Clubcorp 10-Q 2001 Q3 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 September 4, 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
(State or other jurisdiction
of incorporation or organization) 75-2778488
(I.R.S. employer
identification no.)

3030 LBJ Freeway, Suite 700
(Address of principal executive offices) Dallas, Texas 75234
(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 October 16, 2001 was 93,889,798.

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 6. Exhibits and Reports on Form 8-K
EX-10.1 Executive Stock Option Plan
EX-10.2 Omnibus Stock Plan
Letter from KPMG LLP
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 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 September 4, 2001, and the related consolidated statements of operations for the twelve weeks and thirty six weeks ended September 4, 2001 and September 5, 2000 and cash flows for the thirty six weeks ended September 4, 2001 and September 5, 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
October 9, 2001

ClubCorp, Inc.

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

			December 26,			September 4,
			2000			2001
Assets
Current assets:
	Cash and cash equivalents		$	24,771		$	8,470
	Membership and other receivables, net			122,158			116,378
	Inventories			23,369			23,670
	Other assets			20,517			22,364
		Total current assets		190,815			170,882
Property and equipment, net				1,295,435			1,323,897
Other assets				259,331			174,287
Total assets			$	1,745,581		$	1,669,066
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable and accrued liabilities		$	78,315		$	71,194
	Long-term debt — current portion			49,326			54,772
	Other liabilities			116,181			123,270
		Total current liabilities		243,822			249,236
Long-term debt				643,078			571,452
Other liabilities				143,284			163,602
Membership deposits				104,757			111,732
Redemption value of common stock held by benefit plan				66,379			63,259
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 93,889,798 outstanding at September 4, 2001			996			996
	Additional paid-in capital			161,684			161,674
	Accumulated other comprehensive loss			(4,080	)		(6,537	)
	Retained earnings			439,802			411,666
	Treasury stock, 5,488,933 shares at December 26, 2000 and 5,704,610 shares at September 4, 2001			(54,141	)		(58,014	)
		Total stockholders’ equity		544,261			509,785
		Total liabilities and equity	$	1,745,581		$	1,669,066

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						36 Weeks Ended
	September 5,			September 4,			September 5,			September 4,
	2000			2001			2000			2001
Operating revenues	$	253,242		$	241,162		$	717,899		$	704,663
Operating costs and expenses		195,494			185,452			567,315			553,549
Depreciation and amortization		21,732			22,879			60,772			66,563
Selling, general and administrative expenses		18,993			17,100			57,914			55,410
Gain (loss) on divestitures and impairment of assets		118			(31,364	)		134			(31,704	)
Operating income (loss)		17,141			(15,633	)		32,032			(2,563	)
Interest expense		(13,615	)		(13,873	)		(36,265	)		(43,744	)
Other income		666			591			1,959			2,236
Income (loss) from operations before income tax benefit (provision)		4,192			(28,915	)		(2,274	)		(44,071	)
Income tax benefit (provision)		(3,060	)		8,658			(3,421	)		13,027
Minority interest		189			(22	)		1,188			(212	)
Net income (loss)		1,321			(20,279	)	$	(4,507	)	$	(31,256	)
Basic and diluted income (loss) per share	$	.01		$	(.21	)	$	(.05	)	$	(.33	)

See accompanying condensed notes to consolidated financial statements.

3

ClubCorp, Inc.

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

				36 Weeks Ended
				September 5,			September 4,
				2000			2001
Cash flows from operations:
	Net loss			$	(4,507	)	$	(31,256	)
	Adjustments to reconcile net loss to cash flows provided from operations:
		Depreciation and amortization			60,772			66,563
		(Gain) loss on divestitures and impairment of assets			(134	)		31,704
		Amortization of discount on membership deposits			6,787			6,450
		Deferred income taxes			1,299			(15,103	)
		Decrease in real estate held for sale			10,536			6,962
		Decrease (increase) in membership and other receivables, net			(13,774	)		5,703
		Decrease in accounts payable and accrued liabilities			(2,922	)		(483	)
		Net change in deferred membership revenues			11,118			5,838
		Other			10,163			5,354
			Cash flows provided from operations		79,338			81,732
Cash flows from investing activities:
	Additions to property and equipment				(113,815	)		(85,827	)
	Development of new facilities				(35,225	)		(34,534	)
	Development of real estate held for sale				(20,989	)		(4,040	)
	Acquisition of facilities				(32,598	)		—
	Investment in affiliates				(5,272	)		—
	Proceeds from dispositions and sales of assets, net				10,303			51,110
	Other				(1,478	)		3,264
		Cash flows used by investing activities			(199,074	)		(70,027	)
Cash flows from financing activities:
	Borrowings of long-term debt				133,695			—
	Repayments of long-term debt				(16,131	)		(25,720	)
	Membership deposits received, net				1,632			1,364
	Treasury stock transactions, net				(4,825	)		(3,650	)
		Cash flows provided from financing activities			114,371			(28,006	)
Total net cash flows					(5,365	)		(16,301	)
Cash and cash equivalents at beginning of period					36,606			24,771
Cash and cash equivalents at end of period				$	31,241		$	8,470

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 September 4, 2001, the consolidated results of operations for the 12 and 36 weeks ended September 5, 2000 and September 4, 2001 and cash flows for the 36 weeks ended September 5, 2000 and September 4, 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.

Impairment of long-lived assets
Long-lived assets to be held and used and to be disposed of by an entity are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Any impairments are included in gain (loss) on divestitures and impairment of assets in the Consolidated Statement of Operations.

Prior to December 26, 2000, management approved plans to dispose of certain facilities in various segments during 2001 and recorded an impairment loss to write down the carrying value of these facilities for the year ended December 26, 2000. Due to changes in estimates of sales price for several of these facilities, an adjustment to reduce the carrying value of these assets of $505,000 and $536,000 was recorded in the 12 and 36 weeks ended September 4, 2001, respectively.

During the 12 weeks ended September 4, 2001, the majority of an investment in an affiliate accounted for on the equity method was sold to a third party at a substantially lower price than its carrying value resulting in a loss of $21,555,000. Subsequent to this, an impairment loss of $1,887,000 was recorded on the portion of the investment retained to reflect its fair value. Both losses are reflected in gain (loss) on divestitures and impairment of assets in the Consolidated Statement of Operations. The Company had planned to hold this investment on a long term basis prior to its change in investment strategy and had determined that no impairment existed on a long term basis.

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. While management has not made a final determination as to the impact of this new pronouncement on its Consolidated Balance Sheet or Consolidated Statement of Operations, management does not believe such implementation will have a significant impact.

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

5

ClubCorp, Inc.

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 September 4, 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 $225,000,000 notional amount of indebtedness with swap maturity dates ranging from June 2003 through September 2003. These hedges are considered highly effective, however, for the 12 and 36 weeks ended September 4, 2001, ClubCorp recorded $17,000 and $213,000, respectively, as interest expense for the ineffective portion of these instruments. The aggregate fair market value of all interest rate swap contracts was ($9,265,000) on September 4, 2001 and is included in other liabilities on the Consolidated Balance Sheet.

Note 3.    Operating revenues
ClubCorp recognizes revenues from the following sources:

		12 Weeks Ended				36 Weeks Ended
		September 5,		September 4,		September 5,		September 4,
		2000		2001		2000		2001
Membership fees and deposits		$	10,100	$	9,385	$	30,808	$	27,934
Membership dues			75,060		76,441		224,139		230,261
Golf operations revenues			55,029		53,670		150,580		149,531
Food and beverage revenues			62,463		58,381		187,187		180,143
Lodging revenues			17,682		15,616		45,627		42,711
Other revenues			32,908		27,669		79,558		74,083
	Total operating revenues	$	253,242	$	241,162	$	717,899	$	704,663

Note 4.    Income tax benefit (provision)
The income tax benefit (provision) for the 12 and 36 weeks ended September 5, 2000 and September 4, 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				36 Weeks Ended
		September 5,		September 4,		September 5,		September 4,
		2000		2001		2000		2001
Weighted average shares outstanding			94,216,333		93,898,092		94,339,198		94,020,364
Incremental shares from assumed conversions:
	Options		1,259,205		—		—		—
	Warrants		7,096		—		—		—
Diluted weighted average shares			95,482,634		93,898,092		94,339,198		94,020,364

6

ClubCorp, Inc.

(Note 5 continued)

Diluted weighted average shares for the 12 weeks ended September 4, 2001 excludes incremental shares from assumed conversion of 933,307 shares due to the net losses for the period. Diluted weighted average shares for the 36 weeks ended September 5, 2000 and September 4, 2001 excludes incremental shares from assumed conversion of 1,284,079 and 965,313 shares, respectively, due to the net losses for the periods.

Note 6.    Property and equipment
Property and equipment consists of the following (dollars in thousands):

	December 26,			September 4,
	2000			2001
Land and land improvements	$	623,516		$	643,237
Buildings and recreational facilities		432,645			442,460
Leasehold improvements		110,643			123,754
Furniture and fixtures		131,078			136,669
Machinery and equipment		274,440			280,002
Construction in progress		126,981			153,467
		1,699,303			1,779,589
Accumulated depreciation and amortization		(403,868	)		(455,692	)
	$	1,295,435		$	1,323,897

Note 7.    Comprehensive income (loss)
The following summarizes the components of comprehensive income (loss) (dollars in thousands):

	12 Weeks Ended						36 Weeks Ended
	September 5,			September 4,			September 5,			September 4,
	2000			2001			2000			2001
Net income (loss)	$	1,321		$	(20,279	)	$	(4,507	)	$	(31,256	)
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		—			(535	)		—			(3,634	)
Foreign currency translation adjustment		(730	)		4,455			(2,747	)		3,296
Total comprehensive income (loss)	$	591		$	(16,359	)	$	(7,254	)	$	(33,713	)

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, or earnings before interest, taxes, depreciation and amortization, gain (loss) on divestitures and impairment 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						36 Weeks Ended
			September 5,			September 4,			September 5,			September 4,
			2000			2001			2000			2001
Operating revenues:
	Country club and golf facilities		$	125,107		$	123,734		$	350,429		$	354,077
	Business and sports clubs			51,567			50,943			167,884			165,004
	Resorts			53,653			50,693			145,229			143,969
		Total operating revenues for reportable segments		230,327			225,370			663,542			663,050
	Other operations			21,609			13,486			43,551			32,389
	Corporate services			1,306			2,306			10,806			9,224
		Consolidated operating revenues	$	253,242		$	241,162		$	717,899		$	704,663
Adjusted EBITDA:
	Country club and golf facilities		$	30,947		$	31,218		$	88,585		$	88,789
	Business and sports clubs			4,040			4,934			17,647			18,271
	Resorts			10,871			9,020			25,669			23,610
		Total Adjusted EBITDA for reportable segments		45,858			45,172			131,901			130,670
	Other operations			6,272			1,920			3,478			3,396
	Corporate services			(7,744	)		(6,050	)		(29,501	)		(29,306	)
		Consolidated Adjusted EBITDA		44,386			41,042			105,878			104,760
		Depreciation and amortization		(21,732	)		(22,879	)		(60,772	)		(66,563	)
		Gain (loss) on divestitures, sales and impairment of assets		118			(31,363	)		134			(31,704	)
		Net membership deposits and fees		(4,931	)		(2,732	)		(12,317	)		(7,658	)
		Joint venture adjustment		(700	)		299			(891	)		(1,398	)
	Consolidated operating income (loss)		$	17,141		$	(15,633	)	$	32,032		$	(2,563	)

Note 9.    Related Party Transactions
On September 4, 2001, ClubCorp sold its stock of a wholly owned subsidiary, The Owners Club at Telluride, which owned a majority interest in Telluride Club Mountain Village, LLC. to a group of three executive officers for assumption of $22,200,000 of liabilities in a stock purchase agreement resulting in a net loss on divestiture of assets of $3,800,000. ClubCorp continues to provide management services under an existing management agreement.

Note 10.    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 36 weeks ended September 5, 2000 and September 4, 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 September 5, 2000 Compared to 12 Weeks Ended September 4, 2001

Consolidated Operations

        Operating revenues decreased to $241.2 million for the 12 weeks ended September 4, 2001 from $253.2 million for the 12 weeks ended September 5, 2000. This decrease is primarily due to decreases in food and beverage sales, golf operations revenue, room nights, and sales of ownership units in the Company’s Owners Club program as a result of the Company’s continued divestiture of non-strategic assets and the nation’s slowing economy. Revenues and room nights at the Company’s clubs and resorts have been impacted by decreased member and guest usage and reductions in corporate spending, while real estate sales have been affected by the general slowdown in the vacation housing market. These decreases are partially offset by an increase in membership dues at the Company’s private clubs as a result of 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.

        Excluding the impact of net gains (losses) on divestitures and impairment of assets, operating income decreased to $15.7 million for the 12 weeks ended September 4, 2001 from $17.0 million for the 12 weeks ended September 5, 2000. This decrease is due to the decrease in revenues mentioned above, partially offset by lower operating costs and expenses and selling, general and administrative expenses attributable to expense controls implemented in response to declining revenues.

        Net loss on divestitures and impairment of assets was $31.4 million for the 12 weeks ended September 4, 2001, primarily due to the Company’s sale of a 25.0% interest in ClubLink Corporation (ClubLink), a publicly traded company that owns and operates golf facilities and resorts in Canada. The Company planned to hold this investment on a long-term basis prior to its change in investment strategy and had determined that no impairment existed on a long-term basis. The sale generated a loss of approximately $21.6 million on proceeds of $16.0 million, as well as a related $1.9 million impairment loss on the Company’s remaining investment in ClubLink. Additionally, the Company continued its disposition of assets, selling its interest in PGA European Tour Courses, PLC (ETC) for $13.9 million with a loss of $2.0 million, as well as divesting four properties for a net loss of $5.4 million, including a $3.8 million loss on a sale to a related party. See Note 9 to the Condensed Notes to the Company’s Consolidated Financial Statements.

        Management uses Adjusted EBITDA to monitor the performance of the Company and its properties. Adjusted EBITDA consists of EBITDA, or earnings before interest, taxes, depreciation and amortization, gain (loss) on divestitures and impairment of assets, adjusted for net membership deposits and fees, and a joint venture adjustment. Consolidated

9

Adjusted EBITDA decreased to $41.0 million for the 12 weeks ended September 4, 2001 from $44.4 million for the 12 weeks ended September 5, 2000. This decrease is primarily due to the decrease in operating income mentioned above and decreases in net membership deposits and fees at same store facilities, as initiation deposits for full golf memberships at the Company’s high deposit clubs have decreased along with the slowdown in the economy.

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 weeks ended September 5, 2000 and September 4, 2001 (dollars in thousands):

		Same Store					Total
		Country Club and					Country Club and
		Golf Facilities					Golf Facilities
		2000		2001			2000		2001
Number of facilities			108		108			127		118
	Operating revenues	$	115,992	$	120,130		$	125,107	$	123,734
	Operating costs and expenses		88,726		91,986			97,731		96,040
	Depreciation and amortization		11,105		11,208			11,929		11,711
	Gain (loss) on divestitures and impairment of assets		—		(505	)		1,113		(2,836	)
	Segment operating income	$	16,161	$	16,431		$	16,560	$	13,147
	Adjusted EBITDA	$	29,454	$	29,277		$	30,947	$	31,218

        Operating revenues decreased $1.4 million for total country club and golf facilities for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 2000. This decrease is primarily due to a decrease in food and beverage revenues partially offset by an increase in membership dues. The decrease in food and beverage sales is due to the divestiture of 12 clubs since September 5, 2000 (offset by the addition of three in-development properties), and lower member and guest spending due to the slowdown of the nation’s economy. The increase in membership dues is a result of price increases. The increase in revenues at same store country club and golf facilities is due to price increases in membership dues and golf operations.

        Excluding the impact of net gains (losses) on divestitures and impairment of assets, operating income increased to $16.0 million for the 12 weeks ended September 4, 2001 from $15.4 million for the 12 weeks ended September 5, 2000. This increase is primarily due to a reduction in operating costs and expenses due to expense controls implemented in response to the decrease in revenues at these facilities. The Company divested two country club and golf facilities in the 12 weeks ended September 4, 2001, generating net losses of $2.3 million. In addition, an impairment loss of $0.5 million was recorded to write-down the carrying value a property to be disposed based on its estimated sales value less costs of disposal.

        Adjusted EBITDA increased slightly for total country club and golf facilities for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 2000. This increase is primarily due to an increase in net membership deposits and fees related to the opening of one country club and golf facility. Net membership deposits and fees at same store country club and golf facilities have decreased as 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 clubs segment for the 12 weeks ended September 5, 2000 and September 4, 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	$	49,648	$	50,944	$	51,567		$	50,943
	Operating costs and expenses		44,948		45,759		47,283			45,760
	Depreciation and amortization		2,777		3,258		2,868			3,258
	Gain (loss) on divestitures and impairment of assets		—		—		(186	)		—
	Segment operating income	$	1,923	$	1,927	$	1,230		$	1,925
	Adjusted EBITDA	$	4,457	$	4,937	$	4,040		$	4,934

        Operating revenues decreased $0.6 million for total business and sports clubs for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 2000. This decrease is primarily due to a decline in food and beverage sales due to the divestiture of four clubs since September 5, 2000 and a decline in membership at same store clubs. This decrease is partially offset by increases in membership dues as a result of price increases and the introduction of the Signature Gold benefit.

        Segment operating income increased $0.7 million for total business and sports clubs for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 2000. This increase is primarily due to the divestiture of underperforming facilities and the effective management of food and beverage payroll and other operating expenses at same store clubs.

        Adjusted EBITDA increased $0.9 million for total business and sports clubs for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 2000. This increase is primarily due to the increase in operating income mentioned above.

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Resorts

        The following table presents certain summary financial data and other operating data for the Company’s resorts segment for the 12 weeks ended September 5, 2000 and September 4, 2001 (dollars in thousands):

			Same Store and
			Total Resorts
			2000			2001
Number of facilities				5			5
	Operating revenues		$	53,653		$	50,693
	Operating costs and expenses			43,131			40,945
	Depreciation and amortization			3,684			3,830
	Segment operating income		$	6,838		$	5,918
		Adjusted EBITDA	$	10,871		$	9,020
Lodging data: (4 resorts) (1)
	Room nights available			122,695			124,333
	Room nights occupied			78,682			70,731
	Occupancy rate			64.1	%		56.9	%
	Average daily room rate per occupied room		$	184		$	182
	Average daily revenue per occupied room		$	680		$	712

(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 $3.0 million for total resorts for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 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 were down at each of the Company’s resorts. The average daily room rate per occupied room decreased from the prior year due primarily to discounted rates and promotions that were implemented to attract resort guests during the quarter. While revenues and most operating statistics declined, average daily revenue per occupied room increased due to higher spending associated with the increased percentage of social resort guests.

        Segment operating income decreased $0.9 million for total resorts for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 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 $1.9 million for the 12 weeks ended September 4, 2001 versus the 12 weeks ended September 5, 2000. This decrease is primarily due to the decrease in operating income mentioned above and a decrease in membership fees at Barton Creek, which generated significantly higher fees in the 12 weeks ended September 5, 2000 related to the opening of a new golf course.

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Other Operations

        Realty operating revenues decreased $6.7 million to $9.5 million in the 12 weeks ended September 4, 2001 from $16.2 million for the 12 weeks ended September 5, 2000. This decrease is primarily due to decreased closings of units in the Company’s Owners Club program. Effective September 4, 2001, the Company sold the stock of its wholly owned subsidiary, The Owners Club at Telluride, which owned an interest in Telluride Club Mountain Village LLC, to a related party. Upon completion of this transaction, the Company recorded a loss of approximately $3.8 million. See Note 9 to the Condensed Notes to the Company’s Consolidated Financial Statements.

        International operating revenues decreased $1.4 million to $4.0 million in the 12 weeks ended September 4, 2001 from $5.4 million for the 12 weeks ended September 5, 2000. This decrease is primarily due to the divestiture of three international properties since September 5, 2000, partially offset by the acquisition of one country club and golf facility and the opening of three in-development properties. In addition to the international property divestitures mentioned above, the Company further reduced its international holdings in the 12 weeks ended September 4, 2001 by selling publicly traded equity investments in ClubLink and ETC.

36 Weeks Ended September 5, 2000 Compared to 36 Weeks Ended September 4, 2001

Consolidated Operations

        Operating revenues decreased to $704.7 million for the 36 weeks ended September 4, 2001 from $717.9 million for the 36 weeks ended September 5, 2000. This decrease is primarily due to decreases in food and beverage sales, golf operations revenue, room nights, and sales of ownership units in the Company’s Owners Club program as a result of the Company’s continued divestiture of non-strategic assets and the nation’s slowing economy. Revenues and room nights at the Company’s clubs and resorts have been impacted by decreased member and guest usage and reductions in corporate spending, while real estate sales have been affected by the general slowdown in the vacation housing market. These decreases are offset by an increase in membership dues at the Company’s private clubs as a result of price increases and the introduction of the Signature Gold benefit.

        Excluding the impact of net gains (losses) on divestitures and impairment of assets, operating income decreased to $29.1 million for the 36 weeks ended September 4, 2001 from $31.9 million for the 36 weeks ended September 5, 2000. This decrease is due to the decline in revenues mentioned above and increased depreciation and amortization, partially 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 useful lives. The decrease in operating costs and expenses is primarily due to expense controls in response to declining revenues. The decrease in selling, general and administrative expenses is primarily due to cost cutting initiatives that the Company has undertaken in its corporate and other administrative functions.

        Net loss on divestitures and impairment of assets was $31.7 million for the 36 weeks ended September 4, 2001. The Company has disposed of certain significant equity investments, including ETC, ClubLink, and Lifecast.com, recording losses of $26.1 million on the divestiture of these investments. In addition, the Company disposed of 15 properties in the 36 weeks ended September 4, 2001, resulting in net losses of $3.2 million. Impairment losses of $2.4 million were recorded to write-down the remaining investment in ClubLink and the carrying value of certain properties to be disposed.

        Income (loss) from operations before income tax benefit decreased to ($44.1) million for the 36 weeks ended September 4, 2001 from ($2.3) million for the 36 weeks ended September 5, 2000. This decrease is primarily due to the decrease in operating income mentioned above as well as higher interest expense. The increase in interest expense is due to higher levels of outstanding debt attributable to financing needs for capital expansion and development projects, partially offset by a decrease in variable interest rates.

        Consolidated Adjusted EBITDA decreased to $104.8 million for the 36 weeks ended September 4, 2001 from $105.9 million for the 36 weeks ended September 5, 2000, due primarily to the decrease in operating income mentioned

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above and a decrease in net membership deposits and fees, as initiation deposits for full golf memberships at the Company’s high deposit clubs have decreased along with the slowdown in the economy.

Segment and Other Information — 36 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 facilities segment for the 36 weeks ended September 5, 2000 and September 4, 2001 (dollars in thousands):

		Same Store					Total
		Country Club and					Country Club and
		Golf Facilities					Golf Facilities
		2000		2001			2000		2001
Number of facilities			108		108			127		118
	Operating revenues	$	328,736	$	339,317		$	350,429	$	354,077
	Operating costs and expenses		250,442		258,887			272,053		274,659
	Depreciation and amortization		32,714		34,058			34,526		35,814
	Gain (loss) on divestitures and impairment of assets		—		(833	)		1,682		(750	)
	Segment operating income	$	45,580	$	45,539		$	45,532	$	42,854
	Adjusted EBITDA	$	86,170	$	85,684		$	88,585	$	88,789

        Operating revenues increased $3.6 million at total country club and golf facilities for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This increase is primarily due to an increase in membership dues, offset by decreased food and beverage sales. The increase in membership dues is a result of price increases and the introduction of the Signature Gold benefit. Food and beverage revenues have decreased due to divestitures and lower member and guest spending due to the slowdown of the economy.

        Excluding the impact of net losses on divestitures and impairment of assets, operating income decreased slightly to $43.6 million for the 12 weeks ended September 4, 2001 from $43.8 million for the 12 weeks ended September 5, 2000. This decrease is primarily due to increased depreciation and amortization due to recent capital expansions completed at existing facilities and increased usage of technology related assets with shorter useful lives. An impairment loss of $0.8 million was recorded to write-down the carrying value of certain properties to be disposed based on their estimated sales values less costs of disposal.

        Adjusted EBITDA increased slightly at total country club and golf facilities for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This increase is primarily due to an increase in net membership deposits and fees related to the opening of one country club and golf facility. Net membership deposits and fees at same store country club and golf facilities have decreased as 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 clubs segment for the 36 weeks ended September 5, 2000 and September 4, 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	$	159,930	$	164,734	$	167,884		$	165,004
	Operating costs and expenses		140,915		145,880		149,423			145,974
	Depreciation and amortization		8,416		8,702		8,717			8,725
	Gain (loss) on divestitures and impairment of assets		—		—		(371	)		195
	Segment operating income	$	10,599	$	10,152	$	9,373		$	10,500
	Adjusted EBITDA	$	18,205	$	18,095	$	17,647		$	18,271

        Operating revenues decreased $2.9 million at total business and sports clubs for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This decrease is primarily due to the divestiture of four business and sports clubs since September 5, 2000. In addition, a decline in membership has resulted in a decrease in food and beverage 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.

        Segment operating income increased $1.1 million at total business and sports clubs for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This increase is primarily due to the divestiture of underperforming facilities and the effective management of food and beverage payroll and other operating expenses at same store clubs.

        Adjusted EBITDA increased $0.6 million at total business and sports clubs for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This increase is primarily due to the increase in operating income mentioned above.

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Resorts

        The following table presents certain summary financial data and other operating data for the Company’s resorts segment for the 36 weeks ended September 5, 2000 and September 4, 2001 (dollars in thousands):

		Same Store and
		Total Resorts
		2000			2001
Number of facilities			5			5
	Operating revenues	$	145,229			143,969
	Operating costs and expenses		121,866			118,410
	Depreciation and amortization		9,716			10,858
	Segment operating income	$	13,647		$	14,701
	Adjusted EBITDA	$	25,669		$	23,610
Lodging data: (4 resorts) (1) Room nights available			346,278			368,230
	Room nights occupied		202,538			190,496
	Occupancy rate		58.5	%		51.7	%
	Average daily room rate per occupied room	$	185		$	191
	Average daily revenue per occupied room	$	714		$	749

(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 $1.3 million for total resorts for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This decrease is primarily due to decreased revenues attributable to lower group business associated with the slowdown in the nation’s economy, offset by an increase in membership dues. Room nights were down at each of the Company’s resort properties, with the exception of Barton Creek, which added lodging capacity within the past year. Greens fees and food and beverage sales are down due to the decrease in guest occupancy levels at the resorts. Pinehurst sold a significant amount of excess pro shop inventory in the prior year, resulting in a decline in current year golf merchandise sales. Membership dues increased due to an increase in transfer fees at Pinehurst and price increases in dues at all of the Company’s resorts. 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 resort guests.

        Segment operating income increased $1.1 million for total resorts for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This improvement is due to 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 decreased $2.1 million for total resorts for the 36 weeks ended September 4, 2001 versus the 36 weeks ended September 5, 2000. This decrease is primarily due to a decrease in membership fees at Barton Creek, which generated significantly higher fees in the 36 weeks ended September 5, 2000 related to the opening of a new golf course.

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Other Operations

        Realty operating revenues decreased $9.9 million to $22.3 million in the 36 weeks ended September 4, 2001 from $32.2 million for the 36 weeks ended September 5, 2000. This decrease is primarily due to decreased closings of units in the Company’s Owners Club program.

        International operating revenues decreased $1.3 million to $10.1 million in the 36 weeks ended September 4, 2001 from $11.4 million for the 36 weeks ended September 5, 2000. This decrease is primarily due to the divestiture of three international properties since September 5, 2000, partially offset by the acquisition of one country club and golf facility and the opening of three in-development properties. In addition to the international property divestitures mentioned above, the Company further reduced its international holdings in the 12 weeks ended September 4, 2001 by selling publicly traded equity investments in ClubLink and ETC.

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, or leases of facilities 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 as well as downturns in the economy.

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 in 2002. Although total capital expenditures for additions to property and equipment and expansion of new facilities exceeded $170 million for the 36 weeks ended September 5, 2000, capital expenditures for the 36 weeks ended September 4, 2001 were below $125 million and lower than in recent fiscal years. Thus, the Company’s trend of increased capital expenditures over the last two years is not expected to continue in 2001 or the immediate future.

        As part of its normal business practices, the Company is currently in the process of disposing certain properties. Year to date, the Company has completed the disposal of 15 properties for total proceeds of approximately $21.2 million. In addition, the Company completed the sales of equity investments in ETC and ClubLink, receiving proceeds of $13.9 million and $16.0 million, respectively. These funds were used to reduce the balance of the Company’s primary long-term credit facility, which in turn provides flexibility to fund current expansion and development projects. Estimated proceeds in the range of $75 to $80 million are expected to be realized on sales of additional properties within the next year. The completion of these asset sales and subsequent reductions of debt represent a high priority for the Company, as future cash availability from the Company’s primary long-term credit facility will be limited by covenants that became more restrictive in the third quarter of 2001 and will tighten further at year-end 2001. The Company believes that without the successful completion of these asset sales or a waiver of certain covenants by the lenders, there is no assurance that it will be in compliance with its debt covenants at year-end 2001 or in the immediate future thereafter.

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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 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.

        The recent terrorist attacks on the U.S. have created additional uncertainty in the state of the overall U.S. economy. As a result of the uncertainty caused by these events, the Company’s operating performance was immediately impacted as room nights and other revenues decreased significantly. Although trends appear to be improving, there can be no assurance that the economic and political climate will fully recover in the near future, and the longer-term and indirect consequences from this catastrophic event are not yet known. If the slow business conditions in the economy continue or become more severe, ClubCorp’s future revenues and operating results will be negatively impacted.

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. While management has not made a final determination as to the impact of this new pronouncement on its Consolidated Balance Sheet or Consolidated Statement of Operations, management does not believe such implementation will have a significant impact.

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PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.1 -	Restated ClubCorp, Inc. Executive Stock Option Plan
10.2 -	Restated ClubCorp, Inc. Omnibus Stock Plan
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:	October 16, 2001	By: /s/ Charles A. Little
		Charles A. Little Chief Accounting Officer

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INDEX TO EXHIBITS

EXHIBIT
NUMBER	DESCRIPTION
10.1 -	Restated ClubCorp, Inc. Executive Stock Option Plan
10.2 -	Restated ClubCorp, Inc. Omnibus Stock Plan
15.1 -	Letter from KPMG LLP regarding unaudited interim financial statements
24.1 -	Power of Attorney