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~~June 714, ~~2004~~2005

¨	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 333-110521

CLUBCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware		75-2778488
(State or other jurisdiction of incorporation or organization)		(I.R.S. ~~employer~~Employer ~~identification~~Identification noNo.)

3030 LBJ Freeway, Suite 600 Dallas, Texas 75234 (Address of principal executive offices, including zip code)

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

ifIndicate ~~changed~~by ~~since~~check ~~last~~mark whether the registrant (1) has filed all reports required to be filed ~~report:~~by ~~NONE~~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: ~~(1)~~is ~~has~~an ~~filed~~accelerated ~~all~~filer ~~reports required to be filed by Section 13 or 15~~(d)as ofdefined ~~the~~in ~~Securities Exchange Act of 1934 during the~~Rule ~~preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (~~12b-2) ~~has~~of ~~been subject to such filing requirements for~~ the ~~past 90 days~~Act). Yes x¨ No ¨.x

~~Indicate~~The bynumber ~~check~~of ~~mark~~shares ~~whether~~of the registrant’s iscommon anstock ~~accelerated~~outstanding ~~filer (~~as ~~defined in Rule 12b-2~~ of ~~the~~July ~~Exchange~~28, 2005 ~~Act)~~was 93,113,340. ~~Yes ¨ No x.~~

The number of shares of the Registrant’s Common Stock outstanding as of October 21, 2004 was 93,597,392.

CLUBCORP, INC.

INDEX

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2426
Item 4.	Controls and Procedures	2426
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	2426
Item 6.	Exhibits ~~and Reports on Form 8-K~~	2527

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ClubCorp, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

	December 30,2003			September 7,2004
	December 28, 2004			June 14, 2005
Assets
Current assets:
Cash and cash equivalents	$	9096,~~195~~180		$	~~107~~116,~~210~~013
Membership and other receivables, net		84,476			90,507
Restricted cash		28,742			28,742
Inventories		18,828			20,477
Membership and other receivables, net		71,011			79,001
Other assets		21,207			23,766
Inventories		19,711			28,680
Total current assets		214,706			241,960
Prepaid expenses and other assets		33,112			40,987
Property and equipment, net		1,191,679			1,169,598
Total current assets		248,756			293,423
Other assets		140,003			133,697
Property and equipment, net		1,138,348			1,136,700
Total assets	$	1,546,388		$	1,545,255
Notes receivable		43,436			37,232
Other assets		87,445			81,121
Total assets	$	1,517,985		$	1,548,476
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	6979,~~770~~804		$	7288,~~214~~370
Long-term debt - current portion		3223,~~589~~220			2798,~~287~~275
Other liabilities		101,024			138,571
Membership deposits - current portion		16,940			18,402
Total current liabilities		203,383			238,072
Other liabilities		130,058			153,552
Long-term debt, net of current portion		691,230			687,726
Total current liabilities		250,022			358,599
Other liabilities		190,135			157,030
Long-term debt, net of current portion		684,604			602,144
Membership deposits		132,313			147,919
Other liabilities		139,523			139,416
Redemption value of common stock held by benefit plan		38,190			46,116
Membership deposits, net of current portion		136,776			142,537
Total liabilities		1,210,925			1,242,696
Redemption value of common stock held by benefit plan		47,180			51,327
Commitments and contingencies
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, 93,708,720 outstanding at December 30, 2003 and 93,597,392 outstanding at September 7, 2004.		996			996
Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 93,379,080 outstanding at December 28, 2004 and 93,118,640 at June 14, 2005		996			996
Additional paid-in capital		161,672			161,672
Accumulated other comprehensive loss		(67,~~266~~013	)		(96,~~482~~647	)
Retained earnings		~~195~~168,~~341~~582			~~177~~166,~~061~~024
Treasury stock, 5,885,688 shares at December 30, 2003, and 5,997,016 at September 7, 2004		(60,606	)		(61,855	)
Treasury stock, 6,215,328 shares at December 28, 2004 and 6,475,768 at June 14, 2005		(64,357	)		(67,592	)
Total stockholders’ equity		~~291~~259,~~137~~880			~~268~~254,~~392~~453
Total liabilities and stockholders’ equity	$	1,~~546~~517,~~388~~985		$	1,~~545~~548,~~255~~476

See accompanying notes to condensed consolidated financial statements.

ClubCorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

	Twelve Weeks Ended						~~Thirty~~Twenty-~~Six~~Four Weeks Ended
	September 9,2003			September 7,2004			September 9,2003			September 7,2004
	June 15, 2004			June 14, 2005			June 15, 2004			June 14, 2005
Operating revenues	$	219,570		$	221,591		$	623,689		$	645,014
Continuing Operations:
Operating costs and expenses		174,440			173,720			490,242			498,373
Operating revenues	$	237,321		$	256,003		$	418,024		$	445,989
Depreciation and amortization		21,402			19,884			64,526			60,956
Operating costs and expenses		174,625			188,304			320,964			341,460
Selling, general and administrative expenses		14,615			12,183			54,441			48,887
Depreciation and amortization		20,140			19,287			40,693			38,754
Gain (loss) on disposals and impairment of assets		(946	)		(1,175	)		654			(3,809	)
Selling, general and administrative expenses		18,699			18,367			35,369			33,412
Operating income from continuing operations		8,167			14,629			15,134			32,989
Loss on disposals and impairment of assets		2,599			1,328			3,374			1,356
Interest and investment income		229			575			1,015			1,356
Operating income from continuing operations		21,258			28,717			17,624			31,007
Financing cost on prior debt facility		—			—			(10,569	)		—
Interest and investment income		400			887			781			1,658
Interest expense		(1413,~~918~~767	)		(1314,~~932~~116	)		(4627,~~872~~576	)		(4128,~~679~~240	)
Income (loss) from continuing operations before income taxes and minority interest		(67,~~522~~891	)		115,~~272~~488			(419,~~292~~171	)		(74,~~334~~425	)
Income tax (provision) benefit		(867	)		(940	)		8,335			(2,422	)
Income tax provision		(102	)		(1,902	)		(1,453	)		(2,517	)
Minority interest		45(310	)		~~194~~(64	)		22(468	)		(~~274~~214	)
Income (loss) from continuing operations		(7,~~344~~479	)		~~526~~13,522			(3211,~~935~~092	)		~~(10~~1,~~030~~694	)
Discontinued operations:
Income (loss) from discontinued operations before income taxes		~~(1,036~~854	)		~~(128~~29	)		~~10,425~~385			(~~307~~71	)
Income tax provision		(5721	)		(17	)		(~~3,903~~44	)		(1734	)
Income (loss) from discontinued operations		~~(1,093~~833	)		~~(129~~22	)		~~6,522~~341			(~~324~~105	)
Net income (loss)	$	(8,~~437~~312	)	$	~~397~~13,544		$	(2610,~~413~~751	)	$	~~(10~~1,~~354~~589	)
Basic earnings (loss) per share from:
Continuing operations	$	(0.08	)	$	0.0015		$	(0.3512	)	$	(0.1102	)
Discontinued operations		(0.01	)		0.00			0.0701			0.00
Basic earnings (loss) per share	$	(0.09	)	$	0.0015		$	(0.2811	)	$	(0.1102	)
Diluted earnings (loss) per share from:
Continuing operations	$	(0.08	)	$	0.0014		$	(0.3512	)	$	(0.1102	)
Discontinued operations		(0.01	)		0.00			0.0701			0.00
Diluted earnings (loss) per share	$	(0.09	)	$	0.0014		$	(0.2811	)	$	(0.1102	)

See accompanying notes to condensed consolidated financial statements.

ClubCorp, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Thirty-Six Weeks Ended
	Twenty-Four Weeks Ended
	September 9,2003			September 7,2004
	June 15, 2004			June 14, 2005
Cash flows from operating activities:
Loss from operations	$	(26,413	)	$	(10,354	)
Net income (loss)	$	(10,751	)	$	1,589
Adjustments to reconcile to cash flows from operating activities:
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization		6541,~~393~~188			6138,~~064~~805
(Gain) loss on disposals and impairment of assets		(6,365	)		3,649
Loss on disposals and impairment of assets		2,473			1,291
Minority interest in net income (loss) of subsidiaries		(22	)		274
Amortization of discount on membership deposits		5,314			6,631
Equity in income of joint ventures		(856	)		(295	)
Net change in real estate held for sale		236			598
Amortization of discount on membership deposits		8,401			8,251
Net change in membership and other receivables, net		1,212			(8,177	)
Net change in deferred income taxes		(4,477	)		16
Net change in accounts payable and accrued liabilities		(5,217	)		6,812
Net change in real estate held for sale		2,263			342
Net change in deferred income and other liabilities		8,848			13,923
Net change in membership and other receivables, net		(173	)		(5,940	)
Net change in deferred membership revenues		6,742			6,602
Net change in accounts payable and accrued liabilities		(12,398	)		(14,181	)
Other		(5,356	)		(7,588	)
Change in deferred income and other liabilities		3,467			14,235
Cash flows from operating activities		44,689			60,486
Net change in deferred membership revenues		4,230			10,391
Other		5,776			4,029
Cash flows from operating activities		38,826			71,481
Cash flows from investing activities:
Additions to property and equipment		(3918,~~817~~022	)		(3928,~~196~~680	)
Development of new facilities		(1,820	)		—
Acquisition of facilities		—			(1,974	)
Development of real estate held for sale		(~~660~~1,002	)		(12,~~239~~191	)
Proceeds from dispositions, net		30,620			91
Net change in notes receivable		1,712			6,203
Other		~~(69~~626	)		~~6,224~~417
Cash flows from investing activities		(1116,~~746~~686	)		(3426,~~120~~225	)
Cash flows from financing activities:
Borrowings of long-term debt		757,961			18
Repayments of long-term debt		(16,763	)		(11,785	)
Repayments of long-term debt		(699,635	)		(26,412	)
Change in membership deposits		652			592
Loan origination and amendment fees		(12,044	)		(131	)
Treasury stock transactions		(553	)		(3,235	)
Change in membership deposits		2,424			7,428
Other		(113	)		—
Treasury stock transactions		5			(1,249	)
Cash flows from financing activities		(16,777	)		(14,428	)
Cash flows from financing activities		48,711			(20,346	)
Net change in cash and cash equivalents		11,226			19,833
Net change in cash and cash equivalents		75,791			17,015
Cash and cash equivalents at beginning of period		64,420			96,180
Cash and cash equivalents at beginning of period		7,649			90,195
Cash and cash equivalents at end of period	$	75,646		$	116,013
Cash and cash equivalents at end of period	$	83,440		$	107,210

See accompanying notes to condensed consolidated financial statements.

ClubCorp, Inc.

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 3028, ~~2003~~2004, which are a part of ClubCorp’s ~~2003~~2004 Form 10-K.

In our opinion, the accompanying Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly the consolidated financial position of ClubCorp as of ~~September~~June 714, ~~2004~~2005, and the consolidated results of operations for the twelve weeks and ~~thirty~~twenty-~~six~~four weeks ended ~~September~~June 915, ~~2003~~2004 and ~~September~~June 714, ~~2004~~2005, and cash flows for the ~~thirty~~twenty-~~six~~four weeks ended ~~September~~June 915, ~~2003~~2004 and ~~September~~June 714, ~~2004~~2005. 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.

Restricted cash

There was $28.7 million of restricted cash at December 28, 2004 and June 14, 2005, which is comprised of letters of credit totaling $19.0 million representing collateral related to insurance policies, letters of credit totaling $6.2 million representing collateral related to debt covenants (See Note 9), and $3.5 million representing cash in escrow related to a put option on an operating lease at one of our properties. The letters of credit have one-year terms and, therefore, the related restricted cash is included in current assets.

Recent Pronouncements

In ~~January~~December ~~2003~~2004, the FASB issued ~~and~~SFAS ~~then revised in December 2003, FASB Interpretation~~ No. ~~46,~~123 (~~FIN 46R~~revised 2004), “~~Consolidation~~Share-Based ~~of Variable Interest Entities~~Payment,” which ~~changes~~replaces ~~the~~SFAS ~~criteria~~No. by123, ~~which~~“Accounting ~~one~~for ~~company~~Stock-Based ~~includes~~Compensation,” ~~another~~and ~~entity~~supercedes inAPB ~~its~~Opinion ~~consolidated financial statements~~No. ~~FIN~~25, ~~46R~~“Accounting ~~requires~~for ~~a variable~~Stock ~~interest~~Issued ~~entity~~ to beEmployees.” ~~consolidated~~SFAS byNo. a123 ~~company~~(revised if2004) requires ~~that~~compensation ~~company~~costs isrelated ~~subject~~ to ashare-based ~~majority~~payment oftransactions ~~the risk of loss from the variable interest entity’s activities or entitled~~ to ~~receive~~be arecognized ~~majority~~in of the ~~entity’s~~financial ~~residual returns or both~~statements. ~~The~~With ~~assets~~limited exceptions, ~~liabilities~~the ~~and~~amount ~~noncontrolling interests~~ of ~~the~~compensation ~~newly~~cost ~~consolidated~~will ~~variable~~be ~~interest~~measured ~~entities~~based ~~were~~on ~~initially~~fair ~~recorded~~value aton the ~~amounts~~grant atdate ~~which~~of ~~they would have been carried in~~ the ~~consolidated~~equity ~~financial statements if FIN 46R had been~~or ~~effective~~liability ~~when~~instruments weissued. ~~first~~Compensation ~~met~~cost ~~the~~will ~~conditions to~~ be ~~the~~recognized ~~primary~~over ~~beneficiary of~~ the ~~variable~~period ~~interest~~that ~~entity.~~an ~~The~~employee ~~difference~~provides ~~between~~service ~~the~~for ~~net~~that ~~amount~~award. ~~added~~This tonew ~~our~~standard ~~Condensed~~will ~~Consolidated~~be ~~Statement~~effective offor ~~Operations~~us ~~and~~beginning ~~the amount of any previously recognized interest~~ in ~~the~~our ~~newly~~first ~~consolidated~~quarter ~~entity was not material and therefore was not recognized as a cumulative effect~~ of ~~an accounting change when adopted~~2006. ~~The~~We ~~adoption~~are ~~of FIN 46R~~ in the ~~first~~process ~~quarter~~ of ~~2004 resulted in an initial increase in net~~ ~~assets~~evaluating ofthe ~~$1.1~~impact ~~million, including debt~~ of ~~$13.7~~this ~~million,~~standard toon our ~~Condensed~~financial ~~Consolidated Balance Sheet~~statements. ~~Prior periods were not restated. (See Note 2)~~

In December ~~2003~~2004, the FASB issued SFAS No. ~~132R~~152, ~~(revised~~“Accounting ~~2003)~~for Real Estate Time-Sharing Transactions”, ~~“Employers’~~which ~~Disclosures~~clarifies ~~about~~accounting ~~Pensions~~treatment ~~and~~for ~~Other~~timeshare ~~Postretirement~~transactions ~~Benefits”~~and related costs. ~~This~~SFAS ~~statement improves~~No. ~~financial~~152 ~~statement~~is ~~disclosures~~effective for ~~defined~~fiscal ~~benefit~~years ~~plans~~beginning after June 15, 2005. We ~~have~~are ~~not~~currently ~~included~~in ~~these~~the ~~expanded~~process ~~disclosures~~of asevaluating ~~our~~the ~~pension~~possible ~~plan~~effects isof this accounting pronouncement. We do not believe the adoption of this statement will have a material ~~component~~effect ofon our ~~Condensed~~ Consolidated Financial Statements.

Reclassifications

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

ClubCorp, Inc.

Reclassifications

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

Stock-based compensation

Stock-based compensation is accounted for using Accounting Principles Board Opinion (APB) No. 25, ~~and related~~“Accounting ~~interpretations~~for Stock Issued to Employees.” 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 No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure.”

~~There~~During ~~were~~the 1twelve weeks ended June 14,~~225~~ 2005,~~000~~ ~~and~~in ~~210~~accordance with our Omnibus Stock Plan,~~000~~ ~~options~~we granted ~~for~~596,410 ~~the~~options ~~thirty-six~~to ~~weeks~~purchase ~~ended~~common ~~September~~stock 9,with ~~2003~~an ~~and~~exercise ~~September~~price 7of $12.50, ~~2004,~~bringing ~~respectively.~~our ~~There~~year-to-date ~~were~~total 60to 671,~~000~~410 options granted. ~~for~~We ~~the~~granted ~~twelve weeks ended September 7~~150,000 ~~2004. No~~ options ~~were~~to ~~granted~~purchase ~~for~~common stock during the twelve weeks ended ~~September~~June 915, ~~2003~~2004. 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	)

Effective December 29, 2004, we changed certain of our assumptions used to calculate the fair value of options granted and compensation expense. We now use an expected life of seven years (previously 10 years) and a 3% forfeiture rate (previously zero). We are also calculating compensation expense on a straight-line basis over the applicable vesting period. Management believes these changes will more accurately reflect the value of our stock options granted and the requisite service period. These changes have been applied on a prospective basis. Had compensation cost for the option plans been determined based on the fair value at the grant dates for the options consistent with the methodology of SFAS 123, our net income (loss) and net income (loss) per share would have been changed to the following pro forma amounts (dollars in thousands, except per share amounts):

Note 2. Variable Interest Entities


	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 15, 2004			June 14, 2005			June 15, 2004			June 14, 2005
Net income (loss) as reported	$	8,312		$	13,544		$	(10,751	)	$	1,589

Less: Total stock-based compensation expense determined under fair value method, net of taxes		(1,032	)		(286	)		(1,335	)		(2,022	)

Pro forma net earnings (loss)	$	7,280		$	13,258		$	(12,086	)	$	(433	)

Basic earnings (loss) per share - Reported	$	0.09		$	0.15		$	(0.11	)	$	0.02

Basic earnings (loss) per share - Pro Forma	$	0.08		$	0.14		$	(0.13	)	$	(0.00	)

Diluted earnings (loss) per share - Reported	$	0.09		$	0.14		$	(0.11	)	$	0.02

Diluted earnings (loss) per share - Pro Forma	$	0.08		$	0.14		$	(0.13	)	$	(0.00	)

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.

~~The~~Note ~~joint venture was financed by the assumption of debt of which $13~~2.1 ~~million~~Variable ~~is currently outstanding and is included in long-term debt, along with accrued~~ interest ofentities approximately $10.5 million. The majority of the joint venture’s debt is payable only out of distributable cash flow, as defined by the agreements. The notes are subordinated and junior to other liens and are collateralized by the real estate owned by the joint venture. The creditors of the joint venture do not have recourse to other assets of ClubCorp.

~~Other~~During ~~variable~~1994, ~~interest~~we ~~entries~~formed ~~consolidated~~a byjoint ~~ClubCorp~~venture inwith ~~conjunction~~a ~~with~~real estate developer to acquire and develop real estate around a country club. Prior to the ~~implementation~~adoption of FIN 46R, ~~include~~we accounted ~~liquor~~for ~~pool~~our ~~entities~~investment in the joint venture under the equity method, recording a majority of the venture’s operating results. We are the general partner of the joint venture, however, we do not control a majority ownership percentage; ~~associated~~therefore, ~~with~~operating ~~certain~~decisions ~~properties~~would have to go to arbitration in the event of a split in voting. ~~The~~We ~~balance~~recorded ~~sheet~~100% of all losses and ~~income~~then ~~statement~~participated ~~impact~~in ofearnings ~~consolidating~~proportionally ~~these~~with ~~entities~~the isother ~~minimal~~partners.

~~Note~~The 3joint venture purchases virtually all the support services it requires from us and from the real estate developer under management service agreements, which expire at the completion of the development. ~~Operating~~With ~~revenues~~the adoption of FIN 46R, we consolidated the joint venture beginning with our March 23, 2004 Condensed Consolidated Balance Sheet, as the joint venture was determined to be a variable interest entity with us 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 us, no noncontrolling interests are reported in our June 14, 2005 Condensed Consolidated Balance Sheet. The investment was previously carried as a $19.8 million investment liability prior to consolidation.

WeThe ~~recognize~~joint ~~revenues~~venture ~~from~~was financed by the ~~following~~assumption ~~sources~~of ~~(dollars~~debt of which $12.8 million is currently outstanding and is included in ~~thousands):~~long-term debt, along with accrued interest of approximately $11.3 million. The majority of the joint venture’s debt is payable only out of distributable cash flow, as defined by the agreements. The notes are subordinated and junior to other liens and are collateralized by the real estate owned by the joint venture. The creditors of the joint venture do not have recourse to our other assets.

	Twelve Weeks Ended				Thirty-Six Weeks Ended
	September 9,2003		September 7,2004		September 9,2003		September 7,2004
Revenues from continuing operations:
Membership fees and deposits	$	10,724	$	8,140	$	31,907	$	26,605
Membership dues		73,444		75,988		219,393		226,604
Golf operations revenues		44,296		44,095		119,404		122,738
Food and beverage revenues		53,709		57,715		159,599		174,622
Lodging revenues		13,481		14,596		35,559		38,424
Other revenues		23,916		21,057		57,827		56,021
Total operating revenues from continuing operations	$	219,570	$	221,591	$	623,689	$	645,014
Revenues from discontinued operations:
Membership fees and deposits	$	8	$	1	$	344	$	5
Membership dues		1,803		558		6,798		2,576
Golf operations revenues		153		—		1,502		—
Food and beverage revenues		1,097		239		4,347		1,274
Lodging revenues		—		—		—		—
Other revenues		482		93		1,637		503
Total operating revenues from discontinued operations	$	3,543	$	891	$	14,628	$	4,358
Total Operating Revenue	$	223,113	$	222,482	$	638,317	$	649,372

Other variable interest entries consolidated by us in conjunction with the implementation of FIN 46R include a managed golf operation and liquor pool entities associated with certain properties. The impact of consolidating these entities on the Consolidated Balance Sheets and Consolidated Statements of Operations is not significant.

Note 4. Income tax (provision) benefit

The income tax (provision) benefit for the twelve weeks and thirty-six weeks ended September 9, 2003 and September 7, 2004 differs from amounts computed by applying the U.S. Federal tax rate of 35% to income (loss) from operations before income taxes and minority interest due to foreign and state income taxes and the effect of consolidated operations of foreign and other entities not consolidated for Federal income tax purposes. In addition, for the twelve and thirty-six weeks ended September 7, 2004, we fully reserved all additional tax benefits from available carryforwards of net operating losses generated during the periods and therefore, recorded no income tax (provision) benefit related to federal income taxes. Therefore, the provisions for 2004 contain only foreign and state income taxes on the Condensed Consolidated Statements of Operations.

ClubCorp, Inc.

Note 3. Operating revenues

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


	Twelve Weeks Ended				Twenty-Four Weeks Ended
	June 15, 2004		June 14, 2005		June 15, 2004		June 14, 2005
Revenues from continuing operations:
Membership fees and deposits	$	9,191	$	8,078	$	18,393	$	16,609
Membership dues		74,276		77,721		147,810		155,394
Golf operations revenues		51,074		57,200		78,322		84,161
Food and beverage revenues		67,210		69,947		116,121		121,173
Lodging revenues		15,691		16,257		23,828		25,587
Other revenues		19,879		26,800		33,550		43,065

Total operating revenues from continuing operations	$	237,321	$	256,003	$	418,024	$	445,989

Revenues from discontinued operations:
Membership fees and deposits	$	39	$	26	$	76	$	52
Membership dues		2,375		1,055		4,824		2,121
Golf operations revenues		212		211		321		312
Food and beverage revenues		1,074		308		1,821		523
Other revenues		902		633		1,824		1,273

Total operating revenues from discontinued operations	$	4,602	$	2,233	$	8,866	$	4,281

Total operating revenues	$	241,923	$	258,236	$	426,890	$	450,270

Note 4. Income tax provision

The income tax provision for the twelve weeks and twenty-four weeks ended June 15, 2004 and June 14, 2005 differ from amounts computed by applying the U.S. Federal tax rate of 35% to income (loss) from operations before income taxes and minority interest primarily due to foreign and state income taxes, net of Federal benefit (provision), and the effect of consolidated operations of foreign and other entities not consolidated for Federal income tax purposes. In addition, for the twelve weeks and twenty-four weeks ended June 14, 2005, we fully reserved all additional tax benefits from available carryforwards of net operating losses generated during the periods and, therefore, recorded no income tax (provision) benefit related to federal income taxes. Therefore, the provisions for 2005 contain only foreign and state income taxes on the Condensed Consolidated Statement of Operations.

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~~Twenty-~~Six~~Four Weeks Ended
	September 9,2003	September 7,2004	September 9,2003	September 7,2004
	June 15, 2004	June 14, 2005	June 15, 2004	June 14, 2005
Weighted average shares outstanding	93,~~727~~691,~~772~~875	93,~~638~~248,~~694~~860	93,~~727~~700,~~449~~201	93,~~679~~313,~~699~~970
Incremental shares from assumed conversion of options	—890,897	~~864~~1,~~292~~330,692	—	—1,330,692
Diluted weighted average shares	9394,~~727~~582,772	94,~~502~~579,~~986~~552	93,~~727~~700,~~449~~201	9394,~~679~~644,~~699~~662

The diluted weighted average shares exclude the ~~assumed~~impact ~~conversion~~ of ~~52,331 and 26,165 options for~~ the ~~twelve~~assumed ~~and~~conversion ~~thirty-six~~of ~~weeks~~options ~~ended~~to ~~September~~acquire 9506,400 ~~2003,~~shares ~~respectively,~~of ~~and~~common ~~621,036~~stock for the ~~thirty~~twenty-~~six~~four weeks ended ~~September~~June 715, 2004, because they would be anti-dilutive due to our net loss in ~~those~~the ~~periods~~period.

Note 6. Property and equipment

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

	December 30,2003			September 7,2004
	December 28, 2004			June 14, 2005
Land and land improvements	$	~~724~~733,~~903~~171		$	~~727~~741,~~816~~352
Buildings and recreational facilities		~~501~~499,~~210~~570			~~505~~502,~~938~~937
Leasehold improvements		~~104~~105,~~268~~823			105,~~504~~625
Furniture and fixtures		~~131~~135,~~337~~025			~~134~~137,~~162~~898
Machinery and equipment		~~263~~279,~~871~~960			~~275~~296,~~924~~835
Construction in progress		917,~~878~~570			1521,~~930~~610
		1,735,467			1,765,274
		1,771,119			1,806,257
Accumulated depreciation and amortization		(~~543~~632,~~788~~771	)		(~~595~~669,~~676~~557	)
	$	1,~~191~~138,~~679~~348		$	1,~~169~~136,~~598~~700

~~Note~~8 ~~7. Disposal and Impairment of Long- Lived Assets~~

In conjunction with Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”, for all periods presented, certain assets and liabilities expected to be sold with the held-for-sale entities have been reclassified to Other Current Assets and Other Current Liabilities, and all income and expense items have been reclassified as Discontinued Operations.

As of September 7, 2004, we had two properties classified as held for sale. In addition, the balance sheet as of December 30, 2003, includes another property that was divested in the second quarter of 2004. The balance sheet amounts related to these properties include $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 Statement of Operations for all periods presented. See Note 10 for detail of the Statement of Operations impact of Discontinued Operations by segment and in total.

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.

ClubCorp, Inc.

Note 87. ~~Comprehensive~~Disposal ~~Loss~~and impairment of long-lived assets

In accordance with Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”, for all periods presented, certain assets and liabilities expected to be sold with the held-for-sale entities have been reclassified to Other Current Assets and Other Current Liabilities, and all income and expense items have been reclassified as Discontinued Operations.

As of June 14, 2005, we had two properties classified as held for sale. The balance sheet amounts related to these properties were reclassified to Other Current Assets and Other Current Liabilities on the Consolidated Balance Sheets and were comprised of the following (dollars in thousands):


	December 28, 2004		June 14, 2005
Membership and other receivables, net	$	637	$	663
Inventories		171		172
Other current assets		56		62
Property and equipment, net		9,694		9,641
Other assets		120		88

Total assets	$	10,678	$	10,626

Accounts payable and accrued liabilities	$	154	$	222
Other current liabilities		441		536
Long-term debt		2,875		2,844
Other liabilities		369		330

Total liabilities	$	3,839	$	3,932

The properties were reclassified to discontinued operations on the Condensed Consolidated Statement of Operations for all periods presented. See Note 10 for detail of the Statement of Operations impact of discontinued operations by segment and in total.

There was $0.8 million recorded for impairment of assets during the twelve weeks and twenty-four weeks ended June 15, 2005. We recorded $0.3 million and $1.2 million for impairment of assets for the twelve weeks and twenty-four weeks ended June 15, 2004, respectively.

Note 8. Comprehensive Income (Loss)

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

	Twelve Weeks Ended						Twenty-Four Weeks Ended	~~Thirty-Six Weeks Ended~~
	September 9,2003			September 7,2004				September 9,2003				September 7,2004
	June 15, 2004			June 14, 2005			June 15, 2004				June 14, 2005
Net income (loss)	$	(8,~~437~~312	)	$	~~397~~13,544		$	$(10,751	~~(26,413~~)	)	$	$1,589	~~(10,354~~	)
Changes in fair value of derivative instruments and hedging activities, net of income taxes		—			—				3,220				—
Foreign currency translation adjustment		(2,643	)		64			(2,563	)			366
Foreign currency translation adjustment		(1,168	)		(653	)			337				(3,216	)
Total comprehensive income (loss)	$	5,669		$	13,608		$	(13,314	)		$	1,955
Total comprehensive loss	$	(9,605	)	$	(256	)		$	(22,856	)		$	(13,570	)

~~Note~~ 9. ~~Long 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 9. Long term debt

Under the provisions of certain of our debt agreements with Textron Financial Corporation (Textron), we are required to maintain debt service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of June 14, 2005, the debt service coverage ratio was below the minimum level for two individual properties participating in the loan, thereby causing the entire loan ($54 million outstanding principal amount as of June 14, 2005) to be in technical default. We cured the noncompliance by obtaining letters of credit totaling $6.2 million. Additionally, we are out of compliance on two separate promissory notes with Textron related to individual properties with a combined outstanding principal amount of $20 million as of June 14, 2005. Subsequent to June 14, 2005, we paid down $17 million related to one note and received a waiver letter on the other note to bring these properties into compliance. Also, we plan to payoff, prior to their contractual maturity, the remaining balance related to the property for which we received the waiver letter as well as one additional property held individually by Textron. The total amount to be paid off is approximately $8 million. The $25 million that has or will be paid off subsequent to June 14, 2005 has been reclassified to the current portion of long-term debt in the Condensed Consolidated Balance Sheet.

In addition to amounts reclassed to the current portion of long-term debt due to early payoffs and covenant compliance, we have approximately $55 million of unpaid principal maturing during the second quarter of 2006 that has also been reclassified as current. We are in negotiations with one of our lenders regarding a portion of this maturing debt to pay off the balance of approximately $37 million before year end 2005 and obtain a new line of credit.

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~~which 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 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 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. Real estate operations are comprised of residential real estate development and sales, primarily in areas adjacent to golf facilities. AThe majority of other operating revenues is provided from real estate sales.

We evaluate segment performance and allocate resources based on each segment’s EBITDA. We also use EBITDA to monitor our property-level and overall ~~performances~~performance. 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 continued and discontinued operations~~. EBITDA for all periods presented has been ~~adjusted~~calculated tousing ~~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.

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 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~~Financial ~~Statement~~information offor ~~Operations~~the segments is as follows (dollars in thousands):

	Discontinued Operations
	Continuing Operations
	Twelve Weeks Ended						~~Thirty~~Twenty-~~Six~~Four Weeks Ended
	September 9,2003			September 7,2004			September 9,2003			September 7,2004
	June 15, 2004			June 14, 2005			June 15, 2004			June 14, 2005
Country Club and Golf Facilities:
Operating revenues
Operating revenues	$	991		$	(1	)	$	5,885		$	(1	)
Country club and golf facilities	$	128,244		$	132,926		$	229,927		$	236,943
Operating costs and expenses (1)		895			1			5,579			3
Resorts		57,347			68,797			88,685			103,849
Depreciation and amortization		65			—			311			—
Business and sports clubs		49,300			51,135			96,161			99,841
Operating income (loss)	$	31		$	(2	)	$	(5	)	$	(4	)
Other operations and services		2,430			3,145			3,251			5,356
EBITDA	$	96		$	(2	)	$	306		$	(4	)
Total operating revenues	$	237,321		$	256,003		$	418,024		$	445,989
Resorts:
EBITDA
Operating revenues	$	—		$	—		$	—		$	—
Country club and golf facilities	$	32,947		$	34,756		$	55,445		$	57,813
Operating costs and expenses (1)		—			—			—			—
Resorts		17,709			19,484			17,524			20,710
Depreciation and amortization		—			—			—			—
Business and sports clubs		8,571			9,088			15,477			16,495
Operating income	$	—		$	—		$	—		$	—
Reportable segment EBITDA	$	59,227		$	63,328		$	88,446		$	95,018
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	)
Reportable segment EBITDA		59,227		$	63,328		$	88,446		$	95,018
Depreciation and amortization		262			(8	)		867			108
Other operations and services operating revenues		2,430			3,145			3,251			5,356
Gain (loss) on disposals and impairment of assets		(3,028	)		(1	)		5,711			160
Other operations and services operating costs and expenses		(17,660	)		(17,141	)		(30,006	)		(29,257	)
Interest and investment income		—			—			—			—
Depreciation and amortization		(20,140	)		(19,287	)		(40,693	)		(38,754	)
Interest expense		(121	)		(110	)		(237	)		(319	)
Loss on disposals and impairment of assets		(2,599	)		(1,328	)		(3,374	)		(1,356	)
Income (loss) from operations before income taxes and minority interest	$	(1,036	)	$	(128	)	$	10,425		$	(307	)
Interest and investment income		400			887			781			1,658
Interest expense and financing costs		(13,767	)		(14,116	)		(27,576	)		(28,240	)
Income (loss) from operations before income taxes and minority interest	$	7,891		$	15,488		$	(9,171	)	$	4,425

ClubCorp, Inc.

Note 11. Contingencies


	Discontinued Operations
	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 15, 2004			June 14, 2005			June 15, 2004			June 14, 2005
Operating revenues
Country club and golf facilities	$	1,020		$	1,003		$	1,864		$	1,771
Resorts		—			—			—			—
Business and sports clubs		3,582			1,230			7,002			2,510
Other operations and services		—			—			—			—

Total operating revenues	$	4,602		$	2,233		$	8,866		$	4,281

EBITDA
Country club and golf facilities	$	140		$	128		$	268		$	189
Resorts		—			—			—			—
Business and sports clubs		468			169			579			396

Reportable segment EBITDA	$	608		$	297		$	847		$	585

Reconciliation to income (loss) before income taxes:

Reportable segment EBITDA	$	608		$	297		$	847		$	585
Other operations and services operating revenues		—			—			—			—
Other operations and services operating costs and expenses		(624	)		(120	)		(487	)		(238	)
Depreciation and amortization		(236	)		—			(495	)		(51	)
Loss on disposals and impairment of assets		915			79			901			65
Interest and investment income		—			1			—			—
Interest expense and financing costs		191			(228	)		(381	)		(432	)

Income (loss) from operations before income taxes	$	854		$	29		$	385		$	(71	)

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.

ClubCorp, Inc.


	Total Company
	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 15, 2004			June 14, 2005			June 15, 2004			June 14, 2005
Operating revenues
Country club and golf facilities	$	129,264		$	133,929		$	231,791		$	238,714
Resorts		57,347			68,797			88,685			103,849
Business and sports clubs		52,882			52,365			103,163			102,351
Other operations and services		2,430			3,145			3,251			5,356

Total operating revenues	$	241,923		$	258,236		$	426,890		$	450,270

EBITDA
Country club and golf facilities	$	33,087		$	34,884		$	55,713		$	58,002
Resorts		17,709			19,484			17,524			20,710
Business and sports clubs		9,039			9,257			16,056			16,891

Reportable segment EBITDA	$	59,835		$	63,625		$	89,293		$	95,603

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

Reportable segment EBITDA	$	59,835		$	63,625		$	89,293		$	95,603
Other operations and services operating revenues		2,430			3,145			3,251			5,356
Other operations and services operating costs and expenses		(18,284	)		(17,261	)		(30,493	)		(29,495	)
Depreciation and amortization		(20,376	)		(19,287	)		(41,188	)		(38,805	)
Loss on disposals and impairment of assets		(1,684	)		(1,249	)		(2,473	)		(1,291	)
Interest and investment income		400			888			781			1,658
Interest expense and financing costs		(13,576	)		(14,344	)		(27,957	)		(28,672	)

Income (loss) from operations before income taxes and minority interest	$	8,745		$	15,517		$	(8,786	)	$	4,354

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

~~Introduction~~Overview

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~~June 714, ~~2004~~2005, we operated 99100 country clubs, golf clubs and public golf facilities, three destination golf resorts and 6865 business, sports and business/sports clubs in 2927 states, Washington D.C. and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst® Resort and Country Club in Pinehurst, North Carolina, The Homestead® Resort in Hot Springs, 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, California. Golf Digest, Golf Travel and other golf industry publications have consistently ranked several of our approximately 150 golf courses and destination golf resorts among the best in the United States.

Our operations are organized into three ~~principal~~ 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 our 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 indicated, ~~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 in any way to reduce the legal distinctions and separateness between subsidiaries or between us and our subsidiaries.

~~Our~~There ~~consolidated~~is ~~financial~~currently ~~statements~~no ~~are~~public ~~presented~~market onfor aour ~~52/53~~common ~~week~~stock. ~~fiscal~~We ~~year~~are ~~ending~~subject onto the ~~last~~periodic ~~Tuesday~~reporting requirements of ~~December,~~the ~~with~~Securities Exchange Act ~~the~~of ~~first~~1934, ~~three~~as ~~quarters~~amended, ~~consisting~~pursuant ofto 12Section ~~weeks~~15(d) ~~each~~thereof, ~~and~~because ~~the~~we ~~fourth~~filed ~~quarter~~a ~~consisting~~registration ofstatement 16on orForm 17S-1, ~~weeks.~~which ~~The~~became ~~following~~effective ~~discussion~~October of24, ~~our~~1994, ~~financial~~pursuant ~~condition~~to ~~and~~the ~~results~~Securities Act of ~~operations~~1933, ~~for~~as amended (the 12“Registration ~~and~~Statement”). 36The Registration ~~weeks~~Statement ~~ended~~registered ~~September~~participation 9,interests ~~2003~~in the ClubCorp Stock Investment Plan (the “Plan”) and ~~September~~our 7common stock, ~~2004~~ ~~should~~at be$.01 ~~read~~par invalue ~~conjunction~~per ~~with~~share (the ~~our~~“Common ~~Annual~~Stock”), ~~Report~~to onbe ~~Form~~sold ~~10-K~~to ~~for~~ the ~~year~~Plan. ~~ended~~The ~~December~~Plan 30was amended and restated on January 1, ~~2003~~1999, asto ~~filed~~become ~~with~~ the ~~Securities~~ClubCorp ~~and~~Employee ~~Exchange~~Stock ~~Commission~~Ownership Plan (the “Amended Plan”).

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 24 weeks ended June 15, 2004 and June 14, 2005 should be read in conjunction with our Annual Report on Form 10-K for the year ended December 28, 2004, as filed with the Securities and Exchange Commission.

Critical Accounting Policies

For a discussion of our critical accounting policies refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 28, 2004. There have been no material changes to the critical accounting policies discussed in our Annual Report on Form 10-K for the year ended December 28, 2004.

Results of Operations

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

We employ “same store” analysis techniques for a variety of management purposes. By our definition, facilities are evaluated yearly and considered “same store” once they have been fully operational for one year. Developing facilities and divested facilities are not classified as same store; however, facilities held for sale and 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 operating results of our established and new facilities. We believe this approach provides an effective analysis tool 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 lodging data on a same store basis as well, as it is not distorted by divestitures and we believe it provides a clearer picture of trends in our continuing operations.

~~Operating~~14 revenues are comprised mainly of revenues from dues income, golf, food and beverage and lodging, as well as the revenues recognized from initiation deposits and fees. Operating expenses include payroll and related expenses, other fees and expenses and rent.

We use EBITDA to monitor our property-level and overall performance. 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 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 States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurement of EBITDA may not be comparable to similarly titled measures reported by other companies. See Note 10 to our Notes to Condensed Consolidated Financial Statements for a reconciliation of this measure to our condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America.

~~As of our reporting period ended September 9, 2003, we adjusted our segment information to be more in~~ ~~line~~the ~~with~~distortions ~~our internal reporting. The two key components~~ that ~~were~~would ~~changed~~be ~~were~~caused ~~(1)~~by ~~recording elimination entries at~~ the ~~consolidated~~inclusion ~~level instead~~ of ~~allocating~~developing ~~them~~properties. toFacilities ~~each~~divested ~~segment~~during ~~and~~a ~~(2)~~period ~~reviewing~~are ~~gain/loss~~removed from ~~disposal~~the ~~and~~same ~~impairment of assets~~store atclassification ~~the~~for ~~consolidated~~all ~~level~~periods presented. ~~The~~We ~~remaining~~analyze ~~numbers~~membership ~~by segment (operating revenues, operating expenses, depreciation~~ and ~~amortization,~~lodging ~~and~~data ~~EBITDA)~~on ~~then~~a ~~reflect~~same ~~the~~store ~~numbers~~basis ~~that~~as ~~help~~well, ~~drive~~as ~~our~~it ~~business~~is ~~decisions.~~not ~~Reclassifications~~distorted ~~have~~by ~~been~~divestitures ~~made~~and ~~for~~we ~~all periods~~believe ~~presented~~it inprovides ~~accordance~~a ~~with~~clearer ~~accounting~~picture ~~principles~~of ~~generally~~trends ~~accepted~~ in ~~the~~our ~~United~~continuing ~~States of America~~operations.

12Operating ~~Weeks~~revenues ~~Ended~~are ~~September~~comprised 9mainly of revenues from dues income, golf, ~~2003~~food ~~Compared~~and tobeverage 12and ~~Weeks~~lodging, ~~Ended~~as ~~September~~well 7as the revenues recognized from membership deposits and fees. All revenue sources are recognized in the period earned, ~~2004~~which is generally at the time of sale or when the service is provided. Operating expenses include payroll and related expenses, other fees and expenses and rent. All operating costs are expensed as incurred.

We evaluate segment performance and allocate resources based on each segment’s EBITDA. We also use EBITDA to monitor our property-level and overall performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. 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 measurement of EBITDA may not be comparable to similarly titled measures reported by other companies. See Note 10 of the Notes to Condensed 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 America.

12 Weeks Ended June 15, 2004 Compared to 12 Weeks Ended June 14, 2005

Consolidated Operations – Continuing Operations

Operating revenues increased ~~from~~in ~~$219.6~~all ~~million~~three ~~for~~operating divisions ~~third~~– ~~quarter~~country ~~2003~~club toand ~~$221.6~~golf ~~million~~facilities, ~~for~~resorts ~~third~~and ~~quarter~~business ~~2004.~~and ~~This~~sports ~~increase~~clubs ~~was~~– ~~comprised~~ending the second quarter at a consolidated total of $1256.8 0 million, atan ~~our~~improvement ~~country~~of 8% over second quarter 2004. Country club and golf facilities operating revenue increased 4% over 2004, ~~$2.8~~with ~~million~~the atmost ~~our~~significant ~~resorts~~contributions in dues income and ~~$1.7~~food ~~million~~and atbeverage ~~our~~revenue. ~~business~~These ~~and~~increases ~~sports~~were ~~clubs~~partially offset by adecreases ~~decrease~~in ofmembership $4fees and deposits.3 ~~million~~Resorts inoperating ~~our~~revenue ~~other~~increased 20% ~~operations~~over 2004 primarily related to Pinehurst hosting the 2005 U.S. Open and ~~services~~increased occupancy at Barton Creek. ~~The~~Business ~~overall~~and ~~increase~~sports isclubs ~~primarily~~operating ~~due~~revenue toincreased ~~an increase~~4% inover ~~membership~~2004 ~~dues~~primarily ~~and~~due to food and beverage ~~revenues~~private party revenue.

~~Loss~~Operating oncosts ~~disposals~~ and ~~impairment~~expenses offor ~~assets~~country ~~was~~club ~~$0.9~~and ~~million~~golf ~~for~~facilities, ~~third~~resorts and ~~quarter~~business ~~2003~~and sports clubs generally increased as ~~compared~~a result of variable costs related to $1increased operating revenues.2 ~~million~~Country ~~for~~club ~~third~~and ~~quarter~~golf ~~2004.~~facilities ~~The~~operating ~~loss~~costs and expenses primarily increased in ~~2004~~food ~~was~~and ~~primarily~~beverage ~~due~~and togolf ~~the~~operations offset ~~retirement~~by ofa ~~fixed~~decrease ~~assets~~in atrepair ~~several~~and ~~properties~~maintenance costs. Resorts operating costs and expenses primarily increased in golf operations and retail. Business and sports clubs operating costs and expenses primarily increased in food and beverage operations.

~~Excluding~~Operating ~~the~~income ~~impact~~for ofcountry ~~disposals~~club and ~~impairment~~golf ~~of assets, operating~~facilities ~~income~~reflected improved ~~from~~margins ~~$9.1~~in ~~million~~food ~~for~~and ~~third~~beverage ~~quarter~~operations ~~2003~~offset toby ~~$15.8~~decreased ~~million~~margins ~~for~~in ~~third~~golf ~~quarter~~operations ~~2004. This improvement was~~ due to ~~the~~increased ~~increase~~costs infor ~~revenues~~golf ~~mentioned~~course ~~above~~maintenance ascoupled ~~well~~with asfewer arounds ~~decrease~~played. inResorts operating ~~costs~~income ~~and~~reflected ~~expenses~~improved ofmargins ~~$3.2 million. Expenses~~in ~~decreased~~golf ~~due~~operations, tolodging aand ~~$3.4~~retail ~~million~~at ~~recovery~~Pinehurst ofand ~~costs~~Barton ~~during~~Creek ~~third~~offset ~~quarter~~by ~~2004~~decreases ~~related~~at toThe ~~litigation~~Homestead. ~~accrued~~Business ~~earlier~~and insports ~~2004,~~clubs ~~partially~~operating ~~offset~~income byreflected ~~increased~~improved ~~payroll~~food and ~~payroll~~beverage ~~related expenses~~margins.

~~Income~~Consolidated ~~(loss)~~Operations ~~from~~- ~~operations~~Discontinued ~~before~~Operations 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~~The ~~Operations~~periods ended June 15, 2004 and June 14, 2005 include five properties divested in 2004 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $4.6 million in 2004 to $2.2 million in 2005. Net income (loss) from these properties decreased $0.8 million from 2004 to 2005. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.

~~The~~15 periods ended September 9, 2003 and September 7, 2004 include the operations of six properties divested in 2003, one property divested in 2004 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $3.5 million for third quarter 2003 to $0.9 million for third quarter 2004. Operating income (loss) before the impact of disposals and impairment of assets from these properties decreased $2.1 million from third quarter 2003 to third quarter 2004 as only two held for sale entities had activity in 2004 versus several entities with activity in the prior year. Loss on disposals of assets was $3.0 million for third quarter 2003. There was no significant gain (loss) activity for third quarter 2004. In accordance with SFAS 144, depreciation expense was not recorded in the current quarter for properties classified as held for sale.

Segment and Other Information – 12 ~~weeks~~Weeks

Country Club and Golf Facilities

The following ~~table~~tables ~~presents~~present certain summary financial ~~and~~information ~~other operating data~~ for our country club and golf facilities segment for the ~~third~~twelve ~~quarters~~ weeks ended ~~September~~June 915, 2004 ~~2003~~ and ~~September~~June 714, ~~2004~~2005 (dollars in thousands):

	Same Store CountryClub and Golf Facilities				Total Country Club andGolf Facilities
	Same Store Country Club and Golf Facilities				Total Country Club and Golf Facilities
	2003		2004		2003		2004
	2004		2005		2004		2005
Number of facilities at end of period		97		97		99		99
Number of facilities at end of period in continuing operations		94		94		96		99
Operating revenues	$	~~112~~120,~~247~~978	$	~~116~~124,~~603~~872	$	~~112~~121,~~247~~153	$	~~116~~126,~~603~~820
Recognition of membership fees and deposits		87,~~472~~091		56,~~927~~081		87,~~472~~091		56,~~927~~106
Total operating revenues	$	~~120~~128,~~719~~069	$	~~122~~130,~~530~~953	$	~~120~~128,~~719~~244	$	~~122~~132,~~530~~926
Operating costs and expenses (1)		9495,~~003~~295		96,~~545~~689		9395,~~996~~297		9698,~~561~~170
Depreciation and amortization		11,639		11,301		11,639		11,301
Segment EBITDA from continuing operations (1)	$	32,774	$	34,264	$	32,947	$	34,756
Segment operating income from continuing operations	$	15,077	$	14,684	$	15,084	$	14,668
Segment EBITDA from discontinued operations	$	141	$	129	$	140	$	128
Segment operating income (loss) from discontinued operations	$	—	$	—	$	31	$	(2	)
Total Segment EBITDA (1)	$	32,915	$	34,393	$	33,087	$	34,884
EBITDA (1)	$	26,716	$	25,985	$	26,819	$	25,967

(1) Excludes intercompany consulting and support fees of $26.31 million and $46.51 million for Same Store and ~~Total~~$6.2 inmillion ~~2003~~ and ~~2004, respectively~~$6.3 ~~Fees~~million ~~increased~~for Total in ~~2004~~the intwelve ~~conjunction~~weeks ~~with~~ended ~~the~~June ~~terms~~15, of2004 ~~our~~and ~~new~~June ~~debt~~14, ~~facility~~2005, respectively.

Continuing Operations. Total operating revenues increased ~~$1.8~~from ~~million~~second ~~comparing third~~ quarter ~~2003~~2004 to ~~third~~second quarter ~~2004~~2005 for same store country club and golf facilities. ~~This increase was~~ primarily due to increased membership dues and food and beverage ~~sales of $2~~revenues.0 ~~million and~~Membership ~~membership~~ dues of increased $1.89 million ~~partially~~or ~~offset~~4.0% byas ~~decreased~~a ~~recognition~~result of ~~membership~~a ~~fees~~dues ~~and~~price ~~deposits~~increase ofin ~~$2.5~~early ~~million~~2005. Food and beverage ~~revenues~~a ~~increased~~la ascarte aand ~~result~~private ofparty revenues increased a$0.7 lamillion ~~carte~~or ~~business~~4.9% and ~~check~~$0.5 ~~average~~million ator ~~our clubs~~3. ~~Membership~~5%, ~~dues~~respectively, ~~increased~~ as a result of ~~positive~~an ~~membership~~increase ~~trends~~in asvolume ~~well~~and ~~as price increases~~pricing. Golf ~~Recognition~~revenues ofhave ~~membership~~remained ~~fees~~relatively ~~and~~flat ~~deposits decreased primarily~~ due to aan ~~change~~increase in ~~the~~green ~~allocation~~fees ~~procedures~~and ofcart ~~revenue~~fees ~~over~~offset 13by ~~periods~~a ~~versus~~decrease ~~equal amounts~~ in ~~each~~rounds ~~of our four quarters~~played.

Segment ~~operating~~EBITDA ~~income decreased~~increased ~~$0.4~~from ~~million~~second atquarter 2004 to second quarter 2005 for same store country club and golf facilities ~~comparing third quarter 2003 to third quarter 2004~~ as a result of ~~the~~increased operating ~~increase in~~ revenues ~~mentioned above~~, offset by ~~increased~~a related increase in operating costs and expenses ~~of $2~~.5 ~~million.~~ Operating costs and expenses ~~increased~~offset ~~primarily~~the ~~due~~majority toof ~~increased~~our ~~food~~revenue ~~and~~increases ~~beverage~~due ~~and~~to ~~golf~~inflationary ~~operations~~increases ~~expenses~~as ofwell ~~$1.8~~as ~~million~~increased ~~and~~spending ~~$1.1~~on ~~million,~~golf ~~respectively~~course maintenance. Operating ~~Overall,~~margins for food and beverage ~~margins~~ improved when comparing ~~third~~second quarter ~~2003~~2004 to ~~third~~ second quarter ~~2004~~2005 ~~offset~~due byto aincreased ~~decrease~~volume inwhile golf operating ~~margin~~margins ~~mainly~~decreased. ~~due~~Although togolf ~~numerous~~revenues ~~hurricanes~~have ~~and~~increased ~~heavy~~slightly, ~~rains~~expenses ~~during~~increased ~~the~~at ~~quarter.~~a greater ~~Additionally,~~rate wedue ~~decreased~~primarily ato ~~litigation~~golf ~~accrual~~course maintenance costs. These costs are primarily covered by $1our dues price increase.0 ~~million~~Depreciation ~~related~~and toamortization ~~the~~increased ~~settlement~~slightly offrom a$11.1 ~~lawsuit~~million ~~involving~~for ~~the members~~second atquarter ~~one~~2004 ofto ~~our~~$11.4 ~~clubs~~million for second quarter 2005.

Discontinued Operations. The periods ended June 15, 2004 and June 14, 2005 include one managed property divested in 2004 and one property currently held for sale in discontinued operations.

Resorts

The following ~~table~~tables ~~presents~~present certain summary financial data and ~~other~~lodging ~~operating~~ data for our ~~resorts~~resort segment for the ~~third~~twelve ~~quarters~~weeks ended ~~September~~June 915, ~~2003~~2004 and ~~September~~ 7June 14, 2005 ~~2004~~ (dollars in thousands, except number of facilities and lodging data):

	Same Store Resorts						Total Resorts
	2003			2004			2003		2004
	2004			2005			2004		2005
Number of facilities at end of period (1)		3			3			3		3
Number of facilities at end of period in continuing operations (1)		3			3			3		3
Operating revenues	$	4655,~~818~~943		$	4967,~~781~~456		$	4655,~~857~~943	$	4967,~~809~~456
Recognition of membership fees and deposits		1,~~613~~404			1,~~422~~341			1,~~613~~404		1,~~422~~341
Total operating revenues	$	4857,~~431~~347		$	5168,~~203~~797		$	4857,~~470~~347	$	5168,~~231~~797
Operating costs and expenses (2)		3739,~~662~~551			3949,~~663~~113			3839,~~227~~638		4049,~~067~~313
Depreciation and amortization		3,820			3,771			3,927		3,847
Segment EBITDA from continuing operations (2)	$	17,796		$	19,684		$	17,709	$	19,484
Segment operating income from continuing operations	$	6,949		$	7,769		$	6,316	$	7,317
Segment EBITDA from discontinued operations	$	—		$	—		$	—	$	—
Segment operating income from discontinued operations	$	—		$	—		$	—	$	—
Total Segment EBITDA (2)	$	17,796		$	19,684		$	17,709	$	19,484
EBITDA (2)	$	10,769		$	11,539		$	10,243	$	11,164
Lodging data (3 resorts) (1)
Lodging data: (3 resorts) (1)
Room nights available		99,456			99,456
Room nights available		99,792			99,792
Room nights sold		63,168			63,783
Room nights sold		61,642			64,928
Paid occupancy rate		63.5	%		64.1	%
Paid occupancy rate		61.8	%		65.1	%
Average daily rate (3)	$	208		$	213
Average daily revenue per occupied room (3)	$	698		$	707
Revenue per occupied room (4)	$	821		$	844
Average daily revenue per available room (3)	$	431		$	460

(1)	Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead and Barton Creek. Other ancillary resort operations are included in summary financial data for Total Resorts.

(2) Excludes intercompany consulting and support fees of $12.91 million inand ~~2004~~$1.3 million for Same Store and Total. ~~There~~in ~~were~~the notwelve ~~intercompany~~weeks ~~consulting~~ended ~~fees~~June in15, ~~2003~~2004 and June 14, 2005, respectively.

(3) Average daily ~~revenue~~rate ~~per~~is ~~occupied~~based ~~room~~on ~~and~~the average ~~daily~~room ~~revenue~~rate per ~~available~~day ~~room~~for ~~are~~the ~~based~~entire ~~on total operating revenues excluding membership dues, recognition of member initiation fees, and net managed rooms commissions~~year-to-date.

~~Continuing~~(4) ~~Operations.~~Revenue ~~Total~~per ~~operating~~occupied ~~revenues~~room ~~increased~~is ~~$2.8~~based ~~million~~on ~~comparing~~total ~~third~~operating ~~quarter~~revenues ~~2003~~excluding tomembership ~~third~~dues, ~~quarter~~recognition ~~2004~~of ~~for~~member ~~same~~initiation ~~store~~fees ~~resorts. This increase was primarily in food~~ and ~~beverage,~~net ~~golf~~managed ~~and~~rooms ~~lodging at Pinehurst due to increased occupancy and spending~~commissions.

~~Segment~~Continuing ~~operating~~Operations. ~~income~~Total operating revenues increased ~~$0.8~~from ~~million~~second ~~comparing third~~ quarter ~~2003~~2004 to ~~third~~second quarter ~~2004~~2005 for same store resorts. ~~This~~primarily ~~improvement was~~ due to ~~the~~increased ~~increase~~revenues at Pinehurst principally in ~~revenues~~merchandise ~~mentioned~~sales, ~~above~~ticket ~~offset~~sales byand arental ~~$2.0~~of ~~million~~corporate ~~increase~~hospitality intents ~~operating~~during ~~costs~~the ~~and~~hosting ~~expenses~~of the 2005 U.S. ~~Operating~~Open. ~~costs and~~The ~~expenses~~2005 ~~increased~~U.S. ~~due~~Open toweek ~~higher~~is ~~food~~seven ~~and~~days ~~beverage~~long ~~expenses~~with two of ~~$0.8~~the ~~million~~days ~~related~~falling toin our second quarter and the other five days falling in our third quarter. In addition, higher occupancy and ~~spending~~revenue per occupied room at Pinehurst resulted in increased lodging and retail revenues. ~~Food~~Barton Creek increased operating revenues 10.0% from second quarter 2004 compared to second quarter 2005 primarily due to increased occupancy which has led to improved food and beverage and lodging revenues. The Homestead operating ~~margins~~revenues ~~improved~~decreased ~~when~~11.8% ~~comparing~~from ~~third~~second quarter ~~2003~~2004 to ~~third~~second quarter ~~2004~~2005 due to a decrease in occupancy in a highly competitive market.

16Segment EBITDA improved from second quarter 2004 to second quarter 2005 for same store resorts primarily due to profits generated from the 2005 U.S. Open at Pinehurst. In addition, the operating margins for lodging and retail improved at Pinehurst. Barton Creek had improved operating margins in food and beverage, golf operations and lodging when comparing second quarter 2004 to second quarter 2005. The Homestead operating margins decreased for food and beverage and lodging due to the decrease in occupancy. Depreciation and amortization remained steady when comparing second quarter 2004 to second quarter 2005.

Business and Sports Clubs

The following ~~table~~tables ~~presents~~present certain summary financial ~~and~~information ~~other operating data~~ for our business and sports clubs segment for the ~~third~~twelve weeks ~~quarters~~ ended ~~September~~June 915, ~~2003~~2004 and ~~September~~June 714, ~~2004~~2005 (dollars in thousands):

	Same Store Businessand Sports Clubs							Total Business and Sports Clubs
	Same Store Business and Sports Clubs						Total Business and Sports Clubs
	2003				2004			2003				2004
	2004			2005			2004			2005
Number of facilities at end of period		66				66			66				66
Number of facilities at end of period in continuing operations		64			64			64			64
Operating revenues	$	4348,~~224~~777		$	$50,683	~~45,040~~	$	$48,777	~~43,224~~	$	50,683	$	~~45,040~~
Recognition of membership fees and deposits		~~606~~523			452	~~538~~		523	~~606~~		452		~~538~~
Total operating revenues	$	4349,~~830~~300		$	$51,135	~~45,578~~	$	$49,300	~~43,830~~	$	51,135	$	~~45,578~~
Operating costs and expenses (1)		40,~~382~~729			42,047	~~41,577~~		40,729	~~40,382~~		42,047		~~41,577~~
Depreciation and amortization		2,539				2,490			2,539				2,490
Segment EBITDA from continuing operations (1)	$	8,571		$	9,088		$	8,571		$	9,088
Segment operating income from continuing operations	$	909			$	1,511		$	909			$	1,511
Segment EBITDA from discontinued operations	$	208		$	169		$	468		$	169
Segment operating income (loss) from discontinued operations	$	(163	)		$	7		$	(298	)		$	(15	)
Total Segment EBITDA (1)	$	8,779		$	9,257		$	9,039		$	9,257
EBITDA (1)	$	3,400			$	4,000		$	3,347			$	3,978

(1) Excludes intercompany consulting and support fees of $1.2.4 million and $1.3.0 million for Same Store and Total, respectively, in ~~2003~~the ~~and~~twelve weeks ended June 15, 2004 and June 14, 2005.

Continuing Operations. Total operating revenues increased ~~$1.7~~from ~~million comparing~~second ~~third~~ quarter ~~2003~~2004 to ~~third~~second quarter ~~2004~~2005 at same store business and sports clubs. ~~This increase was~~ primarily ~~comprised~~due ofto aincreased ~~$1.2 million increase in~~ food and beverage ~~sales~~private ~~and~~party arevenues ~~$0.6~~and ~~million increase in~~ membership dues. Food and beverage ~~revenues~~ ~~increased~~private ~~primarily~~party asrevenues ~~a result of~~ increased $1.1 ~~spending~~million ~~for~~or a7.3% ladue ~~carte~~to ~~and~~an ~~private~~increase ~~party~~in ~~business~~both volume and ~~most~~pricing. ~~clubs~~Membership ~~had~~dues aincreased ~~higher~~$0.6 ~~per~~million ~~check~~or ~~average in 2004~~2.6% ~~Membership~~primarily ~~dues increased~~ due to ~~the impact of~~ a ~~new~~dues ~~Signature~~price ~~Gold~~increase ~~dining program being offered at the business clubs~~ in ~~2004~~early 2005.

Segment ~~operating income~~EBITDA increased ~~comparing third quarter 2003 to third quarter 2004~~ at same store business and sports clubs ~~due~~from second quarter 2004 to ~~the~~second ~~increase~~quarter in2005 ~~revenues~~due ~~mentioned~~to increased ~~above~~revenue partially offset by a related increase in operating costs and expenses, ofprimarily ~~$1.2~~food ~~million~~and beverage costs. ~~Operating~~ Food and beverage margins ~~were~~improved ~~positively~~when ~~impacted~~comparing bysecond ~~improved~~quarter ~~food~~2004 to second quarter 2005. Depreciation and ~~beverage~~amortization decreased ~~margins~~from ~~due~~$2.3 million for second quarter 2004 to ~~expense~~$2.0 ~~controls~~million infor ~~purchasing~~second ~~and~~quarter ~~operations~~2005.

Discontinued Operations. The periods ended ~~September~~June 915, ~~2003~~2004 and ~~September~~June 714, ~~2004~~2005 include ~~the~~four ~~operations of three~~ properties divested in ~~2003, one property divested in~~ 2004 and ~~two~~one ~~properties~~property 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

~~Included~~Other ~~in results for other~~ operations and services ~~for~~consist ~~the~~primarily ~~third~~of ~~quarter 2004~~real isestate aoperations and ~~$5.0~~our ~~million~~corporate ~~($3~~services.4 ~~million~~Revenues ~~net~~increased ofprimarily ~~legal~~due ~~costs) recovery of previously accrued expenses related~~ to ~~litigation~~fees ~~accrued~~we ~~earlier~~receive infrom ~~2004. During the~~ third-party ~~quarter~~developers ~~2003~~based weon ~~recorded~~ a ~~charge~~percentage of ~~$1.3~~their ~~million~~real toestate ~~accrue for vacation earned by employees~~sales. ~~There was no significant change to the vacation accrual during third quarter 2004.~~

Operating loss from other operations and services improved ~~comparing~~from ~~third~~second quarter ~~2003~~2004 to ~~third~~second quarter ~~2004~~2005 primarily due to ~~the~~revenue ~~reasons~~increases mentioned above aspartially ~~well~~offset asby ~~decreases~~increased ininsurance ~~payroll~~costs related to higher claims and ~~payroll~~the ~~related~~impairment ~~costs~~of our investment in a consulting company. ~~Payroll~~During ~~and payroll~~the ~~related~~second ~~costs~~quarter ~~decreased~~of ~~due~~2004, we accrued $4.4 million related to athe ~~corporate~~potential ~~reorganization~~settlement ~~that~~of ~~led~~an outstanding lawsuit related to ~~reductions~~one inof ~~personnel~~our former properties.

1718

3624 Weeks Ended ~~September~~June 915, ~~2003~~2004 Compared to 3624 Weeks Ended ~~September~~June 714, ~~2004~~2005

Consolidated Operations – Continuing Operations

Operating revenues increased ~~from~~in ~~$623.7~~all ~~million~~three ~~for~~operating ~~the~~divisions 36– ~~weeks ended~~country ~~September~~club 9and golf facilities, ~~2003~~resorts toand ~~$645.0~~business ~~million~~and ~~for~~sports clubs – ending the 3624 weeks ended ~~September~~June 714, ~~2004.~~2005 ~~This~~at ~~increase~~a ~~was~~consolidated ~~comprised~~total of $11446.10 million, atan ~~our~~improvement ~~country~~of 7% over the 24 weeks ended June 15, 2004. Country club and golf facilities operating revenue increased 3% over 2004, ~~$9.7~~with ~~million~~the atmost ~~our~~significant ~~resorts~~contributions in dues income and ~~$5.1~~food ~~million~~and atbeverage ~~our~~revenue. ~~business~~These ~~and~~increases ~~sports~~were ~~clubs,~~partially offset by adecreases ~~decrease~~in ofmembership $4fees and deposits.6 ~~million~~Resorts inoperating ~~our~~revenues ~~other~~increased 17% ~~operations~~over ~~and~~2004 ~~services~~primarily related to Pinehurst hosting the 2005 U.S. ~~The~~Open ~~overall~~as ~~increase~~well isas ~~primarily~~increased ~~due~~occupancy toat anboth ~~increase~~Pinehurst inand ~~membership~~Barton ~~dues~~Creek. Business and sports clubs operating revenue increased 4% primarily due to food and beverage ~~revenues~~revenue as well as dues income.

~~Gain~~Operating ~~(loss)~~costs onand ~~disposals~~expenses for country club and golf ~~impairment~~facilities, ofresorts ~~assets~~and ~~was~~business ~~$0.7~~and ~~million~~sports ~~for~~clubs ~~the~~generally 36increased ~~weeks~~as ~~ended~~a ~~September~~result 9,of ~~2003~~variable ascosts ~~compared~~related to ~~a loss~~increased ofoperating $3revenues.8 ~~million~~Country ~~for~~club ~~the~~and 36golf ~~weeks~~facilities ~~ended~~operating ~~September~~costs 7,and ~~2004.~~expenses ~~The~~primarily ~~loss~~increased in ~~2004~~food ~~includes~~and ~~impairment~~beverage and ofgolf ~~$1.4~~operations ~~million~~offset ~~recorded~~by toa ~~write~~decrease ~~down~~in ~~the~~repair ~~carrying~~and ~~value~~maintenance ofcosts. ~~certain~~Resorts ~~properties.~~operating ~~The~~costs ~~remainder~~and ofexpenses ~~the~~primarily ~~loss~~increased ~~for~~in ~~2004~~golf isoperations ~~primarily~~and ~~related~~retail. toBusiness ~~the retirement~~and ofsports ~~fixed~~clubs ~~assets~~operating atcosts ~~several~~and ~~properties~~expenses primarily increased in food and beverage operations.

~~Excluding the~~Operating ~~impact~~income offor ~~disposals~~country club and golf ~~impairment~~facilities ofreflected ~~assets,~~improved ~~operating~~margins ~~income~~in ~~improved~~food ~~from~~and ~~$14.5~~beverage ~~million~~operations ~~for~~offset ~~the~~by 36a ~~weeks~~reduction ~~ended~~in ~~September~~the 9,profit ~~2003~~margin toin ~~$36.8~~golf ~~million~~operations ~~for~~due ~~the~~to 36increased ~~weeks~~costs ~~ended~~for ~~September~~golf 7,course ~~2004.~~maintenance ~~This~~coupled ~~improvement~~with ~~was~~fewer ~~primarily~~rounds ~~due~~played. toResorts ~~the~~operating ~~increase in~~income ~~revenues~~reflected ~~mentioned~~improved ~~above~~margins ~~partially~~in ~~offset~~food byand ~~increased~~beverage, ~~operating~~golf ~~costs~~operations, lodging and ~~expenses~~retail ofat ~~$2.6~~Pinehurst ~~million. Operating costs~~ and ~~expenses~~Barton ~~increased~~Creek ~~due~~offset toby ~~higher~~decreased ~~usage~~margins ~~primarily~~ at ~~country~~The ~~club~~Homestead. Business and ~~golf~~sports ~~facilities~~clubs asoperating ~~well~~income asreflected atimproved ~~the~~food ~~resorts.~~and beverage margins.

~~Loss~~Consolidated ~~from~~Operations ~~operations~~- ~~before~~Discontinued ~~income~~Operations taxes and minority interest improved from $41.3 million for the 36 weeks ended September 9, 2003 to $7.3 million for the 36 weeks ended September 7, 2004 primarily as a result of the increase in operating income mentioned above. In addition, interest expense decreased $5.2 million primarily related to lower rates obtained from refinancing our bank debt in 2003.

~~Discontinued~~The ~~Operations~~periods ended June 15, 2004 and June 14, 2005 include five properties divested in 2004 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $8.9 million in 2004 to $4.3 million in 2005. Net income (loss) from these properties decreased $0.4 million from 2004 to 2005. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.

~~The~~19 periods ended September 9, 2003 and September 7, 2004 include the operations of 14 properties divested in 2003, one property divested in 2004 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $14.6 million for the 36 weeks ended September 9, 2003 to $4.4 million for the 36 weeks ended September 7, 2004. Operating income (loss) before the impact of disposals and impairment of assets from these properties decreased $5.1 million from the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 as only two held for sale entities had activity in 2004 versus several entities with activity in the prior year. Gain on disposals of assets was $5.7 million for the 36 weeks ended September 9, 2003 and $0.2 million for the 36 weeks ended September 7, 2004. In accordance with SFAS 144, depreciation expense was not recorded in the current quarter for properties classified as held for sale.

Segment and Other Information – 3624 ~~weeks~~Weeks

Country Club and Golf Facilities

The following ~~table~~tables ~~presents~~present certain summary financial ~~and~~information ~~other operating data~~ for our country club and golf facilities segment for the 3624 weeks ended ~~September~~ 9June 15, ~~2003~~ 2004 and ~~September~~June 714, ~~2004~~2005 (dollars in thousands):

	Same Store CountryClub and Golf Facilities				Total Country Club andGolf Facilities
	Same Store Country Club and Golf Facilities				Total Country Club and Golf Facilities
	2003		2004		2003				2004
	2004		2005		2004			2005
Number of facilities at end of period		97		97		99				99
Number of facilities at end of period in continuing operations		94		94		96			99
Operating revenues	$	~~317~~215,~~960~~622	$	~~334~~220,~~259~~953	$	~~318~~215,~~046~~809		$	$224,392	~~334,259~~
Recognition of membership fees and deposits		2514,~~207~~118		2012,~~054~~476		2514,~~208~~118			12,551	~~20,054~~
Total operating revenues	$	~~343~~229,~~167~~740	$	~~354~~233,~~313~~429	$	~~343~~229,~~254~~927		$	$236,943	~~354,313~~
Operating costs and expenses (1)		~~263~~174,~~754~~480		~~276~~176,~~631~~455		~~263~~174,~~865~~482			179,130	~~276,648~~
Depreciation and amortization		33,384		34,053		33,384				34,053
Segment EBITDA from continuing operations (1)	$	55,260	$	56,974	$	55,445		$	57,813
Segment operating income from continuing operations	$	46,029	$	43,629	$	46,005			$	43,612
Segment EBITDA from discontinued operations	$	270	$	190	$	268		$	189
Segment operating loss from discontinued operations	$	—	$	—	$	(5	)		$	(4	)
Total Segment EBITDA (1)	$	55,530	$	57,164	$	55,713		$	58,002
EBITDA (1)	$	79,413	$	77,682	$	79,695			$	77,661

(1) Excludes intercompany consulting and support fees of $611.9 million and $12.71 million for Same Store and ~~Total~~$12.1 inmillion ~~2003~~ and ~~2004, respectively~~$12.4 ~~Fees~~million ~~increased~~for Total in ~~2004~~the in24 ~~conjunction~~weeks ~~with~~ended ~~the~~June ~~terms~~15, of2004 ~~our~~and ~~new~~June ~~debt~~14, ~~facility~~2005, respectively.

Continuing Operations. Total operating revenues increased ~~$11.1~~when ~~million~~ comparing the 3624 weeks ended ~~September~~June 915, ~~2003~~2004 to the 3624 weeks ended ~~September~~June 714, ~~2004~~2005 for same store country club and golf facilities. ~~This increase was~~ primarily due to increased ~~food~~ ~~and~~membership ~~beverage~~dues ~~sales~~and offood $7and beverage revenues.6 ~~million,~~Membership ~~membership~~ dues ofincreased $54.1 million ~~and~~or ~~golf operations revenues of $2~~4.34% ~~million,~~as ~~partially~~a ~~offset~~result ~~by decreased recognition~~ of ~~membership~~a ~~fees~~dues ~~and~~price ~~deposits of $5~~increase.2 ~~million.~~ Food and beverage revenues increased ~~as a~~$1.2 ~~result~~million ofor ~~increased activity and check average at our clubs in both a la carte and private party~~2.6% ~~Membership~~due ~~dues~~to increased asvolume ~~a result of positive membership trends~~ and ~~price~~pricing. ~~increases~~Golf ~~when~~revenues ~~comparing~~have ~~2003~~remained torelatively ~~2004.~~flat ~~Golf operations revenue increased~~ due to ~~higher~~an increase ~~paid~~in ~~rounds~~green asfees aand ~~result~~cart offees ~~the~~offset ~~increased~~by ~~activity~~a atdecrease ~~our~~in ~~clubs~~rounds played. ~~Recognition~~Paid ofrounds ~~membership fees and deposits~~ decreased primarily due to aheavy ~~change~~rains inon the ~~allocation~~West ~~procedures~~coast ofearly ~~revenue over 13 periods versus equal amounts~~ in ~~each~~ ofthe ~~our four quarters~~year.

Segment ~~operating~~EBITDA ~~income~~increased ~~decreased $2.4~~from ~~million~~the at24 ~~same~~weeks ~~store~~ended ~~country~~June ~~club~~15, ~~and~~2004 ~~golf~~to ~~facilities from~~ the 3624 weeks ended ~~September~~June 914, ~~2003~~2005 tofor ~~the~~same 36store ~~weeks~~country club ~~ended~~and ~~September~~golf 7,facilities ~~2004~~ as a result of ~~the~~increased ~~increase~~operating in revenues ~~mentioned above~~, partially offset by ~~increased~~a related increase in operating costs and expenses ~~of $12~~.9 ~~million.~~ Operating costs and expenses ~~increased~~offset ~~primarily~~the ~~due~~majority toof ~~the~~our ~~increased~~revenue ~~usage~~increases atas ~~our~~the clubs ~~which~~had ~~resulted~~decreased activity in 2005 but incurred increased ~~food~~costs ~~and~~due ~~beverage~~to ~~and~~inflation ~~golf~~increases ~~operations~~as ~~expenses~~well ofas ~~$7.0~~increased ~~million~~spending ~~and~~on ~~$3.5~~golf ~~million,~~course ~~respectively~~maintenance. ~~Overall,~~The ~~food~~increase in costs is primarily covered by our dues price increase. Food and beverage operating margins ~~improved~~have stabilized ~~when~~after ~~comparing~~a ~~2003~~very slow start to ~~2004~~the ~~while~~year. ~~golf~~Depreciation ~~operating~~and ~~margins~~amortization ~~decreased~~increased ~~due~~slightly from $22.6 million for the 24 weeks ended June 15, 2004 to ~~numerous~~$22.9 ~~hurricanes~~million ~~and~~for ~~heavy~~the ~~rains~~24 weeks ended June 14, 2005.

Discontinued Operations. The periods ended ~~September~~June 915, ~~2003~~2004 and ~~September~~June 714, 2005 ~~2004~~ include ~~the~~one ~~operations~~managed ofproperty ~~ten properties~~ divested in ~~2003~~2004 ~~in discontinued~~and ~~operations.~~one ~~Segment~~property ~~operating~~currently ~~loss~~held for ~~these~~sale ~~properties~~in ~~were~~discontinued ~~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~~operations.

1920

Resorts

The following ~~table~~tables ~~presents~~present certain summary financial data and ~~other~~lodging ~~operating~~ data for our ~~resorts~~resort segment for the 3624 weeks ended ~~September~~June 915, ~~2003~~2004 and ~~September~~ 7June 14, ~~2004~~ 2005 (dollars in thousands, except number of facilities and lodging data):

	Same Store Resorts						Total Resorts
	2003			2004			2003		2004
	2004			2005			2004		2005
Number of facilities at end of period (1)		3			3			3		3
Number of facilities at end of period in continuing operations (1)		3			3			3		3
Operating revenues	$	~~125~~85,~~350~~863		$	~~135~~101,~~536~~119		$	~~125~~85,~~461~~863	$	~~135~~101,~~633~~119
Recognition of membership fees and deposits		42,~~715~~822			42,~~244~~730			42,~~715~~822		42,~~244~~730
Total operating revenues	$	~~130~~88,~~065~~685		$	~~139~~103,~~780~~849		$	~~130~~88,~~176~~685	$	~~139~~103,~~877~~849
Operating costs and expenses (2)		~~103~~70,~~077~~638			~~110~~83,~~517~~063			~~104~~71,~~397~~161		~~111~~83,~~526~~139
Depreciation and amortization		12,050			11,326			12,377		11,580
Segment EBITDA from continuing operations (2)	$	18,047		$	20,786		$	17,524	$	20,710
Segment operating income from continuing operations	$	14,938		$	17,937		$	13,402	$	16,771
Segment EBITDA from discontinued operations	$	—		$	—		$	—	$	—
Segment operating income from discontinued operations	$	—		$	—		$	—	$	—
Total Segment EBITDA (2)	$	18,047		$	20,786		$	17,524	$	20,710
EBITDA (2)	$	26,988		$	29,263		$	25,779	$	28,351
Lodging data (3 resorts) (1)
Lodging data: (3 resorts) (1)
Room nights available		198,912			198,912
Room nights available		299,376			299,376
Room nights sold		107,164			112,579
Room nights sold		161,057			172,092
Paid occupancy rate		53.9	%		56.6	%
Paid occupancy rate		53.8	%		57.5	%
Average daily rate (3)	$	186		$	191
Average daily revenue per occupied room (3)	$	706		$	720
Revenue per occupied room (4)	$	728		$	742
Average daily revenue per available room (3)	$	380		$	414

(1)	Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead and Barton Creek. Other ancillary resort operations are included in summary financial data for Total Resorts.

(2) Excludes intercompany consulting and support fees of $54.82 million inand ~~2004~~$2.6 million for Same Store and Total. ~~There~~in ~~were~~the no24 ~~intercompany~~weeks ~~consulting~~ended ~~fees~~June in15, ~~2003~~2004 and June 14, 2005, respectively.

Continuing Operations. Total operating revenues increased $9.7 million comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 for same store resorts. This increase was primarily due to increased food and beverage sales of $(4.3) ~~million,~~Revenue ~~lodging~~per ~~revenues~~occupied ofroom ~~$2.8~~is ~~million,~~based ~~other~~on ~~recreation~~total ~~revenues~~operating ~~of $2.2 million and golf operations~~ revenues ofexcluding ~~$1.6~~membership million. Food and beverage sales increased as a result of higher occupancy and spending by social guests during 2004 at all of the resorts. Lodging revenues increased as a result of increased room nights and higher average room rates from the prior yeardues, ~~primarily~~recognition ~~at The Homestead. Other recreation revenues increased as a result~~ of ~~increased~~member ~~spa revenues~~initiation atfees ~~The Homestead~~ and ~~Pinehurst~~net asmanaged ~~well~~rooms ~~as increased ski revenues at The Homestead~~commissions. ~~Golf revenues increased due to increased play on the premium courses at Pinehurst.~~

~~Segment~~Continuing ~~operating~~Operations. ~~income~~Total operating revenues increased ~~$3.0~~when ~~million~~ comparing the 3624 weeks ended ~~September~~June 915, ~~2003~~2004 to the 3624 weeks ended ~~September~~ 7June 14, ~~2004~~2005 for same store resorts. ~~This~~The ~~improvement~~primary ~~was~~reason ~~due~~for ~~to by~~ the increase inis ~~revenues~~merchandise ~~mentioned~~sales, ~~above~~ticket ~~offset~~sales byand arental ~~$7.4~~of ~~million~~corporate ~~increase~~hospitality intents ~~operating~~during Pinehurst’s ~~costs~~hosting ~~and~~of ~~expenses~~the 2005 U.S. ~~Operating~~Open. ~~costs~~The ~~and~~2005 ~~expenses~~U.S. ~~increased~~Open ~~due~~week tois ~~higher~~seven ~~food~~days ~~and beverage~~long ~~expenses~~with two of ~~$3.5~~the ~~million~~days ~~related~~falling toin ~~the~~our ~~higher~~second ~~occupancy~~quarter and ~~spending~~the ~~mentioned~~other ~~above~~five atdays ~~all~~falling ofin ~~the~~our ~~resorts~~third asquarter. ~~well~~In asaddition, ~~increased~~food ~~wages~~and atbeverage ~~The~~and ~~Homestead~~lodging ~~due~~revenues increased toat ~~the~~Pinehurst ~~staffing~~and ofBarton ~~temporary employees~~Creek. Food and beverage ~~operating~~a ~~margins~~la ~~improved when~~carte ~~comparing~~and ~~2003~~private toparty ~~2004.~~revenues ~~Other~~increased ~~recreation~~a ~~operating~~combined ~~expenses increased~~ $1.51 million ~~from~~or ~~increased~~3.9% ~~usage~~as ata ~~The~~result ~~Homestead,~~of ~~primarily~~higher ~~related~~occupancy toand ~~spa~~spending by social guests during 2005 at Pinehurst and ~~ski~~Barton ~~expenses~~Creek. ~~Golf~~A ~~operations~~la carte ~~expenses~~revenues were mainly driven by higher occupancy rates while private party revenues had a significant increase in check average. Lodging revenues increased $1.07 million ~~due~~or to7.7% as a result of increased ~~maintenance~~room nights and higher average room rates ~~expenses~~from the prior year at ~~all~~Pinehurst ~~the~~and ~~resorts~~Barton Creek.

20Segment EBITDA improved from the 24 weeks ended June 15, 2004 to the 24 weeks ended June 14, 2005 for same store resorts due to profits generated from the 2005 U.S. Open at Pinehurst. In addition, the operating margins for food and beverage, lodging and retail improved at Pinehurst. Barton Creek had improved operating margins in food and beverage and lodging. Lodging expenses are more fixed in nature and so the increased lodging revenues had a direct effect on our net income contributing an additional $1.4 million. Depreciation and amortization decreased slightly from $7.6 million for the 24 weeks ended June 15, 2004 to $7.5 million for the 24 weeks ended June 14, 2005.

Business and Sports Clubs

The following ~~table~~tables ~~presents~~present certain summary financial ~~and~~information ~~other operating data~~ for our business and sports clubs segment for the 36 24 weeks ended ~~September~~June 915, ~~2003~~2004 and ~~September~~June 714, ~~2004~~2005 (dollars in thousands):

	Same Store Businessand Sports Clubs								Total Business and Sports Clubs
	Same Store Business and Sports Clubs						Total Business and Sports Clubs
	2003				2004				2003			2004
	2004			2005			2004			2005
Number of facilities at end of period		66				66				66			66
Number of facilities at end of period in continuing operations		64			64			64			64
Operating revenues	$	~~138~~95,~~271~~119		$	$98,862	~~143,631~~	$	95,119	$	~~138,271~~$	98,862	$	~~143,631~~
Recognition of membership fees and deposits		1,~~885~~042			979	~~1,643~~		1,042		~~1,885~~	979		~~1,643~~
Total operating revenues	$	~~140~~96,~~156~~161		$	$99,841	~~145,274~~	$	96,161	$	~~140,156~~$	99,841	$	~~145,274~~
Operating costs and expenses (1)		~~124~~80,~~018~~684			83,346	~~127,823~~		80,684		~~124,020~~	83,346		~~127,823~~
Depreciation and amortization		7,727				7,448				7,727			7,448
Segment EBITDA from continuing operations (1)	$	15,477		$	16,495		$	15,477		$	16,495
Segment operating income from continuing operations	$	8,411			$	10,003			$	8,409		$	10,003
Segment EBITDA from discontinued operations	$	399		$	394		$	579		$	396
Segment operating loss from discontinued operations	$	(446	)		$	(58	)		$	(1,109	)	$	(144	)
Total Segment EBITDA (1)	$	15,876		$	16,889		$	16,056		$	16,891
EBITDA (1)	$	16,004			$	17,501			$	15,583		$	17,415

(1) Excludes intercompany consulting and support fees of $34.78 million and $36.90 million for Same Store and Total, respectively, in ~~2003~~the ~~and~~24 weeks ended June 15, 2004 and June 14, 2005.

Continuing Operations. Total operating revenues increased ~~$5.1~~when ~~million~~ comparing the 3624 weeks ended ~~September~~June 915, ~~2003~~2004 to the 3624 weeks ended ~~September~~June 714, ~~2004~~2005 at same store business and sports clubs. ~~This increase was~~ primarily ~~comprised~~due ofto aincreased ~~$3.5 million increase in~~ food and beverage ~~sales~~private ~~and~~party arevenues ~~$1.7~~and ~~million increase in~~ membership dues. Food and beverage private party revenues increased ~~primarily~~$2.0 asmillion aor ~~result~~7.4% ofdue ~~increased~~to ~~spending~~an increase in ~~ala~~both ~~carte~~volume and ~~private~~pricing. ~~party~~Membership ~~and~~dues ~~most~~increased ~~clubs~~$1.5 ~~had~~million aor ~~higher per check average in 2004~~3.3% ~~Membership~~primarily ~~dues increased~~ due to ~~the~~an ~~impact~~increase ofin ~~the~~members ~~Signature Gold~~as ~~program~~well ~~being~~as ~~offered~~a atdues ~~the~~price ~~business~~increase ~~clubs~~ in ~~2004~~early 2005.

Segment ~~operating~~EBITDA ~~income~~ increased ~~$1.6~~at ~~million~~same ~~comparing~~store ~~the~~business 36and ~~weeks~~sports ~~ended~~clubs ~~September~~from ~~9, 2003 to~~ the 24 36 weeks ended ~~September~~June 715, 2004 atto ~~same~~the ~~store~~24 ~~business~~weeks ~~and~~ended ~~sports~~June ~~clubs~~14, 2005 due to ~~the~~increased ~~increase~~revenue ~~in revenues mentioned above,~~ partially offset by a related increase in operating costs and expenses, ofprimarily ~~$3.8~~food ~~million~~and beverage costs. ~~Operating~~Food and beverage margins ~~were~~improved ~~positively~~when ~~impacted~~comparing 2004 byto ~~improved~~2005. ~~food~~Depreciation and ~~beverage~~amortization ~~margins~~decreased ~~due~~from $4.7 million for the 24 weeks ended June 15, 2004 to ~~expense~~$4.0 ~~controls~~million infor ~~purchasing~~the ~~and~~24 ~~operations~~weeks ended June 14, 2005.

Discontinued Operations. The periods ended ~~September~~June 915, ~~2003~~2004 and ~~September~~ 7June 14, ~~2004~~2005 include ~~the operations of~~ four properties divested in ~~2003,~~2004 and 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~~Other ~~in results for other~~ operations and services ~~for~~consist ~~the~~primarily ~~36 weeks ended September 7, 2004 is a charge~~ of ~~$4.4~~real ~~million~~estate ~~accrued~~operations ~~with~~and ~~respect to the settlement of an outstanding lawsuit related to one of~~ our ~~former properties.~~corporate ~~We previously accrued $0~~services.8 ~~million~~Revenues ~~related~~increased toprimarily ~~this~~due ~~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~~fees ~~lawsuit mentioned above. During the 36 weeks ended September 9, 2003~~ we ~~also~~receive ~~recorded~~from ~~charges~~third-party ofdevelopers ~~$1.5~~based ~~million~~on ~~to cover the costs of~~ a ~~settlement~~percentage ~~related to another one~~ of ~~our~~their ~~former properties and $2.4 million to accrue for vacation earned by employees. There was no significant change~~real toestate ~~the vacation accrual in 2004~~sales.

Operating loss from other operations and services improved ~~comparing~~from the 3624 weeks ended ~~September~~June 915, ~~2003~~2004 to the 3624 weeks ended ~~September~~June 714, ~~2004~~2005 primarily due to ~~decreases~~revenue inincreases ~~payroll~~mentioned ~~and~~above ~~payroll~~as ~~related~~well ~~costs,~~as ~~general~~a ~~and~~rebate ~~administrative~~of ~~and~~previously ~~insurance.~~incurred ~~Payroll and payroll related~~ costs ~~decreased~~partially ~~due~~offset toby aincreased ~~corporate~~insurance ~~reorganization~~costs ~~that~~related ~~led~~ to higher ~~reductions~~claims inand ~~personnel.~~the ~~General~~impairment ~~and~~of ~~administrative~~our ~~expenses~~investment ~~decreased~~in ~~primarily~~a ~~related~~consulting tocompany. During the ~~implementation~~second ofquarter ~~cost~~2004, ~~cutting~~we ~~initiatives~~accrued ~~during~~$4.4 ~~2003~~million ~~showing~~related ~~their~~to ~~effects~~the ~~in 2004.~~potential ~~Insurance~~settlement ~~costs~~of ~~decreased~~an ~~due~~outstanding tolawsuit arelated ~~lower~~to ~~number~~one of ~~health~~our ~~claims~~former properties.

2122

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,~~Our weprimary ~~have~~goal ~~financed~~as ~~our~~it ~~operations~~relates ~~and~~to ~~cash~~liquidity ~~needs~~and ~~primarily through~~capital ~~cash~~resources ~~flows~~is ~~from~~to attain ~~operations, borrowings under credit facilities,~~ and toretain ~~a lesser extent, proceeds from divestitures. We anticipate using cash flow from operations for~~ the ~~remainder~~right level of ~~2004~~debt and ~~the~~cash ~~immediate future thereafter principally~~ to ~~fund~~ ~~planned~~maintain ~~capital~~our ~~replacement~~core ~~expenditures~~properties, tofund ~~repay~~expansions ~~debt~~at ~~and~~our tocurrent ~~build~~properties, ~~cash~~and ~~reserves.~~be Itpoised isfor ~~anticipated~~external ~~that~~growth ~~beginning~~ in ~~2005,~~the wemarketplace. ~~will~~During ~~also~~the ~~use~~last ~~our~~few ~~cash~~years, ~~flow to grow and expand~~ our ~~business~~focus ~~through~~has abeen ~~combination~~on ofstrengthening ~~improvements and expansions of~~our ~~existing~~cash ~~facilities~~position and ~~acquisitions~~refinancing ofand ~~additional~~reducing ~~properties.~~our Wedebt ~~believe any unit growth~~ in ~~the~~order ~~remainder~~to ofsupport ~~2004~~these ~~will~~goals. beOur ~~undertaken~~debt bywas ~~entering~~refinanced ~~into management contracts or lease agreements, while~~ in ~~2005~~2003 and ~~beyond,~~has ~~growth~~been ~~could~~paid ~~take~~down ~~the~~to ~~form~~$700 ~~of both~~million ~~ownership~~as ~~and~~of ~~management~~June ~~opportunities~~14, ~~principally in the golf and resort segments~~2005. ~~Consistent~~We ~~with our strategy, we~~ have ~~entered~~paid ~~into~~down ~~two~~approximately ~~management~~$12 ~~contracts~~million ~~during~~since ~~the~~December ~~twelve weeks ended September 7~~28, 2004.

WeHistorically, ~~distinguish~~we ~~uses~~have offinanced ~~cash~~our ~~for~~operations ~~capital~~and ~~expenditures~~cash toneeds primarily ~~refurbish~~through ~~and~~cash ~~replace existing~~flows ~~property~~from ~~and~~operations, ~~equipment~~debt ~~(i.e.~~and, ~~capital~~to ~~replacements)~~a ~~from~~lesser ~~discretionary~~extent, ~~capital~~proceeds ~~expenditures~~from ~~such~~divestitures. asWe ~~the~~anticipate ~~expansion~~using ofcash ~~existing~~flow ~~facilities~~from ~~(i.e.,~~operations ~~capital expansions) and investments~~ in ~~joint~~2005 ~~ventures.~~principally ~~Capital~~to ~~replacements~~fund ~~are~~ planned ~~expenditures~~ ~~made~~capital ~~each~~replacement ~~year~~expenditures, to ~~maintain~~repay ~~high~~debt ~~quality standards of facilities for the purpose of meeting existing members’ expectations~~ and to ~~attract~~build cash ~~new members~~reserves. ~~Capital~~We ~~expansions~~also ~~are~~expect ~~strategic expansions of existing and newly acquired facilities and resorts that we believe will provide opportunities~~ to ~~expand~~use our ~~membership base and room nights and positively affect long-term~~ cash ~~flows.~~flow ~~Historically,~~in ~~capital~~2005 ~~expansions~~to ~~have~~grow ~~been funded by operating cash flows~~ and ~~external~~expand ~~debt. We~~our ~~expect~~business tothrough ~~spend~~a ~~approximately~~combination $7of ~~million~~improvements inand ~~2004 on capital~~ expansions ~~and~~of ~~improvements to~~ existing facilities, ofon which ~~$3.2~~we ~~million~~have ~~has already been~~ spent. ~~Total capital expenditures are expected to be~~ approximately $60 29 million inyear-to-date. ~~2004~~Based ofon ~~which~~our ~~$39.2~~current ~~million~~projections, ~~has~~we ~~already~~believe ~~been~~our ~~spent.~~current ~~Net~~assets and cash ~~flows~~flow ~~used~~from byoperations ~~investing~~are ~~activities~~sufficient ~~were~~to ~~$34.1~~meet ~~million~~our ~~for~~anticipated ~~the~~working 36capital ~~weeks~~and ~~ended~~operating ~~September~~needs ~~7, 2004 as compared to $11.7 million~~ for the 36next ~~weeks~~12 ~~ended~~months ~~September~~as 9,well ~~2003.~~as ~~The~~support ~~2003~~our ~~net~~anticipated ~~usage~~capital ~~includes proceeds from divestitures of $30~~expenditures.6 ~~million compared to only $0.1 million in 2004.~~

~~Net~~Debt 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.

~~Under~~The ~~the provisions~~majority of our outstanding debt ~~agreement~~at ~~with~~June ~~Textron Financial Corporation (Textron)~~14, we2005 ~~are~~was ~~required~~obtained toas ~~maintain~~a result ~~certain~~of ~~debt~~a ~~service~~major ~~ratios~~refinancing atthat ~~both~~took ~~the~~place ~~portfolio~~during ~~and individual property level~~2003. ~~Each~~The ofrefinancings ~~the~~resulted ~~individual~~in ~~loans~~mortgage ~~has~~portfolios ~~cross-default~~which ~~provisions; therefore,~~had a ~~default~~combined onprincipal anamount ~~individual loan triggers a default on the portfolio. Effective as~~ of ~~June~~approximately ~~30,~~$658 ~~2004~~million, weincluding ~~obtained~~both anfixed ~~amendment~~and tovariable ~~the~~rate ~~debt~~portions. ~~agreement~~The ~~clarifying~~combined refinancings awere ~~component~~comprised of ~~how~~first wemortgages ~~calculate~~on ~~the~~40 ~~debt~~properties ~~service~~and ~~ratio.~~increased Weborrowings ~~may~~on ~~now~~two ~~cure~~existing ~~a default~~mortgage byloans ~~obtaining~~(see aNote ~~letter~~9 of ~~credit~~the orNotes ~~prepaying~~to ~~the~~Condensed ~~loan~~Consolidated Financial Statements).

AsUnder the provisions of ~~September~~certain 7,of ~~2004~~our debt agreements with Textron Financial Corporation (Textron), ~~the~~we are required to maintain debt service ~~ratio~~coverage ~~(as~~ratios ~~defined~~at inboth the ~~amended~~portfolio ~~agreement)~~and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of June 14, 2005, the debt service coverage ratio was below the minimum level for ~~three~~two individual properties participating in the loan, thereby causing the entire loan ($5654 million outstanding principal amount as of June 14, 2005) to be in technical default. We cured the noncompliance ~~through~~by ~~a combination of~~ obtaining letters of credit totaling $36.72 million. ~~and~~Additionally, we are out of compliance on two separate promissory notes with Textron related to individual properties with a combined ~~waiver~~outstanding ~~letter~~principal amount of $20 million as of June 14, 2005. WeSubsequent ~~have~~to ~~reclassified~~June 14, 2005, we paid down $~~5.1~~17 million related to ~~the~~one ~~current~~note ~~portion~~and ofreceived ~~long-term~~a ~~debt~~waiver inletter on the ~~Condensed~~other ~~Consolidated~~note ~~Balance~~to bring these properties into compliance. Also, we ~~Sheet~~plan ~~related~~to payoff, prior to ~~this~~their ~~waiver~~contractual ~~representing~~maturity, the ~~paydown~~remaining ~~amount~~balance ~~required~~related to ~~bring~~the property for which we received the waiver letter as well as one additional property ~~not~~held ~~covered~~individually by ~~letters~~Textron. The total amount to be paid off is approximately $8 million. The $25 million that has or will be paid off subsequent to June 14, 2005 has been reclassified to the current portion of ~~credit~~long-term ~~into~~debt ~~compliance~~in the Condensed Consolidated Balance Sheet.

22In addition to amounts reclassed to the current portion of long-term debt due to early payoffs and covenant compliance, we have approximately $55 million of unpaid principal maturing during the second quarter of 2006 that has also been reclassified as current. We are in negotiations with one of our lenders regarding a portion of this maturing debt to pay off the balance of approximately $37 million before year-end 2005 and obtain a new line of credit.

~~Net~~Cash cash flows provided by operations increased to $71.5 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 various business units. We believe we have adequate capital resources to fund our operations and ~~strategy~~Cash ~~for~~Flow ~~the immediate future. In the event that this is not the case, the company could use its existing cash reserves to meet its obligations or delay or cancel certain capital repair or expansion projects.~~

As a result of our debt refinancing, we no longer have a line of credit. Consequently, we maintain a higher cash balance on hand to cover basic working capital requirements. Our unrestricted cash position was $116 million as of June 14, 2005 as compared to $96 million at December 28, 2004. As previously mentioned, we are in negotiations to pay off the balance of one of our property mortgages before year-end 2005 and obtain a new line of credit which would reduce our outstanding debt and decrease the cash balance on our balance sheet.

Our cash flow from operations was $60.5 million for the 24 weeks ended June 14, 2005, an increase of $15.8 million over 2004. In addition to our daily operating transactions, a key component of our annual operating cash comes from our membership programs. Membership deposits and fees represent advance initiation deposits for the right to become a member. Membership deposits are generally not refundable until a fixed number of years (generally 30 years) after the date of acceptance as a member while membership fees are not refundable. Cash from deposits is used to fund our normal operations. Revenue recognition of these deposits is deferred and amortized. In recent years, we have increasingly allowed new members to defer a portion of the payment of fees and deposits as an incentive for them to join. Although this practice adversely affects the current amount of cash received for fees and deposits, it is subsequently offset through the receipt of recurring membership dues and other revenues received from these members.

We utilize cash to fund operations, maintain our properties, pay down our debt and related interest, and, to a limited extent, buy back company stock. For the 24 weeks ended June 14, 2005, we reduced debt by nearly $12 million and increased our cash and cash equivalents by approximately $20 million. For the remainder of 2005, we are considering additional investments in expanding our existing properties or acquiring new properties as well as prepaying or refinancing portions of our debt. We are in negotiations with one of our lenders regarding a possible refinancing that will decrease interest rates while extending the maturity date.

Capital Spending

The nature of our business requires us to invest a significant amount of capital in our existing properties to maintain them. For the 24 weeks ended June 14, 2005, we expended approximately $27 million in maintenance capital, and we anticipate spending approximately $68 million in fiscal 2005 for maintenance capital.

In addition to maintaining our properties, we also spend discretionary capital to expand existing properties and to enter into new business opportunities. Capital expansion funding totaled more than $2 million for the 24 weeks ended June 14, 2005.

Risks

We believe that we have sufficient and stable funds to allow us to operate our business for the next 12 months as well as evaluate growth opportunities during 2005 and beyond. However, the occurrence of any of the following events might limit our ability to fund operations or provide adequate capital funding:

•

Lack of compliance with debt covenants – currently our defaults on the Textron note are covered by waivers and/or letters of credit. However, should operations cause adverse results at one or a group of properties, we could be put in a position of having to pay down debt or secure additional financing.

•

Exercise of the limited put right by our ESOP – As a means of providing liquidity to the trustees of the Amended Plan, we have provided the trustees a limited put right (the “Redemption Right”) to cause us to redeem common stock, held in trust on behalf of the Amended Plan, at the most recent appraised fair market value as necessary, in the event the trust does not have adequate resources, to meet the following requirements: (1) to fund a participant’s distribution in cash, (2) to diversify a participant’s account in accordance with Internal Revenue Code Section 401(a)(28), (3) to pay expenses incurred by the trustees, and (4) to comply with directions from the plan administrator. The Redemption Right has never been exercised by the Amended Plan. We do not expect that the Redemption Right will be exercised to a significant extent in 2005, but if it is, we could be required to repurchase shares of common stock.

•

Exercise of certain rights by our third party investor – During 1999, we sold 9,375,000 shares of common stock and warrants to acquire 1,012,500 shares of common stock to The Cypress Group. Beginning in October 2004, we are

obligated under certain defined conditions to offer to repurchase a portion of their outstanding shares if we are below a defined leverage ratio. Based on the calculation, we were above the stated leverage ratio and were not required to offer to repurchase any shares during 2004. Furthermore, based on expected future operations, we do not anticipate falling below the stated leverage ratio level until at least October 2006. However, if our actual future operating results differ materially from expectations, we could fall below the leverage ratio before October 2006 and could be required to offer to repurchase a portion of their shares of common stock.

•

Natural disaster or catastrophic events - Events out of our control could cause significant operational implications and/or an inability to obtain financing.

We do not anticipate any of the above situations occurring. Additionally, these risks are somewhat mitigated due to the fact that a significant portion of our capital expansions and new growth spending is discretionary. However, we cannot ensure you that these events will not occur.

Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments

During the ~~quarter~~24 weeks ended ~~September~~June 714, ~~2004~~2005, 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 3028, ~~2003~~2004. 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 3028, ~~2003~~2004 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~~contains ~~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 3028, ~~2003~~2004.

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~~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~~25 ~~Issued Accounting Pronouncements~~

In January 2003, the FASB issued and then revised in December 2003, FASB Interpretation No. 46, (FIN 46R) “Consolidation of Variable Interest Entities” which changes the criteria 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 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 assets, liabilities and noncontrolling 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 difference between the net amount added to our Consolidated Statement of Operations and the amount of any previously recognized interest in the newly consolidated entity was not material and therefore was not recognized as a cumulative effect of an accounting change when adopted. The adoption of FIN 46R in the first quarter of 2004 resulted in an initial increase in net assets of $1.1 million, including debt of $13.7 million, to our Consolidated Balance Sheet. Prior periods were not restated.

InRecently ~~December~~Issued ~~2003,~~Accounting ~~the~~Pronouncements FASB issued SFAS No. 132R (revised 2003), “Employer’s Disclosures about Pensions and Other Postretirement Benefits”. This statement improves financial statement disclosures for defined benefit plans. We have not included these expanded disclosures as our pension plan is not a material component of our Condensed Consolidated Financial Statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123 (revised 2004) requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on fair value on the grant date of the equity or liability instruments issued. Compensation cost will be recognized over the period that an employee provides service for that award. This new standard will be effective for us beginning in our first quarter of 2006. We are in the process of evaluating the impact of this standard on our financial statements.

In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions”, which clarifies accounting treatment for timeshare transactions and related costs. SFAS No. 152 is effective for fiscal years beginning after June 15, 2005. We are currently in the process of evaluating the possible effects of this recently issued accounting pronouncement. We do not believe the adoption of this statement will have a material effect on our Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes to the disclosure on this matter made in our ~~report~~Annual Report on Form 10-K for the ~~fiscal~~ year ended December 3028, ~~2003~~2004.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, ~~have~~has ~~reviewed and~~ evaluated the effectiveness of our disclosure controls and procedures (as defined in ~~Exchange Act~~ Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on that evaluation, ~~the~~our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures ~~are~~were effective ~~and~~as ~~timely,~~of ~~providing~~the ~~them~~end ~~with~~of ~~material~~the ~~information~~period ~~relating~~covered toby usthis report in ensuring that all information required to be disclosed in ~~the~~ reports we file or submit under the Securities Exchange Act of 1934 has been recorded, processed, summarized and reported within the time periods specified by the Securities Exchange Commission.

Changes in Internal Controls

There ~~have~~ ~~not~~has been ~~any~~no ~~significant~~change ~~changes~~ in our internal ~~controls~~control orover infinancial ~~other~~reporting during ~~factors~~the ~~that~~twelve ~~could~~weeks ~~significantly~~ended ~~affect~~June ~~these~~14, ~~controls~~2005 ~~subsequent~~that tohas ~~the~~materially ~~date~~affected, ofor ~~their~~is ~~evaluation.~~reasonably Welikely ~~are~~to ~~not~~materially ~~aware~~affect, ofour ~~any~~internal ~~significant~~control ~~deficiencies~~over orfinancial ~~material weaknesses; therefore no corrective actions were taken~~reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~During the thirty-six weeks ended September 7, 2004, we accrued an additional $5~~None.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~~26 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 6. Exhibits ~~and Reports on Form 8-K~~

(a) Exhibits 10.35 – ClubCorp, Inc. Deferred Compensation Plan 31.1 - Certification by John A. Beckert pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 - Certification by Jeffrey P. Mayer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 - Certification by John A. Beckert 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.

10.31*27 ~~- Third Amendment to the Employment Agreement between ClubCorp, Inc. and John A. Beckert, effective August 28, 2004~~

31.1 - Certification by John A. Beckert pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

32.1 - Certification by John A. Beckert 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

On 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.

* - 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.
Date: October 21, 2004	By:	/s/ Jeffrey P. Mayer
Date: July 28, 2005	By:	/s/ Jeffrey P. Mayer
		Jeffrey P. Mayer
		Chief Financial Officer

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · CLUBCORP INC