Clubcorp 10-Q 2001 Q2 Quarterly report

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 June 12, 2001

[   ] 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 and 333-52612

CLUBCORP, INC.
(Exact name of registrant as specified in its charter)

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

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

The number of shares of the Registrant’s Common Stock outstanding as of July 24, 2001 was 93,925,450.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
		Consolidated Balance Sheet
		Consolidated Statement of Operations
		Consolidated Statement of Cash Flows
		Condensed Notes to Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
EX-15.1 Letter from KPMG LLP
EX-24.1 - Power of Attorney

CLUBCORP, INC.

INDEX

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Independent Accountants’ Review Report	1
	Consolidated Balance Sheet	2
	Consolidated Statement of Operations	3
	Consolidated Statement of Cash Flows	4
	Condensed Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Part II.	OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	19
Item 6.	Exhibits and Reports on Form 8-K	19

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Stockholders
ClubCorp, Inc.:

We have reviewed the consolidated balance sheet of ClubCorp, Inc. and subsidiaries (ClubCorp) as of June 12, 2001, and the related consolidated statements of operations for the twelve weeks and twenty four weeks ended June 12, 2001 and June 13, 2000 and cash flows for the twenty four weeks ended June 12, 2001 and June 13, 2000. These consolidated financial statements are the responsibility of ClubCorp’s management.

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

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

As discussed in Note 2 to the accompanying consolidated financial statements, ClubCorp changed its method of accounting for derivative instruments and hedging activities on December 27, 2000.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of ClubCorp as of December 26, 2000 and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 26, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

KPMG LLP

Dallas, Texas
July 17, 2001

1

ClubCorp, Inc.

Consolidated Balance Sheet
(Dollars in thousands, except share amounts)
(Unaudited)

					December 26,			June 12,
				Assets	2000			2001
Current assets:
	Cash and cash equivalents				$	24,771		$	9,153
	Membership and other receivables, net					122,158			118,799
	Inventories					23,369			25,275
	Other assets					20,517			25,016
			Total current assets			190,815			178,243
Property and equipment, net						1,295,435			1,312,725
Other assets						259,331			247,735
				Total assets	$	1,745,581		$	1,738,703
		Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable and accrued liabilities				$	78,315		$	65,794
	Long-term debt — current portion					49,326			51,022
	Other liabilities					116,181			116,853
			Total current liabilities			243,822			233,669
Long-term debt						643,078			641,203
Other liabilities						143,284			165,035
Membership deposits						104,757			108,809
Redemption value of common stock held by benefit plan						66,379			67,858
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, 94,105,475
		outstanding at December 26, 2000 and 93,925,450
		outstanding at June 12, 2001				996			996
	Additional paid-in capital					161,684			161,674
	Accumulated other comprehensive loss					(4,080	)		(10,457	)
	Retained earnings					439,802			427,346
	Treasury stock, 5,488,933 shares at December 26, 2000
		and 5,668,958 shares at June 12, 2001				(54,141	)		(57,430	)
			Total stockholders’ equity			544,261			522,129
				Total liabilities and equity	$	1,745,581		$	1,738,703

See accompanying condensed notes to consolidated financial statements.

2

ClubCorp, Inc.

Consolidated Statement of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)

	12 Weeks Ended						24 Weeks Ended
	June 13,			June 12,			June 13,			June 12,
	2000			2001			2000			2001
Operating revenues	$	266,020		$	263,735		$	467,221		$	463,501
Operating costs and expenses		204,089			198,960			374,369			368,437
Depreciation and amortization		19,856			21,855			39,040			43,684
Selling, general and administrative expenses		20,666			19,723			38,921			38,310
Operating income		21,409			23,197			14,891			13,070
Interest expense		(11,445	)		(13,872	)		(22,650	)		(29,871	)
Other income		1,685			618			2,292			1,455
Income (loss) from operations before income tax benefit (provision)		11,649			9,943			(5,467	)		(15,346	)
Income tax benefit (provision)		(5,347	)		(4,242	)		(361	)		4,369
Net income (loss)	$	6,302		$	5,701		$	(5,828	)	$	(10,977	)
Basic and diluted income (loss) per share	$	.07		$	.06		$	(.06	)	$	(.12	)

See accompanying condensed notes to consolidated financial statements.

3

ClubCorp, Inc.

Consolidated Statement of Cash Flows
(Dollars in thousands)
(Unaudited)

				24 Weeks Ended
				June 13,			June 12,
				2000			2001
Cash flows from operations:
	Net loss			$	(5,828	)	$	(10,977	)
	Adjustments to reconcile net loss to cash flows provided from operations:
		Depreciation and amortization			39,040			43,684
		Amortization of discount on membership deposits			4,441			4,181
		Write off of investment in joint venture			—			2,557
		Gain on divestitures and sale of assets			(16	)		(2,248	)
		Deferred income taxes			(770	)		(5,715	)
		Decrease in real estate held for sale			6,221			4,239
		Decrease (increase) in membership and other receivables, net			(5,414	)		3,484
		Decrease in accounts payable and accrued liabilities			(4,280	)		(7,101	)
		Net change in deferred membership revenues			4,260			3,760
		Other			1,658			2,142
			Cash flows provided from operations		39,312			38,006
Cash flows from investing activities:
	Additions to property and equipment				(82,363	)		(60,431	)
	Development of new facilities				(20,392	)		(25,465	)
	Development of real estate held for sale				(11,784	)		(2,214	)
	Acquisition of facilities				(1,010	)		—
	Investment in affiliates				(5,101	)		—
	Proceeds from dispositions, net				2,360			20,730
	Other				(865	)		2,193
			Cash flows used by investing activities		(119,155	)		(65,187	)
Cash flows from financing activities:
	Borrowings of long-term debt				97,847			31,100
	Repayments of long-term debt				(10,185	)		(17,467	)
	Membership deposits received, net				1,198			995
	Treasury stock transactions, net				(5,366	)		(3,065	)
			Cash flows provided from financing activities		83,494			11,563
Total net cash flows					3,651			(15,618	)
Cash and cash equivalents at beginning of period					36,606			24,771
Cash and cash equivalents at end of period				$	40,257		$	9,153

See accompanying condensed notes to consolidated financial statements.

4

ClubCorp, Inc.

Condensed Notes to Consolidated Financial Statements

Note 1.   Summary of significant accounting policies

Consolidation

The Consolidated Financial Statements include the accounts of ClubCorp, Inc. (Parent) and its subsidiaries (collectively ClubCorp). All material intercompany balances and transactions have been eliminated.

Interim presentation

The accompanying 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. ClubCorp’s management believes 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 26, 2000 which are a part of ClubCorp’s Form 10-K.

In the opinion of ClubCorp management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments necessary (consisting of normal recurring accruals) to present fairly the consolidated financial position of ClubCorp as of June 12, 2001, the consolidated results of operations for the 12 and 24 weeks ended June 13, 2000 and June 12, 2001 and cash flows for the 24 weeks ended June 13, 2000 and June 12, 2001. 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.

Recent pronouncement

On July 20, 2001, the FASB issued Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets.” This statement will be effective for fiscal years beginning after December 15, 2001. Under the provisions of FAS 142, the cost of certain of the Company’s intangible assets will no longer be subject to amortization. Management has not made a final determination as to the impact of this new pronouncement on its Consolidated Balance Sheet or Statement of Operations.

Reclassifications

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

Note 2.   Derivative instruments

Effective December 27, 2000, ClubCorp adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted. The adoption of FAS 133 resulted in recording $2,119,000, net of $1,141,000 income tax benefit, in accumulated other comprehensive loss for the cumulative effect of the accounting change as of December 27, 2000. ClubCorp also recorded $201,000 as interest expense for the cumulative ineffective portion of these instruments because the impact on the Consolidated Statement of Operations was not significant.

As of June 12, 2001, ClubCorp had interest rate swap contracts to pay fixed rates of interest (ranging from 5.20% to 7.21%) and receive variable rates of interest based on LIBOR on an aggregate of $399.0 million notional amount of indebtedness with maturity dates ranging from July 2001 through September 2003. These hedges are highly effective, however, for the 12 and 24 weeks ended June 12, 2001, ClubCorp recorded $8,000 and $196,000, respectively, as interest expense for the ineffective portion of these instruments. The aggregate fair market value of all interest rate swap contracts was ($8,425,000) on June 12, 2001 and is included in other liabilities on the Consolidated Balance Sheet.

5

ClubCorp, Inc.

Note 3.   Operating revenues

ClubCorp recognizes revenues from the following sources:

		12 Weeks Ended				24 Weeks Ended
		June 13,		June 12,		June 13,		June 12,
		2000		2001		2000		2001
Membership fees and deposits		$	10,832	$	8,841	$	20,708	$	18,549
Membership dues			74,085		77,129		149,079		153,820
Golf operations revenues			62,276		63,109		95,551		95,861
Food and beverage revenues			71,178		68,837		124,724		121,762
Lodging revenues			19,286		17,588		27,945		27,095
Other revenues			28,363		28,231		49,214		46,414
	Total operating revenues	$	266,020	$	263,735	$	467,221	$	463,501

Note 4.   Income tax benefit (provision)

The income tax benefit (provision) for the 12 and 24 weeks ended June 13, 2000 and June 12, 2001 differs from amounts computed by applying the U.S. Federal tax rate of 35% to income (loss) from operations before income tax benefit (provision) primarily due to foreign and state income taxes, net of Federal benefit, and the effect of consolidated operations of foreign and other entities not consolidated for Federal income tax purposes.

Note 5.   Weighted average shares

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

		12 Weeks Ended				24 Weeks Ended
		June 13,		June 12,		June 13,		June 12,
		2000		2001		2000		2001
Weighted average shares outstanding			94,291,570		94,070,736		94,383,772		94,081,500
Incremental shares from assumed conversions:
	Options		1,343,530		1,048,292		—		—
	Warrants		5,037		—		—		—
Diluted weighted average shares			95,640,137		95,119,028		94,383,772		94,081,500

Diluted weighted average shares for the 12 weeks ended June 13, 2000 and June 12, 2001 exclude the assumed conversion of 1,062,150 and 2,429,800 options, respectively, due to their antidilutive effect. Diluted weighted average shares for the 24 weeks ended June 13, 2000 and June 12, 2001 exclude incremental shares from assumed conversion of 1,435,335 and 1,033,382 shares, respectively, due to the net losses for the periods.

6

ClubCorp, Inc.

Note 6.   Property and equipment

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

	December 26,			June 12,
	2000			2001
Land and land improvements	$	623,516		$	641,325
Buildings and recreational facilities		432,645			425,477
Leasehold improvements		110,643			119,543
Furniture and fixtures		131,078			133,232
Machinery and equipment		274,440			274,919
Construction in progress		126,981			153,552
		1,699,303			1,748,048
Accumulated depreciation and amortization		(403,868	)		(435,323	)
	$	1,295,435		$	1,312,725

Note 7.   Comprehensive income (loss)

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

	12 Weeks Ended						24 Weeks Ended
	June 13,			June 12,			June 13,			June 12,
	2000			2001			2000			2001
Net income (loss)	$	6,302		$	5,701			(5,828	)		(10,977	)
Cumulative effect of change in accounting for derivative instruments and hedging activities, net of income taxes		—			—			—			(2,119	)
Changes in fair value of derivative instruments and hedging activities, net of income taxes		—			(285	)		—			(3,099	)
Foreign currency translation adjustment		(1,294	)		1,895			(2,017	)		(1,159	)
Total comprehensive income (loss)	$	5,008		$	7,311		$	(7,845	)	$	(17,354	)

7

ClubCorp, Inc.

Note 8.   Segment reporting

ClubCorp 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. Management uses Adjusted EBITDA to monitor the performance of the Company and its facilities. Adjusted EBITDA consists of EBITDA, an industry standard calculation of earnings before interest, taxes, depreciation and amortization, gain (loss) on divestitures and disposal of assets, adjusted for net membership deposits and fees, and a joint venture adjustment. Financial information for the segments is as follows (dollars in thousands):

				12 Weeks Ended						24 Weeks Ended
				June 13,			June 12,			June 13,			June 12,
				2000			2001			2000			2001
Operating revenues:
	Country club and golf facilities			$	125,068		$	129,472		$	225,322		$	230,343
	Business and sports clubs				60,439			57,846			118,882			114,061
	Resorts				61,256			60,187			91,576			93,277
		Total operating revenues for reportable segments			246,763			247,505			435,780			437,681
	Other operations				14,195			12,450			21,942			18,902
	Corporate services				5,062			3,780			9,499			6,918
		Consolidated operating revenues		$	266,020		$	263,735		$	467,221		$	463,501
Adjusted EBITDA:
	Country club and golf facilities			$	35,965		$	37,153		$	58,272		$	57,607
	Business and sports clubs				7,783			7,692			13,715			13,403
	Resorts				19,040			16,292			14,528			14,643
		Total Adjusted EBITDA for reportable segments			62,788			61,137			86,515			85,653
	Other operations				1,109			411			921			(1,014	)
	Corporate services				(13,231	)		(13,265	)		(21,665	)		(23,801	)
		Consolidated Adjusted EBITDA			50,666			48,283			65,771			60,838
			Depreciation and amortization		(19,856	)		(21,855	)		(39,040	)		(43,684	)
			Gain (loss) on divestitures and disposal of assets		(233	)		(73	)		16			(309	)
			Net membership deposits and fees		(8,246	)		(3,112	)		(10,041	)		(3,287	)
			Joint venture adjustment		(922	)		(46	)		(1,815	)		(488	)
		Consolidated operating income		$	21,409		$	23,197		$	14,891		$	13,070

Note 9.   Contingencies

ClubCorp is subject to certain pending or threatened litigation and other claims. Management, after review and consultation with legal counsel, believes that any potential liability arising from resolution of these matters will not materially affect ClubCorp’s consolidated financial position and results of operations.

8

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

Introduction

      ClubCorp, Inc. (referred to as ClubCorp ® or the Company) is a holding company incorporated under the laws of the State of Delaware that, through its subsidiaries, owns, operates and/or manages country clubs, golf clubs, public golf courses, business clubs, sports clubs, resorts, and certain related real estate through sole ownership, partial ownership (including joint venture interests) and management agreements. The Company’s primary sources of revenue include membership dues, membership fees and deposits, food and beverage operations, golf operations and lodging. The Company also receives management fees with respect to facilities that it manages for third parties.

      The earliest predecessor corporation of ClubCorp was organized in 1957 under the name Country Clubs, Inc. All historical references herein to ClubCorp include Country Clubs, Inc. and its successor corporations. For purposes of this document, unless the context indicates otherwise, references to the Company include ClubCorp and its subsidiaries. However, each of ClubCorp and its subsidiaries is careful to maintain its separate legal existence, and general references to the Company should not be interpreted to reduce in any way the legal distinctions among the subsidiaries or among ClubCorp and its subsidiaries.

      The following discussion of the Company’s financial condition and results of operations for the 12 and 24 weeks ended June 13, 2000 and June 12, 2001 should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 26, 2000, as filed with the Securities and Exchange Commission.

Results of Operations

12 Weeks Ended June 13, 2000 Compared to 12 Weeks Ended June 12, 2001

Consolidated Operations

      Operating revenues decreased to $263.7 million for the 12 weeks ended June 12, 2001 from $266.0 million for the 12 weeks ended June 13, 2000. This decrease is primarily due to decreases in food and beverage revenues attributable to the divestiture of facilities and decreased lodging revenues attributable to lower group business at the Company’s resorts as a result of the slowdown in the nation’s economy. This decrease is offset by an increase in membership dues at the Company’s private clubs due to price increases and the introduction of a new level of Associate Club benefit, Signature Gold, which provides enhanced privileges at a select group of the Company’s properties.

      Operating income increased to $23.2 million for the 12 weeks ended June 12, 2001 from $21.4 million for the 12 weeks ended June 13, 2000. This increase is due to lower operating costs and expenses and decreased selling, general and administrative expenses, offset by increased depreciation and amortization. Operating costs and expenses and selling, general and administrative expenses have declined as a result of expense controls put in place in response to the decrease in revenues at the Company’s facilities. These expense controls are offset by $2.0 million of property losses primarily related to flooding at several of the Company’s Houston area clubs, and severance expenses related to various cost cutting initiatives that the Company has undertaken in its corporate and other administrative functions. Depreciation and amortization increased due to recent capital expansions completed at existing facilities and increased usage of technology related assets with shorter depreciable lives.

      Income from operations before income taxes decreased to $9.9 million for the 12 weeks ended June 12, 2001 from $11.6 million for the 12 weeks ended June 13, 2000. This decrease is primarily due to an increase in interest expense as a result of higher levels of outstanding debt due to financing needs for capital expansions at existing facilities and development of new facilities.

      Management uses Adjusted EBITDA to monitor the performance of the Company and its facilities. Adjusted EBITDA consists of EBITDA, an industry standard calculation of earnings before interest, taxes, depreciation and amortization, gain (loss) on divestitures and disposals of assets, adjusted for net membership deposits and fees, and a joint venture adjustment. Consolidated Adjusted EBITDA decreased to $48.3 million for the 12 weeks ended June 12, 2001 from $50.7 million for the 12 weeks ended June 13, 2000, due primarily to decreases in net membership deposits and fees at the Company’s resorts and country club and golf facilities.

9

Segment and Other Information

Country Club and Golf Facilities

      The following table presents certain summary financial data and other operating data for the Company’s country club and golf facilities segment for the 12 week periods ended June 13, 2000 and June 12, 2001 (dollars in thousands):

		Same Store				Total
		Country Club and				Country Club and
		Golf Facilities				Golf Facilities
		2000		2001		2000		2001
Number of facilities			110		110		125		120
	Operating revenues	$	118,839	$	124,107	$	125,068	$	129,472
	Operating costs and expenses		87,045		90,084		93,513		95,222
	Depreciation and amortization		10,903		11,471		11,385		11,967
	Segment operating income	$	20,891	$	22,552	$	20,170	$	22,283
	Adjusted EBITDA	$	34,440	$	36,176	$	35,965	$	37,153

      Operating revenues increased $4.4 million for total country club and golf facilities for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This increase is primarily attributable to an increase in membership dues and golf revenues. The increase in membership dues is due to price increases in the Company’s dues structure in addition to the introduction of the Signature Gold benefit to the Company’s members. Despite a decrease in golf rounds at same store clubs, golf revenues have increased due to green fee increases and other golf related price increases at the Company’s clubs. These increases are offset by decreases attributable to divestitures.

      Segment operating income increased $2.1 million for total country club and golf facilities for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This increase is due to the increase in revenues mentioned above, offset by increased operating costs and expenses such as payroll and utilities. In addition, the Company divested three country club and golf facilities in the 12 weeks ended June 12, 2001, generating net gains of $1.5 million from divestiture of facilities.

      Adjusted EBITDA increased $1.2 million for total country club and golf facilities for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This increase is attributable to the change in segment operating income mentioned above offset by a decrease in net membership deposits and fees at same store country club and golf facilities. Although the total number of members of the Company’s country club and golf facilities have not declined, initiation deposits for full golf memberships at the Company’s high deposit clubs have decreased along with the slowdown in the economy.

10

Business and Sports Clubs

      The following table presents certain summary financial data and other operating data for the Company’s business and sports clubs segment for the 12 week periods ended June 13, 2000 and June 12, 2001 (dollars in thousands):

		Same Store Business				Total Business
		and Sports Clubs				and Sports Clubs
		2000		2001		2000		2001
Number of facilities			76		76		80		76
	Operating revenues	$	57,513	$	57,848	$	60,439	$	57,846
	Operating costs and expenses		49,573		50,215		52,613		50,081
	Depreciation and amortization		2,797		2,635		2,895		2,635
	Segment operating income	$	5,143	$	4,998	$	4,931	$	5,130
	Adjusted EBITDA	$	7,887	$	7,559	$	7,783	$	7,692

      Operating revenues decreased $2.6 million for total business and sports clubs for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This decrease is primarily due to the divestiture of four business and sports clubs since June 13, 2000. In addition, a decline in membership has resulted in a decrease in food and beverage and other revenues at same store clubs, offset by increases in membership dues as a result of price increases and the introduction of the Signature Gold benefit.

      Adjusted EBITDA remained constant for total business and sports clubs for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This is primarily due to the softening economy and a decrease in net membership deposits and fees at same store and total business and sports clubs.

11

Resorts

      The following table presents certain summary financial data and other operating data for the Company’s resorts segment for the 12 week periods ended June 13, 2000 and June 12, 2001 (dollars in thousands):

		Same Store and
		Total Resorts
		2000			2001
Number of facilities			5			5
	Operating revenues	$	61,256		$	60,187
	Operating costs and expenses		43,735			43,281
	Depreciation and amortization		3,149			3,495
	Segment operating income	$	14,372		$	13,411
	Adjusted EBITDA	$	19,040		$	16,292
Lodging data: (4 resorts) (1)     Room nights available			113,890			123,627
	Room nights occupied		77,623			72,027
	Occupancy rate		68.2	%		58.3	%
	Average daily room rate per occupied room	$	207		$	215
	Average daily revenue per occupied room	$	787		$	829

(1) Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead, Barton Creek and Daufuskie Island.

      Operating revenues decreased $1.1 million for total resorts for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This decrease is primarily due to significant declines in group business as a result of changing economic conditions. With the exception of Barton Creek, which added capacity within the past year, room nights are down at all of the Company’s resorts. While the Company’s resorts experienced a decline in room nights and occupancy rates, average daily room rate per occupied room and average daily revenue per occupied room both increased, reflecting higher pricing and increased spending associated with the increased percentage of social resort guests.

      Segment operating income decreased $1.0 million for total resorts for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This decrease is primarily due to the decrease in revenues mentioned above, offset by the effective management of payroll and other operating costs and expenses in response to reduced guest volume.

      Adjusted EBITDA at total resorts decreased $2.7 million for the 12 weeks ended June 12, 2001 versus the 12 weeks ended June 13, 2000. This decrease is due to the decrease in operating income mentioned above and a decrease of approximately $2.8 million in net membership fees at Barton Creek, which generated significantly higher membership fees in the 12 weeks ended June 13, 2000 related to the opening of a new golf course.

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24 Weeks Ended June 13, 2000 Compared to 24 Weeks Ended June 12, 2001

Consolidated Operations

      Operating revenues decreased to $463.5 million for the 24 weeks ended June 12, 2001 from $467.2 million for the 24 weeks ended June 13, 2000. This decrease is primarily due to decreases in food and beverage revenues attributable to the divestiture of facilities and decreased lodging revenues due to lower group business at the Company’s resorts as a result of the nation’s slowing economy. This decrease is offset by an increase in membership dues at the Company’s private clubs attributable to price increases in the Company’s dues structure.

      Operating income decreased to $13.1 million for the 24 weeks ended June 12, 2001 from $14.9 million for the 24 weeks ended June 13, 2000. This decrease is due to the decrease in revenues mentioned above and increased depreciation and amortization, offset by decreased operating costs and expenses and selling, general and administrative expenses. The increase in depreciation and amortization is primarily due to recent capital expansions completed at existing facilities and increased usage of technology related assets with shorter depreciable lives. The decrease in operating costs and expenses is primarily due to expense controls in areas such as payroll and maintenance expenses in response to the decrease in revenues at the Company’s facilities. The decrease in selling, general and administrative expenses is primarily due to various cost cutting initiatives that the Company has undertaken in its corporate and other administrative functions.

      The Company disposed of 11 properties in the 24 weeks ended June 12, 2001, resulting in net gains on divestitures and sales of assets of approximately $2.3 million, partially offsetting a loss of approximately ($2.6) million on the write off of its investment in Lifecast.com.

      Loss from operations before income tax benefit increased to ($15.3) million for the 24 weeks ended June 12, 2001 from ($5.5) million for the 24 weeks ended June 13, 2000. This increase is primarily due to the decrease in operating income mentioned above as well as higher interest expense as a result of increases in the level of outstanding debt. The increase in outstanding debt is attributable to financing needs for capital expansions at existing facilities, in addition to the development of new facilities.

      Consolidated Adjusted EBITDA decreased to $60.8 million for the 24 weeks ended June 12, 2001 from $65.8 million for the 24 weeks ended June 13, 2000, due primarily to decreases in net membership deposits and fees at the Company’s resorts and country club and golf facilities.

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Segment and Other Information — 24 Weeks

Country Club and Golf Facilities

      The following table presents certain summary financial data and other operating data for the Company’s country club and golf facility segment for the 24 week periods ended June 13, 2000 and June 12, 2001 (dollars in thousands):

		Same Store				Total
		Country Club and				Country Club and
		Golf Facilities				Golf Facilities
		2000		2001		2000		2001
Number of facilities			110		110		125		120
	Operating revenues	$	212,774	$	219,988	$	225,322	$	230,343
	Operating costs and expenses		161,177		167,873		173,753		176,357
	Depreciation and amortization		21,608		22,962		22,597		24,103
	Segment operating income	$	29,989	$	29,153	$	28,972	$	29,883
	Adjusted EBITDA	$	56,905	$	57,284	$	58,272	$	57,607

      Operating revenues increased $5.0 million at total country club and golf facilities for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. This increase is primarily due to an increase in membership dues and golf revenues. The increase in membership dues is a result of price increases in the Company’s dues structure. Despite a decrease in golf rounds at same store clubs, golf revenues have increased due to green fee increases and other golf related price increases at the Company’s clubs. These increases are offset by decreases attributable to divestitures.

      Segment operating income increased $0.9 million at total country club and golf facilities for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. This change is attributable to an increase in operating costs and expenses such as payroll and utilities, and an increase in depreciation and amortization associated with the completion of recent capital expansions. In addition, the Company divested seven country club and golf facilities in the 24 weeks ended June 12, 2001, generating net gains of $2.6 million from divestiture of facilities.

      Adjusted EBITDA decreased $0.7 million at total country club and golf facilities for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. This decrease is primarily due to a decrease in net membership deposits and fees at same store country club and golf facilities. Although the total number of members of the Company’s country club and golf facilities have not declined, initiation deposits for full golf memberships at the Company’s high deposit clubs have decreased along with the slowdown in the economy.

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Business and Sports Clubs

      The following table presents certain summary financial data and other operating data for the Company’s business and sports club segment for the 24 week periods ended June 13, 2000 and June 12, 2001 (dollars in thousands):

		Same Store Business				Total Business
		and Sports Clubs				and Sports Clubs
		2000		2001		2000		2001
Number of facilities			76		76		80		76
	Operating revenues	$	112,846	$	113,791	$	118,882	$	114,061
	Operating costs and expenses		98,716		100,122		104,889		100,215
	Depreciation and amortization		5,639		5,444		5,849		5,467
	Segment operating income	$	8,491	$	8,225	$	8,144	$	8,379
	Adjusted EBITDA	$	13,845	$	13,225	$	13,715	$	13,403

      Operating revenues decreased $4.8 million at total business and sports clubs for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. This decrease is primarily due to the divestiture of four business and sports clubs since June 13, 2000. In addition, a decline in membership has resulted in a decrease in food and beverage and other revenues at same store clubs, offset by increases in membership dues as a result of price increases and the introduction of the Signature Gold benefit.

      Adjusted EBITDA remained constant at total business and sports clubs for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. This is primarily due to the softening economy and a decrease in net membership deposits and fees at same store and total business and sports clubs.

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Resorts

      The following table presents certain summary financial data and other operating data for the Company’s resort segment for the 24 week period ended June 13, 2000 and June 12, 2001 (dollars in thousands):

		Same Store and
		Total Resorts
		2000			2001
Number of facilities			5			5
	Operating revenues	$	91,576		$	93,277
	Operating costs and expenses		78,735			77,465
	Depreciation and amortization		6,032			7,029
	Segment operating income	$	6,809		$	8,783
	Adjusted EBITDA	$	14,528		$	14,643
Lodging data: (4 resorts) (1)      Room nights available			223,582			243,897
	Room nights occupied		123,856			119,765
	Occupancy rate		55.4	%		49.1	%
	Average daily room rate per occupied room	$	186		$	196
	Average daily revenue per occupied room	$	735		$	770

(1) Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead, Barton Creek and Daufuskie Island.

      Operating revenues increased $1.7 million for total resorts for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. This increase is primarily due to increases in lodging, golf and food and beverage revenue at Barton Creek, which added lodging capacity within the past year. In addition, membership dues increased due to an increase in transfer fees at Pinehurst and price increases in dues at all of the Company’s resorts. These increases are offset by decreases in room nights and golf merchandise sales. Room nights and occupancy rates are down at The Homestead, Pinehurst, and Daufuskie Island as a result of lower group business associated with the slowdown in the nation’s economy, partially offset by a more stable market for social room nights. Pinehurst sold a significant amount of excess pro shop inventory in the prior year, accounting for the current decrease in golf merchandise sales. Average daily room rate per occupied room has increased as a result of a higher percentage of social resort guests. Average daily revenue per occupied room has increased due to higher spending by guests on other amenities such as spa and skiing facilities, which generated revenues in the ski season due to favorable snow conditions.

      Segment operating income increased $2.0 million for total resorts for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2001. This improvement is due to the increase in revenues noted above in addition to decreased operating costs and expenses. The decrease in operating costs and expenses is due to the effective management of payroll and other operating costs and expenses in response to reduced guest volume, in addition to a prior year inventory write-down of pro shop merchandise at Pinehurst.

      Adjusted EBITDA increased slightly for the 24 weeks ended June 12, 2001 versus the 24 weeks ended June 13, 2000. While operating income increased as discussed above, net membership deposits and fees decreased. Approximately $3.5 million of this decrease is due to Barton Creek, which generated significantly higher membership fees in the 24 weeks ended June 13, 2000 related to the opening of a new golf course.

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Other Operations

      Realty operating revenues decreased $3.2 million to $12.9 million in the 24 weeks ended June 12, 2001 from $16.1 million for the 24 weeks ended June 13, 2000. This decrease is primarily due to decreased closings of units in the Company’s Owner’s Club program, partially offset by an increase in sales of land held for sale.

      International operating revenues increased slightly to $6.1 million in the 24 weeks ended June 12, 2001 from $5.9 million for the 24 weeks ended June 13, 2000. This increase is due to the acquisition of one country club and golf facility and the opening of three in-development properties, offset by the divestiture of four international properties.

Seasonality of Demand; Fluctuations in Quarterly Results

      The Company’s quarterly results fluctuate as a result of a number of factors. Usage of the Company’s 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. The Company’s 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 weeks of operations and the first, second and third quarters consist of 12 weeks. As a result of these factors, the Company usually generates a disproportionate share of its revenues in the second, third, and fourth quarters of each year and has lower revenues in the first quarter. The timing of purchases, sales, leases of facilities, or divestitures also has caused and may cause the Company’s results of operations to vary significantly in otherwise comparable periods. In addition, the Company’s results can be affected by non-seasonal and severe weather patterns.

Liquidity and Capital Resources

      Historically, the Company has financed its operations and capital expenditures primarily through cash flows from operations, proceeds from divestitures, and long-term debt. The Company’s primary cash needs consist of capital to finance future acquisitions and development, capital expansions at existing and new facilities and working capital. The Company distinguishes capital expenditures to refurbish and replace existing property and equipment (i.e., capital replacements) from discretionary capital expenditures such as the expansion of existing facilities (i.e., capital expansions). Most capital expenditures other than capital replacements are considered discretionary and could be curtailed in periods of low liquidity. Capital replacements are planned expenditures made each year to maintain high quality standards of facilities for the purpose of meeting existing members’ expectations and to attract new members. Capital expansions are discretionary expenditures, which create new amenities or enhance existing amenities at existing facilities. The Company has several “to be built” facilities that are currently being funded and are projected to begin generating cash flows in the remainder of 2001 and 2002. Although total capital expenditures for additions to property and equipment and expansion of new facilities have exceeded $275 million during each of the last two fiscal years, capital expenditures for the 24 weeks ended June 12, 2001 were lower than in recent periods. Thus, the Company’s trend of increased capital expenditures over the last two years is not expected to continue in 2001.

      As part of its normal business practices, the Company is currently in the process of disposing of certain properties. As of July 24, 2001, the Company has completed the disposal of 13 properties for total proceeds of approximately $20.7 million. Estimated proceeds in the range of $85 to $90 million are expected to be realized on sales of additional properties within the next year. The Company plans to use a significant portion of these proceeds to fund its current expansion and development projects, which are reliant on the completion of these asset sales and receipt of their anticipated proceeds. The completion of these asset sales represent a higher priority for the Company, as future cash availability from the Company’s primary long-term debt agreement will be limited by covenants that become more restrictive in the third quarter of 2001.

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

      Certain information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including projections of earnings, revenues or other financial items, statements of the plans and objectives of management for future operations, statements concerning proposed new services, statements regarding future economic conditions or performance, statements about market risk and statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by

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the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Company’s forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of which are summarized in this section and in the Company’s Form 10-K for the year ended December 26, 2000.

      The Company’s success depends on its ability to attract and retain members at its clubs and maintain or increase usage of its facilities. The Company has experienced varying levels of membership enrollment and attrition rates and, in certain areas, decreased levels of usage of its facilities during its 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 the Company’s control, including weather conditions, general economic conditions, changes in demand for golf and private club services and changes in the federal tax laws. There can be no assurance that the Company 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 the Company’s business, operating results, and financial condition. Other factors that may affect the Company’s operating results include, but are not limited to, the actions of our competitors, changes in labor costs, the timing and success of acquisitions and dispositions and changes in law.

Recently Issued Accounting Pronouncements

      On July 20, 2001, the FASB issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” This statement will be effective for fiscal years beginning after December 15, 2001. Under the provisions of FAS 142, the cost of certain of the Company’s intangible assets will no longer be subject to amortization. Management has not made a final determination as to the impact of this new pronouncement on its Consolidated Balance Sheet or Statement of Operations.

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PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

      On May 3, 2001, the shareholders of ClubCorp, Inc., held their annual meeting to elect directors. The following directors were elected:

Robert H. Dedman, Sr., Robert H. Dedman, Jr., Patricia Dedman Dietz, James M. Hinckley, James L. Singleton and Bahram Shirazi.

There were no other matters submitted to a vote of stockholders at the meeting.

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

      15.1 — Letter from KPMG LLP regarding unaudited interim financial statements

      24.1 — Power of Attorney

      (b) Reports on Form 8-K

      Not applicable

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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:	July 24, 2001	By:	/s/ Charles A. Little
			Charles A. Little Senior Vice President and Chief Accounting Officer

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INDEX TO EXHIBITS

EXHIBIT
NUMBER		DESCRIPTION
15.1	—	Letter from KPMG LLP regarding unaudited interim financial statements
24.1	—	Power of Attorney