Clubcorp 10-Q 2006 Q1 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 March 21, 2006

or

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

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

CLUBCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	75-2778488
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

3030 LBJ Freeway, Suite 600

Dallas, Texas 75234

(Address of principal executive offices, including zip code)

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

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

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 (the “Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 under the Exchange Act.

Large accelerated filer¨ Accelerated filer¨ Non-accelerated filerx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock outstanding as of April 18, 2006 was 92,821,459.

CLUBCORP, INC.

INDEX

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.	Controls and Procedures	20
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 6.	Exhibits	21

ClubCorp, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

	December 27, 2005			March 21, 2006
Assets
Current assets:
Cash and cash equivalents	$	188,675		$	155,698
Restricted cash		21,650			21,650
Membership and other receivables, net		72,616			63,871
Inventories		19,106			21,583
Prepaid expenses and other assets		29,061			29,311
Total current assets		331,108			292,113
Property and equipment, net		1,124,761			1,120,642
Notes receivable		33,256			32,614
Other assets		58,582			55,745
Total assets	$	1,547,707		$	1,501,114
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	87,274		$	72,184
Long-term debt - current portion		75,604			40,702
Membership deposits - current portion		18,341			18,680
Other liabilities		120,925			136,791
Total current liabilities		302,144			268,357
Long-term debt, net of current portion		596,014			595,313
Other liabilities		128,385			125,313
Membership deposits, net of current portion		151,273			154,761
Total liabilities		1,177,816			1,143,744
Redemption value of common stock held by benefit plan		53,026			53,026
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding		—			—
Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 92,821,459 outstanding at December 27, 2005 and March 21, 2006		996			996
Additional paid-in capital		161,672			162,383
Accumulated other comprehensive loss		(7,895	)		(8,583	)
Retained earnings		233,490			220,946
Treasury stock, 6,772,949 shares at December 27, 2005 and March 21, 2006		(71,398	)		(71,398	)
Total stockholders’ equity		316,865			304,344
Total liabilities and stockholders’ equity	$	1,547,707		$	1,501,114

See accompanying notes to condensed consolidated financial statements.

1

ClubCorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Operating revenues	$	189,279		$	196,301
Operating costs and expenses		152,322			156,679
Depreciation and amortization		19,419			19,806
Selling, general and administrative expenses		15,045			18,124
Loss on disposals and impairment of assets		28			1,574
Operating income from continuing operations		2,465			118
Interest and investment income		771			1,539
Interest expense		(14,216	)		(13,979	)
Loss from continuing operations before income taxes and minority interest		(10,980	)		(12,322	)
Income tax (provision) benefit		(612	)		136
Minority interest		(150	)		(249	)
Loss from continuing operations		(11,742	)		(12,435	)
Discontinued operations:
Loss from discontinued operations before income taxes		(184	)		(99	)
Income tax provision		(29	)		(10	)
Loss from discontinued operations		(213	)		(109	)
Net loss	$	(11,955	)	$	(12,544	)
Basic and diluted loss per share from:
Continuing operations	$	(0.13	)	$	(0.14	)
Discontinued operations		0.00			0.00
Basic and diluted loss per share	$	(0.13	)	$	(0.14	)

See accompanying notes to condensed consolidated financial statements.

2

ClubCorp, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Cash flows from operating activities:
Net loss	$	(11,955	)	$	(12,544	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		19,518			19,806
Loss on disposals and impairment of assets		42			1,579
Stock-based compensation expense		—			711
Amortization of discount on membership deposits		3,285			3,160
Net change in deferred income taxes		—			(369	)
Net change in prepaid expenses		(1,327	)		173
Net change in membership and other receivables		12,879			10,081
Net change in accounts payable and accrued liabilities		(5,875	)		(15,721	)
Net change in deferred income and other liabilities		17,846			9,466
Net change in deferred membership revenues		3,309			5,409
Other		1,268			(1,377	)
Cash flows from operating activities		38,990			20,374
Cash flows from investing activities:
Additions to property and equipment		(8,876	)		(17,216	)
Acquisitions of facilities		(1,974	)		—
Development of real estate held for sale		(1,241	)		(30	)
Net change in notes receivable		2,100			643
Other		411			7
Cash flows from investing activities		(9,580	)		(16,596	)
Cash flows from financing activities:
Repayments of long-term debt		(5,295	)		(36,889	)
Change in membership deposits		377			134
Cash flows from financing activities		(4,918	)		(36,755	)
Net change in cash and cash equivalents		24,492			(32,977	)
Cash and cash equivalents at beginning of period		96,180			188,675
Cash and cash equivalents at end of period	$	120,672		$	155,698

See accompanying notes to condensed consolidated financial statements.

3

ClubCorp, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Summary of significant accounting policies

Consolidation

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

Interim presentation

The accompanying Condensed Consolidated Financial Statements have been prepared by ClubCorp and are unaudited. Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America have been omitted from the accompanying statements. We believe the disclosures made are adequate to make the information presented not misleading. However, the financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto of ClubCorp for the year ended December 27, 2005, which is a part of ClubCorp’s 2005 Form 10-K.

In our opinion, the accompanying Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly the consolidated financial position of ClubCorp as of December 27, 2005 and March 21, 2006, and the consolidated results of operations and cash flows for the twelve weeks ended March 22, 2005 and March 21, 2006. Interim results are not necessarily indicative of fiscal year performance because of the impact of seasonal and short-term variations and other factors such as timing of acquisitions and dispositions of facilities.

Cash and cash equivalents

For purposes of the Condensed Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand and interest bearing deposits in financial institutions, all of which have maturities of 90 days or less.

Restricted Cash

We had $21.7 million of restricted cash at December 27, 2005 and March 21, 2006. The balance is comprised of $19.0 million in collateral related to insurance policies and $2.7 million in collateral related to letters of credit in connection with debt covenants. The letters of credit have one-year terms and, therefore, the related restricted cash is included in current assets.

Reclassifications

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

4

ClubCorp, Inc.

Note 2. Stock-based compensation

Prior to 2006, we accounted for stock-based compensation under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees”. Under APB 25, the exercise price of the options was equal to the market price at the date of grant and no stock-based compensation cost was reflected in net income. We also adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-based Compensation”, as amended by SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure.”

Effective December 28, 2005, we adopted SFAS No. 123(R), “Share-based Payment”, using the modified-prospective method, which requires the measurement and recognition of compensation cost at fair value for all share-based payments, including stock options. Stock-based compensation for the twelve weeks ended March 21, 2006 includes expense, recognized over the applicable vesting periods for all new options granted and options granted prior to, but unvested, as of December 28, 2005. In accordance with the modified prospective method of adoption, results for prior periods have not been restated.

We granted options to purchase 75,000 shares of common stock during the twelve weeks ended March 22, 2005. We did not grant any options to purchase shares of common stock during the twelve weeks ended March 21, 2006.

The following summarizes compensation cost for the option plans based on the grant date fair value of the options consistent with the methodology prescribed by SFAS No. 123(R) (dollars in thousands, except per share amounts):

	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Net loss as reported	$	(11,955	)	$	(12,544	)
Add: Total stock-based compensation expense included in reported net loss, net of taxes		—			462
Less: Total stock-based compensation expense determined under fair value method, net of taxes		(1,736	)		(462	)
Pro forma net loss	$	(13,691	)	$	(12,544	)
Basic and diluted loss per share - Reported	$	(0.13	)	$	(0.14	)
Basic and diluted loss per share - Pro Forma	$	(0.15	)	$	(0.14	)

5

ClubCorp, Inc.

Note 3. Operating revenues

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

	Twelve Weeks Ended
	March 22, 2005		March 21, 2006
Revenues from continuing operations:
Membership dues	$	77,372	$	80,184
Food and beverage revenues		50,981		53,154
Golf operations revenues		26,810		27,701
Lodging revenues		9,330		9,898
Membership fees and deposits		8,528		7,992
Other revenues		16,258		17,372
Total operating revenues from continuing operations	$	189,279	$	196,301
Revenues from discontinued operations:
Membership dues	$	1,368	$	837
Food and beverage revenues		459		289
Golf operations revenues		251		—
Membership fees and deposits		31		16
Other revenues		646		566
Total operating revenues from discontinued operations	$	2,755	$	1,708
Total operating revenues	$	192,034	$	198,009

Note 4. Income tax (provision) benefit

The income tax (provision) benefit for the twelve weeks ended March 22, 2005 and March 21, 2006 differs from amounts computed by applying the U.S. Federal tax rate of 35% to loss from operations before income taxes and minority interest primarily due to foreign and state income taxes, net of Federal benefit (provision), and the effect of consolidated operations of foreign and other entities not consolidated for Federal income tax purposes. In addition, for the twelve weeks ended March 22, 2005 and March 21, 2006, we fully reserved all additional tax benefits from available carryforwards of net operating losses generated during the periods. We recorded no income tax (provision) benefit related to Federal income taxes for the twelve weeks ended March 22, 2005 and, therefore, the provision contains only foreign and state income taxes on the Condensed Consolidated Statements of Operations. For the twelve weeks ended March 21, 2006, we recorded a deferred tax asset and corresponding tax benefit for the tax effect of stock-based compensation cost (Note 2) of $249,000.

6

ClubCorp, Inc.

Note 5. Weighted average shares

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

	Twelve Weeks Ended
	March 22, 2005	March 21, 2006
Weighted average shares outstanding	93,379,080	92,821,459
Incremental shares from assumed conversion of options	—	—
Diluted weighted average shares	93,379,080	92,821,459

The diluted weighted average shares exclude the impact of the assumed conversion of options to acquire 1,346,903 and 1,265,494 shares of common stock for the twelve weeks ended March 22, 2005 and March 21, 2006, respectively, because they would be anti-dilutive due to our net loss in those periods.

Note 6. Property and equipment

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

	December 27, 2005			March 21, 2006
Land and land improvements	$	738,558		$	741,176
Buildings and recreational facilities		509,211			509,369
Leasehold improvements		118,044			117,897
Furniture and fixtures		142,629			143,244
Machinery and equipment		313,279			314,771
Construction in progress		21,413			27,355
		1,843,134			1,853,812
Accumulated depreciation and amortization		(718,373	)		(733,170	)
	$	1,124,761		$	1,120,642

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ClubCorp, Inc.

Note 7. Disposal and impairment of long-lived assets

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

As of December 27, 2005 and March 21, 2006, we had one property and two properties, respectively, classified as held for sale. The balance sheet amounts related to these properties were reclassified to Other Current Assets and Other Current Liabilities on the Condensed Consolidated Balance Sheets and were comprised of the following (dollars in thousands):

	December 27, 2005		March 21, 2006
Membership and other receivables, net	$	273	$	485
Inventories		69		89
Other current assets		13		25
Property and equipment, net		6,538		6,735
Other assets		42		37
Total assets	$	6,935	$	7,371
Accounts payable and accrued liabilities	$	113	$	95
Other current liabilities		144		354
Long-term debt		2,811		2,811
Other liabilities		196		269
Total liabilities	$	3,264	$	3,529

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

There was no impairment of assets recorded during the twelve weeks ended March 22, 2005 and March 21, 2006, respectively.

Note 8. Comprehensive Loss

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

	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Net loss	$	(11,955	)	$	(12,544	)
Foreign currency translation adjustment		302			(688	)
Total comprehensive loss	$	(11,653	)	$	(13,232	)

8

ClubCorp, Inc.

Note 9. Long term debt

Under the provisions of certain of our debt agreements with Textron Financial Corporation (“Textron”), we are required to maintain debt service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of March 21, 2006, the debt service coverage ratio was below the minimum level for four individual properties participating in the loan, thereby causing the entire loan ($53 million in principal amount) to be in technical default. Subsequent to March 21, 2006, we have cured the noncompliance by obtaining letters of credit totaling $4.0 million.

In early 2006, we amended a loan agreement with Pacific Life representing approximately $37 million of debt maturing in 2006 and established a secured $50 million line of credit which will mature in 2010. As a result, we paid down approximately $32 million and transferred the remaining $5 million as an initial draw on the line of credit which remains outstanding as of March 21, 2006.

For the twelve weeks ended March 21, 2006, we added approximately $1.3 million in new capital leases increasing debt and property, plant, and equipment on our Condensed Consolidated Balance Sheet.

Note 10. Segment reporting

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

Country club and golf facilities operations consist of private country clubs, golf clubs and public golf facilities. Private country clubs provide at least one 18-hole golf course and various other recreational amenities that are open only to members and their guests. Golf clubs provide both private and public golf play and usually offer fewer other recreational amenities. Public golf facilities are open to the public and generally provide the same services as golf clubs.

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

Business and sports club operations consist of business clubs, business/sports clubs and sports clubs. Business clubs provide a setting for dining, business or social entertainment. Sports clubs provide a variety of recreational facilities and business/sports clubs provide a combination of the amenities available at business clubs and sports clubs. All amenities offered above are available only to members and their guests.

Other operations and services consist of real estate operations, corporate overhead and intercompany eliminations made in the consolidation between corporate services and other operating segments. Real estate operations are comprised of residential real estate development and sales, primarily in areas adjacent to golf facilities. The majority of other operating revenues is provided from real estate sales.

We evaluate segment performance and allocate resources based on each segment’s EBITDA. We also use EBITDA to monitor our property-level and overall performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA for all periods presented has been calculated using this definition. EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on accounting principles generally accepted in the United States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurements of EBITDA may not be comparable to similar titled measures reported by other companies.

9

ClubCorp, Inc.

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

	Continuing Operations
	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Operating revenues
Country club and golf facilities	$	103,773		$	108,069
Resorts		35,052			37,071
Business and sports clubs		48,228			49,132
Other operations and services		2,226			2,029
Total operating revenues	$	189,279		$	196,301
EBITDA
Country club and golf facilities		23,216			23,525
Resorts		1,102			3,302
Business and sports clubs		7,398			7,604
Reportable segment EBITDA	$	31,716		$	34,431
Reconciliation to loss before income taxes and minority interest:
Reportable segment EBITDA	$	31,716		$	34,431
Other operations and services operating revenues		2,226			2,029
Other operations and services operating costs and expenses		(12,030	)		(14,962	)
Depreciation and amortization		(19,419	)		(19,806	)
Loss on disposals and impairment of assets		(28	)		(1,574	)
Interest and investment income		771			1,539
Interest expense		(14,216	)		(13,979	)
Loss from operations before income taxes and minority interest	$	(10,980	)	$	(12,322	)

10

ClubCorp, Inc.

	Discontinued Operations
	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Operating revenues
Country club and golf facilities	$	997		$	63
Resorts		—			—
Business and sports clubs		1,758			1,645
Other operations and services		—			—
Total operating revenues	$	2,755		$	1,708
EBITDA
Country club and golf facilities		(88	)		55
Resorts		—			—
Business and sports clubs		236			224
Reportable segment EBITDA	$	148		$	279
Reconciliation to loss before income taxes and minority interest:
Reportable segment EBITDA	$	148		$	279
Other operations and services operating revenues		—			—
Other operations and services operating costs and expenses		(105	)		(116	)
Depreciation and amortization		(99	)		—
Loss on disposals and impairment of assets		(14	)		(5	)
Interest and investment income		—			—
Interest expense		(114	)		(257	)
Loss from operations before income taxes and minority interest	$	(184	)	$	(99	)

11

ClubCorp, Inc.

	Total Company
	Twelve Weeks Ended
	March 22, 2005			March 21, 2006
Operating revenues
Country club and golf facilities	$	104,770		$	108,132
Resorts		35,052			37,071
Business and sports clubs		49,986			50,777
Other operations and services		2,226			2,029
Total operating revenues	$	192,034		$	198,009
EBITDA
Country club and golf facilities	$	23,128		$	23,580
Resorts		1,102			3,302
Business and sports clubs		7,634			7,828
Reportable segment EBITDA	$	31,864		$	34,710
Reconciliation to loss before income taxes and minority interest:
Reportable segment EBITDA	$	31,864		$	34,710
Other operations and services operating revenues		2,226			2,029
Other operations and services operating costs and expenses		(12,135	)		(15,078	)
Depreciation and amortization		(19,518	)		(19,806	)
Loss on disposals and impairment of assets		(42	)		(1,579	)
Interest and investment income		771			1,539
Interest expense		(14,330	)		(14,236	)
Loss from operations before income taxes and minority interest	$	(11,164	)	$	(12,421	)

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

Overview

ClubCorp, Inc. (referred to as ClubCorp^®, the Company, we, us and our throughout this document) is a holding company incorporated under the laws of the State of Delaware that, through its subsidiaries, owns and operates premier golf and business clubs and destination golf resorts. As of March 21, 2006, we operated 98 country clubs, golf clubs and public golf facilities, four destination golf resorts and 65 business, sports and business/sports clubs in 27 states, Washington D.C. and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst^® Resort and Country Club in Pinehurst, North Carolina, The Homestead^® Resort in Hot Springs, Virginia, Barton Creek Resort and Country Club in Austin, Texas, Firestone^® Country Club in Akron, Ohio, Mission Hills^® Country Club near Palm Springs, California, and The City Club on Bunker Hill in Los Angeles, California.Golf Digest,Golf Travel and other golf industry publications have consistently ranked several of our approximately 150 golf courses and destination golf resorts among the best in the United States.

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

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

There is currently no public market for our common stock. We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, pursuant to Section 15(d) thereof, because we filed a registration statement on Form S-1, which became effective October 24, 1994, pursuant to the Securities Act of 1933, as amended (the “Registration Statement”). The Registration Statement registered participation interests in the ClubCorp Stock Investment Plan (the “Plan”) and our common stock, at $.01 par value per share (the “Common Stock”), to be sold to the Plan. The Plan was amended and restated on January 1, 1999, to become the ClubCorp Employee Stock Ownership Plan (the “Amended Plan”).

Our consolidated financial statements are presented on a 52/53 week fiscal year ending on the last Tuesday of December, with the first three quarters consisting of 12 weeks each and the fourth quarter consisting of 16 or 17 weeks. The following discussion of our financial condition and results of operations for the twelve weeks ended March 22, 2005 and March 21, 2006 should be read in conjunction with our Annual Report on Form 10-K for the year ended December 27, 2005, as filed with the Securities and Exchange Commission.

Critical Accounting Policies

For a discussion of our critical accounting policies refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 27, 2005. There have been no material changes to the critical accounting policies discussed in our Annual Report on Form 10-K for the year ended December 27, 2005.

Results of Operations

General

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

We employ “same store” analysis techniques for a variety of management purposes. By our definition, facilities are evaluated yearly and considered “same store” once they have been fully operational for one year. Developing facilities and divested facilities are not classified as same store; however, facilities held for sale and held and used are considered same store until they are divested. This distinction between developing and same store facilities allows us to separately analyze the

13

operating results of our established and new facilities. We believe this approach provides an effective analysis tool because it allows us to assess the results of our core operating strategies by tracking the performance of our same store facilities without the distortions that would be caused by the inclusion of developing properties. Facilities divested during a period are removed from the same store classification for all periods presented. We analyze membership and lodging data on a same store basis as well, so that it is not distorted by divestitures. We believe this provides a clearer picture of trends in our continuing operations.

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

We evaluate segment performance and allocate resources based on each segment’s EBITDA. We also use EBITDA to monitor our property-level and overall performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on accounting principles generally accepted in the United States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurement of EBITDA may not be comparable to similarly titled measures reported by other companies. See Note 10 of the Notes to Condensed Consolidated Financial Statements for a reconciliation of this measure to our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America.

12 Weeks Ended March 22, 2005 Compared to 12 Weeks Ended March 21, 2006

Consolidated Operations – Continuing Operations

Operating revenues increased in all three operating segments – country club and golf facilities, resorts and business and sports clubs – ending the first quarter of 2006 at a consolidated total of $196.3 million, an improvement of 4% over the first quarter of 2005. Country club and golf facilities operating revenue increased 4% due to increases in dues income, golf operations and food and beverage revenue. Resorts operating revenue increased 6% primarily related to increases in golf operations at Pinehurst and lodging and food and beverage revenues at Barton Creek. Business and sports clubs operating revenue increased 2% primarily due to increased dues income and private party food and beverage revenue.

Operating costs and expenses for all segments increased as a result of costs associated with increased operating revenues with the exception of resorts which decreased slightly. In addition to these expected increases, resorts operating costs and expenses decreased due to a decrease in property taxes. Country club and golf facilities operating costs and expenses increased in golf course maintenance. Business and sports clubs operating costs and expenses were negatively impacted by increased utilities costs. Utilities costs increased by $1.2 million or 16% for all three operating segments due primarily to higher pricing.

Operating income (loss) improved in the resorts segment and decreased slightly in the country club and golf facilities and business and sports clubs segments. Resorts reflected improved margins primarily due to controlling payroll and payroll related costs. Country club and golf facilities reflected improved margins resulting from better management of cost of goods sold and payroll costs offset by increased costs for golf course maintenance and depreciation and amortization. Business and sports clubs decreased due to lower volume with a flat food and beverage margin and increased depreciation and amortization.

Consolidated Operations - Discontinued Operations

The periods ended March 22, 2005 and March 21, 2006 include two properties divested in 2005, one managed property divested in 2006 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $2.8 million in 2005 to $1.7 million in 2006. Net income (loss) from these properties improved $0.1 million. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.

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Segment and Other Information – 12 Weeks

Country Club and Golf Facilities

The following tables present certain summary financial information for our country club and golf facilities segment for the twelve weeks ended March 22, 2005 and March 21, 2006 (dollars in thousands):

	Same Store Country Club and Golf Facilities				Total Country Club and Golf Facilities
	2005		2006		2005			2006
Number of facilities at end of period in continuing operations		95		95		98			98
Operating revenues	$	95,903	$	100,590	$	97,332		$	102,086
Recognition of membership fees and deposits		6,412		5,959		6,441			5,983
Total operating revenues	$	102,315	$	106,549	$	103,773		$	108,069
Operating costs and expenses (1)		79,024		83,334		80,557			84,544
Segment EBITDA from continuing operations (1)	$	23,291	$	23,215	$	23,216		$	23,525
Segment EBITDA from discontinued operations (1)	$	—	$	—	$	(88	)	$	55
Total Segment EBITDA (1)	$	23,291	$	23,215	$	23,128		$	23,580

(1) Excludes intercompany consulting and support fees of $6.1 million and $6.3 million for Same Store and $6.3 million and $6.4 million for Total in the twelve weeks ended March 22, 2005 and March 21, 2006, respectively.

Continuing Operations. Total operating revenues and EBITDA increased for same store country club and golf facilities primarily due to increased membership dues, golf operations and food and beverage revenues.

Membership trends for golf and country clubs historically decline in colder months of the year with positive recovery in the spring as weather becomes more favorable for golf. Although we did see a typical trend of declining membership for the first quarter of 2006, it was considerably lower than our decline for the first quarter of 2005. This trend, coupled with an annual price increase that generally occurs at the beginning of the year, resulted in a 4% overall increase in membership dues.

Golf operations revenue increased 4% primarily due to increased rounds played due to good weather in 2006. Abnormally heavy rains on the West coast in 2005 resulted in lower golf revenues for those clubs in peak season in the prior year. Golf course maintenance expenses increased due to efforts to maintain course conditions as well as higher oil and gas costs resulting in overall decreased net profit from golf operations in the current year. Our annual dues price increases, in part, are designed to cover these increased maintenance costs.

Food and beverage revenues increased as a result of increased a la carte spending as well as private party events primarily due to better economic conditions. Although a la carte covers were down for the current year, increased check average resulted in a 7% increase in revenues. In addition, efforts to pre-book private parties were more successful. The outcome was an increase in the number of events held in the current year as well as check average resulting in a 10% increase in revenues. Cost of sales and payroll and related expenses were well managed during the current year resulting in an improved net profit in food and beverage operations.

Depreciation and amortization increased from $11.6 million in 2005 to $12.0 million in 2006 due to additions during the last year.

Discontinued Operations. The periods ended March 22, 2005 and March 21, 2006 include two properties divested in 2005 and one managed property divested in 2006 in discontinued operations.

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Resorts

The following tables present certain summary financial data and lodging data for our resort segment for the twelve weeks ended March 22, 2005 and March 21, 2006 (dollars in thousands):

	Same Store Resorts						Total Resorts
	2005			2006			2005		2006
Number of facilities at end of period in continuing operations (1)		3			3			3		4
Operating revenues	$	33,662		$	35,746		$	33,662	$	35,753
Recognition of membership fees and deposits		1,390			1,318			1,390		1,318
Total operating revenues	$	35,052		$	37,064		$	35,052	$	37,071
Operating costs and expenses (2)		33,950			33,769			33,950		33,769
Segment EBITDA from continuing operations (2)	$	1,102		$	3,295		$	1,102	$	3,302
Segment EBITDA from discontinued operations	$	—		$	—		$	—	$	—
Total Segment EBITDA (2)	$	1,102		$	3,295		$	1,102	$	3,302
Lodging data (3 resorts) (1)
Room nights available		99,244			99,244
Room nights sold		48,797			48,766
Paid occupancy rate		49.2	%		49.1	%
Average daily rate (3)	$	162		$	171
Revenue per occupied room (4)	$	609		$	647

(1) Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead and Barton Creek. In the first quarter of 2006, we signed an agreement to manage Ocean Edge Resort and Golf Club on Cape Cod. Management fee revenue for the twelve weeks ended March 21, 2006 is included.

(2) Excludes intercompany consulting and support fees of $1.3 million for Same Store and Total in the twelve weeks ended March 22, 2005 and March 21, 2006, respectively.

(3) Average daily rate is based on the average room rate per day for the year-to-date.

(4) Revenue per occupied room is based on total operating revenues excluding membership dues, recognition of member initiation fees and net managed rooms commissions.

Continuing Operations. Total operating revenues and EBITDA increased for same store resorts primarily due to higher average daily rate and spending at Barton Creek and Pinehurst.

Barton Creek revenues increased 13% due to a seven percentage point increase in occupancy, a $13 increase in average daily rate and increased spending as they carried forward their momentum from the end of 2005. Pinehurst revenues increased due to an increase in average daily rate and spending offset by a decrease in occupancy. In addition, Pinehurst increased the greens fee prices on several of its courses and increased the total number of rounds played resulting in higher revenue from golf operations. The Homestead operating revenues were comparable with an increase in average daily rate and spending offset by decreased occupancy.

All three resorts were able to effectively manage their variable costs, particularly in payroll and related areas as well as golf course maintenance. The result was an improvement of nearly 6% in EBITDA generated from these additional revenues.

Depreciation and amortization increased slightly from $3.7 million in 2005 to $3.8 million in 2006.

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Business and Sports Clubs

The following tables present certain summary financial information for our business and sports clubs segment for the twelve weeks ended March 22, 2005 and March 21, 2006 (dollars in thousands):

	Same Store Business and Sports Clubs				Total Business and Sports Clubs
	2005		2006		2005		2006
Number of facilities at end of period in continuing operations		62		62		62		63
Operating revenues	$	47,702	$	48,611	$	47,702	$	48,646
Recognition of membership fees and deposits		526		486		526		486
Total operating revenues	$	48,228	$	49,097	$	48,228	$	49,132
Operating costs and expenses (1)		40,830		41,528		40,830		41,528
Segment EBITDA from continuing operations (1)	$	7,398	$	7,569	$	7,398	$	7,604
Segment EBITDA from discontinued operations (1)	$	236	$	219	$	236	$	224
Total Segment EBITDA (1)	$	7,634	$	7,788	$	7,634	$	7,828

(1) Excludes intercompany consulting and support fees of $3.0 million and $3.1 million for Same Store and $3.0 and $3.2 million for Total, respectively in the twelve weeks ended March 22, 2005 and March 21, 2006.

Continuing Operations.Total operating revenues and EBITDA increased at same store business and sports clubs primarily due to increased membership dues and food and beverage private party revenues.

Membership trends for business and sports clubs historically decline in the early part of the year with positive recovery in the later part of the year and throughout the holiday season. Although we did see a typical trend of declining membership for the first quarter of 2006, it was slightly lower than our decline for the first quarter of 2005. This trend, coupled with an annual price increase that generally occurs at the beginning of the year, resulted in a 2% overall increase in membership dues.

Food and beverage operations increased primarily due to more successful efforts in pre-booking private events resulting in a 3% increase in private party revenues. During the first quarter of 2006, payroll and other costs associated with the private events were well controlled resulting in a consistent profit margin in overall food and beverage operations comparing 2005 to 2006.

Depreciation and amortization increased from $2.0 million in 2005 to $2.1 million in 2006.

Discontinued Operations.The periods ended March 22, 2005 and March 21, 2006 include two properties currently held for sale in discontinued operations.

Other Operations and Services – Continuing Operations

Other operations and services consist primarily of real estate operations and corporate services. Revenues primarily consist of fees we receive from third-party developers based on a percentage of their real estate sales. Revenues decreased from $2.2 million in 2005 to $2.0 million in 2006.

Operating loss from other operations and services increased from $9.8 million in 2005 to $12.9 million in 2006 primarily due to the following: (a) recognition of approximately $0.7 million in compensation expense related to the expensing of stock options, (b) an increase in payroll and payroll related costs primarily due to normal true-ups made to our bonus accruals in the first quarter of 2005 and 2006 resulting in a $0.7 million increase in expense year over year and (c) an increase in medical claims mainly due to an industry-wide increase in healthcare costs as well as increased enrollment. The results in 2005 also include a rebate of previously incurred costs.

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Seasonality of Demand; Fluctuations in Quarterly Results

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

Liquidity and Capital Resources

Our primary goal as it relates to liquidity and capital resources is to attain and retain the right level of debt and cash to maintain our core properties, fund expansions at our current properties, and be poised for external growth in the marketplace. During the last few years, our focus has been on strengthening our cash position and refinancing and reducing our debt in order to support these goals. Our cash position decreased to $156 million as of March 21, 2006 compared to $189 million as of December 27, 2005. The primary reason for the reduction was the paydown of $32 million related to a refinancing of a portion of our debt with Pacific Life that was originally scheduled to mature in June 2006. Our debt has been paid down to $636 million as of March 21, 2006 representing payments of approximately $37 million since December 27, 2005.

Historically, we have financed our operations and cash needs primarily through cash flows from operations, debt and, to a lesser extent, proceeds from divestitures. We anticipate using cash flow from operations in 2006 principally to fund planned capital replacement expenditures, repay debt and build cash reserves. We expect to use cash flow from operations in 2006 to grow and expand our business through a combination of improvements and expansions of existing facilities, on which we have spent approximately $17 million year-to-date. Based on our current projections, we believe our current assets and cash flow from operations are sufficient to meet our anticipated working capital and operating needs for the next twelve months as well as support our anticipated capital expenditures.

Debt

In early 2006, we amended a loan agreement with Pacific Life representing approximately $37 million of debt maturing in 2006 and established a secured $50 million line of credit which will mature in 2010. As a result, we paid down approximately $32 million and transferred the remaining $5 million as an initial draw on the line of credit which remains outstanding as of March 21, 2006.

Under the provisions of certain of our debt agreements with Textron Financial Corporation (“Textron”), we are required to maintain debt service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of March 21, 2006, the debt service coverage ratio was below the minimum level for four individual properties participating in the loan, thereby causing the entire loan ($53 million in principal amount) to be in technical default. Subsequent to March 21, 2006, we have cured the noncompliance by obtaining letters of credit totaling $4.0 million.

Cash and Cash Flow

Our cash flow from operations was $20 million for the twelve weeks ended March 21, 2006, a decrease of $19 million compared to 2005. The 2005 cash flow from operations included cash deposits received in preparation for the 2005 U.S. Open.

We utilize cash to fund operations, maintain our properties, pay down our debt and related interest, and, to a limited extent, buy back company stock. In 2006, we have reduced our debt by nearly $37 million while only decreasing our cash and cash equivalents by $33 million. For 2006, we are considering additional investments in improving and expanding our existing properties or acquiring new properties.

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Capital Spending

The nature of our business requires us to invest a significant amount of capital in our existing properties to maintain them. For the twelve weeks ended March 21, 2006, we have expended approximately $11 million in maintenance capital, and we anticipate spending an additional $58 million for the remainder of fiscal 2006.

In addition to maintaining our properties, we also spend discretionary capital to expand or improve existing properties and to enter into new business opportunities. Capital expansion funding totaled approximately $6 million for the twelve weeks ended March 21, 2006, and we anticipate spending an additional $34 million for the remainder of fiscal 2006 for expansion and improvement projects on clubs and resorts we feel have a high potential for return on investment.

Risks

We believe that we have sufficient and stable funds to allow us to operate our business for the next twelve months as well as evaluate growth opportunities during 2006 and beyond. However, the occurrence of any of the following events might limit our ability to fund operations or provide adequate capital funding:

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

• Exercise of the limited put right by our ESOP – As a means of providing liquidity to the trustees of the Amended Plan, we have provided the trustees a limited put right (the “Redemption Right”) to cause us to redeem Common Stock, held in trust on behalf of the Amended Plan, at the most recent appraised fair market value as necessary, in the event the trust does not have adequate resources, to meet the following requirements: (1) to fund a participant’s distribution in cash, (2) to diversify a participant’s account in accordance with Internal Revenue Code Section 401(a)(28), (3) to pay expenses incurred by the trustees, and (4) to comply with directions from the plan administrator. The Redemption Right has never been exercised by the Amended Plan. We do not expect that the Redemption Right will be exercised to a significant extent in 2006, but if it is, we could be required to repurchase shares of Common Stock.

• Exercise of certain rights by our third party investor – During 1999, we sold 9,375,000 shares of common stock and warrants to acquire 1,012,500 shares of common stock to The Cypress Group. Beginning in December 2004, we are obligated under certain defined conditions to offer to repurchase a portion of their outstanding shares if we are below a defined leverage ratio. This calculation is performed annually on December 1^st. Based on the 2005 calculation, we were above the stated leverage ratio and were not required to offer to repurchase any shares. If our actual future operating results differ materially from expectations, we could fall below the leverage ratio at the next annual calculation date and would be required to offer to repurchase a portion of their shares of Common Stock. We do not anticipate this occurring in 2006.

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

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

Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments

During the twelve weeks ended March 21, 2006, there were no material changes outside of the normal course of business to the quantitative and qualitative disclosures about contractual obligations, commitments, contingent liabilities and off-balance sheet arrangements previously reported in the Annual Report on Form 10-K for the year ended December 27, 2005. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments” in the Form 10-K for the year ended December 27, 2005 for a detailed discussion.

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

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of members and guests, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential” or “continue,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of which are summarized in this section and in our Form 10-K for the year ended December 27, 2005.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 27, 2005.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures were effective as of the end of the period covered by this report, in ensuring that all information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934 has been recorded, processed, summarized and reported within the time periods specified by the SEC.

Changes in Internal Controls

There has been no change in our internal control over financial reporting during the twelve weeks ended March 21, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 6. Exhibits

(a) Exhibits

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

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

32.1 - Certification by John A. Beckert pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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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: May 4, 2006	By:	/s/ Jeffrey P. Mayer
		Jeffrey P. Mayer
		Chief Financial Officer