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ClubCorp Reports Tenth Consecutive Quarter of Growth, Narrows Full Year Outlook, and Initiates Strategy to Reduce Leverage

Posted: October 13, 2016 in Chains

ClubCorp - The World Leader In Private ClubsClubCorp – The World Leader In Private Clubs

DALLAS, TX – ClubCorp — The World Leader in Private Clubs (NYSE: MYCC) — announces financial results for its fiscal-year 2016 third quarter ended September 6, 2016. The third quarter of fiscal 2016 and fiscal 2015 consisted of 12 weeks. Year-to-date results of fiscal 2016 and fiscal 2015 consisted of 36 weeks. All growth percentages refer to year-over-year progress.

Third Quarter Results:

  • Revenue increased $4.0 million, or 1.6%, to $259.3 million for the third quarter of 2016.
  • Net Income was flat to prior at $1.2 million.
  • Adjusted EBITDA increased $4.1 million to $59.0 million, up 7.5%, largely from increased revenue and from effectively managing and controlling variable operating expenses.
  • Same Store Clubs revenue was up $1.1 million, up 0.5% to $242.1 million, driven by increases in dues revenue up 2.6% and a la carte and private events food & beverage revenue up 0.5%. This result was offset by golf operations revenue down (3.0)% impacted by lower rounds played.
  • Same-store adjusted EBITDA grew $1.7 million, up 2.7% to $65.0 million, due to increased revenue and favorable operating expenses as a percentage of revenue. Same-store Adjusted EBITDA margin increased 50 bps to 26.8%.
  • New or Acquired Clubs. New clubs opened or acquired in 2015 and 2016 contributed revenue of $13.7 million and adjusted EBITDA of $1.8 million.

FY16 Year-to-date Results:

  • Revenue increased $22.0 million, or 3.1%, to $743.2 million for the first three quarters of the year.
  • Net Loss narrowed by $1.9 million, or 58.3%, to $(1.4) million.
  • Adjusted EBITDA increased $10.5 million to $164.3 million, up 6.8%, driven by higher revenue and improved margin performance across both same-store and new and recently acquired clubs.
  • Same Store Clubs revenue was up $12.1 million, up 1.7% to $702.1 million, driven by increases in dues revenue up 3.4% and food & beverage revenue up 1.9%, offset by golf operations revenue down (1.1)%.
  • Same-store adjusted EBITDA grew $10.3 million, up 5.5% to $196.6 million, due to increased revenue and favorable operating expenses as a percentage of revenue. Same-store Adjusted EBITDA margin increased 100 bps to 28.0%.
  • New or Acquired Clubs. New clubs opened or acquired in 2015 and 2016 contributed revenue of $34.2 million and adjusted EBITDA of $4.2 million.

Quotes:

Eric Affeldt, Chief Executive Officer: “We delivered our tenth quarter of consecutive revenue and adjusted EBITDA growth. Since going public we have grown revenue and adjusted EBITDA by over 30% by implementing a successful three pronged strategy focused on organic growth, reinvention and acquisitions. Part of this strategy anticipated reinvention of clubs we acquired in 2014 and 2015. Much of this planned investment is now complete. As a result, the Company is now prepared to de-lever its balance sheet below 4.0x. We plan to de-lever our balance sheet by continuing to grow adjusted EBITDA, reducing capital spend, including fewer planned same-store reinventions in 2017, and using excess cash to pay down debt.”

Mark Burnett, President and Chief Operating Officer: “We delivered another quarter of adjusted EBITDA growth benefiting from improved performance at recently reinvented and acquired clubs. The Sequoia portfolio continues to perform very well and our results there are meeting our underwriting expectations. We are pleased by the early member response and increased member activity at these clubs. Likewise, our O.N.E. offering continues to appeal to our members with approximately 54% of our memberships now enrolled in our O.N.E. offering.”

Curt McClellan, Chief Financial Officer: “Year-to-date consolidated same-store adjusted EBITDA has grown 5.5% and adjusted EBITDA margins have improved 100 bps to 28%. Nevertheless, same-store revenue in the third quarter was slower than we anticipated driven by weather related issues affecting golf playability and negatively impacting rounds played and a la carte food and beverage spend at multiple clubs. Based on our performance year-to-date, we are narrowing our full-year fiscal 2016 outlook accordingly. Our leverage is currently 4.4x and we are initiating a strategy to de-lever the Company below 4x over the next 12-18 months. We will continue to pursue value enhancing acquisitions including individually-owned and member-owned clubs, yet we do not anticipate any near term levering event for the Company. Additionally, we have actively taken steps towards this objective by lowering future interest expense by refinancing certain of our mortgage debt and repricing our term loan facility this quarter.”

Segment Highlights:

Golf and country clubs (GCC):

  • Third quarter, GCC revenue was up $4.9 million to $215.5 million, up 2.3%.
  • Third quarter, GCC adjusted EBITDA increased $1.8 million to $59.9 million, up 3.1%, and GCC adjusted EBITDA margin increased 20 basis points to 27.8%.
  • Third quarter, GCC same-store revenue increased $1.0 million, up 0.5%. Dues revenue was up 3.0% and food & beverage revenue increased 0.3%, offset by golf operations revenue that declined (3.0)%, driven by fewer rounds played due to continued post-flood remediation of Houston clubs and adverse weather impacts in certain areas.
  • Third quarter, GCC same-store adjusted EBITDA increased $0.9 million, up 1.6%, due largely to favorable operating expenses and improved variable payroll expenses as a percentage of revenue.
  • Third quarter, GCC same-store adjusted EBITDA margin improved 30 basis points to 28.8%.
  • Clubs acquired in 2015 and 2016 contributed third quarter, GCC revenue of $13.7 million and GCC adjusted EBITDA of $1.7 million.

Business, sports and alumni clubs (BSA):

  • Third quarter, BSA revenue was up $0.2 million to $40.3 million, up 0.5% driven by increases in dues revenue and food & beverage revenue.
  • Third quarter, BSA adjusted EBITDA increased $0.8 million to $6.8 million, up 14.0% largely due to a decline in variable payroll expenses as a percentage of revenue and a decrease in rent expense. BSA same-store adjusted EBITDA margin improved 200 basis points to 16.8%.

Other Data:

  • O.N.E. and Other Upgrades. As of September 6, 2016, approximately 54% of our memberships were enrolled in O.N.E. or similar upgrade programs, as compared to approximately 50% of our memberships that were enrolled in similar upgrade programs as of December 29, 2015. As of September 6, 2016, the Company offered O.N.E. at 154 clubs.
  • Reinvention. In total, for 2016, the Company expects ROI expansion capital to be approximately $44 million. Of this amount, ClubCorp plans to invest approximately $21 million on 9 same-store clubs and approximately $23 million on recently acquired clubs.
  • Acquisitions. As of September 6, 2016, ClubCorp has acquired three clubs: Heritage Golf and Country Club in Columbus, Ohio; Marsh Creek Country Club in St. Augustine, Florida and Santa Rosa Country Club in Santa Rosa, California and has entered a management agreement to operate the Country Club of Columbus in Columbus, Georgia. As of September 6, 2016, ClubCorp owns or operates 160 golf and country clubs representing approximately 200 18-hole equivalents, of which nine are managed clubs. Additionally, the Company owns or operates 48 business, sports and alumni clubs, of which three are managed clubs.
  • Membership. Membership totals exclude membership count from managed clubs. As of September 6, 2016, total memberships increased 2,180 to 176,765, up 1.2%, over memberships at September 8, 2015. Total golf and country club memberships increased 2.9%, while total business, sports and alumni club memberships declined 2.2%.
  • Capital Structure. At the end of the third quarter, the Company had $92.1 million in cash and cash equivalents and total liquidity of approximately $237 million. Additionally, the Company completed the refinance of $37 million in mortgage debt with a new rate of LIBOR + 290, with 0.25% LIBOR floor, and subsequent to quarter-end, completed the repricing of its $675 million term loan with a new rate of LIBOR + 300, with 1% LIBOR floor. Combined, both actions are expected to save the Company approximately $2.5 million in annual cash interest expense.

Company Outlook:

The following guidance is based on current management expectations. All financial guidance amounts are estimates and subject to change, including as a result of matters discussed under the “Forward-Looking Statements” cautionary language which follows, and the Company undertakes no duty to update its guidance. For fiscal year 2016, the Company is reducing its revenue outlook and narrowing its adjusted EBIDTA outlook. The Company reduces its anticipated revenue to a range of $1,080 million to $1,090 million and narrows its anticipated adjusted EBITDA to a range of $245 million to $249 million, while maintaining the midpoint at $247 million. This outlook implies year-over-year revenue growth of approximately 2.5 to 3.5 percent, and adjusted EBITDA growth of approximately 5.0 to 6.5 percent.

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