NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands, except per share amounts or unless otherwise indicated)
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
ClubCorp Holdings, Inc. (“Holdings”) and its wholly owned subsidiaries CCA Club Operations Holdings, LLC (“Operations’ Parent”) and ClubCorp Club Operations, Inc. (“Operations” and, together with Holdings and Operations’ Parent, “ClubCorp”) were formed on
November 10, 2010
, as part of a reorganization of ClubCorp, Inc. (“CCI”), which was effective as of
November 30, 2010
, for the purpose of operating and managing golf and country clubs and business, sports and alumni clubs. ClubCorp, together with its subsidiaries, may be referred to as “we”, “us”, “our” or the “Company”.
As of
December 27, 2016
, we own, lease or operate through joint ventures
150
golf and country clubs and manage
nine
golf and country clubs. Likewise, we lease or operate through a joint venture
44
business, sports and alumni clubs and manage
three
business, sports and alumni clubs. Our facilities are located in
26
states, the District of Columbia and
two
foreign countries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
—The consolidated financial statements reflect the consolidated operations of ClubCorp, its wholly and majority owned subsidiaries and certain variable interest entities (“VIEs”) for which we are deemed to be the primary beneficiary. The consolidated financial statements presented herein reflect our financial position, results of operations, cash flows and changes in equity in conformity with accounting principles generally accepted in the United States, or “GAAP”. All intercompany accounts have been eliminated. Immaterial amounts relating to loss from discontinued operations have been reclassified to interest and investment income for the prior years.
Investments in certain unconsolidated affiliates are accounted for by the equity method. See Note
4
.
We have entered into agreements with third-party owners of clubs to act as a managing agent and provide certain services to the third party club owner in exchange for a management fee. The operations of managed clubs are not consolidated. We recognize the contractual management fees as revenue when earned. Additionally, we recognize reimbursements for certain costs of operations at certain managed clubs as revenue.
We have two reportable segments: (1) golf and country clubs and (2) business, sports and alumni clubs. These segments are managed separately and discrete financial information, including Adjusted EBITDA (“Adjusted EBITDA”), a key financial measurement of segment profit and loss, is reviewed regularly by our chief operating decision maker to evaluate performance and allocate resources. See Note
14
.
Fiscal Year
—Our fiscal year consists of a 52/53 week period ending on the last Tuesday of December. For
2016
,
2015
and
2014
, the fiscal years are comprised of the 52 weeks ended
December 27, 2016
,
December 29, 2015
, and
December 30, 2014
, respectively.
Use of Estimates
—The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from such estimated amounts.
Revenue Recognition
—Revenues from club operations, food and beverage and merchandise sales are recognized at the time of sale or when the service is provided and are reported net of sales taxes. Revenues from membership dues are generally billed monthly and recognized in the period earned.
At a majority of our private clubs, members are expected to pay an initiation fee or deposit upon their acceptance as a member to the club. In general, initiation fees are not refundable, whereas initiation deposits are not refundable until a fixed number of years (generally
30
) after the date of acceptance of a member. We recognize revenue related to membership initiation fees and deposits over the expected life of an active membership.
For membership initiation deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized within club operations revenue over the expected life of an active membership. The present value of the refund obligation is recorded as a
membership initiation deposit liability
and accretes over the non-refundable term using the effective interest method with an interest rate defined as our incremental borrowing rate adjusted to reflect a
30
-year time frame. The accretion is included in
interest expense
.
The majority of membership initiation fees received are not refundable and are deferred and recognized within club operations revenue on the consolidated statements of operations over the expected life of an active membership.
The expected lives of active memberships are calculated annually using historical attrition rates. Periods in which attrition rates differ significantly from enrollment rates could have a material effect on our consolidated financial statements by decreasing or increasing the expected lives of active memberships, which in turn would affect the length of time over which we recognize initiation fee and deposit revenues. During each of the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, our estimated expected lives ranged from
one
to
20 years
; the weighted-average expected life of a golf and country club membership was approximately
seven
years and the expected life of a business, sports and alumni club membership was approximately
three
years.
Membership initiation payments recognized within
club operations revenue
on the consolidated statements of operations were
$14.2 million
,
$13.6 million
and
$13.1 million
for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively.
Cash Equivalents
—We consider investments with an original maturity of
three months
or less to be cash equivalents. We consider receivables from credit card companies as cash equivalents because they settle the balances within
two
to
three
days.
Concentration of Credit Risk
—Financial instruments that are exposed to concentrations of credit risk consist primarily of cash deposits placed in high quality credit institutions; these cash deposits, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation. We have not experienced any losses as a result of this practice. We do not enter into financial instruments for hedging, trading or speculative purposes.
Allowance for Doubtful Accounts
—The allowance for doubtful accounts is established and maintained based on our best estimate of accounts receivable collectability. Management estimates collectability by specifically analyzing known troubled accounts, accounts receivable aging and other historical factors that affect collections. Such factors include the historical trends of write-offs and recovery of previously written-off accounts, the financial strength of the member and projected economic and market conditions.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Beginning allowance
|
$
|
5,509
|
|
|
$
|
5,424
|
|
|
$
|
3,666
|
|
|
Bad debt expense, excluding portion related to notes receivable
|
3,141
|
|
|
2,605
|
|
|
2,760
|
|
|
Write offs
|
(3,539
|
)
|
|
(2,520
|
)
|
|
(1,002
|
)
|
|
Ending allowance
|
$
|
5,111
|
|
|
$
|
5,509
|
|
|
$
|
5,424
|
|
Inventories
—Inventories, which consist primarily of food and beverages and merchandise held for resale, are stated at the lower of cost (weighted average cost method) or market. Losses on obsolete or excess inventory are not material.
Property and Equipment, Net
—Property and equipment is recorded at cost, including interest incurred during construction periods. We capitalize costs that both materially add value and appreciably extend the useful life of an asset. With respect to golf course improvements (included in land improvements), only costs associated with original construction, complete replacements, or the addition of new trees, sand traps, fairways or greens are capitalized. All other related costs are expensed as incurred. For building improvements, only costs that extend the useful life of the building are capitalized; repairs and maintenance are expensed as incurred. Internal use software development costs are capitalized and amortized on a straight-line basis over the expected benefit period. The net book value of internal use software totaled
$24.3 million
and
$9.9 million
at
December 27, 2016
and
December 29, 2015
, respectively. See Note
6
.
Depreciation is calculated using the straight-line method based on the following estimated useful lives:
|
|
|
|
|
|
|
|
Depreciable land improvements
|
5
|
-
|
20 years
|
|
Building and recreational facilities
|
20
|
-
|
40 years
|
|
Machinery and equipment (includes internal use software)
|
1
|
-
|
10 years
|
|
Leasehold improvements
|
1
|
-
|
40 years
|
|
Furniture and fixtures
|
3
|
-
|
10 years
|
Leasehold improvements are amortized over the shorter of the term of the respective leases or their useful life using the straight-line method.
Notes Receivable, Net of Allowances
—Notes receivable reflect amounts due from our financing of membership initiation fees and deposits and typically range from
one
to
six
years in original maturity. We recognize interest income as earned and provide an allowance for doubtful accounts. This allowance is based on factors including the historical trends of write-offs and recoveries, the financial strength of the member and projected economic and market conditions.
Goodwill and Other Intangibles, Net
—GAAP requires that we allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the fair value of the net assets acquired or the excess of the aggregate fair values of assets acquired and liabilities assumed is recorded as goodwill.
We classify intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. Intangibles specifically related to an individual property are recorded at the property level. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives as reflected in Note
7
.
We assess the recoverability of the carrying value of goodwill and other indefinite-lived intangibles annually on the first day of the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill impairment is tested for impairment by first comparing the fair value of a reporting unit to its carrying amount. When the fair value is less than carrying value further analysis is performed to measure the amount of impairment loss, if any. See Note
7
.
Impairment of Long-Lived Assets
—We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. For assets to be held and used, we perform a recoverability test to determine if the future undiscounted cash flows over the expected holding period for the property exceed the carrying amount of the assets of the property in question. If the recoverability test is not met, the impairment is determined by comparing the carrying value of the property to its fair value which may be approximated by using future discounted cash flows using a risk-adjusted discount rate. Future cash flows of each property are determined using management’s projections of the performance of a given property based on its past performance and future opportunities, local operations and other factors both within our control and out of our control. Additionally, throughout the impairment evaluation process, we consider the impact of recent property appraisals when they are available. If actual results differ from these estimates, additional impairment charges may be required. As discussed in Note
5
, GAAP establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The fair value calculations associated with these valuations are classified as Level 3 measurements.
Insurance Reserves
—We have established insurance programs to cover exposures above predetermined deductibles for certain insurable risks consisting primarily of physical loss to property, workers’ compensation, employee healthcare, and comprehensive general and auto liability. Insurance reserves are developed by us, using the assistance of a third-party actuary and consideration of our past claims experience, including both the frequency and settlement of claims.
Advertising Expense
—We market our clubs through advertising and other promotional activities. Advertising expense is charged to income during the period incurred. Advertising expense totaled
$5.9 million
,
$6.3 million
and
$5.5 million
for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively.
Foreign Currency
—The functional currency of our entities located outside the United States is the local currency. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the current exchange rate in effect at period-end. All foreign income and expenses are translated at the monthly weighted-average exchange rates during the year.
Translation gains and losses are reported separately, with
no
tax impact for all periods presented, as a component of comprehensive loss, until realized.
No
translation gains or losses have been reclassified into earnings for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
. Realized foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive loss in club operating costs.
Income Taxes
—Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recognized.
We recognize the tax benefit from an uncertain tax position only if we conclude that it is “more likely than not” that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. If the position drops below the “more likely than not” standard, the benefit can no longer be recognized. We use assumptions, estimates and our judgment in determining if the “more likely than not” standard has been met when developing our provision for income taxes. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.
Interest and Investment Income
—Interest and investment income is comprised principally of interest on notes receivable, cash deposits held by financial institutions and the return on our equity investment in Avendra, LLC. See Note
4
.
Leases
—We lease operating facilities under agreements with terms up to
99 years
. These agreements normally provide for minimum rentals plus executory costs. Some of the agreements provide for scheduled rent increases during the lease term, as well as provisions for renewal options. Rent expense is recognized on a straight-line basis over the term of the lease from the time at which we take control of the property. Renewal options determined to be reasonably assured are also included in the lease term. In some cases, we must pay contingent rent generally based on a percentage of gross receipts or positive cash flow as defined in the lease agreements.
Some of our lease agreements contain tenant allowances. Upon receipt of such allowances, we record a deferred rent liability in other liabilities on the consolidated balance sheets. The allowances are then amortized on a straight-line basis over the remaining terms of the corresponding leases as a reduction of rent expense.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-9 (“ASU 2014-9”),
Revenue from Contracts with Customers
. ASU 2014-9 requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. In August 2015, the FASB issued Accounting Standards Update No. 2015-14 which deferred the effective date of ASU 2014-9 to fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2017. We plan to adopt the ASU, as amended, in Q1 2018. In March 2016, the FASB issued Accounting Standards Update No. 2016-8 (“ASU 2016-8”) which clarified the revenue recognition implementation guidance on principal versus agent considerations and is effective during the same period as ASU 2014-9. In April 2016, the FASB issued Accounting Standards Update No. 2016-10 (“ASU 2016-10”) which clarified the revenue recognition guidance regarding the identification of performance obligations and the licensing implementation and is effective during the same period as ASU 2014-9. In May 2016, the FASB issued Accounting Standards Update No. 2016-12 (“ASU 2016-12”) which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. ASU 2016-12 is effective during the same period as ASU 2014-9.
The FASB allows two adoption methods under ASU 2014-9. Under one method, a company will apply the rules to contracts in all reporting periods presented, subject to certain allowable exceptions. Under the other method, a company will apply the rules to all contracts existing as of the first day of Q1 2018, recognizing in beginning retained earnings an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to previous rules (“modified retrospective method”). We anticipate adopting the standard under the modified retrospective method.
Although we are continuing to evaluate, upon initial qualitative evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of contract revenues between various components of the contract which may constitute a performance obligation. These components include initiation payments to join one of our clubs and dues which provide for continued access to our clubs as well as charges for food and beverage, merchandise sales and other club services. We may discount each of these components for new members. The revenues for these components may be
recognized over varying time periods. Membership initiation payments recognized within
club operations revenue
on the consolidated statements of operations were
$14.2 million
for the fiscal year ended
December 27, 2016
, or approximately
1%
of our consolidated total revenue on the consolidated statements of operations. We are still in the process of evaluating the quantitative impact of these changes; however, we cannot currently estimate the impact of change upon adoption, as the amount is dependent on the structure of our membership pricing structure and our employee incentive plans, which we frequently evaluate and adjust to respond to current market conditions. We also believe the requirement to defer incremental contract acquisition costs and recognize them over the contract period or expected customer life will result in the recognition of a deferred charge on our balance sheets, but cannot currently estimate the impact for the same reasons described above.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”),
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
. ASU 2014-15 provides guidance on management’s responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. We adopted ASU 2014-15 during the twelve weeks ended March 22, 2016. Our adoption did not have a material impact on our consolidated financial statements.
In February 2015, the FASB issued Accounting Standards Update No. 2015-2 (“ASU 2015-2”),
Consolidation (Topic 810)–Amendments to the Consolidation Analysis
. ASU 2015-2 applies to entities in all industries and provides a new scope exception to registered money market funds and similar unregistered money market funds. It makes targeted amendments
to existing consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance. The targeted changes are designed to address most of the concerns of the asset management industry. However, entities across all industries will be impacted, particularly those that use limited partnerships. We adopted ASU 2015-2 during the twelve weeks ended March 22, 2016. Our adoption did not have a material impact on our consolidated financial position or results of operations.
In April 2015, the FASB issued Accounting Standards Update No. 2015-3 (“ASU 2015-3”),
Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
ASU 2015-3 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. We adopted ASU 2015-3 during the twelve weeks ended March 22, 2016 and applied it retrospectively. As a result, we have recast the December 29, 2015 consolidated balance sheet to conform to the current period presentation. In August 2015, the FASB issued Accounting Standards Update No. 2015-15 (“ASU 2015-15”),
Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,
confirming that fees related to revolving credit facility arrangements are not addressed in ASU 2015-03. The adoption of this standard reduced previously-presented other assets and long-term debt by
$13.0 million
each. Debt issuance costs associated with our revolving credit facility are recorded within other assets for all periods presented.
In September 2015, the FASB issued Accounting Standards Update No. 2015-16 (“ASU 2015-16”),
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments
. ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. We adopted ASU 2015-16 during the twelve weeks ended March 22, 2016. Our adoption did not have a material impact on our consolidated financial position or results of operations.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (“ASU 2015-17”),
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. We adopted ASU 2015-17 during the twelve weeks ended March 22, 2016 and applied it retrospectively. As a result, we have recast the December 29, 2015 consolidated balance sheet to conform to the current period presentation. The adoption of this standard decreased previously-presented deferred tax assets, net and decreased deferred tax liabilities, net by
$22.6 million
each. Additionally, deferred tax assets, net are now classified as non-current.
In February 2016, the FASB issued Accounting Standards Update No. 2016-2 (“ASU 2016-2”), Leases (Topic 842). ASU 2016-2 requires the recognition of lease assets and lease liabilities by lessees for leases classified as operating leases under previous GAAP; however, ASU 2016-2 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that the effect of leases in the statement of operations and the statement of cash flows is largely unchanged from previous GAAP. ASU 2016-2 is effective for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2018. We plan to adopt ASU 2016-2 in Q1 2019.
Although we are continuing to evaluate, upon initial qualitative evaluation, a key change upon adoption will be the balance sheet recognition of all leased assets and liabilities. Currently we lease many of our business clubs and a few of our golf and country clubs through operating leases which are not recognized on the balance sheet. Future minimum lease obligations under operating leases are disclosed in Note
11
. We anticipate a right to use asset and a related lease liability will be recognized for these leases and potentially other contracts which qualify as leases.
In March 2016, the FASB issued Accounting Standards Update No. 2016-9 (“ASU 2016-9”),
Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.
ASU 2016-9 simplifies the accounting for several aspects of the accounting for equity-based compensation, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted ASU 2016-9 in the twelve weeks ended March 22, 2016. In accordance with the ASU, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement and we have made a policy election to account for forfeitures in the period they occur, rather than estimating a forfeiture rate. Applying this guidance on a modified retrospective basis resulted in a decrease to accumulated deficit of
$3.1 million
, a decrease to Additional paid-in-capital of
$0.8 million
and a decrease to deferred tax liabilities of
$2.3 million
.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (“ASU 2016-13”),
Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 will become effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not anticipate the adoption will have a material impact of the guidance on its consolidated financial position and results of operations.
In January 2017, the FASB issued Accounting Standards Update No. 2017-1 (“ASU 2017-1”),
Business Combinations (Topic 805): Clarifying the Definition of a Business
. Under ASC Topic 805, there are three elements of a business: inputs, processes, and outputs, which must be evaluated to determine if an asset or group of assets is a business. ASU 2017-1 provide a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. ASU 2017-1 will become effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are still in the process of evaluating the quantitative impact of ASU 2017-1.
In January 2017, the FASB issued Accounting Standards Update No. 2017-4 (“ASU 2017-4”),
Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
ASU 2017-4 eliminates Step 2 from the goodwill impairment test. Step 2 required an entity to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in a business combination. Instead, an entity should perform its goodwill impairment test and recognize an impairment charge by comparing the fair value of a reporting unit with its carrying amount. ASU 2017-4 will become effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Our goodwill impairment tests have not proceeded to Step 2 in any fiscal year presented and the estimated fair values of our golf and country clubs and business, sports and alumni clubs reporting units both exceeded their carrying values by a significant amount as of the analysis performed during fiscal year 2016.
3. VARIABLE INTEREST ENTITIES
Consolidated VIEs include
three
managed golf course properties and certain realty interests which we define as “Non-Core Development Entities”. We have determined we are the primary beneficiary of these VIEs as we have the obligation to absorb the majority of losses from and direct activities of these operations. One of these managed golf course property VIEs is financed through a loan payable of
$0.6 million
collateralized by assets of the entity totaling
$3.8 million
as of
December 27, 2016
. The other managed golf course property VIEs are financed through advances from us. Outstanding advances as of
December 27, 2016
total
$5.3 million
compared to recorded assets of
$6.7 million
. The VIE related to the Non-Core Development Entities is financed through notes which are payable through cash proceeds related to the sale of certain real estate held by the Non-Core Development Entities. Recourse of creditors to these VIEs is limited to the assets of the VIE entities, which total
$11.4 million
and
$11.3 million
at
December 27, 2016
and
December 29, 2015
, respectively.
The following summarizes the carrying amount and classification of the VIEs’ assets and liabilities in the consolidated balance sheets as of
December 27, 2016
and
December 29, 2015
, net of intercompany amounts:
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|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
Current assets
|
$
|
1,041
|
|
|
$
|
1,201
|
|
|
Fixed assets, net
|
9,489
|
|
|
9,245
|
|
|
Other assets
|
846
|
|
|
839
|
|
|
Total assets
|
$
|
11,376
|
|
|
$
|
11,285
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
1,125
|
|
|
$
|
1,228
|
|
|
Long-term debt
|
13,035
|
|
|
13,026
|
|
|
Other long-term liabilities
|
24,906
|
|
|
23,817
|
|
|
Noncontrolling interest
|
5,401
|
|
|
5,619
|
|
|
Company capital
|
(33,091
|
)
|
|
(32,405
|
)
|
|
Total liabilities and equity
|
$
|
11,376
|
|
|
$
|
11,285
|
|
4. INVESTMENTS
We have an equity method investment in one active golf and country club joint venture with a carrying value of
$0.4 million
and
$0.5 million
at
December 27, 2016
and
December 29, 2015
, respectively. Our share of earnings in the equity investment is included in
equity in (earnings) loss from unconsolidated ventures
in the consolidated statements of operations.
We also have an equity method investment of
10.2%
in Avendra, LLC, a purchasing cooperative of hospitality companies. The carrying value of the investment was
$1.1 million
and
$2.0 million
at
December 27, 2016
and
December 29, 2015
, respectively. Our share of earnings in the equity investment is included in
equity in (earnings) loss from unconsolidated ventures
in the consolidated statements of operations. Additionally, we recognized
$5.1 million
and
$2.2 million
of return on our equity investment in Avendra, LLC within
interest and investment income
during the
fiscal years ended
December 29, 2015
and
December 30, 2014
, respectively.
No
return on our equity investment in Avendra, LLC was recorded during the
fiscal year ended
December 27, 2016
. All cash distributions from our equity investment are reported as distribution from investment in unconsolidated ventures within the operating section of our consolidated statements of cash flows.
We also have contractual agreements with the Avendra, LLC joint venture to provide procurement services for our clubs for which we received net volume rebates and allowances totaling
$4.7 million
,
$4.2 million
and
$3.5 million
during the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively.
5. FAIR VALUE
GAAP establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:
Level 1—unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company;
Level 2—inputs that are observable in the marketplace other than those inputs classified as Level 1; and
Level 3—inputs that are unobservable in the marketplace and significant to the valuation.
We maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant to the fair value calculation. We recognize transfers between levels of the fair value hierarchy on the date of the change in circumstances that caused the transfer.
Fair Value of Financial Instruments
Debt
—We estimate the fair value of our debt obligations, excluding capital lease obligations and loan origination fees, as follows, as of
December 27, 2016
and
December 29, 2015
:
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|
|
December 27, 2016
|
|
December 29, 2015
|
|
|
Recorded Value
|
|
Fair Value
|
|
Recorded Value
|
|
Fair Value
|
|
Level 2 (1)
|
$
|
996,199
|
|
|
$
|
1,026,323
|
|
|
$
|
1,019,511
|
|
|
$
|
1,020,625
|
|
|
Level 3
|
50,274
|
|
|
41,467
|
|
|
49,952
|
|
|
40,794
|
|
|
Total
|
$
|
1,046,473
|
|
|
$
|
1,067,790
|
|
|
$
|
1,069,463
|
|
|
$
|
1,061,419
|
|
______________________
|
|
|
|
(1)
|
The recorded value for Level 2 debt obligations is presented net of the
$4.8 million
and
$5.5 million
discount as of
December 27, 2016
and
December 29, 2015
, respectively, on the Secured Credit Facilities, as defined in Note
10
.
|
The 2015 Senior Notes and borrowings under the Secured Credit Facilities, as both are defined in Note
10
, are considered Level 2. We use quoted prices for identical or similar liabilities to value debt obligations classified as Level 2. All other debt obligations are considered Level 3. We use adjusted quoted prices for similar liabilities to value debt obligations classified as Level 3. Key inputs include: (1) the determination that certain other debt obligations are similar, (2) nonperformance risk, and (3) interest rates. Changes or fluctuations in these assumptions and valuations will result in different estimates of value. The use of different techniques to determine the fair value of these debt obligations could result in different estimates of fair value at the reporting date.
The carrying value of financial instruments including cash, cash equivalents, receivables, notes receivable, accounts payable and other short-term and long-term assets and liabilities approximate their fair values as of
December 27, 2016
and
December 29, 2015
.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
Our assets and liabilities measured at fair value on a non-recurring basis include equity method investments, property and equipment, mineral rights, goodwill, trade names, liquor licenses, management contracts and other assets and liabilities recorded during business combinations. Assets and liabilities from business combinations were recorded on our consolidated balance sheets at fair value at the date of acquisition. The key assumptions used in determining these values are considered Level 3 measurements. See Note
13
.
The estimated fair values of our assets measured at fair value on a non-recurring basis as a result of impairment losses during the years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
Fair Value (1)
|
|
Impairment Losses
|
|
Fair Value (1)
|
|
Impairment Losses
|
|
Fair Value (1)
|
|
Impairment Losses
|
|
Property and equipment
|
|
$
|
376
|
|
|
$
|
3,233
|
|
|
$
|
52
|
|
|
$
|
2,687
|
|
|
$
|
1,076
|
|
|
$
|
1,443
|
|
|
Investments and other assets
|
|
—
|
|
|
1,197
|
|
|
600
|
|
|
1,623
|
|
|
—
|
|
|
—
|
|
|
Intangible assets - trade names
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
760
|
|
|
60
|
|
|
Intangible assets - liquor licenses
|
|
—
|
|
|
—
|
|
|
21
|
|
|
7
|
|
|
20
|
|
|
2
|
|
|
Intangible assets - management contracts
|
|
—
|
|
|
224
|
|
|
—
|
|
|
827
|
|
|
—
|
|
|
820
|
|
(1) Impaired assets were written down to fair value, which became their new cost basis.
Property and Equipment
—We recognized impairment losses to property and equipment of
$3.2 million
,
$2.7 million
, and
$1.4 million
during the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively, to adjust the carrying amount of certain property and equipment to its fair value of
$0.4 million
,
$0.1 million
and
$1.1 million
, respectively, due to continued and projected lower operating results as well as changes in the expected holding period of certain fixed assets. The valuation methods used to determine fair value included an evaluation of the sales price of comparable real estate properties, a sales comparison approach, an analysis of discounted future cash flows using a risk-adjusted discount rate, an income approach, and consideration of historical cost adjusted for economic obsolescence, a cost approach. The fair value calculations associated with these valuations are classified as Level 3 measurements. See Note
6
.
Investments and Other Assets
—We evaluate these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. We recognized impairment losses to investments and other assets of
$1.2 million
during the
fiscal year ended
December 27, 2016
, to adjust the carrying amount of certain assets to their fair value of
zero
. During the
fiscal year ended
December 29, 2015
, we recognized an impairment of
$1.6 million
to adjust the carrying value of certain mineral rights to their fair value of
$0.6 million
. The valuation is classified as a Level 3 measurement and is based upon inactive market prices for similar assets which are not observable in the marketplace.
Trade Names
—We test our trade name intangible assets annually for impairment, utilizing the relief from royalty method to determine the estimated fair value for each trade name which is classified as a Level 3 measurement. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates.
We recorded impairment of trade names of
$0.1 million
during the
fiscal year ended
December 30, 2014
, to adjust the carrying amount of certain trade names to their fair value of
$0.8 million
. See Note
7
.
Liquor Licenses
—We test our liquor licenses annually for impairment. We use quoted prices for similar assets in active markets when they are available; quoted prices are classified as Level 2 measurements. We recorded immaterial impairments of liquor licenses in the
fiscal years ended
December 29, 2015
and
December 30, 2014
. See Note
7
.
Management Contracts
—We evaluate these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. During the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, we recognized impairment losses of
$0.2 million
,
$0.8 million
and
$0.8 million
to adjust the carrying value of certain management contracts to their fair value of
zero
, due to the termination of the related contracts. The valuations are classified as a Level 3 measurement and is based on expected future cash flows. See Note
7
.
There were no impairments to goodwill in the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
. The key assumptions used in the goodwill impairment analysis are considered Level 3 measurements. See Note
7
. Assets and liabilities from business combinations were recorded on our consolidated balance sheets at fair value at the date of acquisition. The key assumptions used in determining these values are classified as Level 3 measurements. See Note
13
.
6. PROPERTY AND EQUIPMENT
Property and equipment, including capital lease assets, at cost consists of the following at
December 27, 2016
and
December 29, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
Land and non-depreciable land improvements
|
$
|
600,402
|
|
|
$
|
600,819
|
|
|
Depreciable land improvements
|
495,520
|
|
|
478,352
|
|
|
Buildings and recreational facilities
|
534,944
|
|
|
511,124
|
|
|
Machinery and equipment
|
299,900
|
|
|
264,129
|
|
|
Leasehold improvements
|
111,755
|
|
|
111,184
|
|
|
Furniture and fixtures
|
105,195
|
|
|
97,459
|
|
|
Construction in progress
|
18,434
|
|
|
13,413
|
|
|
|
2,166,150
|
|
|
2,076,480
|
|
|
Accumulated depreciation
|
(612,768
|
)
|
|
(541,960
|
)
|
|
Total
|
$
|
1,553,382
|
|
|
$
|
1,534,520
|
|
Depreciation expense, which included depreciation of assets recorded under capital leases, was
$105.4 million
,
$101.0 million
and
$79.4 million
for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively. Interest capitalized as a cost of property and equipment totaled
$0.4 million
,
$0.3 million
and
$0.2 million
for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively.
We evaluate property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. See Note
5
.
We received insurance proceeds of
$12.2 million
related to rain and flooding events and a hurricane that occurred during the
fiscal year ended
December 27, 2016
, damaging certain property and equipment. These proceeds were recognized within loss on disposals of assets within the consolidated statement of operations. We recognized loss on disposal of
$3.2 million
related to the disposition of these assets.
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following at
December 27, 2016
and
December 29, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
Asset
|
Useful
Life
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
$
|
24,790
|
|
|
|
|
|
$
|
24,790
|
|
|
$
|
24,790
|
|
|
|
|
|
$
|
24,790
|
|
|
Liquor Licenses
|
|
|
2,152
|
|
|
|
|
|
2,152
|
|
|
2,068
|
|
|
|
|
|
2,068
|
|
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member Relationships
|
2-7 years
|
|
2,866
|
|
|
$
|
(2,553
|
)
|
|
313
|
|
|
2,866
|
|
|
$
|
(1,907
|
)
|
|
959
|
|
|
Management Contracts
|
1-10 years
|
|
3,580
|
|
|
(1,487
|
)
|
|
2,093
|
|
|
3,959
|
|
|
(988
|
)
|
|
2,971
|
|
|
Trade names
|
2 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,100
|
|
|
(636
|
)
|
|
464
|
|
|
Total
|
|
|
$
|
33,388
|
|
|
$
|
(4,040
|
)
|
|
$
|
29,348
|
|
|
$
|
34,783
|
|
|
$
|
(3,531
|
)
|
|
$
|
31,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
$
|
312,811
|
|
|
|
|
$
|
312,811
|
|
|
$
|
312,811
|
|
|
|
|
$
|
312,811
|
|
Intangible Assets
—Intangible asset amortization expense was
$1.8 million
,
$2.9 million
, and
$1.4 million
for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively.
We retired fully amortized intangible assets and the related accumulated amortization of
$1.1 million
and
$0.6 million
, which were comprised of trade names and management contracts, from the consolidated balance sheets as of
December 27, 2016
and
December 29, 2015
, respectively.
For each of the five fiscal years subsequent to
2016
and thereafter the amortization expense is expected to be as follows:
|
|
|
|
|
|
|
|
Year
|
Amount
|
|
2017
|
$
|
699
|
|
|
2018
|
582
|
|
|
2019
|
347
|
|
|
2020
|
212
|
|
|
2021
|
190
|
|
|
Thereafter
|
376
|
|
|
Total
|
$
|
2,406
|
|
We test indefinite-lived intangible assets for impairment annually. We test intangible assets with finite lives for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. See Note
5
.
Goodwill
—We evaluate goodwill for impairment at the reporting unit level (golf and country clubs and business, sports and alumni clubs), which are the same as our operating segments. When testing for impairment, we first compare the fair value of our reporting units to the recorded values. Valuation methods used to determine fair value include analysis of the discounted future free cash flows that a reporting unit is expected to generate (Income Approach) and an analysis which is based upon a comparison of our reporting units to similar companies utilizing a purchase multiple of earnings before interest, taxes, depreciation and amortization (Market Approach). These valuations are considered Level 3 measurements. Key assumptions used in this model include future cash flows, growth rates, discount rates, capital needs and projected margins, among other factors.
If the carrying amount of the reporting units exceeds its fair value, goodwill is considered potentially impaired and a second step is performed to measure the amount of impairment loss. In the second step of the goodwill impairment test, we compare the implied value of the reporting unit's goodwill with the carrying value of that unit's goodwill. If the carrying value of the reporting unit's goodwill exceeds the implied value, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. Accordingly, the fair value of a reporting unit is allocated to the assets and liabilities of that unit, including intangible assets, and any excess of the value of the reporting unit over the amounts assigned to its assets and liabilities is the implied value of its goodwill.
We evaluate goodwill for impairment annually as of the first day of our last fiscal quarter or whenever events or circumstances indicate that the carrying amount may not be fully recoverable. Based on this analysis, no impairment of goodwill was recorded for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
.
Goodwill
—The following table shows goodwill activity by reporting unit. No impairments have been recorded for either reporting unit.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golf & Country Clubs
|
|
Business, Sports & Alumni Clubs
|
|
Total
|
|
December 30, 2014
|
$
|
167,460
|
|
|
$
|
145,351
|
|
|
$
|
312,811
|
|
|
December 29, 2015
|
$
|
167,460
|
|
|
$
|
145,351
|
|
|
$
|
312,811
|
|
|
December 27, 2016
|
$
|
167,460
|
|
|
$
|
145,351
|
|
|
$
|
312,811
|
|
8. OTHER ASSETS
As of
December 27, 2016
and
December 29, 2015
, other assets is primarily comprised of insurance receivables related to fully insured losses of
$5.6 million
and
$4.4 million
, capital reserve funds of
$2.9 million
and
$3.5 million
, debt issuance costs relating to the revolving credit facility of
$2.0 million
and
$2.6 million
and assets related to mineral rights of
$0.7 million
and
$0.7 million
, respectively.
Mineral Rights
—We evaluate these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. During the
fiscal year ended
December 29, 2015
, we recognized an impairment of
$1.6 million
to adjust the carrying value of certain of these mineral rights to their fair value of
$0.6 million
. We have not recognized any impairment losses to mineral rights in the
fiscal years ended
December 27, 2016
and
December 30, 2014
. The valuation is considered a Level 3 measurement and is based upon inactive market prices for similar assets which are not observable in the marketplace. See Note
5
.
9. CURRENT AND LONG-TERM LIABILITIES
Current liabilities consist of the following at
December 27, 2016
and
December 29, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
Accrued compensation
|
$
|
25,367
|
|
|
$
|
27,247
|
|
|
Accrued interest
|
7,978
|
|
|
2,618
|
|
|
Other accrued expenses
|
9,194
|
|
|
7,576
|
|
|
Total accrued expenses
|
$
|
42,539
|
|
|
$
|
37,441
|
|
|
|
|
|
|
|
Taxes payable other than federal income taxes (1)
|
$
|
19,256
|
|
|
$
|
15,473
|
|
|
Total accrued taxes
|
$
|
19,256
|
|
|
$
|
15,473
|
|
|
|
|
|
|
|
Advance event and other deposits
|
$
|
20,051
|
|
|
$
|
18,708
|
|
|
Unearned dues
|
16,795
|
|
|
14,225
|
|
|
Deferred membership revenues
|
12,083
|
|
|
12,175
|
|
|
Insurance reserves
|
9,704
|
|
|
11,317
|
|
|
Dividends to owners declared, but unpaid
|
8,582
|
|
|
8,467
|
|
|
Other current liabilities
|
3,877
|
|
|
4,300
|
|
|
Total other current liabilities
|
$
|
71,092
|
|
|
$
|
69,192
|
|
______________________
|
|
|
|
(1)
|
We had
no
federal income taxes payable
as of
December 27, 2016
and
December 29, 2015
.
|
Other long-term liabilities consist of the following at
December 27, 2016
and
December 29, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
Uncertain tax positions
|
$
|
7,049
|
|
|
$
|
7,343
|
|
|
Deferred membership revenues
|
46,089
|
|
|
45,960
|
|
|
Casualty insurance loss reserves - long-term portion
|
19,851
|
|
|
14,659
|
|
|
Above market lease intangibles
|
251
|
|
|
352
|
|
|
Deferred rent
|
32,316
|
|
|
29,250
|
|
|
Accrued interest on notes payable related to Non-Core Development Entities
|
24,298
|
|
|
23,236
|
|
|
Other
|
3,055
|
|
|
2,857
|
|
|
Total other long-term liabilities
|
$
|
132,909
|
|
|
$
|
123,657
|
|
10. DEBT AND CAPITAL LEASES
Secured Credit Facilities
Secured Credit Facilities
—In 2010, Operations entered into the credit agreement governing the secured credit facilities (the “Secured Credit Facilities”). The credit agreement governing the Secured Credit Facilities was subsequently amended in 2012, 2013, 2014, 2015 and 2016. As of
December 27, 2016
, the Secured Credit Facilities are comprised of (i) a
$651.0 million
term loan facility, and (ii) a revolving credit facility with capacity of
$175.0 million
with
$145.0 million
available for borrowing, after deducting
$30.0 million
of standby letters of credit outstanding. In addition, the credit agreement governing the Secured Credit Facilities includes capacity which provides, subject to lender participation, for additional borrowings in revolving or term loan commitments of
$125.0 million
, and additional borrowings thereafter so long as a senior secured leverage ratio (the “Senior Secured Leverage Ratio”) does not exceed
3.50
:1.00.
As of
December 27, 2016
, the interest rate on the term loan facility is a variable rate calculated as the higher of (i)
4.0%
or (ii) an elected LIBOR plus a margin of
3.0%
and the maturity date of the term loan facility is
December 15, 2022
.
As of
December 27, 2016
, the revolving credit commitments mature on
January 25, 2021
and borrowings thereunder bear interest at a rate of LIBOR plus a margin of
3.0%
per annum. We are required to pay a commitment fee on all undrawn amounts under the revolving credit facility and a fee on all outstanding letters of credit, payable quarterly in arrears.
As long as commitments are outstanding under the revolving credit facility, we are subject to limitations on the Senior Secured Leverage Ratio and a total leverage ratio (the “Total Leverage Ratio”). The Senior Secured Leverage Ratio is defined as the ratio of Operations’ Consolidated Senior Secured Debt (exclusive of the Senior Notes) to Consolidated EBITDA (disclosed as Adjusted EBITDA and defined in Note
14
) and is calculated on a pro forma basis, giving effect to current period acquisitions as though they had been consummated on the first day of the period presented. The Total Leverage Ratio is defined as the ratio of Operations’ Consolidated Total Debt (including the Senior Notes) to Consolidated EBITDA and is also calculated on a pro forma basis. The credit agreement governing the Secured Credit Facilities requires us to maintain a Senior Secured Leverage Ratio no greater than
4.50
:1.00 and a Total Leverage Ratio of no greater than
5.75
:1.00 as of the end of each fiscal quarter. As of
December 27, 2016
, Operations’ Senior Secured Leverage Ratio was
2.79
:1.00 and the Total Leverage ratio was
4.20
:1.00.
The amendments to the Secured Credit Facilities made during 2014, 2015 and 2016 included, among other things, the following key modifications:
On
February 21, 2014
, Operations entered into a fourth amendment to the credit agreement governing the Secured Credit Facilities which made certain administrative changes to such credit agreement.
On
April 11, 2014
, Operations entered into a fifth amendment to the credit agreement governing the Secured Credit Facilities to, amongst other matters, (i) provide an aggregate of
$350.0 million
, before a discount of
$1.8 million
, of additional senior secured term loans under the existing term loan facility, and (ii) amend the Senior Secured Leverage Ratio.
On
September 30, 2014
, Operations entered into a sixth amendment to the credit agreement governing the Secured Credit Facilities to (i) provide an aggregate of
$250.0 million
, before a debt issuance discount of
$1.9 million
, of incremental senior secured term loans under the existing term loan facility, (ii) modify the interest rate on the term loan facility to a variable rate calculated as the higher of (a)
4.5%
or (b) an elected LIBOR plus a margin of
3.5%
and (iii) modify the accordion feature under the credit agreement to provide for, subject to lender participation, additional borrowings in revolving or term loan commitments.
On
May 28, 2015
, Operations entered into a seventh amendment to the credit agreement governing the Secured Credit Facilities, which reduced the interest rate on the term loan facility to the higher of (a)
4.25%
or (b) an elected LIBOR plus a margin of
3.25%
.
On
December 15, 2015
, Operations entered into an eighth amendment to the credit agreement governing the Secured Credit Facilities to (i) reduce the principal by
$226.1 million
to an aggregate of
$675.0 million
, before a debt issuance discount of
$3.4 million
, (ii) extend the maturity date to
December 15, 2022
, (iii) provide for additional incremental term and revolving commitments under certain circumstances, so long as the Senior Secured Leverage Ratio does not exceed
3.50
:1.00 and (iv) revise the Senior Secured Leverage Ratio and Total Leverage Ratio required as of the end of each fiscal quarter to no greater than
4.50
:1.00 and
5.75
:1.00, respectively. In conjunction with the principal payment made on
December 15, 2015
, we expensed a proportionate share of the unamortized debt issuance costs of
$1.9 million
and unamortized loan discounts of
$0.7 million
to loss on extinguishment of debt in the year ended
December 29, 2015
.
On
January 25, 2016
, Operations entered into a ninth amendment to the credit agreement governing the Secured Credit Facilities to replace the existing revolving credit facility with a new revolving credit facility, with a capacity of
$175.0 million
, maturing on
January 25, 2021
.
On
September 30, 2016
, Operations entered into a tenth amendment to the credit agreement governing the Secured Credit Facilities to decrease the interest rate on the term loan facility to a variable rate calculated as the higher of (a)
4.0%
or (b) an elected LIBOR plus a margin of
3.0%
.
All obligations under the Secured Credit Facilities are guaranteed by Operations’ Parent and each existing and all subsequently acquired or organized direct and indirect restricted subsidiaries of Operations, other than certain excluded subsidiaries (collectively, the “Guarantors”). The Secured Credit Facilities are secured, subject to permitted liens and other exceptions, by a first-priority perfected security interest in substantially all the assets of Operations, and the Guarantors, including, but not limited to (1) a perfected pledge of all the domestic capital stock owned by Operations and the Guarantors, and (2) perfected security interests in and mortgages on substantially all tangible and intangible personal property and material fee-owned property of Operations and the Guarantors, subject to certain exclusions.
We are required to make interest payments on the last business day of each of March, June, September and December. We may be required to prepay the outstanding term loan facility by a percentage of excess cash flows, as defined by the credit agreement governing the Secured Credit Facilities, each fiscal year end after our annual consolidated financial statements are delivered, which percentage may decrease or be eliminated depending on the results of the Senior Secured Leverage Ratio test at the end of each fiscal year. Additionally, we are required to prepay the term loan facility with proceeds from certain asset sales, borrowings and certain insurance claims as defined by the credit agreement governing the Secured Credit Facilities.
We may voluntarily prepay outstanding loans under the Secured Credit Facilities in whole or in part upon prior notice without premium or penalty, other than certain fees incurred in connection with repaying, refinancing, substituting or replacing the existing term loans with new indebtedness.
We are also required to pay a commitment fee on all undrawn amounts under the revolving credit facility and a fee on all outstanding letters of credit, payable in arrears on the last business day of each March, June, September and December.
The credit agreement governing the Secured Credit Facilities limits Operations' Parent's and Operations' (and most or all of Operations' Parent's subsidiaries') ability to:
|
|
|
|
•
|
create, incur, assume or suffer to exist any liens on any of their assets;
|
|
|
|
|
•
|
make or hold any investments (including acquisitions, loans and advances);
|
|
|
|
|
•
|
incur or guarantee additional indebtedness;
|
|
|
|
|
•
|
enter into mergers or consolidations;
|
|
|
|
|
•
|
conduct sales and other dispositions of property or assets;
|
|
|
|
|
•
|
pay dividends or distributions on capital stock or redeem or repurchase capital stock;
|
|
|
|
|
•
|
change the nature of the business;
|
|
|
|
|
•
|
enter into transactions with affiliates; and
|
|
|
|
|
•
|
enter into burdensome agreements.
|
We incurred debt issuance costs of
$6.4 million
in conjunction with the issuance of the term loan facility; these costs were capitalized. In conjunction with the amendments, we capitalized debt issuance costs of
$0.8 million
,
$4.4 million
,
$1.9 million
,
$0.0 million
and
$0.0 million
during the
fiscal years ended
December 25, 2012,
December 31, 2013
,
December 30, 2014
,
December 29, 2015
and
December 27, 2016
, respectively, and expensed additional debt issuance costs of
$6.4 million
,
$9.3 million
and
$1.8 million
during the
fiscal years ended
December 30, 2014
,
December 29, 2015
and
December 27, 2016
, respectively. All capitalized debt issuance costs are amortized over the term of the loan. In conjunction with the principal payment made on
December 15, 2015
, we expensed a proportionate share of the unamortized debt issuance costs of
$1.9 million
to loss on extinguishment of debt in the fiscal year ended
December 29, 2015
.
2015 Senior Notes
On
December 15, 2015
, Operations issued
$350.0 million
of senior notes (the “2015 Senior Notes”), maturing
December 15, 2023
. The net proceeds from the offering of the 2015 Senior Notes were used in part to repay amounts outstanding under the Secured Credit Facilities in connection with the eighth amendment to the credit agreement on December 15, 2015. Interest on the 2015 Senior Notes accrues at a fixed rate of
8.25%
per annum and is payable semiannually in arrears on June 15 and December 15. The 2015 Senior Notes are guaranteed on a full and unconditional basis by each Guarantor (other than Operations’ Parent) that guarantees our obligations under the credit agreement governing the Secured Credit Facilities.
At any time prior to
December 15, 2018
, Operations may redeem the 2015 Senior Notes, in whole or in part, at a price equal to
100%
of the principal amount of the 2015 Senior Notes redeemed, plus an applicable “make-whole” premium and accrued and unpaid interest, if any, to the redemption date.
In addition, at any time prior to
December 15, 2018
, Operations may redeem up to
40%
of the aggregate principal amount of the 2015 Senior Notes at a redemption price of
108.25%
of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of certain equity offerings; provided that at least
50%
of the aggregate principal amount of the 2015 Senior Notes originally issued remains outstanding immediately after the occurrence of such redemption (excluding Notes held by Operations and its subsidiaries); and provided, further, that such redemption occurs within 90 days of the date of the closing of such equity offering.
On and after
December 15, 2018
, Operations may redeem all or a part of the 2015 Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:
|
|
|
|
|
|
|
|
Year
|
|
Percentage
|
|
2018
|
|
106.188
|
%
|
|
2019
|
|
104.125
|
%
|
|
2020
|
|
102.063
|
%
|
|
2021 and thereafter
|
|
100.000
|
%
|
If a change of control, as defined in the indenture governing the 2015 Senior Notes, occurs, holders of the 2015 Senior Notes have the right to require Operations to repurchase all or any part of their 2015 Senior Notes at a purchase price equal to
101%
of the aggregate principal amount of the 2015 Senior Notes repurchased, plus accrued and unpaid interest, if any, to the purchase date.
The indenture governing the 2015 Senior Notes contains covenants that limit, among other things, Operations’ ability and the ability of certain of its subsidiaries, to:
|
|
|
|
•
|
incur, assume or guarantee additional indebtedness;
|
|
|
|
|
•
|
pay dividends or distributions on capital stock or redeem or repurchase capital stock;
|
|
|
|
|
•
|
sell stock of its subsidiaries;
|
|
|
|
|
•
|
transfer or sell assets;
|
|
|
|
|
•
|
enter into transactions with affiliates; and
|
|
|
|
|
•
|
enter into mergers or consolidations.
|
Operations incurred debt issuance costs in conjunction with the issuance of the 2015 Senior Notes of
$7.3 million
. These have been capitalized and are being amortized over the term of the 2015 Senior Notes.
2010 Senior Notes
On
November 30, 2010
, Operations issued
$415.0 million
in senior unsecured notes (the “2010 Senior Notes”), bearing interest at
10.0%
and maturing
December 1, 2018
. On
October 28, 2013
, Operations repaid
$145.3 million
in aggregate principal of 2010 Senior Notes at a redemption price of
110.00%
, plus accrued and unpaid interest thereon. On
April 11, 2014
, Operations provided notice to the trustee for the 2010 Senior Notes that Operations had elected to redeem all of the remaining outstanding 2010 Senior Notes at a redemption price of
110.18%
, plus accrued and unpaid interest thereon, on
May 11, 2014
. Operations irrevocably deposited with the trustee
$309.2 million
, which is the amount sufficient to fund the redemption and to satisfy and discharge Operations' obligations under the 2010 Senior Notes. The redemption premium of
$27.5 million
and the write-off of remaining unamortized debt issuance costs of
$4.0 million
was accounted for as loss on extinguishment of debt during the
fiscal year ended
December 30, 2014
.
Notes payable related to certain Non-Core Development Entities
In 1994 and 1995, we issued notes payable to finance a VIE related to our Non-Core Development Entities. The notes and accrued interest are payable through the cash proceeds related to the sale of certain real estate held by these Non-Core Development Entities. As of
December 27, 2016
, the notes have a principal amount of
$11.8 million
.
Mortgage Loans
On
August 9, 2016
, we entered into a new secured mortgage loan which was guaranteed by ClubCorp USA, Inc., a wholly owned subsidiary of Operations, (the “Wells Fargo Mortgage Loan”) for
$37.0 million
with a maturity date of
May 31, 2019
. As of
December 27, 2016
, the note has a principal amount of
$36.8 million
and accrues interest at a variable rate calculated as
2.90%
plus the greater of (i) one month LIBOR or (ii)
0.25%
. The proceeds of the Wells Fargo Mortgage Loan were primarily used to repay outstanding balances on the Stonebriar / Monarch Loan and the existing mortgage loan agreements with Atlantic Capital Bank and BancFirst. There is an option to extend the maturity through
August 9, 2020
and a second option to extend the maturity through
August 9, 2021
upon satisfaction of certain conditions in the loan agreement.
Stonebriar / Monarch Loan
—In
July 2008
, we entered into a secured mortgage loan with General Electric Capital Corporation for
$32.0 million
(the “Stonebriar / Monarch Loan”). Effective November 30, 2015, the maturity date was
November 2016
. On
August 9, 2016
, we repaid this loan using the proceeds from the Wells Fargo Mortgage Loan.
Atlantic Capital Bank
—In
October 2010
, we entered into a new mortgage loan with Atlantic Capital Bank for
$4.0 million
of debt maturing in
2015
with
25
year amortization. Effective
May 6, 2015
, we amended the loan agreement with Atlantic Capital Bank to extend the maturity date to
April 2020
. On
August 9, 2016
, we repaid this loan using the proceeds from the Wells Fargo Mortgage Loan.
BancFirst
—In
May 2013
, in connection with the acquisition of Oak Tree Country Club, we assumed a mortgage loan with BancFirst for
$5.0 million
with an original maturity of
October 2014
and
two
twelve-month options to extend the maturity through
October 2016
upon satisfaction of certain conditions in the loan agreement. Effective
October 1, 2015
, we extended the term of the loan to
October 1, 2016
. On
August 9, 2016
, we repaid this loan using the proceeds from the Wells Fargo Mortgage Loan.
Long-term borrowings and lease commitments as of
December 27, 2016
and
December 29, 2015
, are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
|
|
|
|
|
Carrying Value
|
Interest Rate
|
|
Carrying Value
|
Interest Rate
|
|
Interest Rate Calculation
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Senior Notes
|
$
|
350,000
|
|
8.25
|
%
|
|
$
|
350,000
|
|
8.25
|
%
|
|
Fixed
|
|
2023
|
|
Secured Credit Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan, gross of discount
|
651,000
|
|
4.00
|
%
|
|
675,000
|
|
4.25
|
%
|
|
As of December 27, 2016, greater of (i) 4.0% or (ii) an elected LIBOR + 3.0%; as of December 29, 2015, greater of (i) 4.25% or (ii) an elected LIBOR + 3.25%
|
|
2022
|
|
Revolving Credit Borrowings (1)
|
—
|
|
3.77
|
%
|
|
—
|
|
3.42
|
%
|
|
LIBOR plus a margin of 3.0%
|
|
(2)
|
|
Notes payable related to certain Non-Core Development Entities
|
11,837
|
|
9.00
|
%
|
|
11,837
|
|
9.00
|
%
|
|
Fixed
|
|
(3)
|
|
Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo Mortgage Loan
|
36,811
|
|
3.67
|
%
|
|
—
|
|
—
|
|
|
2.90% plus the greater of (i) one month LIBOR or (ii) 0.25%
|
|
2019
|
|
Stonebriar / Monarch Loan
|
—
|
|
—
|
|
|
29,112
|
|
6.00
|
%
|
|
5.00% plus the greater of (i) three month LIBOR or (ii) 1%
|
|
(4)
|
|
Atlantic Capital Bank
|
—
|
|
—
|
|
|
3,173
|
|
4.50
|
%
|
|
Greater of (i) 3.0% + 30 day LIBOR or (ii) 4.5%
|
|
(4)
|
|
BancFirst
|
—
|
|
—
|
|
|
3,842
|
|
4.50
|
%
|
|
Greater of (i) 4.5% or (ii) prime rate
|
|
(4)
|
|
Other indebtedness
|
1,626
|
|
4.75% - 6.00%
|
|
|
1,988
|
|
4.75% - 6.00%
|
|
|
Fixed
|
|
Various
|
|
|
1,051,274
|
|
|
|
1,074,952
|
|
|
|
|
|
|
|
Capital leases
|
52,207
|
|
|
|
43,271
|
|
|
|
|
|
|
|
Total obligation
|
1,103,481
|
|
|
|
1,118,223
|
|
|
|
|
|
|
|
Less net loan origination fees included in long-term debt
|
(12,187
|
)
|
|
|
(13,000
|
)
|
|
|
|
|
|
|
Less current portion
|
(19,422
|
)
|
|
|
(20,414
|
)
|
|
|
|
|
|
|
Less discount on the Secured Credit Facilities’ Term Loan
|
(4,801
|
)
|
|
|
(5,489
|
)
|
|
|
|
|
|
|
Long-term debt
|
$
|
1,067,071
|
|
|
|
$
|
1,079,320
|
|
|
|
|
|
|
______________________
|
|
|
|
(1)
|
As of
December 27, 2016
, the revolving credit facility had capacity of
$175.0 million
, which was reduced by the
$30.0 million
of standby letters of credit outstanding, leaving
$145.0 million
available for borrowing. As of
December 29, 2015
, prior to the ninth amendment to the credit agreement governing the Secured Credit Facilities, the revolving credit facility had capacity of
$135.0 million
.
|
|
|
|
|
(2)
|
As of
December 27, 2016
, the revolving credit commitments mature on
January 25, 2021
. As of
December 29, 2015
, prior to the ninth amendment to the credit agreement governing the Secured Credit Facilities, the revolving credit commitments had a maturity date of
September 30, 2018
.
|
|
|
|
|
(3)
|
Notes payable and accrued interest related to certain Non-Core Development Entities are payable through the cash proceeds related to the sale of certain real estate held by these Non-Core Development Entities.
|
|
|
|
|
(4)
|
On
August 9, 2016
, we repaid this loan using the proceeds from the Wells Fargo Mortgage Loan.
|
The amount of long-term debt maturing in each of the five years subsequent to
2016
and thereafter is as follows. This table reflects the contractual maturity dates as of
December 27, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
Debt
|
|
Capital Leases
|
|
Total
|
|
2017
|
$
|
1,068
|
|
|
$
|
18,354
|
|
|
$
|
19,422
|
|
|
2018
|
1,086
|
|
|
15,168
|
|
|
16,254
|
|
|
2019
|
35,565
|
|
|
10,519
|
|
|
46,084
|
|
|
2020
|
96
|
|
|
5,792
|
|
|
5,888
|
|
|
2021
|
—
|
|
|
2,374
|
|
|
2,374
|
|
|
Thereafter
|
1,013,459
|
|
|
—
|
|
|
1,013,459
|
|
|
Total
|
$
|
1,051,274
|
|
|
$
|
52,207
|
|
|
$
|
1,103,481
|
|
11. LEASES
We lease operating facilities under agreements with terms up to
99 years
. These agreements normally provide for minimum rentals plus executory costs. In some cases, we must pay contingent rent generally based on a percentage of gross receipts or positive cash flows as defined in the lease agreements. As a result, future lease payments that are considered contingent on future results are not included in the table below.
Future minimum lease payments for each of the next five years and thereafter required at
December 27, 2016
under operating leases for land, buildings and recreational facilities with initial non-cancelable lease terms in excess of one year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Capital Leases
|
|
Operating Leases
|
|
|
|
|
|
|
|
2017
|
|
$
|
20,591
|
|
|
$
|
22,920
|
|
|
2018
|
|
16,882
|
|
|
21,170
|
|
|
2019
|
|
11,682
|
|
|
19,044
|
|
|
2020
|
|
6,398
|
|
|
17,177
|
|
|
2021
|
|
2,601
|
|
|
17,011
|
|
|
Thereafter
|
|
—
|
|
|
108,928
|
|
|
Minimum lease payments
|
|
$
|
58,154
|
|
|
$
|
206,250
|
|
|
Less: imputed interest component
|
|
5,947
|
|
|
|
|
Present value of net minimum lease payments of which $18.3 million is included in current liabilities
|
|
$
|
52,207
|
|
|
|
Total facility rental expense was
$31.5 million
,
$32.4 million
and
$29.1 million
in the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively; contingent rent was
$9.4 million
,
$10.1 million
and
$9.2 million
in the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
, respectively.
12. INCOME TAXES
Holdings files a consolidated federal income tax return. Income taxes recorded are adjusted to the extent losses or other deductions cannot be utilized in the consolidated federal income tax return. We file state tax returns on a separate company basis or unitary basis as required by law. Additionally, certain subsidiaries of Holdings, owned through lower tier joint ventures, file separate tax returns for federal and state purposes.
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are
calculated using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are provided against deferred income tax assets for amounts which are not considered “more likely than not” to be realized.
Income (loss) before income taxes and noncontrolling interest consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Domestic
|
$
|
6,389
|
|
|
$
|
(7,628
|
)
|
|
$
|
(27,474
|
)
|
|
Foreign
|
(1,016
|
)
|
|
(316
|
)
|
|
(666
|
)
|
|
|
$
|
5,373
|
|
|
$
|
(7,944
|
)
|
|
$
|
(28,140
|
)
|
The income tax (expense) benefit consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Current
|
|
|
|
|
|
|
Federal
|
$
|
758
|
|
|
$
|
(669
|
)
|
|
$
|
42,400
|
|
|
State
|
(3,855
|
)
|
|
(6,010
|
)
|
|
1,242
|
|
|
Foreign
|
(1,299
|
)
|
|
(977
|
)
|
|
(62
|
)
|
|
Total Current
|
(4,396
|
)
|
|
(7,656
|
)
|
|
43,580
|
|
|
Deferred
|
|
|
|
|
|
|
Federal
|
(743
|
)
|
|
4,300
|
|
|
(1,277
|
)
|
|
State
|
3,791
|
|
|
1,727
|
|
|
(834
|
)
|
|
Total Deferred
|
3,048
|
|
|
6,027
|
|
|
(2,111
|
)
|
|
Total income tax (expense) benefit
|
$
|
(1,348
|
)
|
|
$
|
(1,629
|
)
|
|
$
|
41,469
|
|
The differences between income taxes computed using the U.S. statutory Federal income tax rate of
35%
and the actual income tax provision as reflected in the accompanying consolidated statements of operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Expected federal income tax (expense) benefit
|
$
|
(1,880
|
)
|
|
$
|
2,780
|
|
|
$
|
10,113
|
|
|
State taxes, net of federal benefit
|
855
|
|
|
(1,041
|
)
|
|
(2,607
|
)
|
|
Change in valuation allowance - state
|
(1,097
|
)
|
|
(1,820
|
)
|
|
(245
|
)
|
|
Change in valuation allowance - foreign
|
(457
|
)
|
|
(200
|
)
|
|
(1,128
|
)
|
|
Change in valuation allowance - federal
|
(187
|
)
|
|
—
|
|
|
—
|
|
|
Foreign rate differential
|
(89
|
)
|
|
(117
|
)
|
|
(127
|
)
|
|
IETU (business tax in Mexico), withholding and other permanent - foreign
|
(3
|
)
|
|
(210
|
)
|
|
(62
|
)
|
|
Adjustments related to uncertain tax positions
|
(829
|
)
|
|
(749
|
)
|
|
36,409
|
|
|
Equity-based compensation
|
(370
|
)
|
|
(29
|
)
|
|
(298
|
)
|
|
Nondeductible transaction costs
|
—
|
|
|
(311
|
)
|
|
(1,777
|
)
|
|
Membership deposits
|
1,853
|
|
|
—
|
|
|
—
|
|
|
Tax credits
|
1,362
|
|
|
639
|
|
|
—
|
|
|
Nondeductible expenses
|
(442
|
)
|
|
(571
|
)
|
|
1,191
|
|
|
Other, net
|
(64
|
)
|
|
—
|
|
|
—
|
|
|
Actual income tax (expense) benefit
|
$
|
(1,348
|
)
|
|
$
|
(1,629
|
)
|
|
$
|
41,469
|
|
We had the following net operating loss carryforwards at
December 27, 2016
, which are available to offset future taxable income:
|
|
|
|
|
|
|
|
|
|
|
|
Type of Carryforward
|
Gross Amount
|
|
Expiration Dates (in years)
|
|
Federal tax operating loss
|
$
|
63,925
|
|
|
2025
|
-
|
2035
|
|
State tax operating loss
|
$
|
226,433
|
|
|
2017
|
-
|
2035
|
|
AMT net operating loss
|
$
|
46,228
|
|
|
2027
|
-
|
2035
|
|
Foreign net operating loss
|
$
|
18,766
|
|
|
2026
|
The components of the deferred tax assets and deferred tax liabilities at
December 27, 2016
and
December 29, 2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Federal tax net operating loss carryforwards
|
|
|
$
|
22,374
|
|
|
$
|
16,962
|
|
|
State and foreign tax net operating loss carryforwards
|
|
|
14,664
|
|
|
13,487
|
|
|
Membership deferred revenue
|
|
|
72,300
|
|
|
70,669
|
|
|
Reserves and accruals
|
|
|
18,589
|
|
|
18,564
|
|
|
Tax credits
|
|
|
4,587
|
|
|
4,464
|
|
|
Straight-line rent
|
|
|
12,589
|
|
|
11,480
|
|
|
Other
|
|
|
22,168
|
|
|
16,095
|
|
|
Total gross deferred tax assets
|
|
|
167,271
|
|
|
151,721
|
|
|
Valuation allowances:
|
|
|
|
|
|
|
Federal
|
|
|
(187
|
)
|
|
—
|
|
|
State
|
|
|
(8,492
|
)
|
|
(7,413
|
)
|
|
Foreign
|
|
|
(4,141
|
)
|
|
(6,251
|
)
|
|
Total valuation allowance
|
|
|
(12,820
|
)
|
|
(13,664
|
)
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Discounts on membership initiation deposits and acquired notes
|
|
|
(130,954
|
)
|
|
(138,735
|
)
|
|
Property and equipment
|
|
|
(221,215
|
)
|
|
(200,665
|
)
|
|
Deferred revenue
|
|
|
(364
|
)
|
|
(1,151
|
)
|
|
Intangibles
|
|
|
(6,621
|
)
|
|
(7,491
|
)
|
|
Other
|
|
|
(391
|
)
|
|
(472
|
)
|
|
Total gross deferred tax liabilities
|
|
|
(359,545
|
)
|
|
(348,514
|
)
|
|
Net deferred tax liability
|
|
|
$
|
(205,094
|
)
|
|
$
|
(210,457
|
)
|
Valuation allowances included above of
$12.8 million
and
$13.7 million
at
December 27, 2016
and
December 29, 2015
, respectively, relate primarily to net operating loss carryforwards in certain states and in Mexico.
GAAP prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions are recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information.
A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met.
We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax (expense) benefit. Income tax (expense) benefit for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
includes interest expense (benefit) and penalties of
$0.6 million
,
$0.8 million
and
$(10.6) million
, respectively.
A reconciliation of the change in our unrealized tax benefit for all periods presented is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Balance at beginning of year
|
$
|
6,373
|
|
|
$
|
7,542
|
|
|
$
|
50,378
|
|
|
Increases in tax positions for current year
|
—
|
|
|
—
|
|
|
—
|
|
|
Increases in tax positions for prior years
|
116
|
|
|
207
|
|
|
5,800
|
|
|
Decreases in tax positions for prior years
|
(240
|
)
|
|
(604
|
)
|
|
(48,636
|
)
|
|
Increases (decreases) due to currency
|
(765
|
)
|
|
(772
|
)
|
|
—
|
|
|
Balance at end of year
|
$
|
5,484
|
|
|
$
|
6,373
|
|
|
$
|
7,542
|
|
Holdings files income tax returns in the U.S. federal jurisdiction, numerous state jurisdictions and in
three
foreign jurisdictions. During 2014, we completed an Internal Revenue Service (“IRS”) audit of certain components for the 2010 tax return, which included cancellation of indebtedness income related to a reorganization of CCI, which was effective as of November 10, 2010. We are also subject to a variety of state income tax audits for years open under the statute of limitations and certain of our foreign subsidiaries are under audit in Mexico for the 2008 and 2009 tax years. We have received multiple assessments related to such audits and have an immaterial amount recorded within our state income tax payable as of
December 27, 2016
.
As of
December 27, 2016
, tax years 2011 - 2016 remain open under statute for U.S. federal and most state tax jurisdictions. In Mexico, the statute of limitations is generally
five
years from the date of the filing of the tax return for any particular year, including amended returns. Accordingly, in general, tax years 2008 through 2016 remain open under statute; although certain prior years are also open as a result of the tax proceedings described below.
As of
December 27, 2016
and
December 29, 2015
, we have recorded a total of
$7.0 million
and
$7.3 million
, respectively, of unrecognized tax benefits related to uncertain tax positions, including interest and penalties of
$2.9 million
and
$2.3 million
, respectively, which are included in other liabilities in the consolidated balance sheets. If we were to prevail on all uncertain tax positions recorded as of
December 27, 2016
, the net effect would be an income tax benefit of approximately
$4.2 million
, exclusive of any benefits related to interest and penalties.
In
October 2014
, the IRS audit was completed resulting in
$48.6 million
reduction to unrecognized tax benefits, of which
$11.7 million
represented settlements and
$36.9 million
represented further reductions of prior period unrecognized tax benefits. An additional
$11.8 million
of accrued interest and penalties were reversed, thereby resulting in
$43.7 million
of the above benefits being recorded in the income statement. These benefits were offset by an increase of approximately
$7.3 million
of unrecognized tax benefits (including penalties and interest) within fiscal year 2014, primarily related to certain Mexican tax positions described in more detail below.
Certain of our Mexican subsidiaries are under audit by the Mexican taxing authorities for the
2008
and
2009
tax years. In 2013, we received two assessments, for approximately
$3.0 million
each, exclusive of penalties and interest, for two of our Mexican subsidiaries under audit for the
2008
tax year. We have taken the appropriate procedural steps to contest these assessments through the appropriate Mexican judicial channels. We have not recorded a liability related to these uncertain tax positions as we believe it is more likely than not that we will prevail based on the merits of our positions. In 2014, we received an audit assessment for the
2009
tax year for another Mexican subsidiary. We have taken the appropriate procedural steps to contest the assessment through the appropriate Mexican judicial channels. We have recorded a liability related to an unrecognized tax benefit for
$4.0 million
, exclusive of penalties and interest, related to this audit. The unrecognized tax benefit has been recorded due to the technical nature of the tax filing position taken by our Mexican subsidiary and uncertainty around the ultimate outcome of this assessment, which we intend to continue to contest.
Management believes it is unlikely that our unrecognized tax benefits will significantly change within the next 12 months given the current status in particular of the matters currently under examination by the Mexican tax authorities. However, as audit outcomes and the timing of related resolutions are subject to significant uncertainties, we will continue to evaluate the tax issues related to these assessments in future periods. In summary, we believe we are adequately reserved for our uncertain tax positions as of
December 27, 2016
.
13. NEW AND ACQUIRED CLUBS AND CLUB DIVESTITURES
New and Acquired Clubs
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.
Heritage Golf Club
—On
August 30, 2016
, we purchased Heritage Golf Club, a private golf club in Hilliard, Ohio, for a purchase price and net cash consideration of
$3.2 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:
|
|
|
|
|
|
|
|
|
August 30, 2016
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
3,407
|
|
|
Receivables, net of allowances of $6
|
202
|
|
|
Inventory and prepaid assets
|
156
|
|
|
Other current liabilities and accrued taxes
|
(271
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(301
|
)
|
|
Total
|
$
|
3,193
|
|
Santa Rosa Golf and Country Club
—On
March 15, 2016
, we purchased Santa Rosa Golf and Country Club, a private golf club in Santa Rosa, California, for a purchase price and net cash consideration of
$2.5 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
March 15, 2016
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
2,558
|
|
|
Inventory and prepaid assets
|
267
|
|
|
Other current liabilities
|
(153
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(178
|
)
|
|
Total
|
$
|
2,494
|
|
Marsh Creek Country Club
—On
February 2, 2016
, we purchased Marsh Creek Country Club, a private golf club in St. Augustine, Florida, for a purchase price of
$4.5 million
and net cash consideration of
$4.1 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
February 2, 2016
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
4,491
|
|
|
Receivables and inventory
|
92
|
|
|
Other current liabilities and accrued taxes
|
(477
|
)
|
|
Total
|
$
|
4,106
|
|
Bernardo Heights Country Club
—On
December 17, 2015
, we purchased Bernardo Heights, a private golf club in San Diego, California, for a purchase price and net cash consideration of
$2.7 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
December 17, 2015
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
2,840
|
|
|
Inventory and prepaid assets
|
102
|
|
|
Other current liabilities and accrued taxes
|
(104
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(134
|
)
|
|
Total
|
$
|
2,704
|
|
Southeast Portfolio
—On
April 7, 2015
, we acquired a multi-club portfolio of
six
golf and country clubs for a combined purchase price of
$43.8 million
and net cash consideration of
$43.6 million
.
|
|
|
|
|
|
|
|
|
|
Golf and Country Clubs
|
Type of Club
|
Market
|
State
|
Golf Holes
|
|
Bermuda Run Country Club
|
Private Country Club
|
Charlotte
|
NC
|
36
|
|
|
Brookfield Country Club
|
Private Country Club
|
Atlanta
|
GA
|
18
|
|
|
Firethorne Country Club
|
Private Country Club
|
Charlotte
|
NC
|
18
|
|
|
Temple Hills Country Club
|
Private Country Club
|
Nashville
|
TN
|
27
|
|
|
Ford’s Colony Country Club
|
Semi-Private Golf Club
|
Richmond
|
VA
|
54
|
|
|
Legacy Golf Club at Lakewood Ranch (subsequently divested)
|
Public Golf
|
Bradenton
|
FL
|
18
|
|
We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
April 7, 2015
|
|
Receivables, net of allowances of $228
|
$
|
1,757
|
|
|
Inventories and notes receivable
|
646
|
|
|
Land
|
9,920
|
|
|
Depreciable land improvements
|
17,321
|
|
|
Buildings and recreational facilities
|
13,113
|
|
|
Machinery and equipment and furniture and fixtures
|
4,959
|
|
|
Current liabilities
|
(2,063
|
)
|
|
Long-term debt (obligation related to capital leases) and other liabilities
|
(2,020
|
)
|
|
Total
|
$
|
43,633
|
|
Rolling Green Country Club
—On
January 20, 2015
, we purchased Rolling Green Country Club, a private golf club in Arlington Heights, Illinois, for a purchase price of
$6.5 million
and net cash consideration of
$6.4 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
January 20, 2015
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
6,554
|
|
|
Inventory
|
125
|
|
|
Other current liabilities and accrued taxes
|
(110
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(193
|
)
|
|
Total
|
$
|
6,376
|
|
Ravinia Green Country Club
—On
January 13, 2015
, we acquired Ravinia Green Country Club, a private golf club in Riverwoods, Illinois, for a purchase price and net cash consideration of
$5.9 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
January 13, 2015
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
6,034
|
|
|
Inventory and prepaid assets
|
30
|
|
|
Other current liabilities and accrued taxes
|
(186
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(11
|
)
|
|
Total
|
$
|
5,867
|
|
Oro Valley Country Club
—On
December 4, 2014
, we acquired Oro Valley Country Club, a private golf club in Oro Valley, Arizona, for a purchase price and net cash consideration of
$3.1 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
December 4, 2014
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
2,997
|
|
|
Inventory and prepaid assets
|
120
|
|
|
Intangibles, net
|
230
|
|
|
Other current liabilities and accrued taxes
|
(53
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(225
|
)
|
|
Total
|
$
|
3,069
|
|
Sequoia Golf
—On
September 30, 2014
, we completed the Sequoia Golf acquisition, which was executed through the purchase of all the equity interests in each of Sequoia Golf Holdings, LLC and Parthenon-Sequoia Ltd. (“Sequoia Golf”). On the date of acquisition, Sequoia Golf was comprised of
30
owned golf and country clubs and
20
leased or managed clubs. The total purchase price was
$260.0 million
, net of
$5.6 million
of cash acquired and after customary closing adjustments including net working capital. The acquisition was funded through net proceeds of
$244.6 million
, net of discount and debt issuance costs, from incremental term loan borrowings under the Secured Credit Facilities and from cash and cash equivalents. See Note
10
for further description of the incremental term loan borrowings.
The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
|
|
|
|
|
|
|
|
|
September 30, 2014
|
|
|
Receivables
|
$
|
10,204
|
|
|
Inventories, prepaids, notes receivable, current deferred tax assets and other assets
|
7,957
|
|
|
Land
|
54,990
|
|
|
Depreciable land improvements
|
88,025
|
|
|
Buildings and recreational facilities
|
46,931
|
|
|
Machinery and equipment and furniture and fixtures
|
26,954
|
|
|
Intangibles, net
|
9,756
|
|
|
Goodwill
|
54,352
|
|
|
Total assets acquired
|
299,169
|
|
|
Current liabilities
|
(22,266
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(2,544
|
)
|
|
Long-term deferred tax liability, net
|
(14,263
|
)
|
|
Noncontrolling interests in consolidated subsidiaries
|
(89
|
)
|
|
Total liabilities and noncontrolling interests in consolidated subsidiaries
|
(39,162
|
)
|
|
Net assets acquired
|
$
|
260,007
|
|
The excess of the purchase price over the aggregate fair values of assets acquired and liabilities assumed was recorded as goodwill and allocated to the golf and country club reporting unit, which is the only reporting unit within our golf and country club segment. The goodwill recorded is primarily related to: (i) expected cost and revenue synergies from combining operations and expanding our reciprocal access programs and (ii) expected earnings growth due to increased discretionary capital spending. None of the goodwill recorded is deductible for tax purposes. The intangible assets recorded are related to member relationships and management contracts and have a weighted average amortization period of approximately
3 years
. Machinery and equipment recorded above includes
$4.0 million
of assets which are accounted for as capital leases.
The following table presents the unaudited pro forma consolidated financial information of ClubCorp as if the acquisition of Sequoia Golf was completed on December 26, 2012, the first day of fiscal year 2013. The following unaudited pro forma financial information includes adjustments for: (i) depreciation on acquired property and equipment; (ii) alignment of revenue recognition policies; (iii) amortization of intangible assets recorded at the date of the transaction; and (iv) transaction
and business integration related costs. No adjustments were made to reflect anticipated synergies. This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the transaction taken place on December 26, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
December 30, 2014
|
|
December 31, 2013
|
|
Pro forma revenues
|
$
|
1,001,599
|
|
|
$
|
948,472
|
|
|
Pro forma net income (loss) attributable to ClubCorp
|
$
|
(9,080
|
)
|
|
$
|
(55,178
|
)
|
|
Pro forma basic net income (loss) attributable to ClubCorp, per share
|
$
|
(0.14
|
)
|
|
$
|
(1.02
|
)
|
|
Pro forma diluted net income (loss) attributable to ClubCorp, per share
|
$
|
(0.14
|
)
|
|
$
|
(1.02
|
)
|
Baylor Club
—On
April 30, 2014
, we finalized the lease and management rights to the Baylor Club, an alumni club within the new Baylor University football stadium in Waco, Texas.
TPC Piper Glen
—On
April 29, 2014
, we acquired Tournament Players Club (“TPC”) Piper Glen, a private golf club in Charlotte, North Carolina with a purchase price of
$3.8 million
for net cash consideration of
$3.7 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
April 29, 2014
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
3,833
|
|
|
Receivables and inventory
|
210
|
|
|
Other current liabilities and accrued taxes
|
(115
|
)
|
|
Long-term debt (obligation related to capital leases) and other liabilities
|
(197
|
)
|
|
Total
|
$
|
3,731
|
|
TPC Michigan
—On
April 29, 2014
, we acquired TPC Michigan, a semi-private golf club in Dearborn, Michigan with a purchase price of
$3.0 million
for net cash consideration of
$2.6 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
April 29, 2014
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
3,643
|
|
|
Receivables, inventory and prepaid assets
|
235
|
|
|
Other current liabilities and accrued expenses
|
(624
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(157
|
)
|
|
Deferred tax liability
|
(175
|
)
|
|
Membership initiation deposits
|
(370
|
)
|
|
Total
|
$
|
2,552
|
|
The Clubs of Prestonwood
—On
March 3, 2014
, we acquired The Clubs of Prestonwood, a private golf club comprised of two properties, The Creek in Dallas, Texas and The Hills in nearby Plano, Texas, with a purchase price of
$11.2 million
for net cash consideration of
$10.9 million
. We recorded the following major categories of assets and liabilities:
|
|
|
|
|
|
|
|
|
March 3, 2014
|
|
|
Land, depreciable land improvements and property and equipment
|
$
|
14,742
|
|
|
Inventory and prepaid assets
|
97
|
|
|
Other current liabilities and accrued taxes
|
(362
|
)
|
|
Long-term debt (obligation related to capital leases)
|
(280
|
)
|
|
Deferred tax liability
|
(1,300
|
)
|
|
Membership initiation deposits and other liabilities
|
(1,994
|
)
|
|
Total
|
$
|
10,903
|
|
Club Dispositions and Management Agreement Terminations
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. 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.
During the
fiscal year ended
December 27, 2016
,
two
management agreements were terminated, including a management agreement with Jefferson Lakeside Country Club, a private country club located in Richmond, Virginia and a management agreement with Mill Creek Country Club, a private country club located in Mill Creek, Washington. We closed Greenspoint Club, an owned business and sports club located in Houston, Texas and University Club, a leased business and sports club located in Jacksonville, Florida. Additionally, the lease of Airways Golf Club, a leased public golf course in Fresno, California, was terminated. No material gain or loss on divestiture was recorded. These divestitures did not qualify as discontinued operations.
During the fiscal year ended
December 29, 2015
,
ten
management agreements were terminated, including a management agreement with Shoreby Club, a business and sports club located in Bratenahl, Ohio, a multi-course management agreement for Klein Creek Golf Club, a public golf course located in Winfield, Illinois, The Grove Country Club, a private country club located in Long Grove, Illinois, The Royal Fox Country Club and The Royal Hawk Country Club, private country clubs both located in St. Charles, Illinois, a management agreement with Smoke Rise Country Club, a private country club located in Stone Mountain, Georgia, a management agreement with Stone Creek Golf Club, a semi-private country club located in Ocala, Florida, a management agreement with Regatta Bay Golf and Country Club, a private country club located in Destin, Florida, a management agreement with University of Massachusetts Club, an alumni club located in Boston, Massachusetts and a management agreement with Rancho Vista Golf Club, a public golf club in Rancho Vista, California. No gain or loss on divestiture was recorded. These divestitures did not qualify as discontinued operations. On November 4, 2015, we sold Legacy Golf Club at Lakewood Ranch, a public golf course in Bradenton, Florida. We recognized a gain of
$0.6 million
on the sale which is included in loss on disposals of assets in the consolidated statements of operations.
During the fiscal year ended
December 30, 2014
,
five
management agreements were terminated, including a management agreement with Hollytree Country Club, a private country club located in Tyler, Texas, three management agreements acquired with the Sequoia Golf acquisition which terminated after acquisition, and a management agreement with Paragon Club of Hefei, a business club located in Hefei, China. No gain or loss on divestiture was recorded. These divestitures did not qualify as discontinued operations.
14. SEGMENT INFORMATION
We currently have
two
reportable segments: (1) golf and country clubs and (2) business, sports and alumni clubs. These segments are managed separately and discrete financial information, including Adjusted EBITDA, our financial measure of segment profit and loss, is reviewed regularly by our chief operating decision maker to evaluate performance and allocate resources. Our chief operating decision maker is our Chief Executive Officer. We also use Adjusted EBITDA, on a consolidated basis, to assess our ability to service our debt, incur additional debt and meet our capital expenditure requirements. We believe that the presentation of Adjusted EBITDA is appropriate as it provides additional information to investors about our performance and investors and lenders have historically used EBITDA-related measures.
EBITDA is defined as net income before interest expense, income taxes, interest and investment income, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus or minus impairments, gain or loss on disposition and acquisition of assets, income or loss from divested clubs, loss on extinguishment of debt, non-cash and other adjustments, equity-based compensation expense and a deferred revenue adjustment. The deferred revenue adjustment to revenues and Adjusted EBITDA within each segment represents estimated deferred revenue using current membership life estimates related to initiation payments that would have been recognized in the applicable period but for the application of purchase accounting. Adjusted EBITDA is based on the definition of Consolidated EBITDA as defined in the credit agreement governing the Secured Credit Facilities and may not be comparable to similarly titled measures reported by other companies. The credit agreement governing the Secured Credit Facilities and the indenture governing the 2015 Senior Notes contain certain covenants which are based upon specified financial ratios in reference to Adjusted EBITDA, after giving effect to the pro forma impact of acquisitions. Adjusted EBITDA as reported is identical to the computation of Consolidated EBITDA as defined in the credit agreement governing our Secured Credit Facilities, except that for purposes of certain covenants in the credit agreement, a pro forma adjustment is made to Consolidated EBITDA in order to give effect to current period acquisitions as though they had been consummated on the first day of the four quarter period presented. The pro forma impact gives effect to all acquisitions in the fiscal year
2016
as though they had been consummated on the first day of fiscal year
2016
.
Golf and country club operations consist of private country clubs, golf clubs and public golf facilities. Private country clubs provide at least one 18-hole golf course and various other recreational amenities that are open to members and their guests. Golf clubs provide both private and public golf play and usually offer fewer recreational amenities than private country clubs. Public golf facilities are open to the public and generally provide the same amenities as golf clubs.
Business, sports and alumni club operations consist of business clubs, business/sports clubs, sports clubs and alumni clubs. Business clubs provide a setting for dining, business or social entertainment. Sports clubs provide a variety of recreational facilities and business/sports clubs provide a combination of the amenities available at business clubs and sports clubs. Alumni clubs provide the same amenities as business clubs while targeting alumni and staff of universities.
We also disclose corporate expenses and other operations, which consists of other business activities including ancillary revenues related to alliance arrangements, a portion of the revenue associated with upgrade offerings, reimbursements for certain costs of operations at managed clubs, corporate overhead expenses and shared services. Other operations also includes corporate assets such as cash, goodwill, intangible assets, and loan origination fees. While corporate expenses and other operations is not a segment, disclosing corporate expenses and other operations facilitates the reconciliation from segment results to consolidated results.
The table below shows summarized financial information by segment for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
2016
|
|
2015
|
|
2014
|
|
Revenues
|
|
|
|
|
|
|
|
|
Golf and Country Clubs (1)
|
$
|
879,085
|
|
|
$
|
841,341
|
|
|
$
|
693,489
|
|
|
Business, Sports and Alumni Clubs (1)
|
193,390
|
|
|
190,876
|
|
|
178,725
|
|
|
Other operations
|
25,016
|
|
|
19,853
|
|
|
10,062
|
|
|
Elimination of intersegment revenues and segment reporting adjustments
|
(13,137
|
)
|
|
(14,383
|
)
|
|
(12,037
|
)
|
|
Revenues relating to divested clubs (2)
|
4,126
|
|
|
15,180
|
|
|
13,916
|
|
|
Total consolidated revenues
|
$
|
1,088,480
|
|
|
$
|
1,052,867
|
|
|
$
|
884,155
|
|
|
|
|
|
|
|
|
|
Golf and Country Clubs Adjusted EBITDA
|
$
|
260,595
|
|
|
$
|
245,696
|
|
|
$
|
202,887
|
|
|
Business, Sports and Alumni Clubs Adjusted EBITDA
|
$
|
41,592
|
|
|
$
|
39,712
|
|
|
$
|
34,727
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
Golf and Country Clubs
|
$
|
105,687
|
|
|
$
|
107,632
|
|
|
$
|
71,108
|
|
|
Business, Sports and Alumni Clubs
|
13,519
|
|
|
7,316
|
|
|
20,605
|
|
|
Other operations
|
22,693
|
|
|
16,724
|
|
|
5,483
|
|
|
Total consolidated capital expenditures
|
$
|
141,899
|
|
|
$
|
131,672
|
|
|
$
|
97,196
|
|
______________________
|
|
|
|
(1)
|
Includes segment reporting adjustments representing estimated deferred revenue, calculated using current membership life estimates, related to initiation payments that would have been recognized in the applicable period but for the application of purchase accounting in connection with the acquisition of CCI in 2006 and the acquisition of Sequoia Golf on
September 30, 2014
.
|
|
|
|
|
(2)
|
When clubs are divested, the associated revenues are excluded from segment results for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
Total Assets
|
December 27, 2016
|
|
December 29, 2015
|
|
Golf and Country Clubs
|
$
|
1,557,489
|
|
|
$
|
1,554,448
|
|
|
Business, Sports and Alumni Clubs
|
88,967
|
|
|
89,823
|
|
|
Other operations
|
482,258
|
|
|
490,980
|
|
|
Consolidated
|
$
|
2,128,714
|
|
|
$
|
2,135,251
|
|
The following table presents revenue by product type and revenue and long-lived assets by geographical region, excluding financial instruments. Foreign operations are primarily located in Mexico.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
2016
|
|
2015
|
|
2014
|
|
Revenues by Type
|
|
|
|
|
|
|
Dues
|
$
|
517,888
|
|
|
$
|
492,565
|
|
|
$
|
408,351
|
|
|
Food and beverage
|
302,510
|
|
|
291,582
|
|
|
251,838
|
|
|
Golf
|
174,756
|
|
|
173,982
|
|
|
144,139
|
|
|
Other
|
93,326
|
|
|
94,738
|
|
|
79,827
|
|
|
Total
|
$
|
1,088,480
|
|
|
$
|
1,052,867
|
|
|
$
|
884,155
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Revenues
|
|
|
|
|
|
|
United States
|
$
|
1,083,068
|
|
|
$
|
1,046,561
|
|
|
$
|
877,780
|
|
|
All Foreign
|
$
|
5,412
|
|
|
$
|
6,306
|
|
|
$
|
6,375
|
|
|
Total
|
$
|
1,088,480
|
|
|
$
|
1,052,867
|
|
|
$
|
884,155
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
|
|
Long-Lived Assets
|
|
|
|
|
|
|
United States
|
1,889,252
|
|
|
1,881,126
|
|
|
|
|
All Foreign
|
17,950
|
|
|
21,560
|
|
|
|
|
Total
|
1,907,202
|
|
|
1,902,686
|
|
|
|
The table below provides a reconciliation of Golf and Country Clubs Adjusted EBITDA and Business, Sports and Alumni Adjusted EBITDA to income (loss) before income taxes for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
2016
|
|
2015
|
|
2014
|
|
Golf and Country Clubs Adjusted EBITDA
|
$
|
260,595
|
|
|
$
|
245,696
|
|
|
$
|
202,887
|
|
|
Business, Sports and Alumni Clubs Adjusted EBITDA
|
41,592
|
|
|
39,712
|
|
|
34,727
|
|
|
Interest expense
|
(87,188
|
)
|
|
(70,672
|
)
|
|
(65,209
|
)
|
|
Interest and investment income
|
608
|
|
|
5,517
|
|
|
2,582
|
|
|
Depreciation and amortization
|
(107,200
|
)
|
|
(103,944
|
)
|
|
(80,792
|
)
|
|
Impairments and disposition of assets (1)
|
(16,974
|
)
|
|
(24,546
|
)
|
|
(12,843
|
)
|
|
(Loss) income from divested clubs (2)
|
(751
|
)
|
|
(25
|
)
|
|
1,097
|
|
|
Loss on extinguishment of debt (3)
|
—
|
|
|
(2,599
|
)
|
|
(31,498
|
)
|
|
Non-cash adjustments (4)
|
(255
|
)
|
|
(2,008
|
)
|
|
(2,007
|
)
|
|
Acquisition related costs (5)
|
(1,409
|
)
|
|
(4,965
|
)
|
|
(10,568
|
)
|
|
Capital structure costs (6)
|
(1,840
|
)
|
|
(10,047
|
)
|
|
(8,785
|
)
|
|
Centralization and transformation costs (7)
|
(9,806
|
)
|
|
(8,495
|
)
|
|
(1,330
|
)
|
|
Other adjustments (8)
|
(5,076
|
)
|
|
(7,397
|
)
|
|
(4,632
|
)
|
|
Equity-based compensation expense (9)
|
(7,005
|
)
|
|
(4,970
|
)
|
|
(4,303
|
)
|
|
Deferred revenue adjustment (10)
|
(5,419
|
)
|
|
(7,111
|
)
|
|
(5,644
|
)
|
|
Corporate expenses and other operations (11)
|
(54,499
|
)
|
|
(52,090
|
)
|
|
(41,822
|
)
|
|
Income (loss) before income taxes
|
$
|
5,373
|
|
|
$
|
(7,944
|
)
|
|
$
|
(28,140
|
)
|
______________________
|
|
|
|
(1)
|
Includes non-cash impairment charges related to property and equipment and intangible assets and loss on disposals of assets (including property and equipment disposed of in connection with renovations).
|
|
|
|
|
(2)
|
Net income or loss from divested clubs that do not qualify as discontinued operations in accordance with GAAP.
|
|
|
|
|
(3)
|
Includes loss on extinguishment of debt calculated in accordance with GAAP.
|
|
|
|
|
(4)
|
Includes non-cash items related to purchase accounting associated with the acquisition of CCI in 2006 by affiliates of KSL Capital Partners, LLC (“KSL”).
|
|
|
|
|
(5)
|
Represents legal and professional fees related to the acquisition of clubs, including the acquisition of Sequoia Golf on
September 30, 2014
.
|
|
|
|
|
(6)
|
Represents legal and professional fees related to our capital structure, including debt issuance and amendment costs and equity offering costs.
|
|
|
|
|
(7)
|
Includes fees and expenses associated with initial compliance with Section 404(b) of the Sarbanes-Oxley Act, which were primarily incurred in fiscal year 2015 and the twelve weeks ended March 22, 2016, and related centralization and transformation of administrative processes, finance processes and related IT systems.
|
|
|
|
|
(8)
|
Represents adjustments permitted by the credit agreement governing the Secured Credit Facilities including cash distributions from equity method investments less equity in earnings recognized for said investments, income or loss attributable to non-controlling equity interests and expenses paid to an affiliate of KSL.
|
|
|
|
|
(9)
|
Includes equity-based compensation expense, calculated in accordance with GAAP, related to awards held by certain employees, executives and directors.
|
|
|
|
|
(10)
|
Represents estimated deferred revenue, calculated using current membership life estimates, related to initiation payments that would have been recognized in the applicable period but for the application of purchase accounting in connection with the acquisition of CCI in 2006 and the acquisition of Sequoia Golf on
September 30, 2014
.
|
|
|
|
|
(11)
|
Includes other business activities including ancillary revenues related to alliance arrangements, a portion of the revenue associated with upgrade offerings, costs of operations at managed clubs, corporate overhead expenses and shared services expenses.
|
15. EARNINGS PER SHARE
GAAP requires that earnings per share (“EPS”) calculations treat unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents as a separate class of securities (participating securities) and that basic EPS be calculated using the two-class method. We have granted RSAs (as defined in Note
16
) that contain non-forfeitable rights to dividends. Such awards are considered participating securities. The two-class method of computing EPS is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. We have also granted RSAs that contain forfeitable rights to dividends. These awards are not considered participating securities and are excluded from the basic weighted-average shares outstanding calculation.
Basic EPS is computed utilizing the two-class method and is calculated on weighted-average number of common shares outstanding during the periods presented.
Diluted EPS reflects the dilutive effect of equity based awards (potential common shares) that may share in the earnings of ClubCorp when such shares are either issued or vesting restrictions lapse. Diluted EPS is computed using the weighted-average number of common shares and potential common shares outstanding during the periods presented, utilizing the two-class method for unvested equity-based awards.
Presented below is basic and diluted EPS for the
fiscal years ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Numerator for earnings per share
|
$
|
3,108
|
|
|
$
|
3,108
|
|
|
$
|
(9,617
|
)
|
|
$
|
(9,617
|
)
|
|
$
|
13,226
|
|
|
$
|
13,226
|
|
|
Weighted-average shares outstanding
|
64,517
|
|
|
64,517
|
|
|
64,364
|
|
|
64,364
|
|
|
63,941
|
|
|
63,941
|
|
|
Effect of dilutive equity-based awards
|
—
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
Total Shares
|
64,517
|
|
|
64,584
|
|
|
64,364
|
|
|
64,364
|
|
|
63,941
|
|
|
64,318
|
|
|
Net income (loss) attributable to ClubCorp per share
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
(0.15
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
0.21
|
|
|
$
|
0.21
|
|
The basis for the numerator for earnings per share is net income (loss) attributable to ClubCorp. The numerator was adjusted by approximately
$0.5 million
and
$0.1 million
for the dividends allocated to participating securities during the
fiscal years ended
December 27, 2016
and
December 29, 2015
, respectively. There were
no
dividends allocated to participating securities during the
fiscal year ended
December 30, 2014
.
Potential common shares are excluded from the calculation of diluted EPS when the effect of their inclusion would reduce our net loss per share and would be anti-dilutive. For the
fiscal year ended
December 29, 2015
there are
0.2 million
potential common shares excluded from the calculation of diluted EPS. For the
fiscal years ended
December 27, 2016
and
December 30, 2014
there are
no
potential common shares excluded from the calculation of diluted EPS.
16. EQUITY
Equity-Based Awards
—We have granted equity-based awards to employees and non-employee directors in the form of restricted stock awards (“RSAs”), which restrictions will be removed upon satisfaction of time-based vesting requirements, subject to the holder remaining in continued service with us. We have also granted performance restricted stock units (“PSUs”) and “Adjusted EBITDA-Based PSUs”, both of which will convert into shares of our common stock upon satisfaction of (i) time-based vesting requirements and (ii) the applicable performance-based requirements subject to the holder remaining in continued service with us. The number of awards under the PSU and Adjusted EBITDA-Based PSU grants represents the target number of such units that may be earned. The PSU awards performance-based requirements are measured based on Holdings’ total shareholder return over the applicable performance periods compared with a peer group. The Adjusted EBITDA-Based PSU awards vest upon the achievement by the 2017 Same Store Clubs (as defined in the form of award), on a consolidated basis, of a specified level of Adjusted EBITDA for fiscal year 2018. We measure the cost of services rendered in exchange for equity-based awards based upon the grant date fair market value of the respective equity-based awards. The value is recognized over the requisite service period, which is generally the vesting period. The Adjusted EBITDA-Based PSU awards include performance conditions and expense is accrued when achievement of the performance conditions is considered probable. No expense has been recognized for these awards.
The fair market value of each RSA was estimated using Holdings’ closing share price on the date of grant. The fair market value of each PSU was estimated on the date of grant using a Monte Carlo simulation analysis which generates a distribution of possible future stock prices for Holdings and the peer group from the grant date to the end of the applicable performance period. The fair market value of each Adjusted EBITDA-Based PSU was estimated using Holdings’ closing share price on the date of grant. Assumptions used as inputs in the analysis are disclosed below. The risk-free rate is based on U.S. Treasury yields with a term commensurate to the applicable PSU performance period. Expected dividend yields were
0%
as all dividends are assumed to be reinvested. The expected volatility for each PSU is based on the historical volatility of our common stock.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
Risk-free rate
|
0.90
|
%
|
|
0.86
|
%
|
|
Expected dividends
|
—
|
%
|
|
—
|
%
|
|
Expected volatility
|
26.2
|
%
|
|
24.5
|
%
|
|
Expected term (years)
|
3.0
|
|
|
3.0
|
|
The following table shows total equity-based compensation expense included in the consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
December 27, 2016
|
|
December 29, 2015
|
|
December 30, 2014
|
|
Club operating costs exclusive of depreciation
|
$
|
2,934
|
|
|
$
|
1,440
|
|
|
$
|
1,395
|
|
|
Selling, general and administrative
|
4,071
|
|
|
3,530
|
|
|
2,908
|
|
|
Pre-tax equity-based compensation expense
|
7,005
|
|
|
4,970
|
|
|
4,303
|
|
|
Less: benefit for income taxes
|
(2,591
|
)
|
|
(1,858
|
)
|
|
(1,311
|
)
|
|
Equity-based compensation expense, net of tax
|
$
|
4,414
|
|
|
$
|
3,112
|
|
|
$
|
2,992
|
|
As of
December 27, 2016
, there was approximately
$13.0 million
of unrecognized expense related to non-vested, equity-based awards granted to employees, which is expected to be recognized over a weighted average period of approximately
1.8 years
.
The Amended and Restated ClubCorp Holdings, Inc. 2012 Stock Award Plan (the “Stock Plan”) provides for an aggregate amount of no more than
4.0 million
shares of common stock to be available for awards. The Stock Plan provides for the grant of stock options, restricted stock awards, restricted stock units, performance-based awards and other equity-based incentive awards. To date, we have granted RSAs, PSUs, Adjusted EBITDA-Based PSUs and restricted stock units (“RSUs”) under the Stock Plan. As of
December 27, 2016
, approximately
1.3 million
shares of common stock were available for future issuance under the Stock Plan. Treasury stock may be used to settle awards under the Stock Plan.
On
April 1, 2012
, prior to our initial public offering (“IPO”), Holdings granted RSUs to certain executives under the Stock Plan. As of
December 30, 2014
, there were
190,788
RSUs outstanding. During the fiscal year ended
December 29, 2015
, all of the remaining RSUs vested and
122,144
RSUs were converted into shares of our common stock, while
68,644
RSUs were forfeited by employees in lieu of the payment of income tax withholding obligations.
The following table summarizes RSA, PSU and Adjusted EBITDA-Based PSU activity for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
Performance-based awards (1)
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Target shares
|
|
Weighted Average Grant Date Fair Value
|
|
Non-vested balance at December 30, 2014
|
228,066
|
|
|
$
|
18.29
|
|
|
111,610
|
|
|
$
|
17.08
|
|
|
Granted
|
214,306
|
|
|
$
|
18.42
|
|
|
136,071
|
|
|
$
|
19.64
|
|
|
Vested
|
(82,025)
|
|
|
$
|
18.36
|
|
|
—
|
|
|
$
|
—
|
|
|
Forfeited
|
(22,384)
|
|
|
$
|
18.11
|
|
|
(20,271
|
)
|
|
$
|
18.44
|
|
|
Canceled
|
(7,493
|
)
|
|
$
|
18.50
|
|
|
—
|
|
|
$
|
—
|
|
|
Non-vested balance at December 29, 2015
|
330,470
|
|
|
$
|
18.37
|
|
|
227,410
|
|
|
$
|
18.49
|
|
|
Granted
|
876,418
|
|
|
$
|
11.80
|
|
|
741,030
|
|
|
$
|
9.87
|
|
|
Vested
|
(130,681)
|
|
|
$
|
18.95
|
|
|
—
|
|
|
$
|
—
|
|
|
Forfeited
|
(88,736)
|
|
|
$
|
13.48
|
|
|
(97,070
|
)
|
|
$
|
14.72
|
|
|
Canceled
|
(29,521
|
)
|
|
$
|
18.63
|
|
|
—
|
|
|
$
|
—
|
|
|
Non-vested balance at December 27, 2016
|
957,950
|
|
|
$
|
12.73
|
|
|
871,370
|
|
|
$
|
11.58
|
|
______________________
(1) Includes PSUs and Adjusted EBITDA-Based PSUs.
Dividends
—The following is a summary of dividends declared or paid during the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Dividend Per Share
|
|
Record Date
|
|
Total Amount
|
|
Payment Date
|
|
Fiscal Year 2014
|
|
|
|
|
|
|
|
March 18, 2014
|
|
$
|
0.12
|
|
|
April 3, 2014
|
|
$
|
7,725
|
|
|
April 15, 2014
|
|
June 25, 2014
|
|
$
|
0.12
|
|
|
July 7, 2014
|
|
$
|
7,731
|
|
|
July 15, 2014
|
|
September 9, 2014
|
|
$
|
0.12
|
|
|
October 3, 2014
|
|
$
|
7,731
|
|
|
October 15, 2014
|
|
December 3, 2014
|
|
$
|
0.13
|
|
|
January 2, 2015
|
|
$
|
8,377
|
|
|
January 15, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2015
|
|
|
|
|
|
|
|
March 20, 2015
|
|
$
|
0.13
|
|
|
April 2, 2015
|
|
$
|
8,399
|
|
|
April 15, 2015
|
|
June 25, 2015
|
|
$
|
0.13
|
|
|
July 6, 2015
|
|
$
|
8,417
|
|
|
July 15, 2015
|
|
September 3, 2015
|
|
$
|
0.13
|
|
|
October 1, 2015
|
|
$
|
8,416
|
|
|
October 15, 2015
|
|
December 9, 2015
|
|
$
|
0.13
|
|
|
January 4, 2016
|
|
$
|
8,416
|
|
|
January 15, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2016
|
|
|
|
|
|
|
|
February 18, 2016
|
|
$
|
0.13
|
|
|
April 5, 2016
|
|
$
|
8,520
|
|
|
April 15, 2016
|
|
June 10, 2016
|
|
$
|
0.13
|
|
|
July 1, 2016
|
|
$
|
8,508
|
|
|
July 15, 2016
|
|
September 29, 2016
|
|
$
|
0.13
|
|
|
October 10, 2016
|
|
$
|
8,500
|
|
|
October 17, 2016
|
|
December 7, 2016
|
|
$
|
0.13
|
|
|
January 6, 2017
|
|
$
|
8,490
|
|
|
January 17, 2017
|
Share Repurchase Plan
—On February 24, 2016, we announced that our Board of Directors authorized a repurchase of up to
$50.0 million
of our common stock with an expiration date of December 31, 2017. The repurchase program may be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market or privately negotiated transactions, including through plans designed under Rule 10b5-1 of the Securities Exchange Act
of 1934. During the
fiscal year ended
December 27, 2016
, we purchased
192,989
shares under the share repurchase plan. As of
December 27, 2016
, approximately
$47,741,518
remained authorized under the share repurchase plan.
17. COMMITMENTS AND CONTINGENCIES
We routinely enter into contractual obligations to procure assets used in the day to day operations of our business and to invest in our information technology systems. As of
December 27, 2016
, we had capital commitments of
$28.2 million
.
We currently have sales and use tax audits in progress. We believe the potential for a liability related to the outcome of these audits may exist. However, we believe that the outcome of these audits would not materially affect our consolidated financial statements.
Certain of our Mexican subsidiaries are under audit by the Mexican taxing authorities for the
2008
and
2009
tax years. In 2013, we received two assessments, for approximately
$3.0 million
each, exclusive of penalties and interest, for two of our Mexican subsidiaries under audit for the
2008
tax year. We have taken the appropriate procedural steps to contest these assessments through the appropriate Mexican judicial channels. We have not recorded a liability related to these uncertain tax positions as we believe it is more likely than not that we will prevail based on the merits of our positions. In 2014, we received an audit assessment for the
2009
tax year for another Mexican subsidiary. We have taken the appropriate procedural steps to contest the assessment through the appropriate Mexican judicial channels. We have recorded a liability related to an unrecognized tax benefit for
$4.0 million
, exclusive of penalties and interest, related to this audit. The unrecognized tax benefit has been recorded due to the technical nature of the tax filing position taken by our Mexican subsidiary and uncertainty around the ultimate outcome of this assessment, which we intend to continue to contest.
We are currently under audit by state income tax authorities. We have received multiple assessments related to such audits and have an immaterial amount recorded within our state income tax payable as of
December 27, 2016
.
We are subject to certain pending or threatened litigation and other claims that arise in the ordinary course of business. While the outcome of such legal proceedings and other claims cannot be predicted with certainty, after review and consultation with legal counsel, we believe that any potential liability from these matters would not materially affect our consolidated financial statements.
18. RELATED PARTY TRANSACTIONS
We had receivables of
$0.2 million
and
$0.1 million
, as of
December 27, 2016
and
December 29, 2015
, respectively, for outstanding advances from a golf club joint venture in which we have an equity method investment. We recorded
$0.2 million
,
$0.2 million
, and
$0.2 million
in management fees from this venture, in the
fiscal years ended
December 27, 2016
,
December 29, 2015
, and
December 30, 2014
, respectively. As of
December 27, 2016
and
December 29, 2015
, we had a receivable of
$3.5 million
and
$3.2 million
, respectively, for volume rebates from Avendra, LLC, the supplier firm in which we have an equity method investment. See Note
4
.
19. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following table sets forth the historical unaudited quarterly financial data for the periods indicated. The information for each of these periods has been prepared on the same basis as the audited consolidated financial statements and, in our opinion, reflects all adjustments necessary to present fairly our financial results. Operating results for previous periods do not necessarily indicate results that may be achieved in any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the sixteen weeks ended
|
|
For the twelve weeks ended
|
|
2016
|
|
December 27, 2016
|
|
September 6, 2016
|
|
June 14, 2016
|
|
March 22, 2016
|
|
Total revenues
|
|
$
|
345,301
|
|
|
$
|
259,332
|
|
|
$
|
268,974
|
|
|
$
|
214,873
|
|
|
Direct and selling, general and administrative expenses
|
|
312,207
|
|
|
236,556
|
|
|
239,335
|
|
|
208,429
|
|
|
Operating income
|
|
33,094
|
|
|
22,776
|
|
|
29,639
|
|
|
6,444
|
|
|
Net income (loss)
|
|
5,406
|
|
|
1,182
|
|
|
5,750
|
|
|
(8,313
|
)
|
|
Net income (loss) attributable to ClubCorp
|
|
5,224
|
|
|
1,188
|
|
|
5,579
|
|
|
(8,414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ClubCorp per share, basic
|
|
$
|
0.08
|
|
|
$
|
0.02
|
|
|
$
|
0.08
|
|
|
$
|
(0.13
|
)
|
|
Net income (loss) attributable to ClubCorp per share, diluted
|
|
$
|
0.08
|
|
|
$
|
0.02
|
|
|
$
|
0.08
|
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the sixteen weeks ended
|
|
For the twelve weeks ended
|
|
2015
|
|
December 29, 2015
|
|
September 8, 2015
|
|
June 16, 2015
|
|
March 24, 2015
|
|
Total revenues
|
|
$
|
331,688
|
|
|
$
|
255,360
|
|
|
$
|
263,747
|
|
|
$
|
202,072
|
|
|
Direct and selling, general and administrative expenses
|
|
313,148
|
|
|
238,126
|
|
|
246,567
|
|
|
195,216
|
|
|
Operating income
|
|
18,540
|
|
|
17,234
|
|
|
17,180
|
|
|
6,856
|
|
|
Net (loss) income
|
|
(6,259
|
)
|
|
1,185
|
|
|
(223
|
)
|
|
(4,276
|
)
|
|
Net (loss) income attributable to ClubCorp
|
|
(6,346
|
)
|
|
1,252
|
|
|
(196
|
)
|
|
(4,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to ClubCorp per share, basic
|
|
$
|
(0.10
|
)
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
(0.07
|
)
|
|
Net (loss) income attributable to ClubCorp per share, diluted
|
|
$
|
(0.10
|
)
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
(0.07
|
)
|
20. SUBSEQUENT EVENTS
On
December 7, 2016
, our Board of Directors declared a cash dividend of
$8.5 million
, or
$0.13
per share of common stock, to all common stockholders of record at the close of business on
January 6, 2017
. This dividend was paid on
January 17, 2017
.
On
February 7, 2017
, we purchased Eagle’s Nest Country Club, a private golf club in Phoenix, Maryland, for a purchase price of
$2.5 million
, which was satisfied by our assumption of debt of
$2.5 million
. The debt obligation does not accrue interest. Due to the timing of this acquisition, the purchase price allocation was not yet available for disclosure as of the date these financial statements were available to be issued.
On
February 9, 2017
, our board of directors declared a cash dividend of approximately
$8.5 million
, or
$0.13
per share of common stock, to all common stockholders of record at the close of business on
April 5, 2017
. This dividend will be paid on
April 17, 2017
.
On
February 9, 2017
, we granted
360,869
RSAs, under the Stock Plan, to certain officers and employees. Under the terms of the grants, the restrictions will be removed upon satisfaction of time vesting requirements, subject to the holder remaining employed by us. Also on
February 9, 2017
, we granted
296,765
PSUs, under the Stock Plan, to certain officers and employees.
On
February 21, 2017
, we purchased North Hills Country Club, a private golf club in Glenside, Pennsylvania, for a purchase price of
$2.1 million
. Due to the timing of this acquisition, the purchase price allocation was not yet available for disclosure as of the date these financial statements were available to be issued.
Schedule I - Registrant’s Condensed Financial Statements
ClubCorp Holdings, Inc.
Registrant Only Financial Statements
Condensed Statements of Operations and Comprehensive Income (Loss)
For the
Fiscal Years Ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Equity in net income (loss) of subsidiaries
|
$
|
3,577
|
|
|
$
|
(9,512
|
)
|
|
$
|
13,226
|
|
|
NET INCOME (LOSS)
|
3,577
|
|
|
(9,512
|
)
|
|
13,226
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO CLUBCORP HOLDINGS, INC.
|
$
|
3,577
|
|
|
$
|
(9,512
|
)
|
|
$
|
13,226
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
3,577
|
|
|
(9,512
|
)
|
|
13,226
|
|
|
Equity in other comprehensive (loss) income of subsidiaries
|
(2,389
|
)
|
|
(2,959
|
)
|
|
(3,220
|
)
|
|
COMPREHENSIVE INCOME (LOSS)
|
1,188
|
|
|
(12,471
|
)
|
|
10,006
|
|
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLUBCORP HOLDINGS, INC.
|
$
|
1,188
|
|
|
$
|
(12,471
|
)
|
|
$
|
10,006
|
|
ClubCorp Holdings, Inc.
Registrant Only Financial Statements
Condensed Balance Sheets
As of
December 27, 2016
and
December 29, 2015
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
ASSETS
|
|
|
|
|
Investment in subsidiaries
|
$
|
150,952
|
|
|
$
|
176,899
|
|
|
TOTAL ASSETS
|
$
|
150,952
|
|
|
$
|
176,899
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Dividends to owners declared, but unpaid - current
|
8,582
|
|
|
8,467
|
|
|
Dividends to owners declared, but unpaid - long-term
|
—
|
|
|
68
|
|
|
TOTAL LIABILITIES
|
$
|
8,582
|
|
|
$
|
8,535
|
|
|
EQUITY
|
|
|
|
|
Common stock, $0.01 par value, 200,000,000 shares authorized; 65,498,897 and 64,740,736 issued and outstanding at December 27, 2016 and December 29, 2015, respectively
|
655
|
|
|
647
|
|
|
Additional paid-in capital
|
235,871
|
|
|
263,921
|
|
|
Accumulated deficit and accumulated other comprehensive loss
|
(91,898
|
)
|
|
(96,204
|
)
|
|
Treasury stock, at cost (192,989 shares at December 27, 2016)
|
(2,258
|
)
|
|
—
|
|
|
Total stockholders’ equity
|
142,370
|
|
|
168,364
|
|
|
Total equity
|
142,370
|
|
|
168,364
|
|
|
TOTAL LIABILITIES AND EQUITY
|
$
|
150,952
|
|
|
$
|
176,899
|
|
ClubCorp Holdings, Inc.
Registrant Only Financial Statements
Condensed Statements of Cash Flows
For the
Fiscal Years Ended
December 27, 2016
,
December 29, 2015
and
December 30, 2014
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income (loss)
|
$
|
3,577
|
|
|
$
|
(9,512
|
)
|
|
$
|
13,226
|
|
|
Adjustments to reconcile net loss to cash flows from operating activities:
|
|
|
|
|
|
|
Equity in net (income) loss of subsidiary
|
(3,577
|
)
|
|
9,512
|
|
|
(13,226
|
)
|
|
Net cash provided by operating activities
|
—
|
|
|
—
|
|
|
—
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Contribution from subsidiary
|
33,972
|
|
|
33,664
|
|
|
30,765
|
|
|
Distribution to subsidiary
|
—
|
|
|
—
|
|
|
—
|
|
|
Net cash provided by (used in) investing activities
|
33,972
|
|
|
33,664
|
|
|
30,765
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Distribution to owners
|
(33,972
|
)
|
|
(33,664
|
)
|
|
(30,765
|
)
|
|
Net cash (used in) provided by financing activities
|
(33,972
|
)
|
|
(33,664
|
)
|
|
(30,765
|
)
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
—
|
|
|
—
|
|
|
—
|
|
|
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
—
|
|
|
—
|
|
|
—
|
|
|
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Non-cash investing and financing activities are as follows:
|
|
|
|
|
|
|
Distribution declared payable to owners
|
$
|
8,582
|
|
|
$
|
8,535
|
|
|
$
|
8,454
|
|
Notes to Condensed Registrant Only Financial Statements
1. ORGANIZATION
ClubCorp Holdings, Inc. (“Holdings”) and its wholly owned subsidiaries CCA Club Operations Holdings, LLC (“Operations’ Parent”) and ClubCorp Club Operations, Inc. (“Operations” and, together with Holdings and Operations’ Parent, “ClubCorp”) were formed on
November 10, 2010
, as part of a reorganization of ClubCorp, Inc. (“CCI”), which was effective as of
November 30, 2010
, for the purpose of operating and managing golf and country clubs and business, sports and alumni clubs. ClubCorp, together with its subsidiaries, may be referred to as “we”, “us”, “our” or the “Company”.
Holdings has no operations or significant assets or liabilities other than its investment in Operations' Parent and Operations. Accordingly, Holdings is dependent upon distributions from Operations' Parent and Operations to fund its obligations. However, Operations' Parent's and Operations’ ability to pay dividends or lend to Holdings is limited under the terms of our various debt agreements.
2. BASIS OF PRESENTATION
The accompanying condensed financial statements (registrant only) include the accounts of Holdings and its investment in Operations' Parent and Operations accounted for in accordance with the equity method, and do not present the financial statements of Holdings and its subsidiaries on a consolidated basis. These registrant only condensed financial statements should be read in conjunction with the ClubCorp Holdings, Inc. consolidated financial statements.
3. EQUITY-BASED AWARDS
The Amended and Restated ClubCorp Holdings, Inc. 2012 Stock Award Plan (the “Stock Plan”) provides for an aggregate amount of no more than
4.0 million
shares of common stock to be available for awards. The Stock Plan provides for the grant of stock options, restricted stock awards, restricted stock units, performance-based awards and other equity-based incentive awards. To date, we have granted RSAs, PSUs, Adjusted EBITDA-Based PSUs and restricted stock units (“RSUs”) under the Stock Plan. As of
December 27, 2016
, approximately
1.3 million
shares of common stock were available for future issuance under the Stock Plan. Treasury stock may be used to settle awards under the Stock Plan.
On
April 1, 2012
, prior to our initial public offering (“IPO”), Holdings granted RSUs to certain executives under the Stock Plan. As of
December 30, 2014
, there were
190,788
RSUs outstanding. During the fiscal year ended
December 29, 2015
, all of the remaining RSUs vested and
122,144
RSUs were converted into shares of our common stock, while
68,644
RSUs were forfeited by employees in lieu of the payment of income tax withholding obligations.
The following table summarizes RSA, PSU and Adjusted EBITDA-Based PSU activity for the periods presented::
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
Performance-based awards (1)
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Target shares
|
|
Weighted Average Grant Date Fair Value
|
|
Non-vested balance at December 30, 2014
|
228,066
|
|
|
$
|
18.29
|
|
|
111,610
|
|
|
$
|
17.08
|
|
|
Granted
|
214,306
|
|
|
$
|
18.42
|
|
|
136,071
|
|
|
$
|
19.64
|
|
|
Vested
|
(82,025)
|
|
|
$
|
18.36
|
|
|
—
|
|
|
$
|
—
|
|
|
Forfeited
|
(22,384)
|
|
|
$
|
18.11
|
|
|
(20,271
|
)
|
|
$
|
18.44
|
|
|
Canceled
|
(7,493
|
)
|
|
$
|
18.50
|
|
|
—
|
|
|
$
|
—
|
|
|
Non-vested balance at December 29, 2015
|
330,470
|
|
|
$
|
18.37
|
|
|
227,410
|
|
|
$
|
18.49
|
|
|
Granted
|
876,418
|
|
|
$
|
11.80
|
|
|
741,030
|
|
|
$
|
9.87
|
|
|
Vested
|
(130,681)
|
|
|
$
|
18.95
|
|
|
—
|
|
|
$
|
—
|
|
|
Forfeited
|
(88,736)
|
|
|
$
|
13.48
|
|
|
(97,070
|
)
|
|
$
|
14.72
|
|
|
Canceled
|
(29,521
|
)
|
|
$
|
18.63
|
|
|
—
|
|
|
$
|
—
|
|
|
Non-vested balance at December 27, 2016
|
957,950
|
|
|
$
|
12.73
|
|
|
871,370
|
|
|
$
|
11.58
|
|
______________________
(1) Includes PSUs and Adjusted EBITDA-Based PSUs.
4. SUBSEQUENT EVENTS
On
December 7, 2016
, our Board of Directors declared a cash dividend of
$8.5 million
, or
$0.13
per share of common stock, to all common stockholders of record at the close of business on
January 6, 2017
. This dividend was paid on
January 17, 2017
.
On
February 7, 2017
, we purchased Eagle’s Nest Country Club, a private golf club in Phoenix, Maryland, for a purchase price of
$2.5 million
, which was satisfied by our assumption of debt of
$2.5 million
. The debt obligation does not accrue interest. Due to the timing of this acquisition, the purchase price allocation was not yet available for disclosure as of the date these financial statements were available to be issued.
On
February 9, 2017
, our board of directors declared a cash dividend of approximately
$8.5 million
, or
$0.13
per share of common stock, to all common stockholders of record at the close of business on
April 5, 2017
. This dividend will be paid on
April 17, 2017
.
On
February 9, 2017
, we granted
360,869
RSAs, under the Stock Plan, to certain officers and employees. Under the terms of the grants, the restrictions will be removed upon satisfaction of time vesting requirements, subject to the holder remaining employed by us. Also on
February 9, 2017
, we granted
296,765
PSUs, under the Stock Plan, to certain officers and employees.
On
February 21, 2017
, we purchased North Hills Country Club, a private golf club in Glenside, Pennsylvania, for a purchase price of
$2.1 million
. Due to the timing of this acquisition, the purchase price allocation was not yet available for disclosure as of the date these financial statements were available to be issued.