Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

ClubCorp Holdings, Inc. (NYSE:MYCC)

Q3 2013 Earnings Conference Call

October 18, 2013 11:00 AM ET

Executives

Eric Affeldt - President and CEO

Curt McClellan - CFO and Treasurer

Analysts

Steven Kent - Goldman Sachs

Randy Konik - Jefferies

Shaun Kelley - Bank of America

Carlo Santarelli - Deutsche Bank

Alvin Concepcion - Citi

Joseph Edelstein - Stephens

Operator

Good morning, ladies and gentlemen, and welcome to ClubCorp Holdings, Inc.’s third quarter 2013 earnings conference call. Please note that today’s call references third quarter and year-to-date 2013 time periods defined as the 12 or 36 weeks ended September 3, 2013. During today’s presentation all participants will be in listen-only mode. Following our prepared remarks, the conference will be open for question-and-answer session.

Joining today’s call from ClubCorp are Eric Affeldt, President and CEO and Curt McClellan, CFO and Treasurer. At this time I would like to turn the conference call over to Mr. McClellan. Sir, you may begin.

Curt McClellan

Thank you, Jamie. Good morning, everyone, and welcome to our third quarter earnings call. Before we get started, I would like to address a few administrative items. To begin with, this call is being broadcast live from our website and a replay will be available on our website for approximately 30 days from today.

During today’s call we will review third quarter and year-to-date results highlighted in our earnings release published yesterday after market close and contain within our quarterly report to the SEC on Form 10-Q. If you do not have a copy, our earnings release and 10-Q can be accessed on the Investor Relations portion of our website at clubcorp.com.

I would also like to remind all listeners that ClubCorp Holdings, Inc. desires to take advantage of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Certain statements in this conference call may be considered forward-looking statements within the meaning of that act. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For a list of these factors, please refer to the Risk Factors section of our prospectus filed with the SEC on September 20, 2013.

Finally, our discussion may include certain non-GAAP financial measures. More information regarding our forward-looking statements and reconciliations of non-GAAP financial measures to the most comparable GAAP measures are included in the earnings release or can be found in our SEC filings.

Now I will turn the call over to Eric.

Eric Affeldt

Thanks Curt, and welcome again to ClubCorp’s first earnings call as a public equity company following the successful completion of our initial public offering which closed on September 25, as 18 million shares of stock were sold. The last several months have been very active and I would like to take this opportunity to extend our appreciation to investors, employees, business partners and analysts who are involved in this process.

I would also like to thank our 370,000 plus members for choosing to belong to a ClubCorp Club, it’s truly our privilege and purpose to serve you. For those of you not familiar with ClubCorp, our company is a leading owner-operator of private golf and country clubs, business, sports and alumni clubs with the 153 owned and operated clubs located in 25 states, the Districts of Columbia and two foreign countries.

Our operations are organized into two principal business segments. The first is our golf and country clubs and the second is our business, sports and alumni clubs. Our golf and country club segment includes the broad variety of clubs designed to appeal to diverse group of families and individuals who lead active lifestyles and seek a nearby outlet for golf, tennis, swimming, fitness and social activities.

Our business clubs are generally located in office towers or business complexes and cater to business executives, professionals and entrepreneurs with the desire to entertain clients, expand their business networks or work and socialize at a private upscale location.

Our sports clubs include a variety of fitness and racquet facilities and our alumni clubs are associated with leading universities that have large alumni networks and are designed to provide a connection between the university and its alumni and faculty. We are a member-based leisure business and operate with the central purpose of building relationships and enriching the lives of our members.

We believe that our clubs are an integral part of many of our members’ lives and as a result the vast majority of our members retain their memberships each year even during the recent recession.

Our large base of memberships creates a very stable recurring revenue stream and since 2003 we have enjoyed an average annual retention rate in excess of 80%. I'm pleased to announce that revenue for the third quarter of 2013 was $194.8 million, up over 8% from the third quarter of last year.

Adjusted EBITDA for the third quarter was $41.6 million, up 9.3% over the third quarter of 2012. During this period, we continue to see positive net membership growth and increased facility utilization by our existing members. Curt will discuss this in more detail in just a few minutes. But I’d first like to give an update on our three primary growth strategies which we discussed during the IPO roadshow.

Reinvention projects, acquisitions and organic growth. We believe that our ability to conceptualize fund and execute reinvention and other capital projects at our clubs gives us a significant competitive advantage over member owned and an individual privately owned clubs which may have difficulty gaining member consensus and financial backing to execute such improvements.

In 2007, we embarked on a reinvention of our clubs through strategic capital investment projects designed to drive membership sales, facility usage and member retention. Since that time we have invested over $390 million in total capital to better position our clubs in their respective markets. Elements of reinvention include small meeting rooms allowing members to hold impromptu private meetings, media rooms with state-of-the-art audio visual facilities, renovated business centers, enhanced pool area amenities such as cabanas, slides, splash pads etcetera, redesigned golf practice areas for use by beginners as well as avid golfers and newly created or updated indoor and outdoor dining and social gathering areas designed to take advantage of the expensive use and natural beauty of our clubs.

So far this year we completed reinvention projects at nine golf and country clubs, including a multi-million dollar renovation of our Gleneagles Country Club here in Dallas, a club with a unique distinction of hosting America’s only British Open qualifier for the past five years. Additionally we completed golf and country club reinvention projects investing over $1 million each at Stonebriar Country Club in Frisco, Texas; Morgan Run Club & Resort in Rancho Santa Fe, California; Tampa Palms Golf & Country Club in Tampa, Florida and Eagle's Landing Country Club in Stockbridge, Georgia.

This year’s major reinventions in the business, sports and alumni club segment are coming online this month in advance of the busy holiday season and include a Houston club which re-opened this week and the highly anticipated City Club of Los Angeles which we’ll open later this quarter.

Beginning in 2007 and through the end of this year, we will have completed 36 reinventions across both business segments and we remain committed to evaluating future opportunities to apply our reinvention strategy. We currently have identified additional projects at more than 15 golf and country clubs and 7 business sports and alumni clubs where we intend to strategically invest capital during fiscal years 2014 and 2015.

As you know expanding and strengthening our portfolio of clubs through acquisitions also remains an important strategic focus. Given the highly fragmented nature of our industry and a healthy pipeline of identified prospects, we believe a significant opportunity exists to acquire additional clubs while maintaining our disciplined underwriting criteria. So far this year, we've acquired two properties, the renowned Oak Tree Country Club located in Edmond, Oklahoma and Cherry Valley Country Club located in Skillman, New Jersey.

Our acquisition appetite and capacity remains strong and we look forward to welcoming additional clubs into our already strong portfolio. While we continue to seek opportunities to grow the company through strategic capital investments and select acquisitions, our day-to-day focus centers on growing memberships, increasing facility usage and expanding club participation through programming initiatives.

Memberships continue to grow steadily during the third quarter of quarter-end member counts up 1.1% over third quarter of 2012 and up 2.6% since the end of 2012. We attribute the increase in memberships to our experienced sales force, successfully executed acquisition and reinvention projects and our innovative programming and upgrade membership offerings, which continue to make a positive difference on retention.

Our sales efforts are supported by regional and national programs and upgrade offerings such as our Optimal Network Experience or ONE offering that typically are not found at other private clubs. Our upgrade offerings give our members access to our extensive portfolio of clubs in addition to our alliances with other clubs, resorts and facilities both domestically and internationally. As a result, our sales team members are able to readily differentiate our membership offering from other competitive facilities.

Before turning the call over to Curt, I’d like to thank our leadership team and all our employee partners for the continued commitment to our company. Over the past several months our team has done a tremendous job balancing the demands of our capital market transactions, while still remaining focused on maintaining our operational excellence and delivering exceptional service to our members and their guests.

I’d also like to take this opportunity to announce that Mark Burnett, Executive Vice President of our Golf and Country Club division has recently been promoted to the newly created position of Chief Operating Officer. In this role, Mark will retain responsibility for golf and country club operations, while adding oversight of our business, sports and alumni clubs. Mark is a proven operator with a strong track record of success and we look forward to his expanded leadership and future contributions.

Again performance has been solid for the first three quarters of 2013 and we remain optimistic for the balance of the year.

Now I’ll turn it back over to Curt to give you more details on the numbers.

Curt McClellan

Thanks, Eric. As Eric just highlighted, we are pleased with our strong third quarter results. Before going into details on performance, I’d like to give a brief recap of our recent significant financing activities. In September 2013, we closed our initial public offering of shares of common stock. We offered and sold 13.2 million shares at $14 per share and affiliate for KSL Partners LLC offered and sold an additional 4.8 million shares. The offering of primary shares generated $168.8 million net proceeds to the company after deducting underwriting discounts and commissions and estimated offering expenses.

Net proceeds are being used to redeem $145.25 million in aggregate principal of our senior notes and pay approximately $14.5 million of redemption premium in addition to $5.9 million of accrued and unpaid interest there on. We also used a portion of such net proceeds and cash on hand to pay transaction expenses including a one-time payment of $5 million to an affiliate of KSL in connection with the termination of our management agreement.

We also made two important amendments to our credit facility. In July 2013, our subsidiary ClubCorp Club Operations Inc. entered into a second amendment to the credit agreement. We were able to reduce the interest rate on the term loan facility post IPO by 100 basis points to the higher of 4% or LIBOR plus the margin of 300 basis points. We increased borrowings under the term loan by $10 million, while extending its maturity to 2020. We increased the amount of permissible incremental facilities and we modified certain financial covenants and non-financial terms and conditions.

In September, we completed our third amendment to the credit agreement for an incremental $135 million revolving credit facility with the five year maturity at LIBOR plus 300 basis points. With this amendment, we agreed to reduce the existing $50 million revolving credit facility to the amount of $19.6 million letters of credit outstanding. By taking these steps we believe we are well positioned with pro forma leverage at 3.2 times, substantial liquidity and no significant near-term debt maturities.

We expect to continue to grow through strategic capital investment and value added acquisitions without compromising our ability to fund working capital requirements and take you through dividends.

Now for third quarter results. Consolidated revenue for the quarter of $194.8 million increased $14.8 million or 8.2% compared to prior year. The majority of this increase is attributable to same store clubs whose revenue increased $8 million or 4.5% over prior year, while recently acquired clubs accounted for $4.2 million or almost 28% of the increase. The remaining increase is primarily due to reimbursements for certain operating cost at our managed clubs, which are offset in club operating cost and have no net impact on adjusted EBITDA, segment EBITDA or net income.

As Eric mentioned earlier, our operations are organized into two principle segments. We evaluate segment performance and allocated resources based on segment EBITDA. This is a key financial measure used by our management to gauge the health of our business and assess our ability to service debt, incur additional debt and meet capital expenditure requirements.

We are pleased with the growth in our golf and country club segment, since third quarter same store revenues of $150.5 million increased $7.8 million or 5.5% over prior year due to growth from all three major revenue sources dues, golf operations and food and beverage.

Dues revenues increased $2.9 million or 4.6% compared to prior year on higher same store membership counts during the third quarter, up 0.6% and increased average dues per membership. Golf operations revenue increased $2.1 million or 5.7% compared to prior year due to higher golf rounds and increased retail revenue. Food and beverage revenue increased $1.9 million or 6.2% compared to prior year largely due to increases in [a la carte] revenue driven by a 9.9% increase in [a la carte] covers.

Third quarter segment EBITDA for the same store golf and country clubs of $42.4 million increased $2.8 million or 7% over prior year primarily due to the increase in higher margin dues revenue.

In our business, sports and alumni club segment, third quarter revenues of $36.6 million increased $0.2 million or 0.6% compared to prior year as a result of higher dues revenue. Dues revenue increased by $0.4 million or 2.1% over prior year, with the increase driven by higher average dues per membership.

Third quarter segment EBITDA for business, sports and alumni clubs of $4.7 million decreased $0.7 million or 12.4% compared to prior year due to increased leasing cost associated with the relocation and reinvention of the City Club of Los Angeles where we're paying double rent, while finishing the new club for our members.

As for third quarter expenses, club operating cost of $146 million increased $11.9 million or 8.9% compared to prior year due to properties added during 2012 and 2013 and increased labor and food beverage cost of goods sold associated with higher revenues. The remaining increase is primarily due to reimbursements for certain operating cost at our managed clubs which are directly offsetting revenue as mentioned earlier.

SG&A expenses increased $1.6 million or 16.2% for the quarter compared to prior year primarily due to increased one-time cost incurred in connection with the second amendment to our credit agreement, as well as increased cost related to acquisitions of golf and country club.

Year-to-date, we have generated $66.8 million in cash from operations and spent $52.8 million on capital expenditures, which include $18.3 million of maintenance capital and $34.5 million of expansion and acquisition capital.

For the remainder of fiscal 2013, we anticipated spending approximately $6 million on maintenance capital and $19 million on expansion capital excluding new acquisitions. At September 03, 2013, we were in compliance with all covenant restrictions under the credit agreement governing the secured credit facility. And our senior secured leverage ratio stood at 1.99 to 1. We also had 43.3 million in cash and cash equivalents at September 3rd. Pro forma liquidity is 178.3 million and includes cash at the end of the third quarter and the 135 million incremental credit facility obtained under the third amendment and following our IPO.

Now I’d like to present our initial guidance for full year 2013, revenue and adjusted EBITDA. We are pleased with our result through the third quarter and remain optimistic about the strong close to 2013.

We continue to see strong performance and drivers underlying our guidance including membership counts that have grown compared to prior year and improvements in the pace of private party bookings in advance of the holiday season compared to prior year.

We anticipate 2013 revenue to be in range of 806 million and 808 million. And we expect to generate adjusted EBITDA in the range of 174.5 million and 176.5 million. As we communicated previously, our fourth quarter includes one-timers that impact growth rates mainly a fourth quarter income adjustment in 2012, largely offset by our 53rd week in fiscal 2013.

Also this year’s fourth quarter includes certain incremental costs related to becoming a public company. Our guidance estimates are based on current management expectations and maybe subject to change. Please refer to the forward looking statements cautionary language in our earnings release and SEC filings.

In closing I’d like to reaffirm how pleased we are with the year-to-date results and express our gratitude for the contributions made our employee partners in delivering those results.

That concludes our prepared remarks. Jamie if you will open the line for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time we are ready to begin the question-and-answer session. (Operator Instructions) And our first question comes from Steven Kent from Goldman Sachs. Please go ahead with your question.

Steven Kent - Goldman Sachs

Hi good morning. Eric and Curt could you just talk about the gaps of acquisition pipeline? You gave a little bit of color on that, but since you started the IPO process and maybe most importantly since you came public, have you started to see more visibility there from people noticing you and realizing that you have capital and also currency to maybe pursue more transactions?

Eric Affeldt

Steve this is Eric. Thanks for the question. The answer in short is yes, although I don’t think it’s directly attributable to the IPO. We mentioned on the road show that frankly in the last year or year and a half as economic conditions have improved and lenders have decided that it’s okay to release asset that they might have taken back or prospective sellers have decided that if they are off the bottoms and therefore interested in having a dialog about a potential sale that we’ve seen increased activity in business development. At any point in time our pipeline might include 40 to 50 clubs single stores that are active in some form of conversation, this just wouldn’t be clubs that we have identified as ones that we would like to acquire or these are ones where we have actually initiated conversation or received inbound inquiries from those clubs asking for our review of their operations. So I would say that the acquisition pace is picking up. And as always when you are buying and selling you never know how fast the fish are proverbially going to be put in the boat, but nonetheless we have seen an acceleration of our acquisition efforts.

Steven Kent - Goldman Sachs

Okay. And then just for the follow up. Eric you noted in the release and then even on the call that you're noticing some improvement in some of the private events [inaudible] going into the holiday season. How should we think about that opportunity longer term? Is that something that you, as an organization are starting to pursue more aggressively or is that more of a function of maybe a modestly improving economy that’s you're starting to see some of that come back?

Eric Affeldt

I’d say it’s mostly the latter, we have always had an emphasis on private events at our clubs, our fourth quarter is traditionally the largest private event quarter, due to the holiday season obviously, but we have a very dedicated experience sales team, not only at each club have private events directors but also regional private event support as well as corporate support. So it will continue to be a major focus of ours going forward.

Steven Kent - Goldman Sachs

Okay, thank you.

Operator

Our next question comes from Randy Konik from Jefferies. Please go ahead with your question.

Randy Konik - Jefferies

Great. I guess actually I’ve two related questions. One related to private events and also the acquisitions. So on the private events given that you are seeing strengths in the bookings there, has there been anything the past, where you have seen some sort of leading indicator or correlation between strength in private bookings and then that leading off into others parts of the business i.e., more golf rounds played, more potential membership growth et cetera. And then on the acquisition landscape just back to that, how should we expect, what are you seeing in terms of - what you would expect from prices paid and the return characteristics of those acquisitions to be over the next five years versus what you saw in the last five years? So thanks.

Eric Affeldt

Randy, thanks for the questions. I'll take the first one first. Actually the only change, material change I would say relative to private event bookings pace and activity and this would be very true, I think with the hospitality industry as well, is that during the recent recession the booking windows got shorter and shorter as people were unsure as to whether they were going to hold events or if they were going to hold them how large they would be. So as the economies continue to recover, our window is getting larger meaning we're getting more visibility into future period and future quarter activities which we view as positive and I think you would hear the same thing from most of the major hotel companies. But there is really no correlation that I can see between private event activities at any uptick or increase in membership activity per se.

On the latter, we really haven't seen any significant change in pricing expectations. Frankly as I said a moment ago, we are seeing more individuals willing to talk. Because during the recession and this is a bit -- a lot of people didn't understand this thinking that during the recession there would be more sellers, the reality was during the recession there were more people saying, I don't want to sell off the absolute bottom, I'm going to wait until my business picks up a little bit and then I'll chat with you. So again we're seeing a lot more activity, a lot more interest in potential transactions, but I really haven't seen anything relative to prices increasing.

Relative to your question of return parameters, we discussed during our roadshow that we have 10% to 15% unlevered return parameters or guidelines if you will for our acquisitions that is also true with what we refer to as our reinvention capital.

Randy Konik - Jefferies

Great. Thanks a lot.

Operator

Our next question comes from Shaun Kelley from Bank of America. Please go ahead with your question.

Shaun Kelley - Bank of America

Hey good morning guys. Congratulations on making it out to the public markets and to Mark for the promotion. So I guess my first question would be, I am just curious, as we look around the consumer, particularly in the month of September we're seeing just a whole bunch of signs of some unexpected softness. I am wondering if you guys are seeing any change in trend when you look at membership spending or kind of per member spending, really since the end of the quarter that would be noticeable just given kind of the data that we’ve seen out there? Anyway you can comment on that? And the other, maybe you could comment on, if you can’t comment on that would be on private events, have you seen any change in trajectory or pattern really since September? And I am really thinking about as it relates to the government shutdown?

Eric Affeldt

Last one first. No change relating to the government shutdown. And then from there, we really don’t get into specific information on changes in individual club utilization and I say individual. We have said repeatedly that through our transformative capital projects as well as a recovering economy as well as an increase in memberships, that we are seeing increasing club utilization. But I can’t give you the specifics around à la carte cover counts and things of that nature. But I think again the bottom-line is we’re seeing increased utilization of the clubs and that’s been driven by a host of factors.

Shaun Kelley - Bank of America

Okay. Figured I'd try. And then my follow-up question would be could you just characterize for us the opportunities on the portfolio, deals that might be out there and think about acquisitions. I appreciate that there is a huge number of kind of one-off deals that might come your way, but just as you think more broadly or is there an opportunity here to do maybe larger deals or if you do a couple of clubs at a time and how would you kind of characterize that opportunity?

Eric Affeldt

I think the opportunity exists and always has existed. There is multiple examples of smaller if you will, regional firms, and certainly ClubCorp in the past has taken advantage of larger scale acquisitions and/or mergers with some of their competitors. And with that said, it is a very -- although it’s a highly fragmented industry, it’s a very small industry in the standpoint that everybody knows everybody else, we see each other at conferences and certainly talk about business trends, not pricing of course but just business trends in general. So I think it’s safe to say that those conversations happen all the time as kind of a general course of business just like almost any industry you would expect to find leaders talking with one another. And we would certainly hope that we’d have the opportunity to be able to merge with or purchase one of our other larger competitors in the space.

Shaun Kelley - Bank of America

That's all. Thanks, guys.

Operator

Our next question comes from Carlo Santarelli from Deutsche Bank. Please go ahead with your question.

Carlo Santarelli - Deutsche Bank

Just on the acquisition front, when you guys think about the U.S. landscape and certain regions where obviously you have exposure relative to regions where may be you don’t and the tenure of kind of conversations may be in some of the areas of the country where you would like to get into. Do you feel like there is the opportunity in term to geographically diversify yourself a bit more at present and are there certain regions where you feel like the deal market might be a little bit more robust than others right now?

Eric Affeldt

Carlo, thanks for the question. Without leading our competitors to the fishing holes we think are most attractive. I would say that we are likely to continue to look for facilities in and around existing clubs. We do like the opportunity to be able to cross market our facilities with other clubs in existing markets. And with that said, again, there are clearly areas of the country if you look at our map where we are underrepresented that that’s usually because we don’t view the opportunity as strong in those areas.

And again with that said, there are clearly areas that do have good demographics that we would like to enter into. So I don’t want to be too forward-looking here to use the parlance and talk about where we will be trying to expand the portfolio, but we have a team that’s dedicated to going out and proactively seeking opportunities as opposed to waiting for the phone to ring.

Carlo Santarelli - Deutsche Bank

Understood, great. And then if you guys won’t mind just a quick follow-up. With respect to flow through on incremental net revenue in the golf and country club segment specifically, was down a little bit relative to just kind of where you were tracking at the first half of the year. Is there any kind of rule of thumb that you guys think about in terms of incremental dollars to net revenue flowing through the EBITDA on a go forward basis?

Eric Affeldt

I think Curt was trying to tell me to say something, so I am going to let him say whatever.

Curt McClellan

No, I was just going to comment that, thanks Carlo for the question. The margins were just slightly down, I think, in the golf and country division. And generally as you see it start coming out of the peak season of the second quarter and into the third, towards the end of the third quarter golf gets a little bit softer and that’s something that we’ve seen historically. I mean, I will let Eric comment any further on anything he would want to add.

Eric Affeldt

Yeah, I think from there Carlo again if there was margin slippage you probably have seen that the division is still running close to 28% in terms of operating margin at the club level and that’s on a consolidated basis, so there is certainly no cost or concern there whatsoever. And as our recent acquisitions continue to ramp up, I would expect them to get closer and closer to that average number.

Carlo Santarelli - Deutsche Bank

Great. And just as you mentioned kind of as we come though the fall season, does it take some time to adjust maybe the temporary or seasonal labor staff to the business demands at the end of the quarter say in the fall and the season is kind of winding down?

Eric Affeldt

A little bit of time I’m sure we are not quite as open and shut as perhaps as ski resort might be or a regional theme park operator, but that’s also because we do have the opportunity and in fact here in Dallas where we’re headquartered last winter was quite mild and therefore we didn’t shutdown if you will to the degree than we might have the year before where we had a little bit harsher winter. So, and again keep in mind we’re far less weather dependent than a lot of other companies given the predominance of dues as our revenues driver. So we are really not as again open and close as a ski resort might be or a regional theme park operator that’s only operating for a 120 days.

Carlo Santarelli - Deutsche Bank

Great. Thanks, guys. That’s helpful.

Operator

Our next question comes from Greg Badishkanian from Citi. Please go ahead with your question.

Alvin Concepcion - Citi

Hi, good morning. This is Alvin Concepcion in for Greg and congratulations on the recent IPO as well. I was just curious, how much feasibility do you have into the fourth quarter at this point? Maybe another way to ask is, is there a period of time where the both of new memberships come in during the quarter historically or is it pretty evenly spread out?

Eric Affeldt

Alvin, thanks. And again as this is our first call I have to remind myself to talk about forward-looking statements. I can't tell you that period 10 and we’re on a 13 week cycle, period 10 has been completed, but I can't give you the results from that activity. But so nonetheless no comment really is to fourth quarter other than what we’ve previously said.

Relative to membership sales, as you can imagine with the golf and country club division being the largest segment of our business, you can well imagine that, that business typically starts to ramp in the second and third quarter, slows down in the fourth quarter. But again, we’re not going to provide anymore guidance relative to the fourth quarter.

Alvin Concepcion - Citi

Okay, great. And also wondering if you could talk about retention rates in the quarter, have you seen any significant change versus sort of trends earlier this year?

Eric Affeldt

For the third quarter no significant change in trends that we’ve seen previously. The retention rates have been improving steadily since we came out of the recession.

Alvin Concepcion - Citi

Okay, great. And just lastly, are you seeing any geographic differences in metrics like membership, usage retention, I know most of your exposures are in Texas and California, but are you seeing anything different in other markets?

Eric Affeldt

No, I would say not pretty much across the board. Stronger markets tend to stay strong and get a little stronger, softer markets tend to get a little bit stronger, but maybe not to the degree that we would proceed with the “stronger” market.

Alvin Concepcion - Citi

Alright. Thank you very much.

Operator

Our next question comes from Joseph Edelstein from Stephens. Please go ahead with your question.

Joseph Edelstein - Stephens

Hi, thanks for taking my question. Just on for Rick Nelson today and of course congrats on finishing the IPO. I'm curious if you could tell us a little bit about any meaningful membership drive? And Eric you just sort of walked through some of the seasonality that takes place on the golf and country club side, but is there anything that you could speak to whether it’s a corporate sales or family legacy type program?

Eric Affeldt

We do in -- Joseph, do you go by Joe or Joseph?

Joseph Edelstein - Stephens

Joe.

Eric Affeldt

Joe, we did as you know a couple of years ago launch of program that was called The 55 to commemorate our 55th anniversary that is now turned into My Family or something like that where basically it’s the same program where you can effectively purchase a membership or gift a membership to an extended family member at a very deeply discounted dues rate. We have continued with that program. I am very pleased that we continue to see excellent results from that, people take an advantage of it in gifting or buying memberships for extended family members. We've also, as we've discussed previously and certainly did on the road show devoted time energy and resources to expanding our corporate sales effort this year. I won’t get into too much details as to who we're calling on but that will be something we will continue to focus on as we go forward.

Joseph Edelstein - Stephens

And what percentage of your members participated in upgrade of some kind during the quarter?

Eric Affeldt

41%. And that number again has been increasing steadily partly due to the new one optimal network experience program that we rolled out in addition to frankly adding more clubs to the portfolio which again makes us that much more attractive to individuals wanting to figuring out where they want to join a club and they recognize that there is so much more to offer the ClubCorp pass.

Joseph Edelstein - Stephens

And lastly the business and sports club memberships declined a little bit more than we had expected and that pace of the decline actually looks like it was a little faster than what you experienced in the first half of the year. Curious what your expectations are for this segment particularly around membership growth? And also how you think about pricing from the membership dues? Would you rather take price and wait for the economy to help stimulate that membership growth or would you be willing to take a little bit lower of a rate increase in that segment?

Eric Affeldt

Well, obviously I’d prefer to have lots of members and higher prices, but directly to your question, the third quarter is typically a fairly slow quarter for the business club division. Logically if you think about it for a minute, you are talking about the summer months when people are taking holiday and they’re less inclined to be in their home cities and using their clubs as much. So the third quarter numbers are not surprising at all. We are going through our budgets for 2014. And again I won’t get into the details of pricing expectations. But at this point, we’re not materially changing the strategy of deeply discounting memberships in order to drive volume.

Joseph Edelstein - Stephens

It sounds great. Thanks for taking my questions.

Eric Affeldt

Welcome.

Operator

(Operator Instructions). And ladies and gentlemen at this time, I’ll be turning the conference call back over to management for any closing remarks.

Eric Affeldt

Thank you one and all for joining us again today. We look forward to speaking with you again in March, when we’ll share our full year 2013 results. We hope that everybody has a great weekend and hopefully at one of our ClubCorp clubs. Thanks so much Jamie.

Operator

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: ClubCorp Holdings' CEO Discusses Q3 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts