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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended September 7, 2004



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



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



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CLUBCORP, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 75-2778488                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer 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



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



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



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



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##### Table of Contents

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                            |  | 24
|         |  |                                                                                      
|Item 4.  |  | Controls and Procedures                                                               |  | 24
|         |  |                                                                                      
|Part II. |  | OTHER INFORMATION                                                                     |  |   
|         |  |                                                                                      
|Item 1.  |  | Legal Proceedings                                                                     |  | 24
|         |  |                                                                                      
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  | 25



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



ClubCorp, Inc.



Condensed Consolidated
Balance Sheets

(Dollars in thousands)

(Unaudited)



|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                             |  | December 30,2003 |           |   | September 7,2004 |  
|Assets                                                                                                                                                                       |  |                  |           |   |                  |   |           |  
|                                                                                                                                                                             |  |                 
|Current assets:                                                                                                                                                              |  |                  |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                    |  | $                | 90,195    |   |                  | $ | 107,210   |  
|Membership and other receivables, net                                                                                                                                        |  |                  | 84,476    |   |                  |   | 90,507    |  
|Inventories                                                                                                                                                                  |  |                  | 18,828    |   |                  |   | 20,477    |  
|Other assets                                                                                                                                                                 |  |                  | 21,207    |   |                  |   | 23,766    |  
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|Total current assets                                                                                                                                                         |  |                  | 214,706   |   |                  |   | 241,960   |  
|                                                                                                                                                                             |  |                 
|Property and equipment, net                                                                                                                                                  |  |                  | 1,191,679 |   |                  |   | 1,169,598 |  
|Other assets                                                                                                                                                                 |  |                  | 140,003   |   |                  |   | 133,697   |  
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|Total assets                                                                                                                                                                 |  | $                | 1,546,388 |   |                  | $ | 1,545,255 |  
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|Liabilities and Stockholders Equity                                                                                                                                         |  |                  |           |   |                  |   |           |  
|                                                                                                                                                                             |  |                 
|Current liabilities:                                                                                                                                                         |  |                  |           |   |                  |   |           |  
|Accounts payable and accrued liabilities                                                                                                                                     |  | $                | 69,770    |   |                  | $ | 72,214    |  
|Long-term debt - current portion                                                                                                                                             |  |                  | 32,589    |   |                  |   | 27,287    |  
|Other liabilities                                                                                                                                                            |  |                  | 101,024   |   |                  |   | 138,571   |  
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|Total current liabilities                                                                                                                                                    |  |                  | 203,383   |   |                  |   | 238,072   |  
|                                                                                                                                                                             |  |                 
|Long-term debt, net of current portion                                                                                                                                       |  |                  | 691,230   |   |                  |   | 687,726   |  
|Other liabilities                                                                                                                                                            |  |                  | 190,135   |   |                  |   | 157,030   |  
|Membership deposits                                                                                                                                                          |  |                  | 132,313   |   |                  |   | 147,919   |  
|                                                                                                                                                                             |  |                 
|Redemption value of common stock held by benefit plan                                                                                                                        |  |                  | 38,190    |   |                  |   | 46,116    |  
|                                                                                                                                                                             |  |                 
|Stockholders equity:                                                                                                                                                        |  |                  |           |   |                  |   |           |  
|Preferred stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding                                                                                   |  |                  |          |   |                  |   |          |  
|Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 93,708,720 outstanding at December 30, 2003 and 93,597,392
outstanding at September 7, 2004. |  |                  | 996       |   |                  |   | 996       |  
|Additional paid-in capital                                                                                                                                                   |  |                  | 161,672   |   |                  |   | 161,672   |  
|Accumulated other comprehensive loss                                                                                                                                         |  |                  | (6,266    | ) |                  |   | (9,482    | )
|Retained earnings                                                                                                                                                            |  |                  | 195,341   |   |                  |   | 177,061   |  
|Treasury stock, 5,885,688 shares at December 30, 2003, and 5,997,016 at September 7, 2004                                                                                    |  |                  | (60,606   | ) |                  |   | (61,855   | )
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                   |  |                  | 291,137   |   |                  |   | 268,392   |  
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $                | 1,546,388 |   |                  | $ | 1,545,255 |  
|                                                                                                                                                                             |  |                  |           |   |                  |   |           |  



See accompanying notes
to condensed consolidated financial statements.



1



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##### Table of Contents

ClubCorp, Inc.



Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)



|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|---------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                                                   |  | Twelve Weeks Ended |         |   | Thirty-Six Weeks Ended |  
|                                                                                   |  | September 9,2003   |         |   | September 7,2004       |   |         | September 9,2003 |  |   | September 7,2004 |  
|Operating revenues                                                                 |  | $                  | 219,570 |   |                        | $ | 221,591 |                  |  | $ | 623,689          |   |  | $ | 645,014 |  
|Operating costs and expenses                                                       |  |                    | 174,440 |   |                        |   | 173,720 |                  |  |   | 490,242          |   |  |   | 498,373 |  
|Depreciation and amortization                                                      |  |                    | 21,402  |   |                        |   | 19,884  |                  |  |   | 64,526           |   |  |   | 60,956  |  
|Selling, general and administrative expenses                                       |  |                    | 14,615  |   |                        |   | 12,183  |                  |  |   | 54,441           |   |  |   | 48,887  |  
|Gain (loss) on disposals and impairment of assets                                  |  |                    | (946    | ) |                        |   | (1,175  | )                |  |   | 654              |   |  |   | (3,809  | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Operating income from continuing operations                                        |  |                    | 8,167   |   |                        |   | 14,629  |                  |  |   | 15,134           |   |  |   | 32,989  |  
|                                                                                   |  |                    |         |  
|Interest and investment income                                                     |  |                    | 229     |   |                        |   | 575     |                  |  |   | 1,015            |   |  |   | 1,356   |  
|Financing cost on prior debt facility                                              |  |                    |        |   |                        |   |        |                  |  |   | (10,569          | ) |  |   |        |  
|Interest expense                                                                   |  |                    | (14,918 | ) |                        |   | (13,932 | )                |  |   | (46,872          | ) |  |   | (41,679 | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) from continuing operations before income taxes and minority interest |  |                    | (6,522  | ) |                        |   | 1,272   |                  |  |   | (41,292          | ) |  |   | (7,334  | )
|                                                                                   |  |                    |         |  
|Income tax (provision) benefit                                                     |  |                    | (867    | ) |                        |   | (940    | )                |  |   | 8,335            |   |  |   | (2,422  | )
|Minority interest                                                                  |  |                    | 45      |   |                        |   | 194     |                  |  |   | 22               |   |  |   | (274    | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) from continuing operations                                           |  |                    | (7,344  | ) |                        |   | 526     |                  |  |   | (32,935          | ) |  |   | (10,030 | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Discontinued operations:                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) from discontinued operations before income taxes                     |  |                    | (1,036  | ) |                        |   | (128    | )                |  |   | 10,425           |   |  |   | (307    | )
|Income tax provision                                                               |  |                    | (57     | ) |                        |   | (1      | )                |  |   | (3,903           | ) |  |   | (17     | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) from discontinued operations                                         |  |                    | (1,093  | ) |                        |   | (129    | )                |  |   | 6,522            |   |  |   | (324    | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Net income (loss)                                                                  |  | $                  | (8,437  | ) |                        | $ | 397     |                  |  | $ | (26,413          | ) |  | $ | (10,354 | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Basic earnings (loss) per share from:                                              |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Continuing operations                                                              |  | $                  | (0.08   | ) |                        | $ | 0.00    |                  |  | $ | (0.35            | ) |  | $ | (0.11   | )
|Discontinued operations                                                            |  |                    | (0.01   | ) |                        |   | 0.00    |                  |  |   | 0.07             |   |  |   | 0.00    |  
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Basic earnings (loss) per share                                                    |  | $                  | (0.09   | ) |                        | $ | 0.00    |                  |  | $ | (0.28            | ) |  | $ | (0.11   | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Diluted earnings (loss) per share from:                                            |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Continuing operations                                                              |  | $                  | (0.08   | ) |                        | $ | 0.00    |                  |  | $ | (0.35            | ) |  | $ | (0.11   | )
|Discontinued operations                                                            |  |                    | (0.01   | ) |                        |   | 0.00    |                  |  |   | 0.07             |   |  |   | 0.00    |  
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Diluted earnings (loss) per share                                                  |  | $                  | (0.09   | ) |                        | $ | 0.00    |                  |  | $ | (0.28            | ) |  | $ | (0.11   | )
|                                                                                   |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  



See accompanying notes
to condensed consolidated financial statements.



2



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##### Table of Contents

ClubCorp, Inc.



Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)



|                                                                  |  |                        |          |   |                  |   |         |  
|----------------------------------------------------------------- |  | ---------------------- | -------- | - | ---------------- | - | ------- | -
|                                                                  |  | Thirty-Six Weeks Ended |         
|                                                                  |  | September 9,2003       |          |   | September 7,2004 |  
|Cash flows from operating activities:                             |  |                        |          |   |                  |   |         |  
|Loss from operations                                              |  | $                      | (26,413  | ) |                  | $ | (10,354 | )
|Adjustments to reconcile to cash flows from operating activities: |  |                        |          |   |                  |   |         |  
|Depreciation and amortization                                     |  |                        | 65,393   |   |                  |   | 61,064  |  
|(Gain) loss on disposals and impairment of assets                 |  |                        | (6,365   | ) |                  |   | 3,649   |  
|Minority interest in net income (loss) of subsidiaries            |  |                        | (22      | ) |                  |   | 274     |  
|Equity in income of joint ventures                                |  |                        | (856     | ) |                  |   | (295    | )
|Amortization of discount on membership deposits                   |  |                        | 8,401    |   |                  |   | 8,251   |  
|Net change in deferred income taxes                               |  |                        | (4,477   | ) |                  |   | 16      |  
|Net change in real estate held for sale                           |  |                        | 2,263    |   |                  |   | 342     |  
|Net change in membership and other receivables, net               |  |                        | (173     | ) |                  |   | (5,940  | )
|Net change in accounts payable and accrued liabilities            |  |                        | (12,398  | ) |                  |   | (14,181 | )
|Change in deferred income and other liabilities                   |  |                        | 3,467    |   |                  |   | 14,235  |  
|Net change in deferred membership revenues                        |  |                        | 4,230    |   |                  |   | 10,391  |  
|Other                                                             |  |                        | 5,776    |   |                  |   | 4,029   |  
|                                                                  |  |                        |          |   |                  |   |         |  
|Cash flows from operating activities                              |  |                        | 38,826   |   |                  |   | 71,481  |  
|                                                                  |  |                       
|Cash flows from investing activities:                             |  |                        |          |   |                  |   |         |  
|Additions to property and equipment                               |  |                        | (39,817  | ) |                  |   | (39,196 | )
|Development of new facilities                                     |  |                        | (1,820   | ) |                  |   |        |  
|Development of real estate held for sale                          |  |                        | (660     | ) |                  |   | (1,239  | )
|Proceeds from dispositions, net                                   |  |                        | 30,620   |   |                  |   | 91      |  
|Other                                                             |  |                        | (69      | ) |                  |   | 6,224   |  
|                                                                  |  |                        |          |   |                  |   |         |  
|Cash flows from investing activities                              |  |                        | (11,746  | ) |                  |   | (34,120 | )
|                                                                  |  |                       
|Cash flows from financing activities:                             |  |                        |          |   |                  |   |         |  
|Borrowings of long-term debt                                      |  |                        | 757,961  |   |                  |   | 18      |  
|Repayments of long-term debt                                      |  |                        | (699,635 | ) |                  |   | (26,412 | )
|Loan origination and amendment fees                               |  |                        | (12,044  | ) |                  |   | (131    | )
|Change in membership deposits                                     |  |                        | 2,424    |   |                  |   | 7,428   |  
|Treasury stock transactions                                       |  |                        | 5        |   |                  |   | (1,249  | )
|                                                                  |  |                        |          |   |                  |   |         |  
|Cash flows from financing activities                              |  |                        | 48,711   |   |                  |   | (20,346 | )
|                                                                  |  |                        |          |   |                  |   |         |  
|Net change in cash and cash equivalents                           |  |                        | 75,791   |   |                  |   | 17,015  |  
|Cash and cash equivalents at beginning of period                  |  |                        | 7,649    |   |                  |   | 90,195  |  
|                                                                  |  |                        |          |   |                  |   |         |  
|Cash and cash equivalents at end of period                        |  | $                      | 83,440   |   |                  | $ | 107,210 |  
|                                                                  |  |                        |          |   |                  |   |         |  



See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

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 30, 2003, which are a part of ClubCorps 2003 Form 10-K.



In our opinion, the accompanying Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly the consolidated financial position of ClubCorp as of September 7, 2004, the consolidated results of operations
for the twelve weeks and thirty-six weeks ended September 9, 2003 and September 7, 2004, and cash flows for the thirty-six weeks ended September 9, 2003 and September 7, 2004. Interim results are not necessarily indicative of fiscal year performance
because of the impact of seasonal and short-term variations and other factors such as timing of acquisitions and dispositions of facilities.



Cash and cash equivalents



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



Recent
Pronouncements



In January 2003, the FASB issued and then revised in
December 2003, FASB Interpretation No. 46, (FIN 46R) Consolidation of Variable Interest Entities which changes the criteria by which one company includes another entity in its consolidated financial statements. FIN 46R requires a
variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns or
both. The assets, liabilities and noncontrolling interests of the newly consolidated variable interest entities were initially recorded at the amounts at which they would have been carried in the consolidated financial statements if FIN 46R had been
effective when we first met the conditions to be the primary beneficiary of the variable interest entity. The difference between the net amount added to our Condensed Consolidated Statement of Operations and the amount of any previously recognized
interest in the newly consolidated entity was not material and therefore was not recognized as a cumulative effect of an accounting change when adopted. The adoption of FIN 46R in the first quarter of 2004 resulted in an initial increase in net
assets of $1.1 million, including debt of $13.7 million, to our Condensed Consolidated Balance Sheet. Prior periods were not restated. (See Note 2)



In December 2003, the FASB issued SFAS No. 132R (revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits. This statement
improves financial statement disclosures for defined benefit plans. We have not included these expanded disclosures as our pension plan is not a material component of our Condensed Consolidated Financial Statements.



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##### Table of Contents

ClubCorp, Inc.



Reclassifications



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



Stock-based
compensation



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



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



|                                                                                              |  |                    |        |                        |                  |   |                  |  |   |                  |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---------------------- | ---------------- | - | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                                                              |  | Twelve Weeks Ended |        | Thirty-Six Weeks Ended |                 
|                                                                                              |  | September 9,2003   |        |                        | September 7,2004 |   | September 9,2003 |  |   | September 7,2004 |  
|Net income (loss) as reported                                                                 |  | $                  | (8,437 | )                      |                  | $ | 397              |  | $ | (26,413          | ) |  | $ | (10,354 | )
|Less: Total Stock-Based Compensation Expense determined under fair value method, net of taxes |  |                    | 783    |                        |                  |   | 390              |  |   | 4,373            |   |  |   | 1,725   |  
|                                                                                              |  |                    |        |                        |                  |   |                  |  |   |                  |   |  |   |         |  
|Pro Forma net income (loss)                                                                   |  | $                  | (9,220 | )                      |                  | $ | 7                |  | $ | (30,786          | ) |  | $ | (12,079 | )
|                                                                                              |  |                    |        |                        |                  |   |                  |  |   |                  |   |  |   |         |  
|Diluted earnings (loss) per share - Reported                                                  |  | $                  | (0.09  | )                      |                  | $ | 0.00             |  | $ | (0.28            | ) |  | $ | (0.11   | )
|                                                                                              |  |                    |        |                        |                  |   |                  |  |   |                  |   |  |   |         |  
|Diluted earnings (loss) per share - Pro Forma                                                 |  | $                  | (0.10  | )                      |                  | $ | 0.00             |  | $ | (0.33            | ) |  | $ | (0.13   | )
|                                                                                              |  |                    |        |                        |                  |   |                  |  |   |                  |   |  |   |         |  



Note 2. Variable Interest
Entities



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



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



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



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



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##### Table of Contents

ClubCorp, Inc.



The joint venture was financed by the assumption of debt of which $13.1 million is currently outstanding and is
included in long-term debt, along with accrued interest of approximately $10.5 million. The majority of the joint ventures debt is payable only out of distributable cash flow, as defined by the agreements. The notes are subordinated and junior
to other liens and are collateralized by the real estate owned by the joint venture. The creditors of the joint venture do not have recourse to other assets of ClubCorp.



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



Note 3. Operating revenues



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



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



Note 4. Income tax (provision)
benefit



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



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Note 5. Weighted average shares



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



|                                                      |  |                    |  |                        |  |                  |  |                 
|----------------------------------------------------- |  | ------------------ |  | ---------------------- |  | ---------------- |  | ----------------
|                                                      |  | Twelve Weeks Ended |  | Thirty-Six Weeks Ended
|                                                      |  | September 9,2003   |  | September 7,2004       |  | September 9,2003 |  | September 7,2004
|Weighted average shares outstanding                   |  | 93,727,772         |  | 93,638,694             |  | 93,727,449       |  | 93,679,699      
|Incremental shares from assumed conversion of options |  |                   |  | 864,292                |  |                 |  |                
|                                                      |  |                    |  |                        |  |                  |  |                 
|Diluted weighted average shares                       |  | 93,727,772         |  | 94,502,986             |  | 93,727,449       |  | 93,679,699      
|                                                      |  |                    |  |                        |  |                  |  |                 



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



Note 6. Property and equipment



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



|                                          |  |                  |           |   |                  |   |           |  
|----------------------------------------- |  | ---------------- | --------- | - | ---------------- | - | --------- | -
|                                          |  | December 30,2003 |           |   | September 7,2004 |  
|Land and land improvements                |  | $                | 724,903   |   |                  | $ | 727,816   |  
|Buildings and recreational facilities     |  |                  | 501,210   |   |                  |   | 505,938   |  
|Leasehold improvements                    |  |                  | 104,268   |   |                  |   | 105,504   |  
|Furniture and fixtures                    |  |                  | 131,337   |   |                  |   | 134,162   |  
|Machinery and equipment                   |  |                  | 263,871   |   |                  |   | 275,924   |  
|Construction in progress                  |  |                  | 9,878     |   |                  |   | 15,930    |  
|                                          |  |                  |           |   |                  |   |           |  
|                                          |  |                  | 1,735,467 |   |                  |   | 1,765,274 |  
|Accumulated depreciation and amortization |  |                  | (543,788  | ) |                  |   | (595,676  | )
|                                          |  |                  |           |   |                  |   |           |  
|                                          |  | $                | 1,191,679 |   |                  | $ | 1,169,598 |  
|                                          |  |                  |           |   |                  |   |           |  



Note 7. Disposal and Impairment
of Long- Lived Assets



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



As of September 7, 2004, we had two properties classified as held for sale. In addition, the balance sheet as of December 30, 2003, includes another property that was
divested in the second quarter of 2004. The balance sheet amounts related to these properties include $2.0 million and $0.9 million classified in Other Current Assets and $3.5 million and $2.5 million classified as Other Current Liabilities as of
December 30, 2003 and September 7, 2004, respectively. The properties were reclassified to Discontinued Operations on the Condensed Consolidated Statement of Operations for all periods presented. See Note 10 for detail of the Statement of Operations
impact of Discontinued Operations by segment and in total.



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



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Note 8. Comprehensive Loss



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



|                                                                                            |  |                    |        |   |                        |   |      |                  |  |   |                  |   |  |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------------- | - | ---- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                                                            |  | Twelve Weeks Ended |        |   | Thirty-Six Weeks Ended |  
|                                                                                            |  | September 9,2003   |        |   | September 7,2004       |   |      | September 9,2003 |  |   | September 7,2004 |  
|Net income (loss)                                                                           |  | $                  | (8,437 | ) |                        | $ | 397  |                  |  | $ | (26,413          | ) |  | $ | (10,354 | )
|Changes in fair value of derivative instruments and hedging activities, net of income taxes |  |                    |       |   |                        |   |     |                  |  |   | 3,220            |   |  |   |        |  
|Foreign currency translation adjustment                                                     |  |                    | (1,168 | ) |                        |   | (653 | )                |  |   | 337              |   |  |   | (3,216  | )
|                                                                                            |  |                    |        |   |                        |   |      |                  |  |   |                  |   |  |   |         |  
|Total comprehensive loss                                                                    |  | $                  | (9,605 | ) |                        | $ | (256 | )                |  | $ | (22,856          | ) |  | $ | (13,570 | )
|                                                                                            |  |                    |        |   |                        |   |      |                  |  |   |                  |   |  |   |         |  



Note 9. Long term debt



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



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



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ClubCorp, Inc.



Note 10. Segment reporting



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



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



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



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



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



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



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ClubCorp, Inc.



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



Consolidated Statement of Operations:



|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------- | ----------------- |  | - | ----------------- | - |  | - | ------- | -
|                                                                                                      |  | Continuing Operations |        
|                                                                                                      |  | Twelve Weeks Ended    |         |   | Thirty-Six Weeks Ended |  
|                                                                                                      |  | September 9, 2003     |         |   | September 7, 2004      |   |         | September 9, 2003 |  |   | September 7, 2004 |  
|                                                                                                      |  |                       |         |  
|Country Club and Golf Facilities:                                                                     |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating revenues                                                                                    |  | $                     | 120,719 |   |                        | $ | 122,530 |                   |  | $ | 343,254           |   |  | $ | 354,313 |  
|Operating costs and expenses (1)                                                                      |  |                       | 93,996  |   |                        |   | 96,561  |                   |  |   | 263,865           |   |  |   | 276,648 |  
|Depreciation and amortization                                                                         |  |                       | 11,639  |   |                        |   | 11,301  |                   |  |   | 33,384            |   |  |   | 34,053  |  
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating income                                                                                      |  | $                     | 15,084  |   |                        | $ | 14,668  |                   |  | $ | 46,005            |   |  | $ | 43,612  |  
|EBITDA                                                                                                |  | $                     | 26,723  |   |                        | $ | 25,969  |                   |  | $ | 79,389            |   |  | $ | 77,665  |  
|                                                                                                      |  |                       |         |  
|Resorts:                                                                                              |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating revenues                                                                                    |  | $                     | 48,470  |   |                        | $ | 51,231  |                   |  | $ | 130,176           |   |  | $ | 139,877 |  
|Operating costs and expenses (1)                                                                      |  |                       | 38,227  |   |                        |   | 40,067  |                   |  |   | 104,397           |   |  |   | 111,526 |  
|Depreciation and amortization                                                                         |  |                       | 3,927   |   |                        |   | 3,847   |                   |  |   | 12,377            |   |  |   | 11,580  |  
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating income                                                                                      |  | $                     | 6,316   |   |                        | $ | 7,317   |                   |  | $ | 13,402            |   |  | $ | 16,771  |  
|EBITDA                                                                                                |  | $                     | 10,243  |   |                        | $ | 11,164  |                   |  | $ | 25,779            |   |  | $ | 28,351  |  
|                                                                                                      |  |                       |         |  
|Business and sports clubs:                                                                            |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating revenues                                                                                    |  | $                     | 43,830  |   |                        | $ | 45,578  |                   |  | $ | 140,156           |   |  | $ | 145,274 |  
|Operating costs and expenses (1)                                                                      |  |                       | 40,382  |   |                        |   | 41,577  |                   |  |   | 124,020           |   |  |   | 127,823 |  
|Depreciation and amortization                                                                         |  |                       | 2,539   |   |                        |   | 2,490   |                   |  |   | 7,727             |   |  |   | 7,448   |  
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating income                                                                                      |  | $                     | 909     |   |                        | $ | 1,511   |                   |  | $ | 8,409             |   |  | $ | 10,003  |  
|EBITDA                                                                                                |  | $                     | 3,448   |   |                        | $ | 4,001   |                   |  | $ | 16,136            |   |  | $ | 17,451  |  
|                                                                                                      |  |                       |         |  
|Other operations and services:                                                                        |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating revenues                                                                                    |  | $                     | 6,551   |   |                        | $ | 2,252   |                   |  | $ | 10,103            |   |  | $ | 5,550   |  
|Operating costs and expenses (1)                                                                      |  |                       | 16,450  |   |                        |   | 7,698   |                   |  |   | 52,401            |   |  |   | 31,263  |  
|Depreciation and amortization                                                                         |  |                       | 3,297   |   |                        |   | 2,246   |                   |  |   | 11,038            |   |  |   | 7,875   |  
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating loss                                                                                        |  | $                     | (13,196 | ) |                        | $ | (7,692  | )                 |  | $ | (53,336           | ) |  | $ | (33,588 | )
|EBITDA                                                                                                |  | $                     | (9,899  | ) |                        | $ | (5,446  | )                 |  | $ | (42,298           | ) |  | $ | (25,713 | )
|                                                                                                      |  |                       |         |  
|Consolidated Operations:                                                                              |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating revenues                                                                                    |  | $                     | 219,570 |   |                        | $ | 221,591 |                   |  | $ | 623,689           |   |  | $ | 645,014 |  
|Operating costs and expenses (1)                                                                      |  |                       | 189,055 |   |                        |   | 185,903 |                   |  |   | 544,683           |   |  |   | 547,260 |  
|Depreciation and amortization                                                                         |  |                       | 21,402  |   |                        |   | 19,884  |                   |  |   | 64,526            |   |  |   | 60,956  |  
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating income                                                                                      |  | $                     | 9,113   |   |                        | $ | 15,804  |                   |  | $ | 14,480            |   |  | $ | 36,798  |  
|EBITDA                                                                                                |  | $                     | 30,515  |   |                        | $ | 35,688  |                   |  | $ | 79,006            |   |  | $ | 97,754  |  
|                                                                                                     
|(1)    Includes operating costs and expenses as well as selling, general and administrative expenses. | 
|                                                                                                     
|Reconciliation to income (loss) before income taxes and minority interest:                            | 
|                                                                                                      |  |                       |         |  
|EBITDA                                                                                                |  | $                     | 30,515  |   |                        | $ | 35,688  |                   |  | $ | 79,006            |   |  | $ | 97,754  |  
|Depreciation and amortization                                                                         |  |                       | 21,402  |   |                        |   | 19,884  |                   |  |   | 64,526            |   |  |   | 60,956  |  
|Gain (loss) on disposals and impairment of assets                                                     |  |                       | (946    | ) |                        |   | (1,175  | )                 |  |   | 654               |   |  |   | (3,809  | )
|Interest and investment income                                                                        |  |                       | 229     |   |                        |   | 575     |                   |  |   | 1,015             |   |  |   | 1,356   |  
|Interest expense and financing costs                                                                  |  |                       | (14,918 | ) |                        |   | (13,932 | )                 |  |   | (57,441           | ) |  |   | (41,679 | )
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Income (loss) from operations before income taxes and minority interest                               |  | $                     | (6,522  | ) |                        | $ | 1,272   |                   |  | $ | (41,292           | ) |  | $ | (7,334  | )
|                                                                                                      |  |                       |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  



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ClubCorp, Inc.



Consolidated Statement of Operations:



|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---------------------- | - | ---- | ---------------- |  | - | ---------------- | - |  | - | ----- | -
|                                                                                                      |  | Discontinued Operations |       
|                                                                                                      |  | Twelve Weeks Ended      |        |   | Thirty-Six Weeks Ended |  
|                                                                                                      |  | September 9,2003        |        |   | September 7,2004       |   |      | September 9,2003 |  |   | September 7,2004 |  
|Country Club and Golf Facilities:                                                                     |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating revenues                                                                                    |  | $                       | 991    |   |                        | $ | (1   | )                |  | $ | 5,885            |   |  | $ | (1    | )
|Operating costs and expenses (1)                                                                      |  |                         | 895    |   |                        |   | 1    |                  |  |   | 5,579            |   |  |   | 3     |  
|Depreciation and amortization                                                                         |  |                         | 65     |   |                        |   |     |                  |  |   | 311              |   |  |   |      |  
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating income (loss)                                                                               |  | $                       | 31     |   |                        | $ | (2   | )                |  | $ | (5               | ) |  | $ | (4    | )
|EBITDA                                                                                                |  | $                       | 96     |   |                        | $ | (2   | )                |  | $ | 306              |   |  | $ | (4    | )
|                                                                                                      |  |                         |        |  
|Resorts:                                                                                              |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating revenues                                                                                    |  | $                       |       |   |                        | $ |     |                  |  | $ |                 |   |  | $ |      |  
|Operating costs and expenses (1)                                                                      |  |                         |       |   |                        |   |     |                  |  |   |                 |   |  |   |      |  
|Depreciation and amortization                                                                         |  |                         |       |   |                        |   |     |                  |  |   |                 |   |  |   |      |  
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating income                                                                                      |  | $                       |       |   |                        | $ |     |                  |  | $ |                 |   |  | $ |      |  
|EBITDA                                                                                                |  | $                       |       |   |                        | $ |     |                  |  | $ |                 |   |  | $ |      |  
|                                                                                                      |  |                         |        |  
|Business and sports clubs:                                                                            |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating revenues                                                                                    |  | $                       | 2,552  |   |                        | $ | 892  |                  |  | $ | 8,743            |   |  | $ | 4,359 |  
|Operating costs and expenses (1)                                                                      |  |                         | 2,653  |   |                        |   | 915  |                  |  |   | 9,296            |   |  |   | 4,395 |  
|Depreciation and amortization                                                                         |  |                         | 197    |   |                        |   | (8   | )                |  |   | 556              |   |  |   | 108   |  
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating loss                                                                                        |  | $                       | (298   | ) |                        | $ | (15  | )                |  | $ | (1,109           | ) |  | $ | (144  | )
|EBITDA                                                                                                |  | $                       | (101   | ) |                        | $ | (23  | )                |  | $ | (553             | ) |  | $ | (36   | )
|                                                                                                      |  |                         |        |  
|Other operations and services:                                                                        |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating revenues                                                                                    |  | $                       |       |   |                        | $ |     |                  |  | $ |                 |   |  | $ |      |  
|Operating costs and expenses (1)                                                                      |  |                         | (2,380 | ) |                        |   |     |                  |  |   | (6,065           | ) |  |   |      |  
|Depreciation and amortization                                                                         |  |                         |       |   |                        |   |     |                  |  |   |                 |   |  |   |      |  
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating income                                                                                      |  | $                       | 2,380  |   |                        | $ |     |                  |  | $ | 6,065            |   |  | $ |      |  
|EBITDA                                                                                                |  | $                       | 2,380  |   |                        | $ |     |                  |  | $ | 6,065            |   |  | $ |      |  
|                                                                                                      |  |                         |        |  
|Consolidated Operations:                                                                              |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating revenues                                                                                    |  | $                       | 3,543  |   |                        | $ | 891  |                  |  | $ | 14,628           |   |  | $ | 4,358 |  
|Operating costs and expenses (1)                                                                      |  |                         | 1,168  |   |                        |   | 916  |                  |  |   | 8,810            |   |  |   | 4,398 |  
|Depreciation and amortization                                                                         |  |                         | 262    |   |                        |   | (8   | )                |  |   | 867              |   |  |   | 108   |  
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Operating income (loss)                                                                               |  | $                       | 2,113  |   |                        | $ | (17  | )                |  | $ | 4,951            |   |  | $ | (148  | )
|EBITDA                                                                                                |  | $                       | 2,375  |   |                        | $ | (25  | )                |  | $ | 5,818            |   |  | $ | (40   | )
|(1)    Includes operating costs and expenses as well as selling, general and administrative expenses. | 
|                                                                                                     
|Reconciliation to income (loss) before income taxes and minority interest:                            | 
|                                                                                                      |  |                         |        |  
|EBITDA                                                                                                |  | $                       | 2,375  |   |                        | $ | (25  | )                |  | $ | 5,818            |   |  | $ | (40   | )
|Depreciation and amortization                                                                         |  |                         | 262    |   |                        |   | (8   | )                |  |   | 867              |   |  |   | 108   |  
|Gain (loss) on disposals and impairment of assets                                                     |  |                         | (3,028 | ) |                        |   | (1   | )                |  |   | 5,711            |   |  |   | 160   |  
|Interest and investment income                                                                        |  |                         |       |   |                        |   |     |                  |  |   |                 |   |  |   |      |  
|Interest expense                                                                                      |  |                         | (121   | ) |                        |   | (110 | )                |  |   | (237             | ) |  |   | (319  | )
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  
|Income (loss) from operations before income taxes and minority interest                               |  | $                       | (1,036 | ) |                        | $ | (128 | )                |  | $ | 10,425           |   |  | $ | (307  | )
|                                                                                                      |  |                         |        |   |                        |   |      |                  |  |   |                  |   |  |   |       |  



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##### Table of Contents

ClubCorp, Inc.



Note 11. Contingencies



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



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



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##### Table of Contents

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



Introduction



ClubCorp, Inc. (referred to as ClubCorp®, the Company, we, us and our throughout this document) is a holding company incorporated under the laws of the State of Delaware that, through its
subsidiaries, owns and operates premier golf and business clubs and destination golf resorts. As of September 7, 2004, we operated 99 country clubs, golf clubs and public golf facilities, three destination golf resorts and 68 business, sports and
business/sports clubs in 29 states and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst® Resort and Country Club in North Carolina, The Homestead® Resort in Virginia, Barton Creek Resort and Country Club in Austin, Texas, Firestone® Country Club in Akron, Ohio, Mission Hills® Country Club near Palm Springs, California, and The City Club on Bunker Hill in Los
Angeles.



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



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



Our consolidated financial statements are presented on a 52/53 week fiscal year ending on the last Tuesday of December, with
the first three quarters consisting of 12 weeks each and the fourth quarter consisting of 16 or 17 weeks. The following discussion of our financial condition and results of operations for the 12 and 36 weeks ended September 9, 2003 and September 7,
2004 should be read in conjunction with the our Annual Report on Form 10-K for the year ended December 30, 2003, as filed with the Securities and Exchange Commission.



Results of Operations



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



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



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



We use EBITDA to monitor our property-level and overall performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization,
extraordinary items and gains and losses on disposals and impairment of assets and includes both continuing and discontinued operations. EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not
based on accounting principles generally accepted in the United States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurement of EBITDA may not be comparable to similarly titled measures
reported by other companies. See Note 10 to our Notes to Condensed Consolidated Financial Statements for a reconciliation of this measure to our condensed consolidated financial statements prepared in accordance with accounting principles generally
accepted in the United States of America.



13



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##### Table of Contents

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



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



Consolidated Operations  Continuing Operations



Operating revenues increased from $219.6 million for third quarter 2003 to $221.6 million for third quarter 2004. This increase was comprised of $1.8
million at our country club and golf facilities, $2.8 million at our resorts and $1.7 million at our business and sports clubs offset by a decrease of $4.3 million in our other operations and services. The overall increase is primarily due to an
increase in membership dues and food and beverage revenues.



Loss on disposals and impairment of assets was $0.9 million for third quarter 2003 as compared to $1.2 million for third quarter 2004. The loss in 2004 was primarily due to the retirement of fixed assets at several properties.



Excluding the impact of disposals and impairment of assets, operating
income improved from $9.1 million for third quarter 2003 to $15.8 million for third quarter 2004. This improvement was due to the increase in revenues mentioned above as well as a decrease in operating costs and expenses of $3.2 million. Expenses
decreased due to a $3.4 million recovery of costs during third quarter 2004 related to litigation accrued earlier in 2004, partially offset by increased payroll and payroll related expenses.



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



Discontinued Operations



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



14



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##### Table of Contents

Segment and Other Information  12 weeks



Country Club and Golf Facilities



The following table presents certain summary financial and other operating data for our country club and golf facilities segment for the third quarters
ended September 9, 2003 and September 7, 2004 (dollars in thousands):



|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------------------ | ------- | ------------------------------------- | - | ------- |  | ---- | ------- |  | - | ------- | -
|                                                             |  | Same Store CountryClub and Golf Facilities |         | Total Country Club andGolf Facilities |  
|                                                             |  | 2003                                       |         | 2004                                  |   | 2003    |  | 2004 |        
|Number of facilities at end of period                        |  |                                            | 97      |                                       |   | 97      |  |      | 99      |  |   | 99      |  
|Operating revenues                                           |  | $                                          | 112,247 |                                       | $ | 116,603 |  | $    | 112,247 |  | $ | 116,603 |  
|Recognition of membership fees and deposits                  |  |                                            | 8,472   |                                       |   | 5,927   |  |      | 8,472   |  |   | 5,927   |  
|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  
|Total operating revenues                                     |  | $                                          | 120,719 |                                       | $ | 122,530 |  | $    | 120,719 |  | $ | 122,530 |  
|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  
|Operating costs and expenses (1)                             |  |                                            | 94,003  |                                       |   | 96,545  |  |      | 93,996  |  |   | 96,561  |  
|Depreciation and amortization                                |  |                                            | 11,639  |                                       |   | 11,301  |  |      | 11,639  |  |   | 11,301  |  
|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  
|Segment operating income from continuing operations          |  | $                                          | 15,077  |                                       | $ | 14,684  |  | $    | 15,084  |  | $ | 14,668  |  
|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  
|Segment operating income (loss) from discontinued operations |  | $                                          |        |                                       | $ |        |  | $    | 31      |  | $ | (2      | )
|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  
|EBITDA (1)                                                   |  | $                                          | 26,716  |                                       | $ | 25,985  |  | $    | 26,819  |  | $ | 25,967  |  
|                                                             |  |                                            |         |                                       |   |         |  |      |         |  |   |         |  

---

|(1) | Excludes intercompany consulting fees of $2.3 million and $4.5 million for Same Store and Total in 2003 and 2004, respectively. Fees increased in 2004 in conjunction with the terms
of our new debt facility.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing
Operations. Total operating revenues increased $1.8 million comparing third quarter 2003 to third quarter 2004 for same store country club and golf facilities. This increase was primarily due to increased food and beverage sales of $2.0 million
and membership dues of $1.8 million partially offset by decreased recognition of membership fees and deposits of $2.5 million. Food and beverage revenues increased as a result of increased a la carte business and check average at our clubs.
Membership dues increased as a result of positive membership trends as well as price increases. Recognition of membership fees and deposits decreased primarily due to a change in the allocation procedures of revenue over 13 periods versus equal
amounts in each of our four quarters.



Segment operating income
decreased $0.4 million at same store country club and golf facilities comparing third quarter 2003 to third quarter 2004 as a result of the increase in revenues mentioned above, offset by increased operating costs and expenses of $2.5 million.
Operating costs and expenses increased primarily due to increased food and beverage and golf operations expenses of $1.8 million and $1.1 million, respectively. Overall, food and beverage margins improved when comparing third quarter 2003 to third
quarter 2004 offset by a decrease in golf operating margin mainly due to numerous hurricanes and heavy rains during the quarter. Additionally, we decreased a litigation accrual by $1.0 million related to the settlement of a lawsuit involving the
members at one of our clubs.



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##### Table of Contents

Resorts



The following table presents certain summary financial and other operating data for our resorts segment for the third quarters ended September 9, 2003 and
September 7, 2004 (dollars in thousands):



|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|----------------------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------ | ---- |  | ---- | ------ |  | - | ------
|                                                      |  | Same Store Resorts |        |   | Total Resorts
|                                                      |  | 2003               |        |   | 2004          |   |        | 2003 |  | 2004
|Number of facilities at end of period (1)             |  |                    | 3      |   |               |   | 3      |      |  |      | 3      |  |   | 3     
|Operating revenues                                    |  | $                  | 46,818 |   |               | $ | 49,781 |      |  | $    | 46,857 |  | $ | 49,809
|Recognition of membership fees and deposits           |  |                    | 1,613  |   |               |   | 1,422  |      |  |      | 1,613  |  |   | 1,422 
|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Total operating revenues                              |  | $                  | 48,431 |   |               | $ | 51,203 |      |  | $    | 48,470 |  | $ | 51,231
|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Operating costs and expenses (2)                      |  |                    | 37,662 |   |               |   | 39,663 |      |  |      | 38,227 |  |   | 40,067
|Depreciation and amortization                         |  |                    | 3,820  |   |               |   | 3,771  |      |  |      | 3,927  |  |   | 3,847 
|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Segment operating income from continuing operations   |  | $                  | 6,949  |   |               | $ | 7,769  |      |  | $    | 6,316  |  | $ | 7,317 
|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Segment operating income from discontinued operations |  | $                  |       |   |               | $ |       |      |  | $    |       |  | $ |      
|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|EBITDA (2)                                            |  | $                  | 10,769 |   |               | $ | 11,539 |      |  | $    | 10,243 |  | $ | 11,164
|                                                      |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Lodging data: (3 resorts) (1)                         |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Room nights available                                 |  |                    | 99,792 |   |               |   | 99,792 |      |  |      |        |  |   |       
|Room nights sold                                      |  |                    | 61,642 |   |               |   | 64,928 |      |  |      |        |  |   |       
|Paid occupancy rate                                   |  |                    | 61.8   | % |               |   | 65.1   | %    |  |      |        |  |   |       
|Average daily revenue per occupied room (3)           |  | $                  | 698    |   |               | $ | 707    |      |  |      |        |  |   |       
|Average daily revenue per available room (3)          |  | $                  | 431    |   |               | $ | 460    |      |  |      |        |  |   |       

---

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

|(2) | Excludes intercompany consulting fees of $1.9 million in 2004 for Same Store and Total. There were no intercompany consulting fees in 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Average daily revenue per occupied room and average daily revenue per available room are based on total operating revenues excluding membership dues, recognition of member
initiation fees, and net managed rooms commissions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing Operations.Total operating revenues increased $2.8 million comparing third quarter 2003 to third quarter 2004 for same store resorts. This increase was primarily in food and beverage, golf and lodging at Pinehurst due to
increased occupancy and spending.



Segment operating income
increased $0.8 million comparing third quarter 2003 to third quarter 2004 for same store resorts. This improvement was due to the increase in revenues mentioned above offset by a $2.0 million increase in operating costs and expenses. Operating costs
and expenses increased due to higher food and beverage expenses of $0.8 million related to the higher occupancy and spending at Pinehurst. Food and beverage operating margins improved when comparing third quarter 2003 to third quarter 2004.



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##### Table of Contents

Business and Sports Clubs



The following table presents certain summary financial and other operating data for our business and sports clubs segment
for the third quarters ended September 9, 2003 and September 7, 2004 (dollars in thousands):



|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | ----------------------------------- | ------ | ------------------------------- | ---- | - | ------ |  | - | ------ | - |  | - | ------ | -
|                                                             |  | Same Store Businessand Sports Clubs |        | Total Business and Sports Clubs |     
|                                                             |  | 2003                                |        |                                 | 2004 |   | 2003   |  |   | 2004   |  
|Number of facilities at end of period                        |  |                                     | 66     |                                 |      |   | 66     |  |   | 66     |   |  |   | 66     |  
|Operating revenues                                           |  | $                                   | 43,224 |                                 |      | $ | 45,040 |  | $ | 43,224 |   |  | $ | 45,040 |  
|Recognition of membership fees and deposits                  |  |                                     | 606    |                                 |      |   | 538    |  |   | 606    |   |  |   | 538    |  
|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  
|Total operating revenues                                     |  | $                                   | 43,830 |                                 |      | $ | 45,578 |  | $ | 43,830 |   |  | $ | 45,578 |  
|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  
|Operating costs and expenses (1)                             |  |                                     | 40,382 |                                 |      |   | 41,577 |  |   | 40,382 |   |  |   | 41,577 |  
|Depreciation and amortization                                |  |                                     | 2,539  |                                 |      |   | 2,490  |  |   | 2,539  |   |  |   | 2,490  |  
|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  
|Segment operating income from continuing operations          |  | $                                   | 909    |                                 |      | $ | 1,511  |  | $ | 909    |   |  | $ | 1,511  |  
|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  
|Segment operating income (loss) from discontinued operations |  | $                                   | (163   | )                               |      | $ | 7      |  | $ | (298   | ) |  | $ | (15    | )
|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  
|EBITDA (1)                                                   |  | $                                   | 3,400  |                                 |      | $ | 4,000  |  | $ | 3,347  |   |  | $ | 3,978  |  
|                                                             |  |                                     |        |                                 |      |   |        |  |   |        |   |  |   |        |  

---

|(1) | Excludes intercompany consulting fees of $1.2 million and $1.3 million for Same Store and Total, respectively, in 2003 and 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------



Continuing Operations.Total operating revenues increased $1.7 million
comparing third quarter 2003 to third quarter 2004 at same store business and sports clubs. This increase was primarily comprised of a $1.2 million increase in food and beverage sales and a $0.6 million increase in membership dues. Food and beverage
revenues increased primarily as a result of increased spending for a la carte and private party business and most clubs had a higher per check average in 2004. Membership dues increased due to the impact of a new Signature Gold dining program being
offered at the business clubs in 2004.



Segment operating
income increased comparing third quarter 2003 to third quarter 2004 at same store business and sports clubs due to the increase in revenues mentioned above offset by a related increase in operating costs and expenses of $1.2 million. Operating
margins were positively impacted by improved food and beverage margins due to expense controls in purchasing and operations.



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



Other Operations and Services  Continuing Operations



Included in results for other operations and services for the third quarter
2004 is a $5.0 million ($3.4 million net of legal costs) recovery of previously accrued expenses related to litigation accrued earlier in 2004. During the third quarter 2003 we recorded a charge of $1.3 million to accrue for vacation earned by
employees. There was no significant change to the vacation accrual during third quarter 2004.



Operating loss from other operations and services improved comparing third quarter 2003 to third quarter 2004 due to the reasons mentioned above as well as decreases in payroll and payroll related costs. Payroll and
payroll related costs decreased due to a corporate reorganization that led to reductions in personnel.



17



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##### Table of Contents

36 Weeks Ended September 9, 2003 Compared to 36 Weeks Ended September 7, 2004



Consolidated Operations  Continuing Operations



Operating revenues increased from $623.7 million for the 36 weeks ended
September 9, 2003 to $645.0 million for the 36 weeks ended September 7, 2004. This increase was comprised of $11.1 million at our country club and golf facilities, $9.7 million at our resorts and $5.1 million at our business and sports clubs, offset
by a decrease of $4.6 million in our other operations and services. The overall increase is primarily due to an increase in membership dues and food and beverage revenues.



Gain (loss) on disposals and impairment of assets was $0.7 million for the 36 weeks ended September 9, 2003 as compared to a
loss of $3.8 million for the 36 weeks ended September 7, 2004. The loss in 2004 includes impairment of $1.4 million recorded to write down the carrying value of certain properties. The remainder of the loss for 2004 is primarily related to the
retirement of fixed assets at several properties.



Excluding
the impact of disposals and impairment of assets, operating income improved from $14.5 million for the 36 weeks ended September 9, 2003 to $36.8 million for the 36 weeks ended September 7, 2004. This improvement was primarily due to the increase in
revenues mentioned above partially offset by increased operating costs and expenses of $2.6 million. Operating costs and expenses increased due to higher usage primarily at country club and golf facilities as well as at the resorts.



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



Discontinued Operations



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



18



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##### Table of Contents

Segment and Other Information  36 weeks



Country Club and Golf Facilities



The following table presents certain summary financial and other operating data for our country club and golf facilities segment for the 36 weeks ended
September 9, 2003 and September 7, 2004 (dollars in thousands):



|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  
|--------------------------------------------------- |  | ------------------------------------------ | ------- | ------------------------------------- | - | ------- |  | - | ------- | - |  | - | ------- | -
|                                                    |  | Same Store CountryClub and Golf Facilities |         | Total Country Club andGolf Facilities |  
|                                                    |  | 2003                                       |         | 2004                                  |   | 2003    |  |   | 2004    |  
|Number of facilities at end of period               |  |                                            | 97      |                                       |   | 97      |  |   | 99      |   |  |   | 99      |  
|Operating revenues                                  |  | $                                          | 317,960 |                                       | $ | 334,259 |  | $ | 318,046 |   |  | $ | 334,259 |  
|Recognition of membership fees and deposits         |  |                                            | 25,207  |                                       |   | 20,054  |  |   | 25,208  |   |  |   | 20,054  |  
|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  
|Total operating revenues                            |  | $                                          | 343,167 |                                       | $ | 354,313 |  | $ | 343,254 |   |  | $ | 354,313 |  
|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  
|Operating costs and expenses (1)                    |  |                                            | 263,754 |                                       |   | 276,631 |  |   | 263,865 |   |  |   | 276,648 |  
|Depreciation and amortization                       |  |                                            | 33,384  |                                       |   | 34,053  |  |   | 33,384  |   |  |   | 34,053  |  
|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  
|Segment operating income from continuing operations |  | $                                          | 46,029  |                                       | $ | 43,629  |  | $ | 46,005  |   |  | $ | 43,612  |  
|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  
|Segment operating loss from discontinued operations |  | $                                          |        |                                       | $ |        |  | $ | (5      | ) |  | $ | (4      | )
|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  
|EBITDA (1)                                          |  | $                                          | 79,413  |                                       | $ | 77,682  |  | $ | 79,695  |   |  | $ | 77,661  |  
|                                                    |  |                                            |         |                                       |   |         |  |   |         |   |  |   |         |  

---

|(1) | Excludes intercompany consulting fees of $6.9 million and $12.7 million for Same Store and Total in 2003 and 2004, respectively. Fees increased in 2004 in conjunction with the terms
of our new debt facility.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing
Operations. Total operating revenues increased $11.1 million comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 for same store country club and golf facilities. This increase was primarily due to increased
food and beverage sales of $7.6 million, membership dues of $5.1 million and golf operations revenues of $2.3 million, partially offset by decreased recognition of membership fees and deposits of $5.2 million. Food and beverage revenues increased as
a result of increased activity and check average at our clubs in both a la carte and private party. Membership dues increased as a result of positive membership trends and price increases when comparing 2003 to 2004. Golf operations revenue
increased due to higher paid rounds as a result of the increased activity at our clubs. Recognition of membership fees and deposits decreased primarily due to a change in the allocation procedures of revenue over 13 periods versus equal amounts in
each of our four quarters.



Segment operating income decreased
$2.4 million at same store country club and golf facilities from the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 as a result of the increase in revenues mentioned above, offset by increased operating costs and expenses
of $12.9 million. Operating costs and expenses increased primarily due to the increased usage at our clubs which resulted in increased food and beverage and golf operations expenses of $7.0 million and $3.5 million, respectively. Overall, food and
beverage operating margins improved when comparing 2003 to 2004 while golf operating margins decreased due to numerous hurricanes and heavy rains.



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



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##### Table of Contents

Resorts



The following table presents certain summary financial and other operating data for our resorts segment for the 36 weeks ended September 9, 2003 and
September 7, 2004 (dollars in thousands):



|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|----------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | ---- |  | ---- | ------- |  | - | -------
|                                                      |  | Same Store Resorts |         |   | Total Resorts
|                                                      |  | 2003               |         |   | 2004          |   |         | 2003 |  | 2004
|Number of facilities at end of period (1)             |  |                    | 3       |   |               |   | 3       |      |  |      | 3       |  |   | 3      
|Operating revenues                                    |  | $                  | 125,350 |   |               | $ | 135,536 |      |  | $    | 125,461 |  | $ | 135,633
|Recognition of membership fees and deposits           |  |                    | 4,715   |   |               |   | 4,244   |      |  |      | 4,715   |  |   | 4,244  
|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Total operating revenues                              |  | $                  | 130,065 |   |               | $ | 139,780 |      |  | $    | 130,176 |  | $ | 139,877
|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Operating costs and expenses (2)                      |  |                    | 103,077 |   |               |   | 110,517 |      |  |      | 104,397 |  |   | 111,526
|Depreciation and amortization                         |  |                    | 12,050  |   |               |   | 11,326  |      |  |      | 12,377  |  |   | 11,580 
|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Segment operating income from continuing operations   |  | $                  | 14,938  |   |               | $ | 17,937  |      |  | $    | 13,402  |  | $ | 16,771 
|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Segment operating income from discontinued operations |  | $                  |        |   |               | $ |        |      |  | $    |        |  | $ |       
|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|EBITDA (2)                                            |  | $                  | 26,988  |   |               | $ | 29,263  |      |  | $    | 25,779  |  | $ | 28,351 
|                                                      |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Lodging data: (3 resorts) (1)                         |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Room nights available                                 |  |                    | 299,376 |   |               |   | 299,376 |      |  |      |         |  |   |        
|Room nights sold                                      |  |                    | 161,057 |   |               |   | 172,092 |      |  |      |         |  |   |        
|Paid occupancy rate                                   |  |                    | 53.8    | % |               |   | 57.5    | %    |  |      |         |  |   |        
|Average daily revenue per occupied room (3)           |  | $                  | 706     |   |               | $ | 720     |      |  |      |         |  |   |        
|Average daily revenue per available room (3)          |  | $                  | 380     |   |               | $ | 414     |      |  |      |         |  |   |        

---

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

|(2) | Excludes intercompany consulting fees of $5.8 million in 2004 for Same Store and Total. There were no intercompany consulting fees in 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Average daily revenue per occupied room and average daily revenue per available room are based on total operating revenues excluding membership dues, recognition of member
initiation fees, and net managed rooms commissions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing Operations.Total operating revenues increased $9.7 million comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 for same store resorts. This increase was primarily due to increased food
and beverage sales of $4.3 million, lodging revenues of $2.8 million, other recreation revenues of $2.2 million and golf operations revenues of $1.6 million. Food and beverage sales increased as a result of higher occupancy and spending by social
guests during 2004 at all of the resorts. Lodging revenues increased as a result of increased room nights and higher average room rates from the prior year, primarily at The Homestead. Other recreation revenues increased as a result of increased spa
revenues at The Homestead and Pinehurst as well as increased ski revenues at The Homestead. Golf revenues increased due to increased play on the premium courses at Pinehurst.



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



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##### Table of Contents

Business and Sports Clubs



The following table presents certain summary financial and other operating
data for our business and sports clubs segment for the 36 weeks ended September 9, 2003 and September 7, 2004 (dollars in thousands):



|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------- |  | ----------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                    |  | Same Store Businessand Sports Clubs |         |   | Total Business and Sports Clubs |  
|                                                    |  | 2003                                |         |   | 2004                            |   |         | 2003 |  |   | 2004    |  
|Number of facilities at end of period               |  |                                     | 66      |   |                                 |   | 66      |      |  |   | 66      |   |  |   | 66      |  
|Operating revenues                                  |  | $                                   | 138,271 |   |                                 | $ | 143,631 |      |  | $ | 138,271 |   |  | $ | 143,631 |  
|Recognition of membership fees and deposits         |  |                                     | 1,885   |   |                                 |   | 1,643   |      |  |   | 1,885   |   |  |   | 1,643   |  
|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Total operating revenues                            |  | $                                   | 140,156 |   |                                 | $ | 145,274 |      |  | $ | 140,156 |   |  | $ | 145,274 |  
|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Operating costs and expenses (1)                    |  |                                     | 124,018 |   |                                 |   | 127,823 |      |  |   | 124,020 |   |  |   | 127,823 |  
|Depreciation and amortization                       |  |                                     | 7,727   |   |                                 |   | 7,448   |      |  |   | 7,727   |   |  |   | 7,448   |  
|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Segment operating income from continuing operations |  | $                                   | 8,411   |   |                                 | $ | 10,003  |      |  | $ | 8,409   |   |  | $ | 10,003  |  
|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Segment operating loss from discontinued operations |  | $                                   | (446    | ) |                                 | $ | (58     | )    |  | $ | (1,109  | ) |  | $ | (144    | )
|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|EBITDA (1)                                          |  | $                                   | 16,004  |   |                                 | $ | 17,501  |      |  | $ | 15,583  |   |  | $ | 17,415  |  
|                                                    |  |                                     |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  

---

|(1) | Excludes intercompany consulting fees of $3.7 million and $3.9 million for Same Store and Total, respectively, in 2003 and 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------



Continuing Operations.Total operating revenues increased $5.1 million
comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 at same store business and sports clubs. This increase was primarily comprised of a $3.5 million increase in food and beverage sales and a $1.7 million increase
in membership dues. Food and beverage revenues increased primarily as a result of increased spending in ala carte and private party and most clubs had a higher per check average in 2004. Membership dues increased due to the impact of the Signature
Gold program being offered at the business clubs in 2004.



Segment operating income increased $1.6 million comparing the 36 weeks ended September 9, 2003 to the 36 weeks ended September 7, 2004 at same store business and sports clubs due to the increase in revenues mentioned above, partially offset
by a related increase in operating costs and expenses of $3.8 million. Operating margins were positively impacted by improved food and beverage margins due to expense controls in purchasing and operations.



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



Other Operations and Services  Continuing Operations



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



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



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##### Table of Contents

Seasonality of Demand; Fluctuations in Quarterly Results



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



Liquidity and Capital Resources



Historically, we have financed our operations and cash needs primarily
through cash flows from operations, borrowings under credit facilities, and to a lesser extent, proceeds from divestitures. We anticipate using cash flow from operations for the remainder of 2004 and the immediate future thereafter principally to
fund planned capital replacement expenditures, to repay debt and to build cash reserves. It is anticipated that beginning in 2005, we will also use our cash flow to grow and expand our business through a combination of improvements and expansions of
existing facilities and acquisitions of additional properties. We believe any unit growth in the remainder of 2004 will be undertaken by entering into management contracts or lease agreements, while in 2005 and beyond, growth could take the form of
both ownership and management opportunities, principally in the golf and resort segments. Consistent with our strategy, we have entered into two management contracts during the twelve weeks ended September 7, 2004.



We distinguish uses of cash for 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) and investments in joint ventures. 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 strategic expansions of existing and newly acquired
facilities and resorts that we believe will provide opportunities to expand our membership base and room nights and positively affect long-term cash flows. Historically, capital expansions have been funded by operating cash flows and external debt.
We expect to spend approximately $7 million in 2004 on capital expansions and improvements to existing facilities of which $3.2 million has already been spent. Total capital expenditures are expected to be approximately $60 million in 2004 of which
$39.2 million has already been spent. Net cash flows used by investing activities were $34.1 million for the 36 weeks ended September 7, 2004 as compared to $11.7 million for the 36 weeks ended September 9, 2003. The 2003 net usage includes proceeds
from divestitures of $30.6 million compared to only $0.1 million in 2004.



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



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



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



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Net cash flows provided by operations increased to $71.5 million in the 36 weeks ended September 7, 2004
from $38.8 million in the 36 weeks ended September 9, 2003 primarily due to increased income generated in our various business units. We believe we have adequate capital resources to fund our operations and strategy for the immediate future. In the
event that this is not the case, the company could use its existing cash reserves to meet its obligations or delay or cancel certain capital repair or expansion projects.



Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments



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



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



This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of
historical fact should be considered forward-looking statements for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our
plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of
members and guests, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as may, will, expects,
plans, anticipates, intends, believes, estimates, potential or continue, or the negative thereof or other similar words. Although we believe that the expectations
reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may
be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of which are summarized in this section and in our Form 10-K for the year
ended December 30, 2003.



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



Recently Issued Accounting Pronouncements



In January 2003, the FASB issued and then revised in December 2003, FASB Interpretation No. 46, (FIN 46R) Consolidation of Variable Interest
Entities which changes the criteria by which one company includes another entity in its consolidated financial statements. FIN 46R requires a variable interest entity to be consolidated by a company if that company is subject to a majority of
the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns or both. The assets, liabilities and noncontrolling interests of the newly consolidated variable interest
entities were initially recorded at the amounts at which they would have been carried in the Consolidated Financial Statements if FIN 46R had been effective when we first met the conditions to be the primary beneficiary of the variable interest
entity. The difference between the net amount added to our Consolidated Statement of Operations and the amount of any previously recognized interest in the newly consolidated entity was not material and therefore was not recognized as a cumulative
effect of an accounting change when adopted. The adoption of FIN 46R in the first quarter of 2004 resulted in an initial increase in net assets of $1.1 million, including debt of $13.7 million, to our Consolidated Balance Sheet. Prior periods were
not restated.



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##### Table of Contents

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



Item 3. Quantitative and Qualitative Disclosures about Market Risk



There were no material changes to the disclosure on this matter made in our report on Form 10-K for the fiscal year ended December 30, 2003.



Item 4. Controls and Procedures



Evaluation
of Disclosure and Procedures



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



Changes in Internal Controls



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



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



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



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



24



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##### Table of Contents

Item 6. Exhibits and Reports on Form 8-K



| | (a) | Exhibits
| | --- | --------



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



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



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



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



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



| | (b) | Reports on Form 8-K
| | --- | -------------------



On September 7, 2004, we filed a Current Report on Form 8-K, reporting, under Item 5.02  Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers, the third amendment to the Employment Agreement between ClubCorp, Inc. and John A. Beckert.



---

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



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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 21, 2004 |  | By:            |  | /s/ Jeffrey P. Mayer   
|                       |  |                |  | Jeffrey P. Mayer       
|                       |  |                |  | Chief Financial Officer



26