UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 97, ~~2003~~2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file numbers 33-89818, 33-96568, 333-08041, 333-57107, 333-52612 and 333-~~52612~~110521

CLUBCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware		75-2778488
(State or other jurisdiction		(I.R.S. employer
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)
of incorporation or organization)		identification no.)
3030 LBJ Freeway, Suite 700		Dallas, Texas 75234
(Address of principal executive offices)		(Zip Code)

3030 LBJ Freeway, Suite 600

Dallas, Texas 75234

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code: (972) 243-6191

Former name, former address and former fiscal year, ~~if changed since last report: NONE~~

if changed since last report: NONE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.

The number of shares of the Registrant’s Common Stock outstanding as of October 2421, ~~2003~~ 2004 was 93,~~727~~597,~~772~~392.

CLUBCORP, INC.

INDEX

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Independent Auditors’ Review Report	1
	Condensed Consolidated Balance Sheets	1
	Consolidated Balance Sheet	2
	Condensed Consolidated Statements of Operations	2
	Consolidated Statement of Operations	3
	Condensed Consolidated Statements of Cash Flows	3
	Consolidated Statement of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	4
	Condensed Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
Part II.	OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	26
Item 1.	Legal Proceedings	24
Item 6.	Exhibits and Reports on Form 8-K	25

PART I. FINANCIAL INFORMATION

~~ITEM~~ Item 1. ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders

ClubCorp, Inc.:

We have reviewed the consolidated balance sheet of ClubCorp, Inc. and subsidiaries (ClubCorp) as of September 9, 2003, and the related consolidated statement of operations for the twelve weeks and thirty-six weeks ended September 9, 2003 and September 3, 2002, and the consolidated statement of cash flows for the thirty-six weeks ended September 9, 2003 and September 3, 2002. These consolidated financial statements are the responsibility of ClubCorp’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 7 to the accompanying consolidated financial statements, effective December 26, 2001, ClubCorp changed its method of accounting for the impairment or disposal of long-lived assets.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of ClubCorp as of December 31, 2002, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for the year then ended (not presented herein); and in our report dated April 7, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

KPMG LLP

Dallas, Texas

October 23, 2003

ClubCorp, Inc.

~~Consolidated~~Condensed Consolidated Balance ~~Sheet~~Sheets

(Dollars in thousands)

(Unaudited)

	December 31,2002			September 9,2003
	December 30,2003			September 7,2004
Assets
Current assets:
Cash and cash equivalents	$	790,~~649~~195		$	83107,~~440~~210
Membership and other receivables, net		9084,~~895~~476			90,~~878~~507
Inventories		2018,~~015~~828			20,~~913~~477
Other assets		8621,~~881~~207			6123,~~587~~766
Total current assets		~~205~~214,~~440~~706			~~256~~241,~~818~~960
Property and equipment, net		1,~~197~~191,~~692~~679			1,~~175~~169,~~291~~598
Other assets		~~168~~140,~~145~~003			~~161~~133,~~978~~697
Total assets	$	1,~~571~~546,~~277~~388		$	1,~~594~~545,~~087~~255
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	7169,~~782~~770		$	5972,~~380~~214
Long-term debt – current portion		69,483			31,221
Long-term debt - current portion		32,589			27,287
Other liabilities		~~136~~101,~~199~~024			~~119~~138,~~256~~571
Total current liabilities		~~277~~203,~~464~~383			~~209~~238,~~857~~072
Long-term debt		596,727			699,736
Long-term debt, net of current portion		691,230			687,726
Other liabilities		~~148~~190,~~222~~135			~~148~~157,~~634~~030
Membership deposits		~~116~~132,~~234~~313			~~126~~147,~~081~~919
Redemption value of common stock held by benefit plan		38,~~697~~190			3546,~~317~~116
Stockholders’ equity:
Preferred stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding		—			—
Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 93,727,191 and 93,727,772 outstanding at December 31, 2002 and at September 9, 2003, respectively.		996			996
Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 93,708,720 outstanding at December 30, 2003 and 93,597,392 outstanding at September 7, 2004.		996			996
Additional paid-in capital		161,672			161,672
Accumulated other comprehensive loss		(86,~~381~~266	)		(49,~~824~~482	)
Retained earnings		~~300~~195,~~080~~341			~~277~~177,~~047~~061
Treasury stock, 5,867,217 and 5,866,636 shares at cost at December 31, 2002, and at September 9, 2003, respectively.		(60,434	)		(60,429	)
Treasury stock, 5,885,688 shares at December 30, 2003, and 5,997,016 at September 7, 2004		(60,606	)		(61,855	)
Total stockholders’ equity		~~393~~291,~~933~~137			~~374~~268,~~462~~392
Total liabilities and stockholders’ equity	$	1,~~571~~546,~~277~~388		$	1,~~594~~545,~~087~~255

See accompanying ~~condensed~~ notes to condensed consolidated financial statements.

ClubCorp, Inc.

Condensed Consolidated ~~Statement~~Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2002			September 9, 2003			September 3, 2002			September 9,200B3
	September 9,2003			September 7,2004			September 9,2003			September 7,2004
Operating revenues	$	~~218~~219,~~943~~570		$	221,~~385~~591		$	~~637~~623,~~638~~689		$	~~630~~645,~~421~~014
Operating costs and expenses		~~172~~174,~~578~~440			~~174~~173,~~090~~720			~~503~~490,~~822~~242			~~491~~498,~~078~~373
Depreciation and amortization		1921,~~701~~402			2119,~~785~~884			6164,~~513~~526			6560,~~030~~956
Selling, general and administrative expenses		1714,~~231~~615			1412,~~621~~183			5354,~~743~~441			5448,~~441~~887
(Gain) loss on disposals and impairment of assets		3,862			(37	)		13,659			316
Gain (loss) on disposals and impairment of assets		(946	)		(1,175	)		654			(3,809	)
Operating income from continuing operations		58,~~571~~167			1014,~~926~~629			415,~~901~~134			1932,~~556~~989
Interest and investment income		74229			~~229~~575			~~484~~1,015			1,~~015~~356
Financing cost on prior debt facility		—			—			—(10,569	)		~~(10,569~~—	)
Interest expense		(14,~~372~~918	)		(1413,~~718~~932	)		(4146,~~214~~872	)		(4641,~~672~~679	)
Loss from continuing operations before income taxes and minority interest		(8,727	)		(3,563	)		(35,829	)		(36,670	)
Income (loss) from continuing operations before income taxes and minority interest		(6,522	)		1,272			(41,292	)		(7,334	)
Income tax (provision) benefit		~~1,762~~(867	)		(~~2,632~~940	)		98,~~069~~335			6(2,~~000~~422	)
Minority interest		~~213~~45			45194			~~527~~22			22(274	)
Loss from continuing operations		(6,752	)		(6,150	)		(26,233	)		(30,648	)
Income (loss) from continuing operations		(7,344	)		526			(32,935	)		(10,030	)
Discontinued operations:
Income (loss) from discontinued operations before income taxes		(61,~~050~~036	)		(~~3,995~~128	)		(610,~~813~~425	)		~~5,804~~(307	)
Income tax (provision) benefit		1,888			1,708			2,024			(1,569	)
Income tax provision		(57	)		(1	)		(3,903	)		(17	)
Income (loss) from discontinued operations		(41,~~162~~093	)		(~~2,287~~129	)		(46,~~789~~522	)		~~4,235~~(324	)
Net loss	$	(10,914	)	$	(8,437	)	$	(31,022	)	$	(26,413	)
Net income (loss)	$	(8,437	)	$	397		$	(26,413	)	$	(10,354	)
Basic and diluted loss per share on:
Basic earnings (loss) per share from:
Loss from continuing operations	$	(0.07	)	$	(0.07	)	$	(0.28	)	$	(0.33	)
Continuing operations	$	(0.08	)	$	0.00		$	(0.35	)	$	(0.11	)
Income (loss) from discontinued operations		(0.05	)		(0.02	)		(0.05	)		0.05
Discontinued operations		(0.01	)		0.00			0.07			0.00
Basic and diluted loss per share	$	(0.12	)	$	(0.09	)	$	(0.33	)	$	(0.28	)
Basic earnings (loss) per share	$	(0.09	)	$	0.00		$	(0.28	)	$	(0.11	)
Diluted earnings (loss) per share from:
Continuing operations	$	(0.08	)	$	0.00		$	(0.35	)	$	(0.11	)
Discontinued operations		(0.01	)		0.00			0.07			0.00
Diluted earnings (loss) per share	$	(0.09	)	$	0.00		$	(0.28	)	$	(0.11	)

See accompanying ~~condensed~~ notes to condensed consolidated financial statements.

ClubCorp, Inc.

Condensed Consolidated ~~Statement~~Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Thirty-Six Weeks Ended
	September 3,2002			September 9, 2003
	September 9,2003			September 7,2004
Cash flows from operations:
Cash flows from operating activities:
Loss from continuing operations	$	(26,233	)	$	(30,648	)
Loss from operations	$	(26,413	)	$	(10,354	)
Adjustments to reconcile loss from continuing operations to cash flows provided from operations:
Adjustments to reconcile to cash flows from operating activities:
Income (loss) from discontinued operations		(4,789	)		4,235
Depreciation and amortization		65,393			61,064
Depreciation and amortization from continuing operations		61,513			65,030
(Gain) loss on disposals and impairment of assets		(6,365	)		3,649
Depreciation and amortization from discontinued operations		3,784			363
Minority interest in net income (loss) of subsidiaries		(22	)		274
Loss on disposals and impairment of assets from continuing operations		13,659			316
Equity in income of joint ventures		(856	)		(295	)
(Gain) loss on disposals and impairment of assets from
Amortization of discount on membership deposits		8,401			8,251
discontinued operations		1,469			(6,681	)
Net change in deferred income taxes		(4,477	)		16
Minority interest in net income (loss) of subsidiaries		(527	)		(22	)
Net change in real estate held for sale		2,263			342
Equity in (gains) losses of joint ventures		1,555			(856	)
Net change in membership and other receivables, net		(173	)		(5,940	)
Amortization of discount on membership deposits		6,746			8,401
Net change in accounts payable and accrued liabilities		(12,398	)		(14,181	)
Net change in deferred income taxes		(13,177	)		(4,477	)
Change in deferred income and other liabilities		3,467			14,235
Net change in real estate held for sale		2,846			2,263
Net change in deferred membership revenues		4,230			10,391
Net change in membership and other receivables, net		1,192			(173	)
Other		5,776			4,029
Net change in accounts payable and accrued liabilities		(2,417	)		(12,398	)
Cash flows from operating activities		38,826			71,481
Net change in deferred income		6,047			3,467
Net change in deferred membership revenues		(1,619	)		4,230
Other		2,548			5,776
Cash flows provided from operations		52,597			38,826
Cash flows from investing activities:
Additions to property and equipment		(6239,~~935~~817	)		(39,~~817~~196	)
Development of new facilities		(121,~~666~~820	)		~~(1,820~~—	)
Development of real estate held for sale		(~~3,911~~660	)		(~~660~~1,239	)
Proceeds from dispositions, net		1430,~~294~~620			~~30,620~~91
Other		(~~108~~69	)		~~(69~~6,224	)
Cash flows used by investing activities		(65,326	)		(11,746	)
Cash flows from investing activities		(11,746	)		(34,120	)
Cash flows from financing activities:
Borrowings of long-term debt		47757,~~680~~961			~~757,961~~18
Repayments of long-term debt		(17699,~~804~~635	)		(~~699~~26,~~635~~412	)
Loan origination and amendment fees		(512,~~342~~044	)		(~~12,044~~131	)
Membership deposits received, net		2,015			2,424
Change in membership deposits		2,424			7,428
Treasury stock transaction, net		(53	)		5
Treasury stock transactions		5			(1,249	)
Cash flows provided from financing activities		26,496			48,711
Cash flows from financing activities		48,711			(20,346	)
Net cash flows continuing operations		13,303			77,874
Net change in cash and cash equivalents		75,791			17,015
Net cash flows from discontinued operations		464			(2,083	)
Cash and cash equivalents at beginning of period		7,649			90,195
Total cash flows from continuing and discontinued operations		13,767			75,791
Cash and cash equivalents at end of period	$	83,440		$	107,210
Cash and cash equivalents at beginning of period		3,212			7,649
Cash and cash equivalents at end of period	$	16,979		$	83,440

See accompanying ~~condensed~~ notes to condensed consolidated financial statements.

ClubCorp, Inc.

~~Condensed~~ Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Summary of significant accounting policies

Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of ClubCorp, Inc. and its majority-owned subsidiaries that are not considered variable interest entities (VIEs) and VIEs for which the Company is the primary beneficiary (collectively, ClubCorp). All material intercompany balances and transactions have been eliminated.

Interim presentation

The accompanying Condensed Consolidated Financial Statements have been prepared by ClubCorp and are unaudited. Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America have been omitted from the accompanying statements. We believe the disclosures made are adequate to make the information presented not misleading. However, the financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto of ClubCorp for the year ended December 3130, ~~2002~~2003, which are a part of ClubCorp’s 2003 Form 10-K.

In our opinion, the accompanying ~~unaudited~~Condensed Consolidated Financial Statements reflect all adjustments necessary ~~(consisting of normal recurring accruals)~~ to present fairly the consolidated financial position of ClubCorp as of September 97, ~~2003~~2004, ~~and~~ the consolidated results of operations for the twelve weeks and thirty-six weeks ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004, and cash flows for the thirty-six weeks ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004. Interim results are not necessarily indicative of fiscal year performance because of the impact of seasonal and short-term variations and other factors such as timing of acquisitions and dispositions of facilities.

Cash and cash equivalents

For purposes of the Condensed Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand and interest bearing deposits in financial institutions, all of which have maturities of 90 days or less. Cash and cash equivalents also contains restricted cash which serves as collateral for letters of credit of $22.3 million as of December 30, 2003 and $27.0 million as of September 7, 2004. The 2004 balance is comprised of $23.3 million representing collateral related to insurance policies and $3.7 million related to debt covenants (See Note 9). These letters of credit have one-year terms and therefore, the related restricted cash is included in current assets.

Recent Pronouncements

In ~~April~~January ~~2002~~2003, the ~~Financial~~FASB ~~Accounting~~issued ~~Standards~~and ~~Board~~then ~~(“FASB”)~~revised ~~issued~~in December ~~SFAS~~2003, FASB Interpretation No. ~~145~~46, (~~SFAS~~FIN ~~145~~46R), “~~Rescission~~Consolidation of ~~FASB~~Variable ~~Statements~~Interest ~~No.~~Entities” 4,which 44changes ~~and~~the ~~62,~~criteria ~~Amendment~~by which one company includes another entity in its consolidated financial statements. FIN 46R requires a variable interest entity to be consolidated by a company if that company is subject to a majority of ~~FASB~~the ~~Statement~~risk Noof loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. 13The assets, liabilities and ~~Technical~~noncontrolling ~~Corrections~~interests of the newly consolidated variable interest entities were initially recorded at the amounts at which they would have been carried in the consolidated financial statements if FIN 46R had been effective when we first met the conditions to be the primary beneficiary of the variable interest entity.” The ~~main~~difference ~~provisions~~between the net amount added to our Condensed Consolidated Statement of ~~this~~Operations ~~statement~~and ~~address~~the ~~classification~~amount of ~~debt~~any ~~extinguishments~~previously ~~and~~recognized interest ~~accounting~~in ~~for~~the ~~certain~~newly ~~lease~~consolidated ~~transactions.~~entity ~~SFAS~~was ~~145~~not material and therefore was ~~effective~~not ~~for~~recognized ~~fiscal~~as ~~years~~a ~~beginning~~cumulative ~~after May~~effect ~~15,~~of ~~2002~~an accounting change when adopted. The adoption of ~~SFAS~~FIN ~~No.~~46R ~~145~~in ~~affected~~the ~~our~~first ~~presentation~~quarter of ~~the~~2004 ~~write~~resulted ~~off~~in an initial increase in net assets of ~~unamortized~~$1.1 ~~financing~~million, ~~costs~~including indebt of $13.7 million, to our Condensed Consolidated ~~Statement~~Balance ofSheet. ~~Operations~~Prior periods were not restated. (See Note 2)

In ~~June~~December ~~2002~~2003, the FASB issued SFAS No. ~~146~~132R (revised 2003), “~~Accounting~~Employers’ ~~for~~Disclosures ~~Costs~~about ~~Associated~~Pensions ~~with~~and ~~Exit~~Other orPostretirement ~~Disposal Activities.~~Benefits”. ~~The~~This ~~main~~statement ~~provisions~~improves offinancial ~~this~~ statement ~~address~~disclosures ~~the~~for ~~recognition~~defined ofbenefit ~~liabilities~~plans. ~~associated~~We ~~with~~have ~~exit~~not orincluded ~~disposal~~these ~~activities~~expanded ~~and~~disclosures isas ~~effective~~our ~~for~~pension ~~exit~~plan oris ~~disposal~~not ~~activities~~a ~~initiated~~material ~~after~~component ~~December 31, 2002. Implementation~~ of ~~this~~our ~~statement~~Condensed ~~had no impact on our~~ Consolidated Financial Statements.

In4 November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34.” FIN 45 redefines the recognition and disclosures to be made by the guarantor in its interim and annual financial statements regarding obligations under certain guarantees issued. The provisions of the disclosure requirements are effective for financial statements of interim or annual reports ending after December 15, 2002. Implementation of this statement had no impact on our Consolidated Financial Statements.

In January 2003, the FASB issued FASB Interpretation No. 46, (FIN 46) “Consolidation of Variable Interest Entities” which changes the criteria by which one company includes another entity in its consolidated financial statements. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The effective date for applying the provisions of FIN 46 have been deferred for interests held by public entities in variable interest entities or potential variable interest entities created before February 1, 2003. The impact of the initial consolidation of the variable interest entities to which the deferral applies will be on the balance sheet for the first interim or annual period ending after December 15, 2003. We are currently evaluating the impact this statement will have on our Consolidated Financial Statements. We believe that this statement may cause us to consolidate a joint venture that would add net assets of $1.8 million including debt of $14.9 million to our Consolidated Balance Sheet. This investment is carried as an equity investment at September 9, 2003.

ClubCorp, Inc.

In December 2002, the FASB issued SFAS No. 148 (SFAS 148), “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123.” SFAS 148 amends the disclosure requirements in SFAS 123 for stock-based compensation for annual periods ending after December 15, 2002 and for interim periods beginning after December 15, 2002. The disclosure requirements apply to all companies, including those that continue to recognize stock-based compensation under Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees.” SFAS 148 also provides three alternative transition methods for companies that choose to adopt the fair value measurement provisions of SFAS 123. We have not chosen to adopt the fair value measurement provisions of SFAS 123; however, we are in compliance with the disclosure requirements as shown below in the Stock-based compensation disclosure.

In April 2003, the FASB issued SFAS No. 149 (SFAS 149), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133. SFAS 149 is effective for fiscal quarters that began prior to June 15, 2003 and for hedging relationships designated after June 30, 2003. Implementation of this statement will have no impact to our Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150 (SFAS 150), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Implementation of this statement had no impact to our Consolidated Financial Statements.

Reclassifications

Certain amounts previously reported have been reclassified to conform with the current period presentation.

Cash and cash equivalents

Our policy is to invest cash in excess of operating requirements in income producing investments. For purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents include cash on hand and interest-bearing deposits in financial institutions, all of which have maturities of 180 days or less. Also contained in cash and cash equivalents is restricted cash which mainly consists of $21.9 million used to collateralize line of credit. These letters of credit have one year terms and therefore, are included in current assets

Stock-based compensation

Stock-based compensation is accounted for using APB 25 and related interpretations. Under APB 25, if the exercise price of the options is greater than or equal to the market price at the date of grant, no compensation expense is recorded. We have also adopted the disclosure-only provisions of SFAS 123, “Accounting for Stock-based Compensation” for options issued, as amended by SFAS 148.

6There were 1,225,000 and 210,000 options granted for the thirty-six weeks ended September 9, 2003 and September 7, 2004, respectively. There were 60,000 options granted for the twelve weeks ended September 7, 2004. No options were granted for the twelve weeks ended September 9, 2003. Stock compensation expense related to options has not been recorded for any of the periods presented. Had compensation cost for the option plans been determined based on the fair value at the grant dates for the options, our net income (loss) and diluted earnings (loss) per share would have been changed to the following pro forma amounts (dollars in thousands, except per share amounts):


	Twelve Weeks Ended					Thirty-Six Weeks Ended
	September 9, 2003			September 7, 2004		September 9, 2003			September 7, 2004
Net income (loss) as reported	$	(8,437	)	$	397	$	(26,413	)	$	(10,354	)
Less: Total Stock-Based Compensation Expense determined under fair value method, net of taxes		783			390		4,373			1,725

Pro Forma net income (loss)	$	(9,220	)	$	7	$	(30,786	)	$	(12,079	)

Diluted earnings (loss) per share - Reported	$	(0.09	)	$	0.00	$	(0.28	)	$	(0.11	)

Diluted earnings (loss) per share - Pro Forma	$	(0.10	)	$	0.00	$	(0.33	)	$	(0.13	)

Note 2. Variable Interest Entities

During 1994, ClubCorp formed a joint venture with a real estate developer to acquire and develop real estate around a country club.

Prior to the adoption of FIN 46R, ClubCorp accounted for its investment in the joint venture under the equity method, recording a majority of the venture’s operating results. ClubCorp is the general partner of the joint venture, however, ClubCorp does not control a majority ownership percentage; therefore, operating decisions would have to go to arbitration in the event of a split in voting. ClubCorp recorded 100% of all losses and then participated in earnings proportionally with the other partners.

The joint venture purchases virtually all the support services it requires from both ClubCorp and from the real estate developer under management service agreements, which expire at the completion of the development.

With the adoption of FIN 46R, ClubCorp consolidated the joint venture beginning with its March 23, 2004 Condensed Consolidated Balance Sheet, as the joint venture was determined to be a variable interest entity with ClubCorp as its primary beneficiary. Due to the historical net operating losses of the joint venture in excess of the partners’ equity interests of the joint venture not owned by ClubCorp, no noncontrolling interests are reported in ClubCorp’s September 7, 2004 Condensed Consolidated Balance Sheet. The investment was previously carried as a $19.8 million negative investment liability prior to consolidation.

ClubCorp, Inc.

InThe ~~accordance~~joint ~~with~~venture was financed by the ~~requirements~~assumption of ~~SFAS~~debt ~~123,~~of ~~the~~which ~~fair~~$13.1 ~~value~~million ofis ~~the~~currently ~~options~~outstanding ~~granted~~and ~~were~~is ~~estimated~~included ~~using~~in ~~the Black~~long-~~Scholes~~term ~~option-pricing~~debt, ~~model~~along with ~~the~~accrued ~~following~~interest ~~assumptions~~of ~~for~~approximately ~~the~~$10.5 ~~twelve~~million. ~~and~~The ~~thirty-six~~majority ~~weeks~~of ~~ended~~the ~~September~~joint 3,venture’s ~~2002~~debt ~~and~~is ~~September~~payable 9,only ~~2003:~~out ~~risk-free~~of ~~weighted~~distributable ~~average~~cash ~~interest rates of 3.6%~~flow, anas ~~expected~~defined ~~volatility~~by ~~of 40%,~~the anagreements. ~~expected~~The ~~life~~notes ofare ~~ten~~subordinated ~~years~~ and ~~zero~~junior to ~~dividend~~other ~~yield.~~liens ~~Had~~and ~~compensation~~are ~~cost~~collateralized ~~for~~by the ~~option~~real ~~plans~~estate ~~been~~owned ~~determined~~by ~~based on~~ the ~~fair~~joint ~~value~~venture. atThe ~~the~~creditors ~~grant~~of ~~dates for~~ the ~~options,~~joint ~~our~~venture ~~net~~do ~~loss~~not ~~and net loss per share would~~ have ~~been~~recourse ~~changed~~ to ~~the following~~other ~~pro~~assets ~~forma~~of ~~amounts~~ClubCorp. ~~(dollars in thousands, except per share amounts):~~

	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2002			September 9, 2003			September 3, 2002			September 9, 2003
Net Loss as reported	$	(10,914	)	$	(8,437	)	$	(31,022	)	$	(26,413	)
Add: Total Stock-Based Compensation Benefit (Expense) determined under fair value method, net of taxes		2,423			(783	)		(3,346	)		(4,373	)
Pro Forma Net loss	$	(8,491	)	$	(9,220	)	$	(34,368	)	$	(30,786	)
Loss per share – Reported	$	(0.12	)	$	(0.09	)	$	(0.33	)	$	(0.28	)
Loss per share – Pro Forma	$	(0.09	)	$	(0.10	)	$	(0.37	)	$	(0.33	)

Other variable interest entries consolidated by ClubCorp in conjunction with the implementation of FIN 46R include liquor pool entities associated with certain properties. The balance sheet and income statement impact of consolidating these entities is minimal.

During twelve weeks ended September 3, 2002, we had employee forfeitures that resulted in a credit to compensation expense.

Effective March 15, 2003, employees forfeited 3,778,986 options valued at $18,872,000, net of taxes. During November 2003, an equal number of options will be issued to these employees with an exercise price of current market value. In accordance with APB 25, no additional compensation costs will be recorded.

Note 2. Derivative instruments

Variable interest rates on our newly refinanced mortgage debt are based on the 30 day LIBOR rate plus an incremental margin (between 275 and 375 basis points) and the US Prime rate plus an incremental margin of 100 basis points. Interest payments on approximately 72% of the floating portion of these notes are protected by interest rate cap agreements that limit our exposure to rises in interest rates over certain amounts. During the twelve weeks ended September 9, 2003, we recognized a reduction to interest expense of $264,000 to record the change in fair value of these instruments.

During the twelve weeks ended September 9, 2003 we had certain interest rate swap contacts related to our bank financing that matured. The impact of this hedge activity was recorded at the time the bank debt was refinanced and, as such, had no impact on the Consolidated Financial Statements for the twelve weeks ended September 9, 2003.

ClubCorp, Inc.

Note 3. Operating revenues

We recognize revenues from the following sources (dollars in thousands):

Twelve Weeks Ended

Thirty-Six Weeks Ended

September 3, 2002

September 9, 2003

September 3, 2002

September 9, 2003

September 9,2003

September 7,2004

September 9,2003

September 7,2004

Revenues from continuing operations:

Membership fees and deposits

810,~~957~~724

118,~~994~~140

2831,~~132~~907

2826,~~941~~605

Membership dues

7473,~~122~~444

7275,~~828~~988

~~222~~219,~~709~~393

~~218~~226,~~852~~604

Golf operations revenues

4244,~~262~~296

4144,~~453~~095

~~124~~119,~~606~~404

~~123~~122,~~647~~738

Food and beverage revenues

53,~~719~~709

5457,~~464~~715

~~161~~159,~~238~~599

~~161~~174,~~971~~622

Lodging revenues

13,~~896~~481

1314,~~481~~596

3835,~~946~~559

3538,~~559~~424

Other revenues

2523,~~987~~916

2721,~~165~~057

6257,~~007~~827

6156,~~451~~021

Total operating revenues from continuing operations

~~218~~219,~~943~~570

221,~~385~~591

~~637~~623,~~638~~689

~~630~~645,~~421~~014

Revenues from discontinued operations:

Membership fees and deposits

~~387~~8

~~328~~1

~~704~~344

~~328~~5

Membership dues

31,~~479~~803

~~633~~558

96,~~828~~798

32,~~226~~576

Golf operations revenues

~~5,469~~153

~~153~~—

141,~~826~~502

~~1,502~~—

Food and beverage revenues

31,~~572~~097

~~342~~239

94,~~857~~347

1,~~975~~274

Lodging revenues

9—

—

18—

—

Other revenues

~~271~~482

~~272~~93

1,~~171~~637

~~865~~503

Total operating revenues from discontinued operations

133,~~187~~543

~~1,728~~891

3614,~~404~~628

74,~~896~~358

Total Operating Revenue

223,113

222,482

638,317

649,372

Note 4. Income tax ~~benefit~~ (provision) benefit

The income tax (provision) ~~benefits~~benefit for the twelve weeks ~~and~~ and thirty-six weeks ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 ~~differ~~differs from amounts computed by applying the U.S. Federal tax rate of 35% to income (loss) from operations before income ~~tax~~taxes ~~benefit~~and ~~primarily~~minority interest due to ~~our~~foreign ~~decision~~and tostate ~~not book additional~~income ~~benefit~~taxes ofand ~~$1.4~~the ~~million~~effect ~~related~~of toconsolidated ~~our~~operations ~~third~~of ~~quarter~~foreign ~~loss.~~and Weother ~~are~~entities ~~currently~~not inconsolidated ~~the~~for ~~process~~Federal ofincome ~~assessing~~ tax ~~planning~~purposes. ~~strategies~~In toaddition, ~~support~~for ~~our~~the ~~ability~~twelve toand ~~continue~~thirty-six toweeks ~~utilize~~ended ~~our~~September ~~net~~7, ~~operating~~2004, ~~loss~~we ~~carry~~fully ~~forwards~~reserved inall ~~the~~additional ~~future~~tax ~~and~~benefits from ~~adjustments~~available tocarryforwards ~~our~~ of net ~~asset~~operating ~~position~~losses ~~will~~generated beduring ~~based~~the onperiods ~~these~~and ~~assessments.~~therefore, ~~Additional~~recorded ~~differences~~no ~~arise~~income ~~due~~tax to(provision) ~~foreign~~benefit ~~and~~related ~~state~~to federal income taxes,. ~~net of Federal benefit~~Therefore, ~~and~~ the ~~effect~~provisions offor ~~consolidated~~2004 ~~operations~~contain ofonly foreign and ~~other~~state ~~entities~~income taxes ~~not~~on ~~consolidated~~the ~~for~~Condensed ~~Federal income~~Consolidated ~~tax~~Statements ~~purposes~~of Operations.

~~Note~~6 ~~5. Weighted average shares~~

Loss per share is computed using the weighted average number of shares outstanding of 93,740,461 and 93,727,772 for basic loss per share calculations for the twelve weeks ended September 3, 2002 and September 9, 2003, respectively. The weighted average number of shares outstanding for the thirty-six weeks ended September 3, 2002 and September 9, 2003 was 93,742,020 and 93,727,449, respectively. Diluted weighted average shares for the twelve weeks ended September 3, 2002 and September 9, 2003 exclude incremental shares from assumed conversion of 559,349 and 52,331 shares, respectively, due to the net losses for the periods. Diluted weighted average shares for the thirty-six weeks ended September 3, 2002 and September 9, 2003 excluded incremental shares from assumed conversion of 484,584 and 26,165 shares, respectively.

ClubCorp, Inc.

Note 5. Weighted average shares

The following table summarizes the weighted average number of shares used to calculate basic and diluted earnings (loss) per share:


	Twelve Weeks Ended		Thirty-Six Weeks Ended
	September 9, 2003	September 7, 2004	September 9, 2003	September 7, 2004
Weighted average shares outstanding	93,727,772	93,638,694	93,727,449	93,679,699
Incremental shares from assumed conversion of options	—	864,292	—	—

Diluted weighted average shares	93,727,772	94,502,986	93,727,449	93,679,699

The diluted weighted average shares exclude the assumed conversion of 52,331 and 26,165 options for the twelve and thirty-six weeks ended September 9, 2003, respectively, and 621,036 for the thirty-six weeks ended September 7, 2004 due to our net loss in those periods.

Note 6. Property and equipment

Property and equipment consists of the following (dollars in thousands):

	December 31, 2002			September 9, 2003
	December 30,2003			September 7,2004
Land and land improvements	$	~~671~~724,~~886~~903		$	~~683~~727,~~857~~816
Buildings and recreational facilities		~~491~~501,~~866~~210			~~499~~505,~~154~~938
Leasehold improvements		~~110~~104,~~623~~268			~~108~~105,~~648~~504
Furniture and fixtures		~~136~~131,~~477~~337			~~135~~134,~~887~~162
Machinery and equipment		~~264~~263,~~411~~871			~~268~~275,~~930~~924
Construction in progress		139,~~311~~878			15,~~428~~930
		1,688,574			1,711,904
		1,735,467			1,765,274
Accumulated depreciation and amortization		(~~490~~543,~~882~~788	)		(~~536~~595,~~613~~676	)
	$	1,~~197~~191,~~692~~679		$	1,~~175~~169,~~291~~598

Note 7. Disposal and Impairment of Long- Lived Assets

OnIn ~~December~~conjunction ~~26,~~with ~~2001, we adopted~~ Statement of ~~Financial~~ Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets.” ~~SFAS 144 supercedes SFAS 121 and the portion of Accounting Principles Board Opinion No. 30 that deals with the disposal of a business segment. In conjunction with this statement~~, for all periods presented, certain assets and liabilities expected to be sold with the held-for-sale entities have been ~~included~~reclassified to in Other ~~current~~Current Assets and Other Current Liabilities, and all income and expense items have been reclassified as Discontinued Operations.

As of September 97, ~~2003~~2004, we had ~~three~~two properties classified as held for sale. ~~One~~In ofaddition, ~~these~~the ~~properties~~balance ~~held~~sheet ~~for sale was recorded under SFAS 121~~ as ~~part~~ of ~~continuing~~December ~~operations.~~30, ~~The~~2003, ~~remaining~~includes ~~two~~another ~~properties~~property ~~were~~that ~~reported~~was divested asin ~~held~~the ~~for~~second ~~sale~~quarter ~~under the guidance~~ of ~~SFAS 144~~2004. The balance sheet amounts related to these ~~two~~ properties ~~are~~include ~~included~~$2.0 million and $0.9 million classified in Other Current Assets and $3.5 million and $2.5 million classified as Other Current Liabilities as of December 30, 2003 and September 7, 2004, respectively. The properties were reclassified to Discontinued Operations on the Condensed Consolidated ~~Balance~~Statement ~~Sheet~~of ~~and~~Operations ~~are~~for ~~comprised~~all periods presented. See Note 10 for detail of the ~~following~~Statement ~~(dollars~~of Operations impact of Discontinued Operations by segment and in ~~thousands):~~ total.

	December 31, 2002		September 9, 2003
Membership and other receivables, net	$	1,427	$	92
Inventories		705		13
Other current assets		3,362		—
Property and equipment, net		26,596		7,548
Other assets		12		619
Total assets	$	32,102	$	8,272
Accounts payable and accrued liabilities	$	728	$	19
Other current liabilities		1,513		699
Long-term debt		7,013		—
Other liabilities		762		—
Membership deposits		9,409		144
Total liabilities	$	19,425	$	862

We recorded impairment of $1.7 million for the thirty-six weeks ended September 7, 2004. There was no impairment recorded during the thirty-six weeks ended September 9, 2003.

~~The~~7 two properties as well as all properties that were divested during the twelve weeks ended September 9, 2003 were also reclassified to Discontinued Operations on the Consolidated Statement of Operations for all periods presented. See Note 9 for detail of the Statement of Operations impact of Discontinued Operations by segment and in total.

ClubCorp, Inc.

Note 8. Comprehensive ~~(loss)~~Loss

The following summarizes the components of comprehensive income (loss) (dollars in thousands):

	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2002			September 9, 2003			September 3, 2002			September 9, 2003
	September 9,2003			September 7,2004			September 9,2003			September 7,2004
Net Loss	$	(10,914	)	$	(8,437	)	$	(31,022	)	$	(26,413	)
Net income (loss)	$	(8,437	)	$	397		$	(26,413	)	$	(10,354	)
Changes in fair value of derivative instruments and hedging activities, net of income taxes		~~365~~—			—			23,~~020~~220			~~3,220~~—
Foreign currency translation adjustment		(1,~~032~~168	)		(~~1,168~~653	)		~~(2,887~~337	)		~~337~~(3,216	)
Total comprehensive loss	$	(119,~~581~~605	)	$	(~~9,605~~256	)	$	(3122,~~889~~856	)	$	(2213,~~856~~570	)

Note 9. ~~Segment~~Long ~~reporting~~term debt

Under the provisions of our debt agreement with Textron Financial Corporation (Textron), we are required to maintain certain debt service ratios at both the portfolio and individual property level. Each of the individual loans has cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. Effective as of June 30, 2004, we obtained an amendment to the debt agreement clarifying a component of how we calculate the debt service ratio. We may now cure a default by obtaining a letter of credit or prepaying the loan.

As of September 7, 2004, the debt service ratio (as defined in the amended agreement) was below the minimum level for three individual properties participating in the loan, thereby causing the entire loan ($56 million) to be in technical default. We cured the noncompliance through a combination of obtaining letters of credit totaling $3.7 million and a waiver letter. We have reclassified $5.1 million to the current portion of long-term debt in the Condensed Consolidated Balance Sheet related to this waiver representing the paydown amount required to bring the property not covered by letters of credit into compliance.

ClubCorp, Inc.

Note 10. Segment reporting

Our operations are organized into three principal business segments according to the type of facility or service provided: country club and golf facilities, business and sports clubs and resorts. We have determined that the operations of these three segments have similar economic characteristics and meet the criteria that permit the operations to be aggregated into these reportable segments. The primary sources of revenue for all segments are membership revenues, consisting of dues, fees and deposits, and food and beverage sales. Additionally, country club and golf facilities and resorts have significant golf operations revenue and resorts have significant lodging revenue.

Country club and golf facilities operations consist of ~~domestic~~ 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 only to members and their guests. Golf clubs provide both private and public golf play and usually offer fewer other recreational amenities. Public golf facilities are open to the public and generally provide the same services as golf clubs.

Business and sports club operations consist of ~~domestic~~ business clubs, business/sports clubs and sports 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. All amenities offered above are available only to members and their guests.

Resorts offer a wide variety of amenities including golf courses, lodging and conference facilities, dining areas and other recreational facilities. Resorts are open to the public and offer optional membership.

Other operations and services consist of real estate operations, corporate overhead, and intercompany eliminations made in the consolidation between corporate services and other operating segments ~~and reclassifications made to conform with generally accepted accounting principles~~. ~~Realty~~Real estate operations are comprised of residential real estate development and sales, primarily in areas adjacent to golf facilities. A majority of operating revenues ~~are~~is provided from real estate sales. As of January 1, 2003, we reclassified our international properties from other operations and services to their functional segments as either country club and golf facilities or business and sports clubs. Segment results for all periods presented have been restated to reflect this reclassification, which is consistent with changes in our internal management and organizational structure.

We use EBITDA to monitor our property-level and overall performances. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, extraordinary items and gains and losses on disposals and impairment of assets and includes both ~~continuing~~continued and discontinued operations. EBITDA for all periods presented has been adjusted to reflect this definition. EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on accounting principles generally accepted in the United States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurements of EBITDA may not be comparable to similar titled measures reported by other companies.

~~During the twelve weeks ended September~~ 9, 2003, we adjusted our segment information to be more in line with our internal reporting. The two key components that were changed were (1) recording elimination entries at the consolidated level instead of allocating them to each segment and (2) reviewing gain/loss from disposal and impairment of assets at the consolidated level. The remaining numbers by segment (operating revenues, operating expenses, depreciation and amortization, and EBITDA) then reflect the numbers that help drive our business decisions. Reclassifications have been made for all periods presented in accordance with generally accepted accounting principles.

ClubCorp, Inc.

Financial information for the segments is as follows (dollars in thousands):

Consolidated Statement of Operations:	Continuing Operations
	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3,2002			September 9,2003			September 3,2002			September 9,2003
Country Club and Golf Facilities:
Operating revenues	$	119,514		$	119,717		$	337,831		$	340,250
Operating costs and expenses (1)		97,181			96,385			275,398			270,992
Depreciation and amortization		10,357			11,639			31,801			33,384
Operating income	$	11,976		$	11,693		$	30,632		$	35,874
EBITDA	$	22,333		$	23,332		$	62,433		$	69,258
Business and sports clubs:
Operating revenues	$	47,688		$	45,997		$	150,824		$	146,919
Operating costs and expenses (1)		45,213			43,867			139,185			135,035
Depreciation and amortization		2,815			2,724			8,687			8,231
Operating income (loss)	$	(340	)	$	(594	)	$	2,952		$	3,653
EBITDA	$	2,475		$	2,130		$	11,639		$	11,884
Resorts:
Operating revenues	$	47,499		$	48,470		$	133,028		$	130,176
Operating costs and expenses (1)		38,038			38,228			106,368			104,397
Depreciation and amortization		3,907			3,927			11,511			12,377
Operating income	$	5,554		$	6,315		$	15,149		$	13,402
EBITDA	$	9,461			10,242		$	26,660			25,779
Other operations and services:
Operating revenues	$	4,242		$	7,201		$	15,955		$	13,076
Operating costs and expenses (1)		9,377			10,231			36,614			35,095
Depreciation and amortization		2,622			3,495			9,514			11,038
Operating loss	$	(7,757	)	$	(6,525	)	$	(30,173	)	$	(33,057	)
EBITDA	$	(5,135	)	$	(3,030	)	$	(20,659	)	$	(22,019	)
Consolidated Operations:
Operating revenues	$	218,943		$	221,385		$	637,638		$	630,421
Operating costs and expenses (1)		189,809			188,711			557,565			545,519
Depreciation and amortization		19,701			21,785			61,513			65,030
Operating income (2)	$	9,433		$	10,889		$	18,560		$	19,872
EBITDA	$	29,134		$	32,674		$	80,073		$	84,902
(1) Includes operating costs and expenses as well as selling, general and administrative expenses.
(2) Reconciliation to Income (loss) from operations before income taxes and minority interest:
Operating income	$	9,433		$	10,889		$	18,560		$	19,872
Gain (Loss) on disposals and impairment of assets		(3,862	)		37			(13,659	)		(316	)
Interest and investment income		74			229			484			1,015
Interest expense and financing costs		(14,372	)		(14,718	)		(41,214	)		(57,241	)
Loss from operations before income taxes and minority interest	$	(8,727	)	$	(3,563	)	$	(35,829	)	$	(36,670	)

Consolidated Statement of Operations:


	Continuing Operations
	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 9, 2003			September 7, 2004			September 9, 2003			September 7, 2004
	September 9, 2003			September 7, 2004			September 9, 2003			September 7, 2004
Country Club and Golf Facilities:
Operating revenues	$	120,719		$	122,530		$	343,254		$	354,313
Operating costs and expenses (1)		93,996			96,561			263,865			276,648
Depreciation and amortization		11,639			11,301			33,384			34,053

Operating income	$	15,084		$	14,668		$	46,005		$	43,612
EBITDA	$	26,723		$	25,969		$	79,389		$	77,665

Resorts:
Operating revenues	$	48,470		$	51,231		$	130,176		$	139,877
Operating costs and expenses (1)		38,227			40,067			104,397			111,526
Depreciation and amortization		3,927			3,847			12,377			11,580

Operating income	$	6,316		$	7,317		$	13,402		$	16,771
EBITDA	$	10,243		$	11,164		$	25,779		$	28,351

Business and sports clubs:
Operating revenues	$	43,830		$	45,578		$	140,156		$	145,274
Operating costs and expenses (1)		40,382			41,577			124,020			127,823
Depreciation and amortization		2,539			2,490			7,727			7,448

Operating income	$	909		$	1,511		$	8,409		$	10,003
EBITDA	$	3,448		$	4,001		$	16,136		$	17,451

Other operations and services:
Operating revenues	$	6,551		$	2,252		$	10,103		$	5,550
Operating costs and expenses (1)		16,450			7,698			52,401			31,263
Depreciation and amortization		3,297			2,246			11,038			7,875

Operating loss	$	(13,196	)	$	(7,692	)	$	(53,336	)	$	(33,588	)
EBITDA	$	(9,899	)	$	(5,446	)	$	(42,298	)	$	(25,713	)

Consolidated Operations:
Operating revenues	$	219,570		$	221,591		$	623,689		$	645,014
Operating costs and expenses (1)		189,055			185,903			544,683			547,260
Depreciation and amortization		21,402			19,884			64,526			60,956

Operating income	$	9,113		$	15,804		$	14,480		$	36,798
EBITDA	$	30,515		$	35,688		$	79,006		$	97,754

(1) Includes operating costs and expenses as well as selling, general and administrative expenses.

Reconciliation to income (loss) before income taxes and minority interest:

EBITDA	$	30,515		$	35,688		$	79,006		$	97,754
Depreciation and amortization		21,402			19,884			64,526			60,956
Gain (loss) on disposals and impairment of assets		(946	)		(1,175	)		654			(3,809	)
Interest and investment income		229			575			1,015			1,356
Interest expense and financing costs		(14,918	)		(13,932	)		(57,441	)		(41,679	)

Income (loss) from operations before income taxes and minority interest	$	(6,522	)	$	1,272		$	(41,292	)	$	(7,334	)

ClubCorp, Inc.

Consolidated Statement of Operations:


	Discontinued Operations
	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 9, 2003			September 7, 2004			September 9, 2003			September 7, 2004
Country Club and Golf Facilities:
Operating revenues	$	991		$	(1	)	$	5,885		$	(1	)
Operating costs and expenses (1)		895			1			5,579			3
Depreciation and amortization		65			—			311			—

Operating income (loss)	$	31		$	(2	)	$	(5	)	$	(4	)
EBITDA	$	96		$	(2	)	$	306		$	(4	)

Resorts:
Operating revenues	$	—		$	—		$	—		$	—
Operating costs and expenses (1)		—			—			—			—
Depreciation and amortization		—			—			—			—

Operating income	$	—		$	—		$	—		$	—
EBITDA	$	—		$	—		$	—		$	—

Business and sports clubs:
Operating revenues	$	2,552		$	892		$	8,743		$	4,359
Operating costs and expenses (1)		2,653			915			9,296			4,395
Depreciation and amortization		197			(8	)		556			108

Operating loss	$	(298	)	$	(15	)	$	(1,109	)	$	(144	)
EBITDA	$	(101	)	$	(23	)	$	(553	)	$	(36	)

Other operations and services:
Operating revenues	$	—		$	—		$	—		$	—
Operating costs and expenses (1)		(2,380	)		—			(6,065	)		—
Depreciation and amortization		—			—			—			—

Operating income	$	2,380		$	—		$	6,065		$	—
EBITDA	$	2,380		$	—		$	6,065		$	—

Consolidated Operations:
Operating revenues	$	3,543		$	891		$	14,628		$	4,358
Operating costs and expenses (1)		1,168			916			8,810			4,398
Depreciation and amortization		262			(8	)		867			108

Operating income (loss)	$	2,113		$	(17	)	$	4,951		$	(148	)
EBITDA	$	2,375		$	(25	)	$	5,818		$	(40	)
(1) Includes operating costs and expenses as well as selling, general and administrative expenses.

Reconciliation to income (loss) before income taxes and minority interest:

EBITDA	$	2,375		$	(25	)	$	5,818		$	(40	)
Depreciation and amortization		262			(8	)		867			108
Gain (loss) on disposals and impairment of assets		(3,028	)		(1	)		5,711			160
Interest and investment income		—			—			—			—
Interest expense		(121	)		(110	)		(237	)		(319	)

Income (loss) from operations before income taxes and minority interest	$	(1,036	)	$	(128	)	$	10,425		$	(307	)

ClubCorp, Inc.

Consolidated Statement of Operations:	Discontinued Operations
	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3,2002			September 9,2003			September 3,2002			September 9,2003
Country Club and Golf Facilities:
Operating revenues	$	10,404		$	991		$	28,827		$	5,885
Operating costs and expenses (1)		9,527			902			26,680			5,648
Depreciation and amortization		290			65			2,923			311
Operating income (loss)	$	587		$	24		$	(776	)	$	(74	)
EBITDA	$	877		$	89		$	2,147		$	237
Business and sports clubs:
Operating revenues	$	1,541		$	385		$	6,330		$	1,980
Operating costs and expenses (1)		1,990			415			7,646			2,336
Depreciation and amortization		32			12			212			52
Operating loss	$	(481	)	$	(42	)	$	(1,528	)	$	(408	)
EBITDA	$	(449	)	$	(30	)	$	(1,316	)	$	(356	)
Resorts:
Operating revenues	$	16		$	—		$	362		$	—
Operating costs and expenses (1)		9			—			8			—
Depreciation and amortization		—			—			—			—
Operating income	$	7		$	—		$	354		$	—
EBITDA	$	7			—		$	354			—
Other operations and services:
Operating revenues	$	1,226		$	352		$	885		$	31
Operating costs and expenses (1)		3,272			(4	)		3,277			(11	)
Depreciation and amortization		803			(1	)		649			—
Operating income (loss)	$	(2,849	)	$	357		$	(3,041	)	$	42
EBITDA	$	(2,046	)	$	356		$	(2,392	)	$	42
Consolidated Operations:
Operating revenues	$	13,187		$	1,728		$	36,404		$	7,896
Operating costs and expenses (1)		14,798			1,313			37,611			7,973
Depreciation and amortization		1,125			76			3,784			363
Operating income (loss) (2)	$	(2,736	)	$	339		$	(4,991	)	$	(440	)
EBITDA	$	(1,611	)	$	415		$	(1,207	)	$	(77	)
(1) Includes operating costs and expenses as well as selling, general and administrative expenses.
(2) Reconciliation to loss from operations before income taxes and minority interest:
Operating income (loss)	$	(2,736	)	$	339		$	(4,991	)	$	(440	)
Gain (loss) on disposals and impairment of assets		(3,211	)		(4,012	)		(1,469	)		6,681
Interest and investment income		—			—			3			—
Interest expense		(103	)		(322	)		(356	)		(437	)
Income (loss) from operations before income taxes and minority interest	$	(6,050	)	$	(3,995	)	$	(6,813	)	$	5,804

Note 11. Contingencies

During the thirty-six weeks ended September 7, 2004, we accrued an additional $5.2 million to cover estimated settlement charges related to a lawsuit involving a property disposed of in 2002. We had previously recorded a $1.0 million accrual related to this lawsuit as well as established an escrow of $5.7 million. During the twelve weeks ended September 7, 2004, we settled the lawsuit for $5.9 million. The escrow was released to cover the settlement and $0.3 million remaining accrual was reversed. We also received $5.0 million ($3.4 million net of legal fees) in a matter related to this lawsuit that was settled out of court and recorded as a recovery of previously accrued expenses.

During the twelve weeks ended September 7, 2004, we finalized a settlement with the members of a club for $0.6 million. We had accrued $1.6 million related to this lawsuit in 2003; therefore, we reversed the remaining $1.0 million of accrued expenses during the twelve weeks ended September 7, 2004.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

ClubCorp, Inc. (referred to as ClubCorp®, the Company, we, us and our throughout this document) is a holding company incorporated under the laws of the State of Delaware that, through its subsidiaries, owns and operates premier golf and business clubs and destination golf resorts. As of September 97, ~~2003~~2004, we operated ~~100~~99 country clubs, golf clubs and public golf facilities, three destination golf resorts and 7068 business, sports and business/sports clubs in 29 states and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst® Resort and Country Club in North Carolina, The Homestead® Resort in Virginia, Barton Creek Resort and Country Club in Austin, Texas, Firestone® Country Club in Akron, Ohio, Mission Hills® Country Club near Palm Springs, California, and The City Club on Bunker Hill in Los Angeles.

Our operations are organized into three principal business segments: country club and golf facilities, resorts, and business and sports clubs. Other operations that are not assigned to a principal business segment include our real estate operations and corporate services. Our primary sources of revenue include membership dues, membership fees and deposits, food and beverage operations, golf operations and lodging.

Our predecessor corporation was organized in 1957 under the name Country Clubs, Inc. All historical references herein to us shall also include Country Clubs, Inc. and its successor corporations. For purposes of this document, unless the context indicates otherwise, these references to us also include our various subsidiaries. However, we and each of our subsidiaries are careful to maintain separate legal existence, and general references to us should not be interpreted to reduce the legal distinctions between subsidiaries or between us and our subsidiaries.

Our consolidated financial statements are presented on a 52/53 week fiscal year ending on the last Tuesday of December, with the first three quarters consisting of 12 weeks each and the fourth quarter consisting of 16 or 17 weeks. The following discussion of our financial condition and results of operations for the 12 and 36 weeks ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 should be read in conjunction with the our Annual Report on Form 10-K for the year ended December 3130, ~~2002~~2003, as filed with the Securities and Exchange Commission.

Results of Operations

We analyze operating results and manage our business segments using the following concepts and definitions:

~~Operating~~We ~~revenues~~employ ~~are~~“same ~~comprised~~store” ~~mainly~~analysis techniques for a variety of management ~~revenues~~purposes. ~~from~~By ~~dues~~our ~~income~~definition, ~~golf, food~~facilities are evaluated yearly and ~~beverage~~considered “same store” once they have been fully operational for one year. Developing facilities and ~~lodging,~~divested asfacilities ~~well~~are not classified as same store; however, facilities held and used are considered same store until they are divested. This distinction between developing and same store facilities allows us to separately analyze the ~~revenues~~operating ~~recognized~~results ~~from~~of ~~initiation~~our ~~deposits~~established and ~~fees~~new facilities. ~~Operating~~We believe ~~expenses~~this ~~include~~approach ~~payroll~~provides ~~and~~an ~~related~~effective ~~expenses,~~analysis ~~other~~tool ~~fees~~because it allows us to assess the results of our core operating strategies by tracking the performance of our same store facilities without the distortions that would be caused by the inclusion of developing properties. Facilities divested during a period are removed from the same store classification for all periods presented. We analyze membership and ~~expenses~~lodging data on a same store basis as well, ~~rent~~as it is not distorted by divestitures and ~~membership~~we ~~commissions~~believe ~~amortized~~it provides a clearer picture of trends in our continuing operations.

WeOperating ~~use~~revenues ~~EBITDA~~are tocomprised ~~monitor~~mainly ~~our~~of ~~property-level~~revenues ~~and~~from ~~overall~~dues ~~performance. EBITDA is defined as earnings before interest~~income, ~~taxes~~golf, ~~depreciation~~food and ~~amortization,~~beverage ~~extraordinary items~~ and ~~gains~~lodging, ~~and~~as ~~losses~~well ~~on disposals and impairment of assets and includes both continuing and discontinued operations. EBITDA should not be construed~~ as an ~~alternative to, or a better indicator of, operating income or loss, is not based on accounting principles generally accepted in~~ the ~~United~~revenues ~~States~~recognized offrom initiation ~~America,~~deposits and ~~is not necessarily a measure of our cash flow or ability to fund our cash needs~~fees. ~~Our measurement~~Operating ofexpenses ~~EBITDA~~include ~~may~~payroll ~~not~~and berelated ~~comparable~~expenses, ~~to similarly titled measures reported by~~ other ~~companies.~~fees ~~See~~and ~~Note~~expenses 9and to our Consolidated Financial Statements for a reconciliation of this measure to our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of Americarent.

~~During~~We ~~the~~use ~~twelve~~EBITDA ~~weeks~~to ~~ended~~monitor ~~September~~our 9property-level and overall performance. EBITDA is defined as earnings before interest, ~~2003~~taxes, wedepreciation ~~adjusted~~and ~~our~~amortization, extraordinary ~~segment~~items ~~information~~and togains beand ~~more~~losses inon ~~line~~disposals ~~with~~and ~~our~~impairment ~~internal~~of ~~reporting.~~assets ~~The~~and ~~two~~includes ~~key~~both ~~components~~continuing ~~that~~and ~~were~~discontinued ~~changed~~operations. ~~were~~EBITDA ~~(1)~~should ~~recording~~not ~~elimination~~be ~~entries~~construed ~~at the~~as ~~consolidated~~an ~~level~~alternative ~~instead~~to, or a better indicator of, ~~allocating~~operating ~~them~~income toor ~~each~~loss, ~~segment~~is ~~and~~not based ~~(2)~~on ~~reviewing~~accounting ~~gain/loss~~principles ~~from~~generally ~~disposal~~accepted ~~and~~in ~~impairment~~the United States of ~~assets~~America, atand ~~the~~is ~~consolidated~~not ~~level.~~necessarily ~~The~~a ~~remaining~~measure ~~numbers~~of byour ~~segment~~cash ~~(operating~~flow ~~revenues,~~or ~~operating~~ability ~~expenses,~~to ~~depreciation and~~fund ~~amortization,~~our ~~and~~cash needs. Our measurement of EBITDA) ~~then~~may ~~reflect~~not ~~the~~be ~~numbers~~comparable ~~that~~to ~~help~~similarly ~~drive~~titled ~~our~~measures reported ~~business~~by ~~decisions~~other companies. ~~Reclassifications~~See ~~have~~Note ~~been~~10 ~~made~~to our Notes to Condensed Consolidated Financial Statements for ~~all~~a ~~periods~~reconciliation ~~presented~~of this measure to our condensed consolidated financial statements prepared in accordance with ~~generally~~accounting principles generally accepted ~~accounting~~in ~~principles~~the United States of America.

12As ~~Weeks~~of ~~Ended~~our reporting period ended September 39, ~~2002~~2003, ~~Compared~~we adjusted our segment information to 12be ~~Weeks~~more ~~Ended~~in line ~~September~~with 9our internal reporting. The two key components that were changed were (1) recording elimination entries at the consolidated level instead of allocating them to each segment and (2) reviewing gain/loss from disposal and impairment of assets at the consolidated level. The remaining numbers by segment (operating revenues, ~~2003~~operating expenses, depreciation and amortization, and EBITDA) then reflect the numbers that help drive our business decisions. Reclassifications have been made for all periods presented in accordance with accounting principles generally accepted in the United States of America.

12 Weeks Ended September 9, 2003 Compared to 12 Weeks Ended September 7, 2004

Consolidated Operations – Continuing Operations

Operating revenues increased from $~~218~~219.96 million for third quarter ~~2002~~2003 to $221.46 million for third quarter ~~2003~~2004. This increase was comprised ~~primarily~~ of ~~operating revenue increases of~~ $31.0 8 million inat our ~~other~~country ~~operations~~club and ~~services~~golf ~~and~~facilities, $12.08 million at our resorts, ~~partially~~and ~~offset by decreases of~~ $1.7 million at our business and sports clubs offset by a decrease of $4.3 ~~Included~~million in ~~these~~our ~~segment~~other ~~variances~~operations ~~are~~and ~~divestitures~~services. ofThe ~~facilities~~overall ~~that~~increase ~~accounted~~is ~~for~~primarily ~~$0.6~~due ~~million~~to ofan increase ~~the~~in ~~net~~membership ~~revenue~~dues ~~decrease~~and ~~mentioned~~food ~~above~~and beverage revenues.

~~Gain~~Loss ~~(loss)~~ on disposals and impairment of assets was ($30.9) million for third quarter ~~2002~~2003 as compared to $~~37,000~~1.2 million for third quarter ~~2003~~2004. ~~Included~~The inloss ~~these figures are impairment losses of $0.7 million recorded~~ in ~~the~~2004 12was ~~weeks~~primarily ~~ended~~due ~~September 3, 2002~~ to ~~write down~~ the ~~carrying~~retirement ~~value~~ of ~~certain~~fixed ~~properties~~assets ~~classified~~at asseveral ~~held for sale under SFAS 121~~properties.

Excluding the impact of disposals and impairment of assets, operating ~~income~~ ~~increased~~income improved from $9.41 million for third quarter ~~2002~~2003 to $1015.98 million for third quarter ~~2003~~2004. This ~~increase~~improvement was ~~primarily~~ due to ~~decrease operating costs and expenses of $1.1 million and~~ the increase in revenues mentioned above, ~~partially~~as ~~offset~~well ~~by increased depreciation and amortization of $2.1 million. Operating expenses declined~~ as a ~~result~~decrease ~~of expense controls~~ in ~~operations~~operating ~~and~~costs ~~lower cost of goods sold due to the decline in business volume. Depreciation~~ and ~~amortization~~expenses ~~increased as a result~~ of ~~capital expansion and development activity at our existing properties. Loss from operations before income taxes and minority interest decreased from of~~ $83.72 million. ~~for~~Expenses decreased ~~third~~due ~~quarter 2002~~ to a $3.64 million ~~for~~recovery of costs during third quarter ~~2003~~2004 asrelated ato ~~result of~~litigation ~~the~~accrued ~~increase~~earlier in ~~operating~~2004, ~~income~~partially ~~mentioned~~offset ~~above.~~by ~~Interest~~increased ~~expense~~payroll ~~remained~~and ~~relatively~~payroll ~~constant~~related expenses.

Income (loss) from operations before income taxes and minority interest improved from a loss of $6.5 million for third quarter 2003 to income of $1.3 million for third quarter 2004 primarily as a result of the increase in operating income mentioned above. In addition, interest expense decreased $1.0 million primarily related to lower rates obtained from refinancing our bank debt in 2003.

Discontinued Operations

AtThe periods ended September 9, 2003 and September 7, 2004 include the operations of 30six properties divested ~~properties~~in 2003, one property divested in 2004 and two properties currently held for sale ~~were included~~ in discontinued operations. Operating revenues for these properties decreased from $133.25 million for third quarter ~~2002~~ 2003 to $10.79 million for third quarter ~~2003~~2004. ~~Segment~~Operating ~~operating~~ income (loss) before the impact of disposals and impairment of assets from these properties ~~increased~~decreased $32.1 million from third quarter ~~2002~~2003 to third quarter ~~2003~~2004 ~~primarily~~ as aonly ~~result~~two ofheld ~~the divestiture~~for ofsale ~~underperforming~~entities ~~facilities.~~had Weactivity ~~divested one property~~ in ~~the~~2004 12versus ~~weeks~~several ~~ended~~entities ~~September~~with 3,activity ~~2002 and 3 properties~~ in the 12prior ~~weeks ended September 9, 2003~~year. ~~Gain~~Loss ~~(loss)~~ on disposals ~~and impairment~~ of assets was ($3.2)0 million ~~and ($4.0) million~~ for ~~the~~third ~~twelve~~quarter ~~weeks ended September 3, 2002 and September 9,~~ 2003~~, respectively~~. ~~The~~There ~~main~~was ~~component~~no ofsignificant gain (loss) ~~was~~activity ~~impairment~~for third ~~losses~~quarter ~~of $4~~2004.5 ~~million~~In ~~and~~accordance ~~$2.0~~with ~~million~~SFAS ~~that were recorded during the 12 weeks ended September 3~~144, ~~2002~~depreciation ~~and September~~expense 9,was ~~2003,~~not ~~respectively,~~recorded toin ~~write down~~ the ~~carrying~~current ~~value~~quarter offor ~~certain~~ properties toclassified beas ~~disposed~~held for sale.

Segment and Other Information – 12 weeks

Country Club and Golf Facilities

The following table presents certain summary financial and other operating data for our country club and golf facilities segment for the third quarters ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 (dollars in thousands):

	Same Store Country Club and Golf Facilities				Total Country Club and Golf Facilities
	Same Store CountryClub and Golf Facilities				Total Country Club andGolf Facilities
	2002		2003		2002		2003
	2003		2004		2003		2004
Number of facilities at end of period		9497		9497		~~100~~99		9899
Operating revenues	$	~~110~~112,~~037~~247	$	~~109~~116,~~715~~603	$	~~111~~112,~~524~~247	$	~~112~~116,~~245~~603
Recognition of membership fees and deposits		78,~~941~~472		75,~~363~~927		78,~~990~~472		75,~~472~~927
Total operating revenues	$	~~117~~120,~~977~~719	$	~~117~~122,~~078~~530	$	~~119~~120,~~514~~719	$	~~119~~122,~~717~~530
Operating costs and expenses		94,594		93,647		97,181		96,385
Operating costs and expenses (1)		94,003		96,545		93,996		96,561
Depreciation and amortization		1011,~~547~~639		11,~~306~~301		1011,~~357~~639		11,~~639~~301
Segment operating income from continuing operations	$	1215,~~836~~077	$	1214,~~125~~684	$	1115,~~976~~084	$	1114,~~693~~668
Segment operating income from discontinued operations	$	50	$	130	$	587	$	24
Segment operating income (loss) from discontinued operations	$	—	$	—	$	31	$	(2	)
EBITDA	$	23,510	$	23,561	$	23,210	$	23,421
EBITDA (1)	$	26,716	$	25,985	$	26,819	$	25,967

~~Continuing Operations.~~(1) ~~Total~~Excludes ~~operating~~intercompany ~~revenues~~consulting ~~decreased~~fees ~~$0.9 million from third quarter 2002 to third quarter 2003 for same store country club and golf facilities. This decrease was primarily due to decreased golf operations revenues~~ of $02.93 million~~, decreased~~ ~~food~~ and ~~beverage sales of~~ $04.5 million ~~and~~for ~~decreased~~Same ~~recognition~~Store ~~of membership fees~~ and ~~deposits~~Total ofin ~~$0.5~~2003 ~~million, partially offset by increased membership dues of $0.7 million,~~ and ~~increased other recreation revenue of $0.3 million. Golf operations revenue decreased due to decreased demand which resulted in lower rounds~~2004, ~~merchandise sales and other ancillary golf revenues~~respectively. ~~Food~~Fees and beverage revenues declined as a result of lower activity at our clubs. Recognition of membership fees and deposits declined due to decreased amortization as a result of less membership additions. Membership dues increased asin a2004 ~~result of price increases and a slight reversal~~ in ~~negative~~conjunction ~~membership~~with ~~trends. The dues volume has increased since~~ the ~~beginning~~ ofterms ~~the year showing favorable results for the first time in over two years. Other recreation revenue increased due to higher usage~~ of ~~tennis, athletics and other amenities offered at~~ our ~~private~~new ~~country~~debt ~~clubs~~facility.

~~Segment~~Continuing Operations. Total operating ~~income~~revenues ~~decreased~~increased $01.78 million atcomparing third quarter 2003 to third quarter 2004 for same store country club and golf facilities. ~~from~~This ~~third~~increase ~~quarter~~was ~~2002~~primarily due to ~~third~~increased ~~quarter~~food ~~2003~~and asbeverage asales ~~result~~ of ~~the~~$2.0 ~~decrease~~million and inmembership ~~revenues~~dues ~~mentioned~~of ~~above and a~~ $01.8 million ~~increase in depreciation and amortization,~~ partially offset by decreased ~~operating~~recognition ~~costs~~of membership fees and ~~expenses~~deposits of $02.95 million. ~~Operating~~Food ~~costs~~ and ~~expenses~~beverage ~~decreased~~revenues increased as a result of ~~savings~~increased ina ~~golf~~la ~~and~~carte ~~food~~business and ~~beverage~~check ~~operations~~average ~~due~~at toour ~~expense~~clubs. Membership ~~controls~~dues ~~implemented~~increased ~~due~~as toa ~~the~~result ~~decline~~of inpositive ~~volume~~membership intrends ~~these~~as ~~areas~~well as price increases. ~~Depreciation~~Recognition of membership fees and ~~amortization~~deposits ~~increased~~decreased primarily due to ~~recent~~ ~~expansion~~a ~~projects~~change ~~completed~~in atthe allocation procedures of revenue over 13 periods versus equal amounts in each of our ~~properties~~four quarters.

~~Discontinued~~Segment ~~Operations.~~operating ~~The~~income decreased ~~operations~~$0.4 ofmillion 21at ~~divested~~same store country club and golf facilities ~~and~~comparing ~~two~~third ~~clubs~~quarter ~~currently~~2003 ~~held~~to ~~for~~third ~~sale~~quarter ~~were~~2004 ~~included~~as a result of the increase in ~~discontinued~~revenues ~~operations.~~mentioned ~~Segment~~above, ~~operating~~offset ~~income~~by ~~for~~increased ~~these~~operating ~~properties~~costs ~~decreased~~and expenses of $02.65 million. Operating costs and expenses increased primarily due to increased food and beverage and golf operations expenses of $1.8 million ~~from~~and $1.1 million, respectively. Overall, food and beverage margins improved when comparing third quarter ~~2002~~2003 to third quarter 2004 offset by a decrease in golf operating margin mainly due to numerous hurricanes and heavy rains during the quarter. ~~2003~~Additionally, aswe decreased a ~~result~~litigation accrual by $1.0 million related to the settlement of ~~divestitures~~a lawsuit involving the members at one of our clubs.

Resorts

The following table presents certain summary financial and other operating data for our resorts segment for the third quarters ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 (dollars in thousands):

	Same Store Resorts						Total Resorts
	2002			2003			2002		2003
	2003			2004			2003		2004
Number of facilities at end of period		3			3			3		3
Number of facilities at end of period (1)		3			3			3		3
Operating revenues	$	4546,~~952~~818		$	4649,~~819~~781		$	46,~~098~~857	$	4649,~~857~~809
Recognition of membership fees and deposits		1,~~377~~613			1,~~613~~422			1,~~401~~613		1,~~613~~422
Total operating revenues	$	4748,~~329~~431		$	4851,~~431~~203		$	4748,~~499~~470	$	4851,~~470~~231
Operating costs and expenses		38,621			37,662			38,038		38,228
Operating costs and expenses (2)		37,662			39,663			38,227		40,067
Depreciation and amortization		3,~~771~~820			3,~~820~~771			3,~~907~~927		3,~~927~~847
Segment operating income from continuing operations	$	46,~~937~~949		$	67,~~949~~769		$	56,~~554~~316	$	67,~~315~~317
Segment operating income from discontinued operations	$	—		$	—		$	7—	$	—
EBITDA	$	8,708		$	10,769		$	9,468	$	10,242
EBITDA (2)	$	10,769		$	11,539		$	10,243	$	11,164
Lodging data: (3 resorts)
Lodging data: (3 resorts) (1)
Room nights available		99,~~708~~792			99,~~708~~792
Room nights sold		5561,~~477~~642			6164,~~561~~928
Paid occupancy rate		5561.68	%		6165.71	%
Average daily revenue per occupied room (1)	$	754		$	698
Average daily revenue per occupied room (3)	$	698		$	707
Average daily revenue per available room (1)	$	420		$	431
Average daily revenue per available room (3)	$	431		$	460

(1) ~~Average~~Number ~~daily~~of ~~revenue~~facilities ~~per~~and ~~occupied~~lodging ~~room~~data ~~and~~is ~~average~~comprised ~~daily~~of ~~revenue~~data ~~per~~from ~~available~~wholly ~~room~~owned ~~are~~resorts ~~based~~consisting onof ~~total~~Pinehurst, ~~operating~~The ~~revenues~~Homestead ~~excluding~~and ~~membership~~Barton ~~dues,~~Creek. ~~recognition~~Other ofancillary ~~member~~resort ~~initiation~~operations ~~fees,~~are ~~and~~included ~~net~~in ~~managed~~summary ~~rooms~~financial ~~commissions~~data for Total Resorts.

(2) ~~Includes~~Excludes ~~results~~intercompany consulting fees of ~~our~~$1.9 ~~resorts~~million ~~possessive~~in ~~overhead~~2004 ~~entity~~for inSame ~~addition~~Store toand ~~our~~Total. 3There ~~same~~were ~~store~~no ~~resorts~~intercompany consulting fees in 2003.

Continuing Operations. Total operating revenues increased $1.1 million from third quarter 2002 to third quarter 2003 for same store resorts. This increase was primarily due to increased food and beverage sales of $1.2 million and increased lodging and spa revenues of $0.(3) ~~million~~Average ~~each,~~daily ~~partially offset by lower golf operations~~ revenue ofper ~~$0.6~~occupied ~~million. Food and beverage sales increased as a result of higher occupancy and spending by social guests during the quarter. Lodging revenues increased as a result of increased~~ room ~~nights, although promotions~~ and ~~discounted~~average ~~pricing~~daily ~~strategies~~revenue ~~reduced~~per ~~average~~available room ~~rates~~ ~~from~~are ~~the~~based ~~prior~~on ~~year.~~total ~~Spa~~operating revenues ~~increased~~excluding asmembership adues, ~~result~~recognition of ~~price~~member ~~increases~~initiation ~~at The Homestead. Golf operations revenues declined as a result of an 8.4% decrease in greens~~ fees, ~~per~~and ~~round~~net ~~due~~managed torooms ~~the extension of discounted pricing strategies to our resorts’ golf operations~~commissions.

~~Segment~~Continuing Operations. Total operating ~~income~~ revenues increased $2.08 million ~~from~~comparing third quarter ~~2002~~2003 to third quarter ~~2003~~2004 for same store resorts. This increase was ~~due~~primarily ~~to a $1.0 million decrease~~ in ~~operating~~food ~~costs~~ and ~~expenses~~beverage, ingolf ~~addition to the increase in revenues mentioned above. Operating costs~~ and ~~expenses~~lodging ~~decreased~~at Pinehurst due to reduced intercompany consulting fees that were not billed in 2003 as well as of the elimination of a large portion of our resorts’ offsite overhead structure. The elimination of the consulting fee billings had no ~~net impact on Total Resorts operating expenses as Total Resorts includes the offsetting overhead revenue. Other operating expenses~~ increased ~~$0.6 million as a result of increased~~ occupancy ~~resulting~~and ~~from our discounted pricing strategies~~spending.

~~Discontinued~~Segment ~~Operations~~operating income increased $0.8 ~~Discontinued~~million ~~operations~~comparing ~~were comprised~~third ofquarter ~~the~~2003 ~~management~~to ~~fees~~third ofquarter ~~one~~2004 ~~divested~~for ~~resort~~same ~~property~~store resorts. ~~The~~This ~~management~~improvement ~~agreement~~was ~~for~~due ~~this~~to ~~property~~the ~~was~~increase ~~terminated~~in revenues mentioned above offset by a $2.0 million increase in ~~2002~~operating costs and expenses. Operating costs and expenses increased due to higher food and beverage expenses of $0.8 million related to the higher occupancy and spending at Pinehurst. Food and beverage operating margins improved when comparing third quarter 2003 to third quarter 2004.

Business and Sports Clubs

The following table presents certain summary financial and other operating data for our business and sports clubs segment for the third quarters ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 (dollars in thousands):

	Same Store Businessand Sports Clubs						Total Business and Sports Clubs	~~Total Business andSports Clubs~~
	2002			2003				2002				2003
	2003			2004			2003				2004
Number of facilities at end of period		7066			7066			66	70			66	70
Operating revenues	$	4643,~~266~~224		$	45,~~413~~040		$	$43,224	~~46,801~~		$	$45,040	~~45,386~~
Recognition of membership fees and deposits		~~885~~606			~~611~~538			606	~~887~~			538	~~611~~
Total operating revenues	$	4743,~~151~~830		$	4645,~~024~~578		$	$43,830	~~47,688~~		$	$45,578	~~45,997~~
Operating costs and expenses		44,732			43,871				45,213				43,867
Operating costs and expenses (1)		40,382			41,577			40,382				41,577
Depreciation and amortization		2,~~795~~539			2,~~724~~490			2,539	~~2,815~~			2,490	~~2,724~~
Segment operating loss from continuing operations	$	(376	)	$	(571	)		$	(340	)		$	(594	)
Segment operating income from continuing operations	$	909		$	1,511		$	909			$	1,511
Segment operating loss from discontinued operations	$	—		$	—			$	(481	)		$	(42	)
Segment operating income (loss) from discontinued operations	$	(163	)	$	7		$	(298	)		$	(15	)
EBITDA	$	2,418		$	2,153			$	2,026			$	2,100
EBITDA (1)	$	3,400		$	4,000		$	3,347			$	3,978

~~Continuing Operations. Total operating revenues decreased $~~(1.1) ~~million~~Excludes ~~from~~intercompany ~~third~~consulting ~~quarter~~fees ~~2002 to third quarter 2003 at same store business and sports clubs. This decrease was primarily comprised~~ of a $01.92 million ~~decrease in food~~ and ~~beverage sales, a~~ $01.3 million ~~decrease~~for inSame ~~recognition~~Store ~~of membership fees~~ and ~~deposits~~Total, ~~and a $0.2 million decline in membership dues~~respectively, ~~partially offset by a $0.3 million increase~~ in ~~other~~2003 revenue. Although membership retention levels have improved from those experienced in the last two fiscal years, we continue to experience slight attrition in member counts due to continued economic uncertainty. These trends have resulted in decreased membership dues and ~~decreased recognition of membership deposits and fees~~2004. Food and beverage revenues decreased primarily as a result of decreases in private parties stemming from lower membership and activity at our clubs. Other revenue increased as a result of increased usage of tennis, athletics and spa facilities, in addition to improved results from non-wholly-owned facilities.

~~Segment~~Continuing Operations. Total operating ~~loss~~revenues increased $01.27 million comparing ~~from~~ third quarter ~~2002~~2003 to third quarter ~~2003~~2004 at same store business and sports clubs. ~~due~~This toincrease ~~the~~was ~~decrease~~primarily incomprised ~~revenues~~of ~~mentioned~~a ~~above,~~$1.2 ~~partially~~million ~~offset~~increase byin ~~decreased operating~~food ~~costs~~ and ~~expenses~~beverage ofsales and a $0.96 million. ~~Operating~~increase ~~margins~~in ~~were~~membership ~~positively~~dues. ~~impacted~~Food byand ~~improved~~beverage revenues ~~food~~increased ~~and~~primarily ~~beverage~~as ~~margins~~a ~~due~~result toof ~~expense~~increased ~~controls~~spending infor ~~purchasing~~a la carte and ~~operations,~~private inparty ~~addition~~business toand most clubs had a ~~decline~~higher inper ~~rent~~check ~~expense~~average ofin $02004.2 ~~million.~~Membership ~~Rent expense~~dues ~~has~~increased ~~declined~~ due to the ~~renegotiation~~impact of ~~certain~~a ofnew ~~our~~Signature ~~facilities’~~Gold ~~lease~~dining ~~agreements~~program ~~with~~being offered ~~their~~at ~~respective~~the ~~landlords,~~business inclubs ~~addition to a decline~~ in ~~contingent rent payments~~2004.

~~Discontinued~~Segment ~~Operations.~~operating income ~~The~~increased ~~operations~~comparing ofthird ~~eight~~quarter ~~divested~~2003 to third quarter 2004 at same store business and sports clubs ~~were~~due ~~included~~to the increase in ~~discontinued operations.~~revenues ~~Segment~~mentioned ~~operating~~above ~~loss~~offset ~~from~~by ~~these~~a ~~properties~~related ~~decreased~~increase in operating costs and expenses of $01.42 million. ~~from~~Operating margins ~~third~~were ~~quarter~~positively ~~2002~~impacted toby ~~third~~improved ~~quarter~~food ~~2003~~and asbeverage amargins ~~result~~due ofto ~~the~~expense ~~divestiture~~controls ofin ~~underperforming~~purchasing ~~clubs~~and operations.

Discontinued Operations. The periods ended September 9, 2003 and September 7, 2004 include the operations of three properties divested in 2003, one property divested in 2004 and two properties currently held for sale in discontinued operations. Segment operations from these properties improved $0.3 million from third quarter 2003 to third quarter 2004.

Other Operations and Services – Continuing Operations

~~Operating~~Included ~~income~~in results for ~~our~~other ~~real estate~~ operations ~~improved~~and byservices ~~$0.3~~for ~~million~~the ~~from~~ third quarter 2004 ~~2003~~is toa ~~third~~$5.0 ~~quarter~~million ~~2002~~($3.4 ~~This increase~~million ~~was~~net ~~primarily~~of ~~due~~legal tocosts) ~~cost~~recovery ~~cutting~~of ~~initiatives~~previously inaccrued ~~the~~expenses ~~administrative~~related ~~and~~to ~~sales~~litigation ~~and~~accrued ~~marketing~~earlier ~~functions~~in of2004. ~~our~~During ~~real~~the ~~estate~~third ~~operations.~~quarter ~~Operationally,~~2003 we ~~experienced~~recorded ~~increased~~a ~~real~~charge ~~estate sales~~ of $01.63 million asto aaccrue ~~result~~for ofvacation ~~the~~earned ~~sale~~by employees. ofThere ~~all~~was ~~13 ownership~~no ~~interests~~significant ofchange ato ~~unit~~the atvacation ~~Owners~~accrual ~~Club—Homestead~~during third quarter 2004.

~~Included~~Operating inloss ~~third~~from ~~quarter~~other ~~2003~~operations ~~results~~and isservices aimproved ~~charge~~comparing ofthird ~~$1.3~~quarter ~~million~~2003 to ~~accrue~~third ~~for~~quarter ~~vacation~~2004 ~~earned~~due byto ~~employees.~~the ~~This~~reasons ismentioned inabove ~~addition~~as towell ~~the~~as ~~reserve~~decreases ofin ~~$2.8~~payroll ~~million~~and ~~that~~payroll ~~was~~related ~~previously~~costs. ~~established,~~Payroll ~~$1.1~~and payroll ~~million~~related ofcosts ~~which~~decreased ~~was~~due ~~recorded~~to ina ~~the first~~corporate ~~and~~reorganization ~~second~~that ~~quarters~~led ofto ~~2003~~reductions in personnel.

36 Weeks Ended September 39, ~~2002~~2003 Compared to 36 Weeks Ended September 97, ~~2003~~2004

Consolidated Operations – Continuing Operations

Operating revenues ~~decreased~~increased from $~~637~~623.67 million for the 36 weeks ended September 39, ~~2002~~2003 to $~~630~~645.40 million for the 36 weeks ended September 97, ~~2003 as a result of i) divestitures, ii) continued economic uncertainty and iii) poor weather conditions at several of our properties~~2004. This ~~decrease~~increase was comprised of ~~operating revenue decreases of~~ $311.91 million at our ~~business~~country club and ~~sports~~golf ~~clubs~~facilities, $29.87 million inat our ~~other~~resorts ~~operations~~ and ~~services, and~~ $25.91 million at our ~~resorts,~~business ~~partially~~and ~~offset~~sports clubs, offset by ana ~~increase~~decrease of $2.4.6 million atin our ~~country~~other ~~club~~operations and ~~golf facilities~~services. ~~Included in~~The ~~these~~overall ~~segment~~increase ~~variances~~is ~~are~~primarily ~~divestitures~~due ofto ~~facilities~~an ~~that~~increase ~~accounted~~in ~~for~~membership ~~$4.4~~dues ~~million~~and offood ~~the~~and ~~net~~beverage ~~revenue decrease mentioned above~~revenues.

~~Loss~~Gain (loss) on disposals and impairment of assets was $130.7 million infor the 36 weeks ended September 39, ~~2002~~2003 as compared to a loss of $0.3.8 million infor the 36 weeks ended September 97, ~~2003~~2004. WeThe ~~disposed~~loss ~~of four properties~~ in ~~the~~2004 36includes ~~weeks~~impairment ~~ended~~of ~~September~~$1.4 3,million ~~2002~~recorded ~~and one property in addition~~ to ~~those~~write ~~mentioned~~down ~~below in~~ the 36carrying ~~weeks~~value ~~ended~~of ~~September~~certain ~~9, 2003~~properties. ~~Included~~The inremainder ~~these figures are impairment losses~~ of ~~$0.7 million recorded in~~ the 36loss ~~weeks~~for ~~ended~~2004 ~~September~~is 3,primarily ~~2002~~related to ~~write down~~ the retirement ~~carrying value~~ of ~~certain~~fixed ~~properties~~assets ~~classified~~at asseveral ~~held for sale under SFAS 121~~properties.

Excluding the impact of disposals and impairment of assets, operating income ~~increased~~improved tofrom $1914.95 million for the 36 weeks ended September 9, 2003 ~~from~~ to $1836.68 million for the 36 weeks ended September 37, ~~2002~~2004. This ~~increase~~improvement was primarily due to athe ~~decline~~increase in revenues ~~operating~~mentioned ~~costs~~above ~~and expenses of $12.0 million,~~ partially offset by increased ~~depreciation~~operating costs and ~~amortization~~expenses of $32.56 million~~, and the decline in revenues mentioned above~~. Operating costs and expenses ~~declined~~increased asdue ~~a result of expense controls in operations, in addition~~ to ~~being~~higher ~~impacted~~usage inprimarily ~~the prior year by a litigation accrual of $3.2 million relating to an arbitration decision~~ at ~~one of our~~ country ~~clubs.~~ ~~Depreciation~~club and ~~amortization~~golf ~~increased~~facilities as awell ~~result~~as ~~of capital expansion and development activity~~ at ~~our~~the ~~existing properties~~resorts.

Loss from operations before income taxes and minority ~~interests~~interest ~~decreased~~improved to from $3641.73 million for the 36 weeks ended September 9, 2003 ~~from~~to $357.83 million for the 36 weeks ended September 37, ~~2002.~~2004 ~~This~~primarily ~~decrease~~as ~~was~~a ~~primarily~~result ~~due~~of to the ~~improvement~~increase in operating income mentioned above,. ~~offset~~In byaddition, ~~increased~~ interest expense ofdecreased $5.42 million ~~as a result of higher levels of outstanding debt and higher loan fee~~primarily ~~amortization~~related ~~in the first two quarters of 2002 due~~ to ~~amendments~~lower torates ~~our~~obtained ~~previous~~from ~~credit facility. On June 4, 2003, we completed a major~~ refinancing of our ~~outstanding~~ bank debt. ~~As a result of these transactions, we wrote off $10.6 million~~ in ~~unamortized~~ ~~financing costs related to our previous credit facility in second quarter~~ 2003.

Discontinued Operations

AtThe periods ended September 9, 2003 and September 7, 2004 include the operations of 3014 properties divested ~~properties~~in 2003, one property divested in 2004 and two properties currently held for sale ~~were included~~ in discontinued operations. Operating revenues for these properties decreased from $3614.46 million for the 36 weeks ended September 39, ~~2002~~2003 to $74.94 million for the 36 weeks ended September 97, ~~2003~~2004. ~~Segment~~Operating ~~operating~~income (loss) before the impact of disposals and impairment of assets from these properties decreased $45.6 1 million ~~for~~from the 36 weeks ended September 9, 2003 ~~from~~to the 36 weeks ended September 37, ~~2002.~~2004 ~~This~~as ~~change~~only ~~was primarily~~two aheld ~~result~~for ofsale ~~the~~entities ~~divestiture~~had ofactivity ~~underperforming~~in ~~facilities.~~2004 Weversus ~~divested~~several ~~six~~entities ~~properties~~with activity in the 36prior ~~weeks~~year. ~~ended~~Gain ~~September~~on 3,disposals ~~2002~~of ~~and~~assets 15was ~~properties~~$5.7 inmillion for the 36 weeks ended September 9, 2003. ~~Impairment losses of $6.3 million~~ and $2.0.2 million ~~were~~ ~~recorded~~for ~~during~~ the 36 weeks ended September 37, ~~2002~~2004. ~~and~~In ~~September~~accordance 9,with ~~2003,~~SFAS ~~respectively~~144, todepreciation ~~write~~expense ~~down~~was ~~the~~not ~~carrying~~recorded ~~value~~in ofthe ~~certain~~current quarter for properties toclassified beas ~~disposed~~held for sale.

Segment and Other Information -– 36 ~~Weeks~~weeks

Country Club and Golf Facilities

The following table presents certain summary financial and other operating data for our country club and golf ~~facility~~facilities segment for the 36 ~~week~~weeks ~~periods~~ ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 (dollars in thousands):

	Same Store Country Club and Golf Facilities				Total Country Club and Golf Facilities
	Same Store CountryClub and Golf Facilities				Total Country Club andGolf Facilities
	2002		2003		2002			2003
	2003		2004		2003			2004
Number of facilities at end of period		9497		9497		~~100~~99			9899
Operating revenues	$	~~308~~317,~~478~~960	$	~~311~~334,~~187~~259	$	~~313~~318,~~989~~046		$	~~318~~334,~~041~~259
Recognition of membership fees and deposits		2325,~~814~~207		2120,~~923~~054		2325,~~842~~208			2220,~~209~~054
Total operating revenues	$	~~332~~343,~~292~~167	$	~~333~~354,~~110~~313	$	~~337~~343,~~831~~254		$	~~340~~354,~~250~~313
Operating costs and expenses		266,329		263,045		275,398			270,992
Operating costs and expenses (1)		263,754		276,631		263,865			276,648
Depreciation and amortization		3133,~~615~~384		3234,~~416~~053		3133,~~801~~384			3334,~~384~~053
Segment operating income from continuing operations	$	3446,~~348~~029	$	3743,~~649~~629	$	3046,~~632~~005		$	3543,~~874~~612
Segment operating income (loss) from discontinued operations	$	184	$	208	$	(776	)	$	(74	)
Segment operating loss from discontinued operations	$	—	$	—	$	(5	)	$	(4	)
EBITDA	$	66,378	$	70,420	$	64,580		$	69,495
EBITDA (1)	$	79,413	$	77,682	$	79,695		$	77,661

~~Continuing Operations.~~(1) ~~Total~~Excludes ~~operating~~intercompany ~~revenues~~consulting ~~increased~~fees $0.8 million at same store country club and golf facilities for the 36 weeks ended September 9, 2003 as compared to the 36 weeks ended September 3, 2002. This increase was primarily attributable to increased membership dues of $16.79 million and ~~increased other recreation revenue of~~ $112.17 million, ~~partially~~for ~~offset~~Same byStore ~~decreased~~and ~~recognition~~Total ofin ~~membership~~2003 ~~deposits~~ and ~~fees~~2004, ~~of $1~~respectively.9 ~~million.~~Fees ~~Membership dues~~ increased asin a2004 ~~result of price increases and a slight reversal~~ in ~~negative~~conjunction ~~membership~~with ~~trends. The dues volume has increased since~~ the ~~beginning~~terms of ~~the year showing favorable results for the first time in over two years. Other recreation revenue increased due to higher usage of tennis, athletics and other amenities offered at~~ our ~~private~~new ~~country~~debt ~~clubs~~facility. Recognition of membership fees and deposits declined due to decreased amortization as a result of less membership additions. The additional $1.6 million increase in operating revenues at total country club and golf facilities was primarily due to the ramping up of developing properties.

~~Segment~~Continuing Operations. Total operating ~~income~~revenues increased $311.31 million atcomparing ~~same store country club and golf facilities for~~ the 36 weeks ended September 9, 2003 ~~from~~to the 36 weeks ended September 37, ~~2002~~2004 asfor asame ~~result~~store ofcountry ~~decreased~~club ~~operating costs~~ and ~~expenses~~golf ~~of $3~~facilities.3 ~~million~~This ~~and the~~ increase inwas ~~revenues~~primarily ~~mentioned~~due ~~above,~~to ~~partially~~increased food ~~offset~~and bybeverage asales of $07.86 million, ~~increase~~membership indues ~~depreciation~~of ~~and amortization~~$5.1 ~~Operating~~million ~~costs~~ and ~~expenses were~~golf ~~impacted~~operations inrevenues ~~the~~of ~~prior~~$2.3 ~~year~~million, partially offset by adecreased ~~litigation~~recognition ~~accrual~~of membership fees and deposits of $35.2 million. ~~relating~~Food toand anbeverage ~~arbitration~~revenues ~~decision~~increased atas a ~~one~~result of ~~our~~increased ~~country~~activity ~~clubs. Depreciation~~ and ~~amortization~~check ~~increased~~average ~~due~~at toour ~~recent~~clubs ~~expansion~~in ~~projects~~both ~~completed~~a atla ~~our~~carte ~~properties.~~and ~~The additional~~private $1party.9 ~~million~~Membership ~~increase~~dues inincreased ~~segment~~as ~~operating~~a ~~income~~result ~~for~~of ~~total~~positive ~~country~~membership ~~club~~trends and ~~golf~~price ~~facilities~~increases ~~was~~when ~~primarily~~comparing ~~due~~2003 to ~~the~~2004. ~~second~~Golf ~~quarter~~operations ~~2002~~revenue increased ~~divestiture~~due ofto ~~Daufuskie~~higher ~~Island~~paid ~~Club~~rounds ~~and~~as ~~Resort,~~a ~~one~~result of ~~our~~the ~~former~~increased ~~resorts~~activity ~~that~~at ~~was~~our ~~reclassified~~clubs. ~~to our~~Recognition ~~country~~of ~~club~~membership fees and ~~golf~~deposits ~~facilities~~decreased ~~segment~~primarily atdue ~~the~~to ~~outset~~a ofchange ~~fiscal~~in ~~year~~the ~~2002~~allocation ~~due~~procedures toof ~~the~~revenue ~~reduction~~over in13 ~~services~~periods ~~offered~~versus atequal ~~the~~amounts ~~property~~ in each ~~anticipation~~ of ~~its~~our ~~sale~~four quarters.

~~Discontinued~~Segment ~~Operations.~~operating ~~The~~income ~~operations~~decreased $2.4 ofmillion 21at ~~divested~~same store country club and golf facilities ~~and~~from ~~two~~the ~~clubs~~36 ~~currently~~weeks ~~held for~~ended ~~sale~~September ~~were~~9, ~~included~~2003 into ~~discontinued~~the ~~operations.~~36 ~~Segment~~weeks ~~operating~~ended ~~income~~September ~~from~~7, ~~these~~2004 ~~properties~~as a result of the increase in revenues mentioned above, offset by increased operating costs and expenses of $012.79 million. ~~for~~Operating ~~total~~costs ~~country~~and ~~club~~expenses ~~and~~increased ~~golf~~primarily ~~facilities~~due ~~for~~to the 36increased ~~weeks~~usage ~~ended~~at ~~September~~our 9,clubs ~~2003~~which ~~from~~resulted ~~the~~in 36increased ~~weeks~~food ~~ended~~and ~~September~~beverage and golf operations expenses of $7.0 million and $3.5 million, ~~2002~~respectively. Overall, food and ~~primarily~~beverage asoperating amargins ~~result~~improved ofwhen ~~the~~comparing ~~divestiture~~2003 ofto ~~underperforming~~2004 ~~properties~~while golf operating margins decreased due to numerous hurricanes and heavy rains.

Discontinued Operations. The periods ended September 9, 2003 and September 7, 2004 include the operations of ten properties divested in 2003 in discontinued operations. Segment operating loss for these properties were flat for the 36 weeks ended September 9, 2003 compared to the 36 weeks ended September 7, 2004 as a result of decreased activity related to the divested entities.

Resorts

The following table presents certain summary financial and other operating data for our ~~resort~~resorts segment for the 36 ~~week~~weeks ~~periods~~ ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 (dollars in thousands):

	Same Store Resorts						Total Resorts ~~(2)~~
	2002			2003			2002		2003
	2003			2004			2003		2004
Number of facilities at end of period		3			3			3		3
Number of facilities at end of period (1)		3			3			3		3
Operating revenues	$	~~128~~125,~~813~~350		$	~~125~~135,~~350~~536		$	~~128~~125,~~891~~461	$	~~125~~135,~~462~~633
Recognition of membership fees and deposits		4,~~050~~715			4,~~715~~244			4,~~137~~715		4,~~715~~244
Total operating revenues	$	~~132~~130,~~863~~065		$	~~130~~139,~~065~~780		$	~~133~~130,~~028~~176	$	~~130~~139,~~176~~877
Operating costs and expenses		108,542			103,078			106,368		104,397
Operating costs and expenses (2)		103,077			110,517			104,397		111,526
Depreciation and amortization		1112,~~174~~050			1211,~~050~~326			1112,~~511~~377		1211,~~377~~580
Segment operating income from continuing operations	$	1314,~~147~~938		$	1417,937		$	1513,~~149~~402	$	1316,~~402~~771
Segment operating income from discontinued operations	$	—		$	—		$	~~354~~—	$	—
EBITDA	$	24,321		$	26,987		$	27,014	$	25,779
EBITDA (2)	$	26,988		$	29,263		$	25,779	$	28,351
Lodging data: (3 resorts)
Lodging data: (3 resorts) (1)
Room nights available		299,~~124~~376			299,~~124~~376
Room nights sold		~~154~~161,~~041~~057			~~161~~172,~~057~~092
Paid occupancy rate		5153.58	%		5357.85	%
Average daily revenue per occupied room (1)	$	753		$	706
Average daily revenue per occupied room (3)	$	706		$	720
Average daily revenue per available room (1)	$	388		$	380
Average daily revenue per available room (3)	$	380		$	414

(1) ~~Average~~Number ~~daily~~of ~~revenue~~facilities ~~per~~and ~~occupied~~lodging ~~room~~data ~~and~~is ~~average~~comprised ~~daily~~of ~~revenue~~data ~~per~~from ~~available~~wholly ~~room~~owned isresorts ~~based~~consisting onof ~~total~~Pinehurst, ~~operating~~The ~~revenues~~Homestead ~~excluding~~and ~~membership~~Barton ~~dues~~Creek. ~~and~~Other ~~recognition~~ancillary ofresort ~~member~~operations ~~initiation~~are ~~fees~~included in summary financial data for Total Resorts.

(2) ~~Includes~~Excludes ~~results~~intercompany consulting fees of ~~our~~$5.8 ~~resorts~~million ~~possessive~~in ~~overhead~~2004 ~~entity~~for inSame ~~addition~~Store toand ~~our~~Total. 3There ~~same~~were ~~store~~no ~~resorts~~intercompany consulting fees in 2003.

~~Continuing Operations. Total operating revenues decreased $2.8 million for same store resorts for the 36 weeks ended September 9, 2003 from the 36 weeks ended September~~ (3,) ~~2002.~~Average ~~This~~daily ~~decrease was primarily due to decreased golf operations~~ revenue of $2.5 million and lower lodging revenues of $1.2 million, in addition to other income of $0.9 million. Partially offsetting these decreases were increases in spa revenue of $1.0 million and increased recognition of membership fees of $0.7 million. Golf operations revenues declined primarily due to a 6.7% decrease in rounds and a 2.8% decrease in greens fee per ~~round~~ asoccupied aroom ~~result of poor weather~~ and reduced spending by resort guests. In addition, golf instruction revenues declined due to the termination of an agreement with a golf teaching center. Although paid occupancy rates increased slightly in 2003, lodging revenues were impacted by lower rates that our resorts offered in order to improve business volume. The Homestead was affected by extremely poor weather conditions and the timing of our prior fiscal year end, which resulted in the revenues from the year-end holiday season being recorded at the end of fiscal year 2002 as opposed to at the beginning of fiscal year 2003. In addition, general economic uncertainty and the war in Iraq combined to affect operating performance at Pinehurst during the first and second quarters of 2003. These factors combined to result in the 6.2% decrease in average daily revenue per ~~occupied~~available room ~~for~~are ~~the~~based 36on ~~weeks~~total ~~ended~~operating ~~September~~revenues 9,excluding ~~2003~~membership ~~compared to the 36 weeks ended September 3~~dues, ~~2002.~~recognition ~~Other income declined as a result~~ of ~~promotional~~member ~~discounts~~initiation ~~offered by our resorts to increase occupancy. Spa revenue increased due to the opening of The Spa at Pinehurst in second quarter 2002 and price increases at The Homestead. Recognition of membership~~ fees ~~increased~~, ~~as a result of the amortization of membership fees~~ and ~~positive~~net ~~membership~~managed ~~trends~~rooms ~~at Pinehurst~~commissions.

~~Segment~~Continuing Operations. Total operating ~~income~~revenues increased $19.87 million ~~for~~comparing ~~same store resorts for~~ the 36 weeks ended September 9, 2003 ~~from~~to the 36 weeks ended September 37, ~~2002~~2004 for same store resorts. This increase was primarily due to aincreased ~~decline in operating costs~~ food and ~~expenses~~beverage sales of $54.53 million, ~~partially~~lodging ~~offset~~revenues byof ~~the~~$2.8 ~~decrease~~million, inother recreation revenues ~~mentioned~~of ~~above~~$2.2 million and ~~increased~~golf ~~depreciation~~operations ~~and~~revenues ~~amortization~~ of $01.96 million. ~~Operating~~Food ~~costs~~ and ~~expenses declined~~beverage sales increased as a result of ~~expense~~higher ~~controls~~occupancy inand ~~operations~~spending inby ~~response~~social guests toduring ~~the~~2004 ~~decline~~at inall ~~revenues,~~of asthe ~~well~~resorts. asLodging ~~overhead~~revenues ~~reductions~~increased ~~resulting~~as ~~from~~a ~~cost~~result ~~cutting~~of ~~initiatives~~increased ~~implemented~~room innights ~~the~~and ~~second~~higher ~~half~~average ofroom ~~2002~~rates ~~and~~from ~~into~~the ~~2003.~~prior ~~As part of this reorganization~~year, ~~intercompany~~primarily ~~consulting~~at ~~fees~~The ~~were not billed in 2003~~Homestead. ~~The~~Other ~~elimination~~recreation ofrevenues ~~the~~increased ~~consulting~~as ~~fee~~a ~~billings~~result ~~had~~of noincreased ~~net~~spa revenues ~~impact~~at onThe ~~Total~~Homestead ~~Resorts~~and ~~operating~~Pinehurst ~~expenses~~ as ~~Total~~well ~~Resorts~~as ~~includes~~increased ~~the~~ski ~~offsetting~~revenues ~~overhead~~at ~~revenue~~The Homestead. ~~Depreciation~~Golf ~~and amortization~~revenues increased due to ~~recent~~increased ~~expansion~~play ~~projects~~on ~~completed~~the atpremium ~~our~~courses ~~resorts~~at Pinehurst. ~~The~~

Segment operating income increased $3.0 million comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 for same store resorts. This improvement was due to by the increase in revenues mentioned above offset by a $7.4 million increase in operating costs and expenses. Operating costs and expenses increased due to higher food and beverage expenses of $3.5 million related to the higher occupancy and spending mentioned above at all of the resorts as well as increased wages at The Homestead due to the staffing of temporary employees. Food and beverage operating margins improved when comparing 2003 to 2004. Other recreation operating expenses increased $1.5 million from increased usage at The Homestead, primarily related to spa and ski expenses. Golf operations expenses increased $1.0 million due to increased maintenance expenses at all the resorts.

$1.7 million decrease in segment operating income at total resorts reflects the elimination of the consulting fee at the total resort level.

Discontinued Operations. Discontinued operations were comprised of the management fees of one divested resort property. The management agreement for this property was terminated in 2002.

Business and Sports Clubs

The following table presents certain summary financial and other operating data for our business and sports ~~club~~clubs segment for the 36 ~~week~~weeks ~~periods~~ ended September 39, ~~2002~~2003 and September 97, ~~2003~~2004 (dollars in thousands):

	Same Store Businessand Sports Clubs						~~Total Business andSports Clubs~~		Total Business and Sports Clubs
	2002			2003			2002				2003
	2003				2004				2003				2004
Number of facilities at end of period		7066			70	66		70		66		70		66
Operating revenues	$	~~146~~138,~~339~~271		$	~~144,986~~$	143,631	$	~~148,009~~	$	138,271	$	~~145,017~~	$	143,631
Recognition of membership fees and deposits		21,~~813~~885			~~1,902~~	1,643		~~2,815~~		1,885		~~1,902~~		1,643
Total operating revenues	$	~~149~~140,~~152~~156		$	~~146,888~~$	145,274	$	~~150,824~~	$	140,156	$	~~146,919~~	$	145,274
Operating costs and expenses		137,761			135,044			139,185				135,035
Operating costs and expenses (1)		124,018				127,823				124,020				127,823
Depreciation and amortization		87,~~622~~727			~~8,231~~	7,448		~~8,687~~		7,727		~~8,231~~		7,448
Segment operating income from continuing operations	$	28,~~769~~411		$	~~3,613~~$	10,003	$	~~2,952~~	$	8,409	$	~~3,653~~	$	10,003
Segment operating loss from discontinued operations	$	—(446	)	$	—$	(58	$)	~~(1,528~~	)$	(1,109	$)	~~(408~~	)$	(144	)
EBITDA	$	11,390		$	11,844		$	10,323			$	11,528
EBITDA (1)	$	16,004			$	17,501			$	15,583			$	17,415

Continuing Operations. Total operating revenues decreased $2.3 million at same store business and sports clubs for the 36 weeks ended September 9, 2003 from the 36 weeks ended September 3, 2002. This decrease was primarily due to a $(1.0) ~~million~~Excludes ~~decline~~intercompany ~~in membership~~consulting ~~dues,~~fees ~~a decline in food and beverage revenues~~ of $13.07 million, and ~~decreased recognition of membership deposits and fees of~~ $03.9 million. ~~Partially~~for ~~offsetting~~Same ~~these~~Store decreases was an increase in other revenue of $0.6 million. Although membership retention levels have improved from those experienced in the last two fiscal years, we continue to experience slight attrition in member counts due to continued economic uncertainty. These trends have resulted in decreased membership dues and decreased recognition of membership deposits and fees. Food and beverage revenues decreased primarily as a result of decreases in private parties stemming from lower membership and activity at our clubs. Other revenue increased as a result of increased usage of tennisTotal, ~~athletics and spa facilities~~respectively, in ~~addition~~2003 toand ~~improved results from non-wholly-owned facilities~~2004.

~~Segment~~Continuing Operations. Total operating ~~income~~revenues increased $05.81 million comparing ~~at same store business and sports clubs for~~ the 36 weeks ended September 9, 2003 ~~from~~to the 36 weeks ended September 37, ~~2002.~~2004 ~~This~~at ~~increase~~same ~~was~~store ~~primarily~~business ~~due~~and tosports ~~decreased~~clubs. ~~operating~~This ~~costs~~increase ~~and~~was ~~expenses~~primarily comprised of a $23.75 million, ~~partially~~increase ~~offset by the decrease~~ in ~~revenues mentioned above. Operating margins were positively impacted by improved~~ food and beverage ~~margins~~ ~~due~~sales ~~to expense controls in purchasing~~ and ~~operations, in addition to~~ a ~~decline in rent expense of~~ $1.17 million increase in membership dues. ~~Rent~~Food ~~expense~~and ~~has~~beverage ~~declined~~revenues ~~due~~increased toprimarily ~~the~~as ~~renegotiation~~a result of ~~certain~~increased ofspending ~~our~~in ~~facilities’~~ala ~~lease~~carte ~~agreements~~and ~~with~~private ~~their~~party ~~respective landlords,~~and inmost ~~addition~~clubs tohad a ~~decline~~higher inper ~~contingent~~check ~~rent~~average ~~payments~~in 2004. ~~Depreciation~~Membership ~~and~~dues ~~amortization~~increased ~~declined~~ due to ~~lower~~the ~~recent~~impact ~~levels~~ of ~~capital~~the ~~spending~~Signature Gold program being offered at ~~our~~the business ~~and~~clubs ~~sports~~in ~~clubs~~2004.

~~Discontinued~~Segment ~~Operations~~operating income increased $1.6 ~~The~~million ~~operations~~comparing ofthe ~~eight~~36 ~~divested~~weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 at same store business and sports clubs ~~were~~due ~~included~~to the increase in ~~discontinued operations.~~revenues ~~Segment~~mentioned ~~operating~~above, ~~loss~~partially ~~from~~offset by ~~these~~a ~~properties~~related ~~decreased~~increase ~~$1.1~~in ~~million~~operating ~~for~~costs ~~the~~and 36expenses ~~weeks~~of ~~ended~~$3.8 ~~September~~million. 9,Operating ~~2003~~margins ~~from~~were ~~the~~positively 36impacted ~~weeks~~by ~~ended~~improved ~~September~~food 3,and ~~2002~~beverage asmargins adue ~~result~~to ofexpense ~~the~~controls ~~divestiture~~in ofpurchasing ~~underperforming~~and ~~facilities~~operations.

Discontinued Operations. The periods ended September 9, 2003 and September 7, 2004 include the operations of four properties divested in 2003, one property divested in 2004 and two properties currently held for sale in discontinued operations. Segment operating loss from these properties improved $1.0 million comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004.

Other Operations and Services – Continuing Operations

Included in results for other operations and services for the 36 weeks ended September 7, 2004 is a charge of $4.4 million accrued with respect to the settlement of an outstanding lawsuit related to one of our former properties. We previously accrued $0.8 million related to this lawsuit. Also included in results for 2004 is a $5.0 million ($3.4 million net of legal costs) recovery of previously accrued expenses related to the lawsuit mentioned above. During the 36 weeks ended September 9, 2003 we also recorded charges of $1.5 million to cover the costs of a settlement related to another one of our former properties and $2.4 million to accrue for vacation earned by employees. There was no significant change to the vacation accrual in 2004.

Operating loss from other operations and services improved comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 primarily due to decreases in payroll and payroll related costs, general and administrative and insurance. Payroll and payroll related costs decreased due to a corporate reorganization that led to reductions in personnel. General and administrative expenses decreased primarily related to the implementation of cost cutting initiatives during 2003 showing their effects in 2004. Insurance costs decreased due to a lower number of health claims.

Other Operations and Services – Continuing Operations

Operating income for our real estate operations improved to $0.2 million in the 36 weeks ended September 9, 2003 from a loss of ($3.8) million for the 36 weeks ended September 3, 2002. This increase was primarily due to cost cutting initiatives in the administrative and sales and marketing functions of our real estate operations. Operationally, we experienced decreased real estate sales of $1.8 million as a result of lower sales of units in our Owners Club program. Partially offsetting this decrease in real estate sales was a $2.0 million increase in our equity in earnings of a non-consolidated real estate joint venture due to increased realty sales.

Included in results for other operations and services for the 36 weeks ended September 9, 2003 is a charge of $1.5 million recorded to cover the costs of a settlement reached in a lawsuit related to one of our former properties. This amount is in addition to the $1.0 million reserve established during the fourth quarter of 2002 for this matter. We also recognized a charge of $2.4 million in the 36 weeks ended September 9, 2003 to accrue for vacation earned by employees. This amount is in addition to the $1.7 million reserve established during the fourth quarter of 2002.

During the 36 weeks ended September 9, 2003 we recorded a charge of $1.0 million to cover incurred litigation fees and settlement charges related to one component of an outstanding lawsuit related to one of our former properties. Parties to this lawsuit are also claiming damages in the maximum amount of $5.5 million for which we have not set up any accrual as the actual settlement is not estimable at this time as the amount is still subject to significant reduction. In accordance with legal requirements, we are currently holding $4.5 million in escrow pertaining to this matter until the lawsuit is resolved.

Seasonality of Demand; Fluctuations in Quarterly Results

Our quarterly results fluctuate as a result of a number of factors. Usage of our country club and golf facilities and resorts declines significantly during the first and fourth quarters, when colder temperatures and shorter days reduce the demand for golf and golf-related activities. Our business facilities generate a disproportionately greater share of their yearly revenues in the fourth quarter, which includes the holiday and year-end party season. In addition, the fourth quarter consists of 16 or 17 weeks of operations and the first, second and third quarters consist of 12 weeks. As a result of these factors, we usually generate a disproportionate share of our revenues in the second, third, and fourth quarters of each year and have lower revenues and profits in the first quarter. The timing of purchases, sales, leases of facilities, or divestitures, has also caused and may cause our results of operations to vary significantly in otherwise comparable periods. In addition, our results can be and have been affected by non-seasonal and severe weather patterns.

Liquidity and Capital Resources

Historically, we have financed our operations and cash needs primarily through cash flows from operations, borrowings under credit facilities, and to a lesser extent, proceeds from divestitures. ~~Our~~We ~~primary~~anticipate using cash ~~needs~~flow from operations for the remainder of ~~2003~~2004 and the immediate future thereafter ~~consist~~principally ~~of capital~~ to ~~finance working~~ ~~capital~~fund ~~needs,~~planned capital ~~replacements~~replacement ~~at existing facilities~~expenditures, ~~limited~~to ~~capital~~repay ~~expansion~~debt and ~~development~~to ~~projects,~~build ~~and~~cash ~~debt service~~reserves. WeIt ~~distinguish~~is ~~capital~~anticipated ~~expenditures~~that tobeginning ~~refurbish~~in ~~and replace existing property and equipment (i.e.~~2005, ~~capital replacements)~~we ~~from~~will ~~discretionary~~also ~~capital~~use ~~expenditures~~our ~~such~~cash asflow ~~the~~to ~~expansion~~grow ~~of existing facilities (i.e., capital expansions)~~ and ~~investments~~expand inour ~~joint~~business ~~ventures.~~through ~~Capital~~a ~~replacements~~combination ~~are planned expenditures made each year to maintain high quality standards~~ of ~~facilities~~improvements ~~for~~and ~~the~~expansions ~~purpose~~ of ~~meeting~~ existing ~~members’~~facilities ~~expectations~~ and toacquisitions ~~attract~~of ~~new~~additional ~~members~~properties. ~~Capital~~We ~~expansions~~believe ~~are~~any ~~discretionary~~unit ~~expenditures~~growth ~~that~~in ~~create new amenities or enhance existing amenities at existing facilities. The company plans to invest~~ the ~~vast~~remainder ~~majority~~ of ~~its capital expenditures in 2003 and~~ 2004 ~~into capital replacements. The limited amounts planned for capital expansions~~ will be ~~invested~~undertaken inby ~~our~~entering ~~existing~~into ~~properties~~management ~~where~~contracts aor ~~return~~lease ~~can~~agreements, bewhile ~~achieved through growth~~ in ~~the~~2005 ~~asset’s~~and ~~cash~~beyond, ~~flows~~growth ~~rather~~could ~~than~~take bythe ~~acquiring~~form orof both ~~investing~~ownership inand ~~new~~management ~~facilities.~~opportunities, ~~Total~~principally ~~capital expenditures are expected to be approximately $54 million~~ in ~~2003~~the golf and ~~$60~~resort ~~million in 2004~~segments. ~~Net~~Consistent ~~cash~~with ~~flows~~our ~~used by investing activities were $11.7 million for the 36 weeks ended September 9~~strategy, ~~2003~~we ashave ~~compared~~entered tointo ~~$65.3~~two ~~million~~management ~~for~~contracts during the 36twelve weeks ended September 37, ~~2002~~2004.

~~Net~~We distinguish uses of cash ~~flows~~for ~~from~~capital ~~financing~~expenditures ~~activities~~to ~~were~~refurbish ~~$48~~and replace existing property and equipment (i.7e., ~~million~~capital ~~for~~replacements) from discretionary capital expenditures such as the 36expansion ~~weeks~~of ~~ended~~existing ~~September~~facilities 9(i.e., ~~2003~~capital asexpansions) ~~compared~~and toinvestments ~~$26~~in joint ventures.5 ~~million~~Capital replacements are planned expenditures made each year to maintain high quality standards of facilities for the 36purpose ~~weeks~~of ~~ended~~meeting existing members’ expectations and to attract new members. Capital expansions are strategic expansions of existing and newly acquired ~~September~~facilities 3and resorts that we believe will provide opportunities to expand our membership base and room nights and positively affect long-term cash flows. Historically, ~~2002~~capital expansions have been funded by operating cash flows and external debt. We Inexpect ~~June,~~to ~~2003,~~spend weapproximately ~~refinanced~~$7 ~~the~~million ~~majority~~in 2004 on capital expansions and improvements to existing facilities of ~~our~~which ~~bank~~$3.2 ~~credit~~million ~~facility~~has ~~with~~already ~~mortgage~~been ~~loan~~spent. ~~financing~~Total ~~totaling~~capital expenditures are expected to be approximately $~~617~~60 million in 2004 of which $39.62 million has already been spent. ~~Additionally,~~Net wecash ~~closed~~flows onused 3by ~~additional~~investing ~~mortgage~~activities ~~loans~~were ~~during~~$34.1 million for the ~~twelve~~36 weeks ended September 97, ~~2003 totaling~~2004 as compared to $4011.7 million offor ~~which~~the 36 weeks ended September 9, 2003. The 2003 net usage includes proceeds from divestitures of $2330.6 million ~~was~~compared ~~utilized~~ to ~~settle~~only an$0.1 ~~existing~~million ~~loan~~in 2004.

Net cash flows from financing activities were a use of $20.3 million for the 36 weeks ended September 7, 2004 as compared to cash provided of $48.7 million for the 36 weeks ended September 9, 2003. The 2004 activity reflects our intent to pay down debt with free cash flow. Year to date, we have reduced debt by $26.4 million. The 2003 activity largely reflects the debt refinancing in the second quarter of 2003 which provided us with additional working capital and liquidity, as well as favorable interest rates.

~~and~~Net ~~contingent~~cash ~~purchase~~flows ~~price~~provided by operations increased to $71.5 ~~Overall~~million in the 36 weeks ended September 7, 2004 from $38.8 million in the 36 weeks ended September 9, 2003 primarily due to increased income generated in our ~~cash~~various ~~flow~~business ~~situation~~units. ~~has~~We ~~improved~~believe aswe have adequate capital resources to fund our operations and strategy for the ~~refinancing~~immediate ~~provided~~future. usIn ~~with~~the ~~additional~~event ~~working~~that ~~capital~~this ~~and~~is ~~liquidity~~not the case, ~~favorable~~the ~~interest~~company ~~rates~~could ~~and~~use ~~less~~its ~~restrictive~~existing ~~debt~~cash ~~covenants~~reserves to meet its obligations or delay or cancel certain capital repair or expansion projects.

~~Net~~Off-Balance ~~cash~~Sheet ~~flows provided from by operations decreased to $38.8 million in the 36 weeks ended September 9~~Arrangements, ~~2003~~Contractual ~~from~~Obligations ~~$52.6 million in the 36 weeks ended September 3, 2002 as a result of lower revenues~~ and ~~reductions~~Commercial ofCommitments accounts payable. We anticipate that the company will be able to generate cash flows from operating activities in an amount greater than our obligations for scheduled principal payments and expected capital expenditures. In the event that this is not the case, the company could use its existing cash reserve to meet its obligations or delay or cancel certain capital repair or expansion projects. As a result of our refinancing transactions mentioned above, we believe we have adequate capital resources to fund our operations. As of October 24, 2003, we have also completed the divestiture of 16 properties and certain other holdings in the current year for net cash proceeds of approximately $30.6 million.

During the quarter ended September 7, 2004, there were no material changes outside of the normal course of business to the quantitative and qualitative disclosures about contractual obligations, commitments, contingent liabilities and off-balance sheet arrangements previously reported in the Annual Report on Form 10-K for the year ended December 30, 2003. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments” in the Form 10-K for December 30, 2003 for a detailed discussion.

Factors That May Affect Future Operating Results and the Accuracy of Our Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of members and guests, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential” or “continue,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of which are summarized in this section and in our Form 10-K for the year ended December 3130, ~~2002~~2003.

Our success depends on our ability to attract and retain members at our clubs and maintain or increase usage of our facilities. We have experienced varying levels of membership enrollment and attrition rates and, in certain areas, decreased levels of usage of our facilities during our operating history. Although management devotes substantial efforts to ensuring that members and guests are satisfied, many of the factors affecting club membership and facility usage are beyond our control, including weather conditions, general economic conditions, changes in demand for golf and private club services and changes in the federal tax laws. There can be no assurance that we will be able to maintain or increase membership or facility usage. Significant periods where attrition rates exceed enrollment rates, or where facilities’ usage is below historical levels would have a material adverse effect on our business, operating results, and financial condition. Other factors that may affect our operating results include, but are not limited to, our ability to obtain external financing, the actions of our competitors, changes in labor costs, the timing and success of acquisitions and dispositions, changes in law, future terrorist attacks on U.S. targets, prolonged U.S. military efforts with Iraq and/or other nations, or other related international geopolitical uncertainties.

Recently Issued Accounting Pronouncements

In ~~April~~January ~~2002~~2003, the ~~Financial~~FASB ~~Accounting~~issued ~~Standards~~and ~~Board~~then ~~(“FASB”)~~revised ~~issued~~in ~~SFAS~~December 2003, FASB Interpretation No. ~~145~~46, (~~SFAS~~FIN ~~145~~46R), “~~Rescission~~Consolidation of ~~FASB~~Variable ~~Statements~~Interest Entities” Nowhich changes the criteria by which one company includes another entity in its consolidated financial statements. 4,FIN 4446R ~~and~~requires ~~62,~~a ~~Amendment~~variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of ~~FASB~~loss ~~Statement~~from Nothe variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. 13The assets, liabilities and ~~Technical~~noncontrolling ~~Corrections~~interests of the newly consolidated variable interest entities were initially recorded at the amounts at which they would have been carried in the Consolidated Financial Statements if FIN 46R had been effective when we first met the conditions to be the primary beneficiary of the variable interest entity.” The ~~main~~difference ~~provisions~~between ofthe ~~this~~net ~~statement~~amount ~~address~~added ~~classification~~to ofour ~~debt~~Consolidated ~~extinguishments~~Statement of Operations and ~~accounting~~the ~~for~~amount ~~certain~~of ~~lease~~any ~~transactions.~~previously ~~SFAS~~recognized ~~145~~interest in the newly consolidated entity was ~~effective~~not ~~for~~material ~~fiscal~~and ~~years~~therefore ~~beginning~~was ~~after~~not recognized as a cumulative ~~May~~effect ~~15,~~of ~~2002~~an accounting change when adopted. The adoption of ~~SFAS~~FIN ~~No.~~46R ~~145~~in ~~affected~~the ~~our~~first ~~presentation~~quarter of ~~the~~2004 ~~write~~resulted ~~off~~in an initial increase in net assets of ~~unamortized~~$1.1 ~~financing~~million, ~~costs~~including indebt of $13.7 million, to our Consolidated ~~Statement~~Balance ofSheet. ~~Operations~~Prior periods were not restated.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The main provisions of this statement address the recognition of liabilities associated with exit or disposal activities and is effective for exit or disposal activities initiated after December 31, 2002. Implementation of this statement had no impact on our consolidated financial statements.

In ~~November~~December ~~2002~~2003, the FASB issued ~~FASB~~SFAS ~~Interpretation~~ No. 45132R (~~FIN~~revised 452003), “~~Guarantor~~Employer’s ~~Accounting~~Disclosures ~~and Disclosure~~about ~~Requirements~~Pensions ~~for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57,~~ and ~~107~~Other ~~and~~Postretirement ~~rescission of FASB Interpretation No~~Benefits”. ~~34.”~~This ~~FIN~~statement 45improves ~~redefines~~financial ~~the~~statement ~~recognition and~~ disclosures tofor ~~be made~~defined bybenefit ~~the guarantor in its interim and annual financial statements regarding obligations under certain guarantees issued~~plans. ~~The~~We ~~provisions~~have ofnot ~~the~~included ~~disclosure~~these ~~requirements~~expanded ~~are~~disclosures ~~effective~~as ~~for~~our ~~financial~~pension ~~statements~~plan ofis ~~interim~~not ora ~~annual~~material ~~reports~~component ~~ending after December 15, 2002. Implementation~~ of ~~this statement had no impact on~~ our ~~consolidated~~Condensed Consolidated ~~financial~~Financial ~~statements~~Statements.

In April 2003, the FASB issued SFAS No. 149 (SFAS 149), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133. SFAS 149 is effective for fiscal quarters that began prior to June 15, 2003 and for hedging relationships designated after June 30, 2003. Implementation of this statement had no impact to our Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

WeThere ~~have~~were no material changes to the disclosure on this matter made in our report on Form 10-QK for the ~~quarter~~fiscal year ended ~~June~~December 1730, 2003.

Item 4. Controls and Procedures

~~An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial~~Evaluation ~~Officer,~~ of ~~the~~Disclosure ~~effectiveness of the design~~ and ~~operation~~Procedures of our disclosure controls and procedures as of September 9, 2003 pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is

Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective and timely, providing them with material information relating to us required to be disclosed in the reports we file or submit under the Exchange Act.

Changes in Internal Controls

There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. We are not aware of any significant deficiencies or material weaknesses; therefore no corrective actions were taken.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

recorded, processed, summarized and reported as and when required. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subject to the date of management’s evaluation.

Part II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits

10.~~1—Second~~31* - Third Amendment to the Employment Agreement between ClubCorp, Inc. ~~Omnibus~~and ~~Stock~~John ~~Plan~~A. Beckert, effective August 28, 2004

1031.~~2—First~~1 ~~Amendment~~- Certification by John A. Beckert pursuant to ~~the~~18 ~~ClubCorp~~U.S.C. Section 1350, ~~Inc.~~as ~~Executive~~adopted ~~Stock~~pursuant ~~Option~~to ~~Plan~~Section 302 of the Sarbanes-Oxley Act of 2002.

1531.~~1—Letter~~2 ~~from~~- ~~KPMG~~Certification ~~LLP~~by ~~regarding~~Jeffrey ~~unaudited~~P. ~~interim~~Mayer ~~financial~~pursuant ~~statements~~to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

3132.1— - Certification by ~~Robert~~John HA. ~~Dedman,~~Beckert ~~Jr.~~ pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of 2002.

3132.2— - Certification by Jeffrey P. Mayer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of 2002.

32.1—Certification by Robert H. Dedman, Jr. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2—Certification by Jeffrey P. Mayer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)

Reports on Form 8-K

~~Not~~On ~~applicable~~September 7, 2004, we filed a Current Report on Form 8-K, reporting, under Item 5.02 – Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers, the third amendment to the Employment Agreement between ClubCorp, Inc. and John A. Beckert.

26* - Incorporated by reference to our Current Report on Form 8-K filed on September 7, 2004

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ClubCorp, Inc.		~~ClubCorp, Inc.~~
Date: October 24, 2003			By:	/s/ Jeffrey P. Mayer
Date: October 21, 2004	By:	/s/ Jeffrey P. Mayer
				Jeffrey P. Mayer Chief Financial Officer
		Jeffrey P. Mayer
		Chief Financial Officer

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