ClubCorp Club Operations, Inc.

CIK:0001515382|SEC Filings

CLUB ACQUISITIONS, CLUB DISPOSITIONS AND DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2013

CLUB ACQUISITIONS, CLUB DISPOSITIONS AND DISCONTINUED OPERATIONS

Club Acquisitions

Assets and liabilities from business combinations were recorded on our consolidated balance sheets at fair value at the date of acquisition. The results of operations of such businesses have been included in the consolidated statements of operations since their date of acquisition.

Chantilly National Golf & Country Club—On December 17, 2013, we acquired Chantilly National Golf & Country Club, a private country club located in Centreville, Virginia, in exchange for net cash consideration of $4.8 million. We recorded the following major categories of assets and liabilities, which are subject to change until our information is finalized, no later than twelve months from the acquisition date:



Depreciable land improvements, property and equipment	$	5,171
Inventory	103
Other current liabilities	(25		)
Other long-term liabilities	(180		)
Long-term debt	(234		)
Total	$	4,835

Cherry Valley Country Club—On June 18, 2013, we acquired Cherry Valley Country Club, a private country club located in Skillman, New Jersey, in exchange for net cash consideration of $5.6 million. We recorded the following major categories of assets and liabilities:



Depreciable land improvements, property and equipment	$	5,976
Prepaid assets	121
Inventory	179
Long-term debt	(311		)
Other liabilities	(408		)
Total	$	5,557

Oak Tree Country Club—On May 22, 2013, we acquired Oak Tree Country Club, a private country club located in Edmond, Oklahoma, in exchange for net cash consideration of $5.2 million. We assumed debt of $5.0 million in connection with the acquisition. We recorded the following major categories of assets and liabilities:



Land, property and equipment	$	12,108
Receivables, prepaid assets and other assets	662
Inventory	233
Current maturities of long-term debt	(468		)
Long-term debt	(4,486		)
Deferred tax liability	(722		)
Membership initiation deposits and other liabilities	(2,099		)
Total	$	5,228

Hartefeld National Golf Club—On April 18, 2012, we acquired Hartefeld National Golf Club, a private country club located in Avondale, Pennsylvania. We recorded the following major categories of assets and liabilities in exchange for consideration of $3.6 million:



Land, depreciable land improvements, property and equipment	$	3,999
Prepaid real estate taxes	31
Inventory	112
Deferred revenue and other liabilities	(572		)
Total	$	3,570

Long Island Clubs—On June 7, 2011, ClubCorp acquired three properties located in Long Island, New York. The properties include Hamlet Golf and Country Club which is a private golf club, and Wind Watch Golf and Country Club and Willow Creek Golf and Country Club which are semi-private golf clubs. We recorded the following major categories of assets and liabilities in exchange for total consideration of $18.8 million:



Land, property and equipment	$	20,223
Prepaid real estate taxes	487
Inventory	197
Deferred revenue and other liabilities	(2,131		)
Total	$	18,776

Canterwood Golf & Country Club—On August 9, 2011, ClubCorp acquired Canterwood Golf and Country Club, a private golf club property located in Gig Harbor, Washington. We recorded the following major categories of assets and liabilities in exchange for consideration of $4.0 million:



Land, property and equipment	$	4,003
Inventory and other current assets	149
Deferred revenue and other liabilities	(171		)
Total	$	3,981

There was no goodwill recorded on any of the purchase transactions listed above.

Revenues and operating income associated with clubs acquired during the fiscal years ended December 31, 2013, December 25, 2012 and December 27, 2011, were as follows for each year.



	2013		2012		2011
Revenues	$	34,751	$	22,175	$	10,079
Operating income (loss)	$	538	$	705	$	(620	)

The pro forma information related to these acquisitions is not material to our historical results of operations.

Club Dispositions

Clubs may be divested when we determine they will be unable to provide a positive contribution to cash flows from operations in future periods and/or when they are determined to be non-strategic holdings for the Company. Gains from divestitures are recognized in the period in which operations cease and losses are recognized when we determine that the carrying value is not recoverable and exceeds fair value.

Glendale Racquet Club, Inc.—On September 27, 2012, we sold certain assets and liabilities of Glendale Racquet Club, Inc., a sports club located in Milwaukee, Wisconsin, to an unrelated third party for $5.9 million. The sale resulted in a pre-tax loss of $11.1 million recorded in the fiscal year ended December 25, 2012 including a $6.5 million loss recognized for goodwill allocated to this entity. See Note 7. These losses are included in loss from discontinued operations in the consolidated statements of operations and comprehensive loss.

We discontinued one additional business, sports and alumni club and one golf management contract in the fiscal year ended December 25, 2012 for a pre-tax gain of $0.1 million. In conjunction with the discontinued golf management contract, we recorded impairment of liquor licenses of $0.1 million. See Note 7. We discontinued two business, sports and alumni clubs and one golf management contract for a pre-tax loss of $0.0 million during the fiscal year ended December 27, 2011.

We did not discontinue any clubs in the fiscal year ended December 31, 2013.

There were no assets held for sale at December 31, 2013 or December 25, 2012.

Discontinued Club Operations

Operations of the clubs that have been disposed along with the held for sale property were reclassified to discontinued operations on the consolidated statements of operations. Summarized financial information for these clubs is as follows:



	2013			2012			2011
Revenues	$	—		$	3,759		$	7,387
Operating expenses, excluding loss on disposals and impairments of assets	(10		)	(3,658		)	(7,152		)
Gain (loss) on disposals and impairments of assets	1			(11,448		)	(126		)
Interest expense	—			(2,239		)	(215		)
Loss from discontinued club operations, before taxes	(9		)	(13,586		)	(106		)
Income tax (expense) benefit	(3		)	2,669			(152		)
Net income (loss) from discontinued clubs	$	(12	)	$	(10,917	)	$	(258	)

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 25, 2012	Dec. 27, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (39,969)	$ (26,293)	$ (34,898)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation	69,211	68,780	68,941
Amortization	2,863	9,829	24,973
Asset Impairment Charges, Including Discontinued Operations	6,380	4,926	1,273
Bad debt expense	3,502	2,793	3,435
Equity in earnings from unconsolidated ventures	(2,638)	(1,947)	(1,487)
Distribution from investment in unconsolidated ventures	4,699	3,882	4,872
Loss on disposals of assets	8,121	22,208	9,627
Amortization and write-off of debt issuance costs	5,084	2,033	1,915
Accretion of discount on member deposits	20,961	24,596	18,281
Amortization of surface rights bonus revenue	0	(1,823)	(3,750)
Amortization of above and below market rent intangibles	141	281	233
Share-based Compensation	14,217	0	0
Debt early redemption premium	14,525	0	0
Net change in deferred tax assets and liabilities	(4,136)	(13,815)	(20,073)
Net change in prepaid expenses and other assets	(2,849)	(532)	607
Net change in receivables and membership notes	(26,925)	1,859	2,874
Net change in accounts payable and accrued liabilities	(817)	4,262	9,085
Net change in other current liabilities	26,550	1,953	(12,708)
Net change in other long-term liabilities	(5,187)	(6,055)	1,474
Net cash provided by operating activities	93,733	96,937	74,674
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(59,541)	(54,208)	(47,940)
Payments to Acquire Businesses, Net of Cash Acquired	(15,620)	(3,570)	(22,756)
Proceeds from dispositions	1,419	8,002	551
Proceeds from insurance	0	2,228	0
Net change in restricted cash and capital reserve funds	(59)	230	(282)
Return of capital in equity investments	1,073	0	486
Net cash used in investing activities	(72,728)	(47,318)	(69,941)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(170,937)	(14,830)	(12,884)
Proceeds from Issuance of Long-term Debt	10,713	0	0
Debt early redemption premium, Financing Activity	(14,525)	0	0
Payments for Derivative Instrument, Financing Activities	0	(57)	0
Payments of Debt Issuance Costs	(7,872)	(917)	(2,276)
Payments of Capital Distribution	(35,000)	0	0
Proceeds from Contributed Capital	0	0	3,197
Proceeds from Issuance Initial Public Offering	173,250	0	0
Payments of Stock Issuance Costs	(4,349)	0	0
Payments to Noncontrolling Interests	0	(942)	0
Proceeds from new membership initiation deposits	1,042	851	423
Repayments of membership initiation deposits	(1,421)	(3,016)	(358)
Net cash used in financing activities	(49,099)	(18,911)	(11,898)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(50)	826	951
NET INCREASE IN CASH AND CASH EQUIVALENTS	(28,144)	31,534	(6,214)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	81,851	50,317	56,531
CASH AND CASH EQUIVALENTS - END OF PERIOD	53,707	81,851	50,317
Supplemental Cash Flow Information [Abstract]
Interest Paid	61,441	66,932	61,007
Income Taxes Paid	3,187	4,089	14,080
Noncash Investing and Financing Items [Abstract]
Capital Lease Obligations Incurred	11,342	10,799	14,942
Capital Expenditures Incurred but Not yet Paid	1,790	1,092	1,070
Leasehold Improvements Incurred But Yet Paid	0	442	370
Non Cash Contribution From Owner	0	0	1,058
Distributions declared, but unpaid	7,654
Notes Assumed	4,954	0	0
Parent Company [Member]
Noncash Investing and Financing Items [Abstract]
Distributions declared, but unpaid	7,654	0	0
Distribution related to utilization of DTA, Non-cash disclosure	$ 4,518	$ 0	$ 0

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 25, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 53,707	$ 81,851
Receivables, net of allowances of $3,666 and $2,626 at December 31, 2013 and December 25, 2012, respectively	83,151	51,580
Inventories	15,819	14,361
Prepaids and other assets	13,339	12,199
Deferred tax assets	10,403	8,076
Total current assets	176,419	168,067
Investments	8,032	11,166
Property and equipment, net (includes $9,347 and $9,870 related to VIEs at December 31, 2013 and December 25, 2012, respectively)	1,234,903	1,223,539
Notes receivable, net of allowances of $724 and $563 at December 31, 2013 and December 25, 2012, respectively	4,756	3,183
Goodwill	258,459	258,459
Intangibles, net	27,234	31,958
Other assets	25,502	23,224
TOTAL ASSETS	1,735,305	1,719,596
CURRENT LIABILITIES:
Current maturities of long-term debt	11,567	24,988
Membership initiation deposits - current portion	112,212	91,398
Accounts payable	26,530	27,441
Accrued expenses	36,772	35,989
Accrued taxes	20,415	16,637
Other liabilities	79,300	52,915
Total current liabilities	286,796	249,368
Long-term debt (includes $1,320 and $1,571 related to VIEs at December 31, 2013 and December 25, 2012, respectively)	626,275	756,532
Membership initiation deposits	204,154	202,630
Deferred tax liability	212,604	208,993
Other liabilities	136,833	129,009
Total liabilities	1,466,662	1,546,532
Commitments and contingencies (See Note 15)
EQUITY
Common stock of ClubCorp Club Operations, Inc., $1.00 par value, 1,000 shares authorized, issued and outstanding at December 31, 2013 and December 25, 2012, respectively	1	1
Additional paid-in capital	349,256	213,310
Accumulated other comprehensive loss	(1,070)	(672)
Retained deficit	(90,321)	(50,140)
Total stockholders' equity	257,866	162,499
Noncontrolling interests in consolidated subsidiaries and variable interest entities	10,777	10,565
Total equity	268,643	173,064
TOTAL LIABILITIES AND EQUITY	$ 1,735,305	$ 1,719,596