AVALON LAKES GOLF COURSE Investor: Stop the spending

Avalon Lakes lost $900,000 last year but will make money in the future, anexecutive said.
HOWLAND -- A New York investor is upset that $10 million is being spent on Avalon Lakes Golf Course and wants the parent company to stop spending its cash on hand and give it to shareholders instead.
Paul O'Leary, whose company owns about 4 percent of Avalon Holdings Corp. stock, said after the company's annual meeting Monday that having a beautiful course isn't doing anything for the price of company stock.
The stock has been trading at under $3 a share for most of the past year, which makes the value of the company's stock less than the $13 million in cash that the company has. The value of the company's 3.8 million outstanding shares is about $10.5 million.
"The market is saying, 'You are destroying an incredible amount of value here,' " said O'Leary, general partner of Raffles Associates, which has 150,000 shares of Avalon Holdings stock.
O'Leary flew in from New York to pose these questions during the meeting:
* When will golf course revenues justify the expense of redesigning the course and building a locker room and lounge?
* Will the company return the $13 million to shareholders instead of spending it on the golf course or other businesses?
Ronald Klingle, Avalon Holdings chairman and chief executive, said he still expects the golf course renovations to produce "a very good return" for the company.
The golf course lost about $900,000 last year. The company as a whole lost $3.3 million, including a $2.2 million accounting charge it took for writing off a debt owed by a customer in bankruptcy.
Avalon Holdings has invested heavily in the course. It spent about $8 million to remodel it in 1999 and 2000 and now is spending between $2 million and $3 million on other improvements, including the new locker room and lounge.
O'Leary said annual golf course revenues were about $500,000 before the renovations so they now should rise by $1.5 million to $2 million to justify the improvements.
Klingle didn't commit to a revenue projection but said he thinks the course will make money.
The fee for public play was raised from $50 to $150. It also is accepting members, who can elect to pay $1,000 a year and $50 a round or $3,000 a year and golf for free.
Klingle said the course has about 200 members from the Mahoning and Shenango valleys, and he intends to begin advertising in other areas. He said he isn't sure how many memberships the company will sell because it depends on what type of memberships are bought and how often people are playing.
He said he is convinced the course has a good market niche as an upscale public course. Country clubs are facing financial difficulties and regular public courses face stiff competition, he said.
Avalon Lakes, however, can have a solid financial base from its members, while still attracting public play from people who come from 100 miles away or more.
Golf Digest this year ranked the course No. 8 on its list of top new upscale public courses.
Seeks dividend
As for the company cash, O'Leary said he wants the $13 million to be returned to shareholders as a dividend or used to buy back stock. Before the course renovations began, the company had $22 million in cash, he said.
He said the business prospects for Avalon Holdings are so dim that the remaining cash shouldn't be spent on the golf course or its other operating companies.
"Why would you put a penny into these businesses? The question is why aren't they getting out of them?" he asked.
Besides the golf course, Avalon Holdings operates DartAmerica, a trucking business in Canfield, and environmental services and landfill management companies.
Klingle said the company hasn't decided whether the cash will be invested into these businesses.
They company suffered last year because its major customers were hurting, not because the businesses were poorly operated, he said.
Bankruptcies in the steel industry left these companies with less work to go after, he said. The tariffs on foreign steel enacted recently should create more business this year, he said.

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