairment. For purposes of the
Company's Consolidated Statement of Cash Flows, these impairment losses are
treated as non-cash transactions. In addition, the impairment losses will have
no impact on the Company's Formula Price.
HOLDING COMPANY ACTIVITIES
ClubCorp maintains investments in marketable equity securities, various
venture capital partnerships and an oil and gas venture. Investment income
(loss) consists of the following for the periods presented (dollars in
millions):
YEARS ENDED DECEMBER 31,
--------------------
1996 1995 1994
----- ----- ------
Gain on sale of investments $ 3.4 $ 1.1 $ -
Write-down of oil and gas venture - - (1.8)
Cash distribution from oil and gas venture 0.9 - -
Stock distribution from venture capital partnership - 0.7 0.3
----- ----- ------
$ 4.3 $ 1.8 $(1.5)
===== ===== ======
ClubCorp files a consolidated federal income tax return. See Note 13 of
the Notes to the Consolidated Financial Statements for additional disclosures
related to ClubCorp's income taxes. ClubCorp's federal and state income taxes
are as follows (dollars in millions):
Years ended December 31,
-----------------------
1996 1995 1994
------ ------- ------
Income (loss) from continuing operations
before income tax provision and
minority interest $17.6 $(25.7) $16.4
====== ======= ======
Income tax provision:
Federal
Current 0.1 0.9 (0.2)
Deferred - (0.1) -
------ ------- ------
0.1 0.8 (0.2)
State (1.4) (1.7) (1.7)
------ ------- ------
$(1.3) $ (0.9) $(1.9)
====== ======= ======
Percentage of income tax provision to
income (loss) from continuing operations
before income tax provision and
minority interest 7.4% 3.5% 11.6%
====== ======= ======
The Company operates in 33 states and its operations are subject to tax
by various state and local taxing authorities. The Company generates
substantial taxable income in various states including Texas, Illinois, North
Carolina and Florida. As state and local taxing authorities raise tax rates
and change tax codes to increase tax revenues (in order to compensate for
lower federal assistance and increased responsibility for administration of
social programs), the Company is increasingly experiencing more exposure to
state and local income taxes.
Since the acquisition of Franklin in 1988, ClubCorp has reduced or
eliminated its tax liability (to 2% of alternative minimum taxable income) by
using net operating loss carryforwards that resulted from Franklin's
operations. After considering amended returns finalized in 1996, ClubCorp has
estimated net operating loss carryforwards at the end of 1996 of $569.0
million and $147.6 million for regular and alternative minimum taxes,
respectively. As a result, the Company will be able to continue to reduce its
estimated tax liability to 2% of alternative minimum taxable income until such
alternative minimum tax net operating losses are fully utilized or expire.
The net operating losses expire from 2004 to 2010. These estimates are based
upon certain assumptions concerning the Company's 1996 operations from an
alternative minimum tax perspective and may be revised at the time the Company
prepares its federal income tax return.
The Company has substantial regular net operating loss carryforwards
available. To realize the deferred tax asset fully the Company will need to
generate future taxable income of approximately $210.0 million by 2011. Based
on the Company's historical pretax earnings, adjusted for significant
nonrecurring items such as gains on divestitures, management believes it is
more likely than not the Company will realize the benefit of the deferred tax
assets, net of the valuation allowance, existing at December 31, 1996. The
assumptions used to estimate the realizability of the deferred tax assets are
subjective in nature and involve uncertainties and matters with significant
judgment. There can be no assurance that the Company will generate any
specific level of continuing earnings. The Company will receive benefits in
the form of tax credits in the future to the extent of alternative minimum
taxes paid.
The Company's federal income tax returns for 1991 through 1994 are under
examination by the Internal Revenue Service. Because many types of
transactions are susceptible to varying interpretations under federal income
tax laws and regulations, the net operating loss carryforwards and net
deferred tax asset reported in the Consolidated Financial Statements could
change at a later date upon final determination by the taxing authorities.
Management believes the Company will prevail on any significant interpretation
issues.
Corporate expenses represent primarily general administrative expenses
associated with holding company activities. During 1996, 1995 and 1994
corporate expenses were $3.2 million, $2.7 million and $1.7 million,
respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements and related notes begin
on Page F-1 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
directors and executive officers of ClubCorp:
Name Age Position
- ------------------------------------- --- -------------------------------------------------------------------
Robert H. Dedman, Sr. 71 Chairman of the Board and Chief Executive Officer
James E. Maser (1) (2) (3) (4) (5) 59 Vice Chairman of the Board
Robert H. Dedman, Jr. (1) (2) (3) (4) 39 President, Chief Operating Officer and Director; Chairman of the
Board and Chief Executive Officer of CCA; Chairman of the Board
and Chief Executive Officer of Club Resorts
James P. McCoy, Jr. (1) (2) (3) (5) 51 Chief Financial Officer, Senior Vice President and Director
John H. Gray (2) (3) (4) (5) 47 Executive Vice President, Chief Administrative Officer and Director
James M. Hinckley (1) (2) (4) 41 Director; President and Chief Operating Officer of CCA
and Club Resorts
Terry A. Taylor (1) (2) (3) (5) 41 Senior Vice President, Secretary, Chief Legal Officer and Director
Mark W. Dietz 43 Executive Vice President and Director
Albert E. Chew, III (2) (4) 43 Senior Vice President and Director
Randy L. Williams (1) (2) 47 Executive Vice President and Director
Richard S. Poole (2) 71 Executive Vice President and Director
Jerry W. Dickenson 56 Director
Nancy M. Dedman 69 Director
Patricia Dedman Dietz 41 Director
Robert H. Johnson (2) (4) 50 Director
(1) Member of Investment Committee
(2) Member of Executive Committee
(3) Member of Audit Committee
(4) Member of Human Resources Committee
(5) Member of Treasury Stock Committee
The Board of Directors of ClubCorp is currently comprised of 15
directors. All directors of ClubCorp hold office until the next annual meeting
of stockholders and until their successors have been duly elected and
qualified. Officers for 1997 will be appointed by ClubCorp's Board of
Directors in the second quarter of 1997, effective January 1, 1997.
Robert H. Dedman, Sr. has been Chairman of the Board and Chief Executive
Officer of ClubCorp since its inception in 1957. Mr. Dedman is a director of
United Meridian Corporation and an advisory director of Stewart Information
Services, Inc. The following members of Mr. Dedman's family are also
directors and/or officers of the Company: Nancy M. Dedman (wife), Robert H.
Dedman, Jr. (son), Patricia Dedman Dietz (daughter) and Mark W. Dietz
(son-in-law).
James E. Maser has been associated with the Company since 1965 and has
been a director since 1971, serving as Vice Chairman of the Board of Directors
since 1989. Mr. Maser also serves as a director of American Eagle Group, Inc.
Robert H. Dedman, Jr. joined the Company in 1980 and served as Director
of Corporate Planning from 1980 until 1984. From 1984 until 1987, Mr. Dedman
was an Associate at Salomon Brothers Inc., specializing in mergers and
acquisitions. Mr. Dedman returned to the Company in 1987 as Chief Financial
Officer of ClubCorp. Since 1989, Mr. Dedman has served as President, Chief
Operating Officer and director of ClubCorp and as Chairman of the Board and
Chief Executive Officer of CCA. Mr. Dedman also serves as Chairman of the
Board of Club Resorts.
James P. McCoy, Jr. joined the Company in 1973, and served as Vice
President and Treasurer during 1983. He has been a director of ClubCorp since
1994. From 1983 to 1986, Mr. McCoy was the Manager of Corporate Financial
Services for Merrill Lynch. Mr. McCoy returned in 1986 as the Treasurer of
ClubCorp and has been the Chief Financial Officer of ClubCorp since 1988.
John H. Gray joined the Company in 1981 and has been Executive Vice
President, Chief Administrative Officer and a director of ClubCorp since 1989.
James M. Hinckley joined the Company in 1970, and since that time he has
held various positions and offices with the Company. Mr. Hinckley has been a
director of ClubCorp since 1989. Mr. Hinckley has also been the President of
Club Resorts and Chief Operating Officer since February 1992. Effective
January 1, 1995, Mr. Hinckley became President and Chief Operating Officer of
all of ClubCorp's domestic operating subsidiaries.
Terry A. Taylor has been Senior Vice President, Secretary and Chief
Legal Officer of ClubCorp since 1990, and has been a director of ClubCorp
since January 1994. From 1987 to 1990, Mr. Taylor served as Vice President
and General Counsel for a subsidiary of Halliburton Company.
Mark W. Dietz has been a director of ClubCorp since 1986 and an
Executive Vice President of ClubCorp since January 1995. For more than five
years prior to February 1992, Mr. Dietz was the owner and principal officer of
Concord Realty, Inc., which, prior to its acquisition by ClubCorp, was
involved in various real estate activities. Mr. Dietz is married to Patricia
Dedman Dietz.
Albert E. Chew, III joined the Company in 1988 as Director of Human
Resources for Club Resorts. In 1992, Mr. Chew was elected as a Vice President
of ClubCorp. Mr. Chew has served as a director of ClubCorp since January 1994
and became Senior Vice President of ClubCorp in 1995.
Randy L. Williams joined the Company in 1976 as a club manager. Since
then he has served in various executive capacities with the Company and in
1994 assumed responsibility for all new business development for ClubCorp.
Effective January 1995, Mr. Williams became a director and Executive Vice
President of ClubCorp.
Richard S. Poole joined the Company in 1960 and has been a director of
ClubCorp since 1969. Mr. Poole served as Executive Vice President of ClubCorp
from 1987 through 1989. Since 1989, Mr. Poole has served in various executive
capacities with the Company and, beginning in 1995, has resumed serving as
Executive Vice President of ClubCorp.
Jerry W. Dickenson joined the Company in 1969 and has been a director of
ClubCorp since 1972. Mr. Dickenson served as Executive Vice President of
ClubCorp from 1987 through 1989 and in 1995. Mr. Dickenson was the Chairman
of the Board of Club Resorts from 1987 through 1994.
Nancy M. Dedman has been a director of ClubCorp since its inception in
1957.
Patricia Dedman Dietz has been a director of ClubCorp since 1982. Ms.
Dietz has been a psychotherapist in private practice for the last 13 years.
Robert H. Johnson joined the Company in 1975 and has been a director of
ClubCorp since 1988. Mr. Johnson served as President and Chief Operating
Officer of CCA from 1986 through 1994. Effective January 1, 1995, Mr. Johnson
became President and Chief Operating Officer of The International Group of
ClubCorp.
ITEM 11. EXECUTIVE COMPENSATION
- ----------------------------------
Summary Compensation Table
- ----------------------------
The following table sets forth the compensation paid by ClubCorp to its
chief executive officer and its four other most highly compensated executive
officers (collectively, the "Named Executive Officers") during the years ended
December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ----------------------------------
AWARDS PAYOUTS
----------------- ------------
OTHER ANNUAL RESTRICTED LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS (1) PAYOUTS (2)
- ----------------------------------- ---- -------- -------- ------------- ----------------- ------------
Robert H. Dedman, Sr. 1996 $302,820 $ - $ - $ - $ 94,244
Chairman of the Board and 1995 302,820 - - - 95,468
Chief Executive Officer 1994 302,820 - - - 108,472
Robert H. Dedman, Jr. 1996 288,400 - - - 75,015
President, Chief Operating 1995 280,000 - - - 75,989
Officer and Director 1994 280,000 150,630 - - 86,331
James M. Hinckley 1996 283,250 - - - 66,246
President of Club Resorts, 1995 275,000 - - - 67,117
President of CCA and Director 1994 231,750 50,000 - - 76,251
Robert H. Johnson 1996 240,400 - - - 62,883
President and Chief Operating 1995 233,398 - - - 63,699
Officer (foreign operating 1994 233,398 - - - 72,369
subsidiaries) and Director
James E. Maser 1996 213,590 - - - 68,468
Vice Chairman of the Board 1995 213,590 - - - 69,358
1994 213,590 - - - 78,808
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
- ----------------------------------- --------------
Robert H. Dedman, Sr. $ 7,000 (3)
Chairman of the Board and 8,400 (3)
Chief Executive Officer 7,000 (3)
Robert H. Dedman, Jr. 8,946 (4)
President, Chief Operating 14,340 (4)
Officer and Director 11,873 (4)
James M. Hinckley 2,662 (5)
President of Club Resorts, 1,062 (5)
President of CCA and Director 558 (5)
Robert H. Johnson 3,750 (5)
President and Chief Operating 1,267 (5)
Officer (foreign operating 554 (5)
subsidiaries) and Director
James E. Maser 4,216 (5)
Vice Chairman of the Board 1,373 (5)
640 (5)
- --------------------------
(1) No restricted stock was awarded for 1996, 1995 or 1994. There were no
unvested restricted stock awards as of December 31, 1996.
(2) Reflects the dollar value of payouts in 1996, 1995 and 1994 (based
upon the Formula Price at the date of the payout) relating to restricted stock
awarded for periods prior to 1994, as follows: Robert H. Dedman, Sr. - 9,416
shares in 1994 and 9,415 shares in 1995 and 1996; Robert H. Dedman, Jr. -
7,494 shares in 1994, 1995, and 1996; James M. Hinckley - 6,619 shares in
1994, and 1995 and 6,618 shares in 1996; Robert H. Johnson - 6,282 shares in
1994, 1995, and 1996 and James E. Maser - 6,841 shares in 1994 and 6,840
shares in 1995 and 1996.
(3) Represents amounts paid to Mr. Dedman for services rendered as a
director of Franklin.
(4) Consists of $646 in 1996, $840 in 1995, and $473 in 1994 in Basic
Matching Contributions and Discretionary Matching Contributions made by
ClubCorp on Mr. Dedman's behalf pursuant to the Plan and $8,300 in 1996,
$13,500 in 1995 and $11,400 in 1994 paid to Mr. Dedman for services rendered
as a director of Franklin.
(5) Represents Basic Matching Contributions and Discretionary Matching
Contributions made by ClubCorp on Mr. Hinckley's, Mr. Johnson's, and Mr.
Maser's behalf, respectively, pursuant to the Plan.
SAR Exercise and Value Table
- --------------------------------
The following table summarizes for each Named Executive Officer the
aggregated SAR exercises during the fiscal year ended December 31, 1996 and