##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



xQUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 6, 2005

or



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



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



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CLUBCORP, INC.

(Exact name of registrant as specified in its charter)



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



3030 LBJ Freeway,
Suite 600

Dallas, Texas 75234

(Address of principal executive offices, including zip code)





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



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



---



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



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



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



The number of
shares of the registrants common stock outstanding as of October 20, 2005 was 93,113,340.



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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 |  | 14
|         |  |                                                                                      
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 26
|         |  |                                                                                      
|Item 4.  |  | Controls and Procedures                                                               |  | 26
|         |  |                                                                                      
|Part II. |  | OTHER INFORMATION                                                                     |  |   
|         |  |                                                                                      
|Item 1.  |  | Legal Proceedings                                                                     |  | 27
|         |  |                                                                                      
|Item 6.  |  | Exhibits                                                                              |  | 27



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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)



|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ----------------- | - | --------- | -
|Assets                                                                                                                                                          |  | December 28, 2004 |           |   | September 6, 2005 |  
|Current assets:                                                                                                                                                 |  |                   |           |   |                   |   |           |  
|Cash and cash equivalents                                                                                                                                       |  | $                 | 96,180    |   |                   | $ | 94,359    |  
|Restricted cash                                                                                                                                                 |  |                   | 28,742    |   |                   |   | 21,650    |  
|Membership and other receivables, net                                                                                                                           |  |                   | 71,008    |   |                   |   | 80,387    |  
|Inventories                                                                                                                                                     |  |                   | 19,684    |   |                   |   | 20,519    |  
|Prepaid expenses and other assets                                                                                                                               |  |                   | 33,313    |   |                   |   | 29,193    |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Total current assets                                                                                                                                            |  |                   | 248,927   |   |                   |   | 246,108   |  
|                                                                                                                                                                |  |                  
|Property and equipment, net                                                                                                                                     |  |                   | 1,138,178 |   |                   |   | 1,135,729 |  
|Notes receivable                                                                                                                                                |  |                   | 43,436    |   |                   |   | 38,969    |  
|Other assets                                                                                                                                                    |  |                   | 87,444    |   |                   |   | 81,659    |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Total assets                                                                                                                                                    |  | $                 | 1,517,985 |   |                   | $ | 1,502,465 |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Liabilities and Stockholders Equity                                                                                                                            |  |                   |           |   |                   |   |           |  
|Current liabilities:                                                                                                                                            |  |                   |           |   |                   |   |           |  
|Accounts payable and accrued liabilities                                                                                                                        |  | $                 | 79,699    |   |                   | $ | 74,375    |  
|Long-term debtcurrent portion                                                                                                                                  |  |                   | 23,220    |   |                   |   | 75,015    |  
|Membership depositscurrent portion                                                                                                                             |  |                   | 16,940    |   |                   |   | 18,387    |  
|Other liabilities                                                                                                                                               |  |                   | 130,199   |   |                   |   | 128,853   |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Total current liabilities                                                                                                                                       |  |                   | 250,058   |   |                   |   | 296,630   |  
|Long-term debt, net of current portion                                                                                                                          |  |                   | 684,601   |   |                   |   | 596,499   |  
|Other liabilities                                                                                                                                               |  |                   | 139,490   |   |                   |   | 139,490   |  
|Membership deposits, net of current portion                                                                                                                     |  |                   | 136,776   |   |                   |   | 146,460   |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Total liabilities                                                                                                                                               |  |                   | 1,210,925 |   |                   |   | 1,179,079 |  
|Redemption value of common stock held by benefit plan                                                                                                           |  |                   | 47,180    |   |                   |   | 51,327    |  
|                                                                                                                                                                |  |                  
|Commitments and contingencies                                                                                                                                   |  |                   |           |   |                   |   |           |  
|                                                                                                                                                                |  |                  
|Stockholders equity:                                                                                                                                           |  |                   |           |   |                   |   |           |  
|Preferred stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding                                                                      |  |                   |          |   |                   |   |          |  
|Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 93,379,080 outstanding at December 28, 2004 and 93,113,340 at September 6, 2005 |  |                   | 996       |   |                   |   | 996       |  
|Additional paid-in capital                                                                                                                                      |  |                   | 161,672   |   |                   |   | 161,672   |  
|Accumulated other comprehensive loss                                                                                                                            |  |                   | (7,013    | ) |                   |   | (5,760    | )
|Retained earnings                                                                                                                                               |  |                   | 168,582   |   |                   |   | 182,809   |  
|Treasury stock, 6,215,328 shares at December 28, 2004 and 6,481,068 at September 6, 2005                                                                        |  |                   | (64,357   | ) |                   |   | (67,658   | )
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Total stockholders equity                                                                                                                                      |  |                   | 259,880   |   |                   |   | 272,059   |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  
|Total liabilities and stockholders equity                                                                                                                      |  | $                 | 1,517,985 |   |                   | $ | 1,502,465 |  
|                                                                                                                                                                |  |                   |           |   |                   |   |           |  



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 7, 2004  |         |   | September 6, 2005      |   |         | September 7, 2004 |  |   | September 6, 2005 |  
|Continuing operations:                                                             |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|                                                                                   |  |                    |         |  
|Operating revenues                                                                 |  | $                  | 218,449 |   |                        | $ | 274,321 |                   |  | $ | 636,038           |   |  | $ | 719,756 |  
|                                                                                   |  |                    |         |  
|Operating costs and expenses                                                       |  |                    | 170,537 |   |                        |   | 208,262 |                   |  |   | 490,847           |   |  |   | 548,854 |  
|Depreciation and amortization                                                      |  |                    | 19,660  |   |                        |   | 19,472  |                   |  |   | 60,270            |   |  |   | 58,157  |  
|Selling, general and administrative expenses                                       |  |                    | 12,379  |   |                        |   | 15,658  |                   |  |   | 47,748            |   |  |   | 49,070  |  
|Loss on disposals and impairment of assets                                         |  |                    | 1,187   |   |                        |   | 899     |                   |  |   | 4,561             |   |  |   | 2,255   |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Operating income from continuing operations                                        |  |                    | 14,686  |   |                        |   | 30,030  |                   |  |   | 32,612            |   |  |   | 61,420  |  
|Interest and investment income                                                     |  |                    | 575     |   |                        |   | 927     |                   |  |   | 1,356             |   |  |   | 2,585   |  
|Interest expense                                                                   |  |                    | (13,820 | ) |                        |   | (13,963 | )                 |  |   | (41,344           | ) |  |   | (42,297 | )
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Income (loss) from continuing operations before income taxes and minority interest |  |                    | 1,441   |   |                        |   | 16,994  |                   |  |   | (7,376            | ) |  |   | 21,708  |  
|                                                                                   |  |                    |         |  
|Income tax provision                                                               |  |                    | (922    | ) |                        |   | (337    | )                 |  |   | (2,370            | ) |  |   | (2,848  | )
|Minority interest                                                                  |  |                    | 194     |   |                        |   | (329    | )                 |  |   | (274              | ) |  |   | (543    | )
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Income (loss) from continuing operations                                           |  |                    | 713     |   |                        |   | 16,328  |                   |  |   | (10,020           | ) |  |   | 18,317  |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Discontinued operations:                                                           |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Income (loss) from discontinued operations before income taxes                     |  |                    | (298    | ) |                        |   | 470     |                   |  |   | (266              | ) |  |   | 110     |  
|Income tax provision                                                               |  |                    | (18     | ) |                        |   | (13     | )                 |  |   | (68               | ) |  |   | (53     | )
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Income (loss) from discontinued operations                                         |  |                    | (316    | ) |                        |   | 457     |                   |  |   | (334              | ) |  |   | 57      |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Net income (loss)                                                                  |  | $                  | 397     |   |                        | $ | 16,785  |                   |  | $ | (10,354           | ) |  | $ | 18,374  |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Basic earnings (loss) per share from:                                              |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Continuing operations                                                              |  | $                  | 0.01    |   |                        | $ | 0.18    |                   |  | $ | (0.11             | ) |  | $ | 0.20    |  
|Discontinued operations                                                            |  |                    | (0.01   | ) |                        |   | 0.00    |                   |  |   | 0.00              |   |  |   | 0.00    |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Basic earnings (loss) per share                                                    |  | $                  | 0.00    |   |                        | $ | 0.18    |                   |  | $ | (0.11             | ) |  | $ | 0.20    |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Diluted earnings (loss) per share from:                                            |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Continuing operations                                                              |  | $                  | 0.01    |   |                        | $ | 0.18    |                   |  | $ | (0.11             | ) |  | $ | 0.19    |  
|Discontinued operations                                                            |  |                    | (0.01   | ) |                        |   | 0.00    |                   |  |   | 0.00              |   |  |   | 0.00    |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  
|Diluted earnings (loss) per share                                                  |  | $                  | 0.00    |   |                        | $ | 0.18    |                   |  | $ | (0.11             | ) |  | $ | 0.19    |  
|                                                                                   |  |                    |         |   |                        |   |         |                   |  |   |                   |   |  |   |         |  







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 7, 2004      |         |   | September 6, 2005 |  
|Cash flows from operating activities:                                               |  |                        |         |   |                   |   |         |  
|Net income (loss)                                                                   |  | $                      | (10,354 | ) |                   | $ | 18,374  |  
|Adjustments to reconcile net income (loss) to cash flows from operating activities: |  |                        |         |   |                   |   |         |  
|Depreciation and amortization                                                       |  |                        | 61,064  |   |                   |   | 58,294  |  
|Loss on disposals and impairment of assets                                          |  |                        | 3,649   |   |                   |   | 1,623   |  
|Amortization of discount on membership deposits                                     |  |                        | 8,251   |   |                   |   | 8,933   |  
|Net change in real estate held for sale                                             |  |                        | 342     |   |                   |   | 2,099   |  
|Net change in prepaid expenses                                                      |  |                        | (3,336  | ) |                   |   | 4,275   |  
|Net change in membership and other receivables, net                                 |  |                        | (5,940  | ) |                   |   | (9,875  | )
|Net change in accounts payable and accrued liabilities                              |  |                        | (14,181 | ) |                   |   | (6,591  | )
|Net change in deferred income and other liabilities                                 |  |                        | 14,235  |   |                   |   | (14,653 | )
|Net change in deferred membership revenues                                          |  |                        | 10,391  |   |                   |   | 11,087  |  
|Other                                                                               |  |                        | 7,360   |   |                   |   | 8,499   |  
|                                                                                    |  |                        |         |   |                   |   |         |  
|Cash flows from operating activities                                                |  |                        | 71,481  |   |                   |   | 82,065  |  
|                                                                                    |  |                       
|Cash flows from investing activities:                                               |  |                        |         |   |                   |   |         |  
|Additions to property and equipment                                                 |  |                        | (39,196 | ) |                   |   | (46,906 | )
|Acquisition of facilities                                                           |  |                        |        |   |                   |   | (1,974  | )
|Development of real estate held for sale                                            |  |                        | (1,239  | ) |                   |   | (5,981  | )
|Net change in notes receivable                                                      |  |                        | 6,193   |   |                   |   | 7,949   |  
|Net change in restricted cash                                                       |  |                        | (1,225  | ) |                   |   | 7,092   |  
|Other                                                                               |  |                        | 122     |   |                   |   | 436     |  
|                                                                                    |  |                        |         |   |                   |   |         |  
|Cash flows from investing activities                                                |  |                        | (35,345 | ) |                   |   | (39,384 | )
|                                                                                    |  |                       
|Cash flows from financing activities:                                               |  |                        |         |   |                   |   |         |  
|Repayments of long-term debt                                                        |  |                        | (26,412 | ) |                   |   | (41,801 | )
|Change in membership deposits                                                       |  |                        | 7,428   |   |                   |   | 600     |  
|Treasury stock transactions                                                         |  |                        | (1,362  | ) |                   |   | (3,301  | )
|                                                                                    |  |                        |         |   |                   |   |         |  
|Cash flows from financing activities                                                |  |                        | (20,346 | ) |                   |   | (44,502 | )
|                                                                                    |  |                        |         |   |                   |   |         |  
|Net change in cash and cash equivalents                                             |  |                        | 15,790  |   |                   |   | (1,821  | )
|Cash and cash equivalents at beginning of period                                    |  |                        | 64,420  |   |                   |   | 96,180  |  
|                                                                                    |  |                        |         |   |                   |   |         |  
|Cash and cash equivalents at end of period                                          |  | $                      | 80,210  |   |                   | $ | 94,359  |  
|                                                                                    |  |                        |         |   |                   |   |         |  





See accompanying notes to condensed consolidated financial statements.



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ClubCorp, Inc.

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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 28, 2004, which are a part of ClubCorps 2004 Form 10-K.



In our opinion, the accompanying Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly the
consolidated financial position of ClubCorp as of December 28, 2004 and September 6, 2005, and the consolidated results of operations for the twelve weeks and thirty-six weeks ended September 7, 2004 and September 6, 2005, and
cash flows for the thirty-six weeks ended September 7, 2004 and September 6, 2005. Interim results are not necessarily indicative of fiscal year performance because of the impact of seasonal and short-term variations and other factors such
as timing of acquisitions and dispositions of facilities.



Cash and cash equivalents

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



Restricted cash

We had $28.7 million
and $21.7 million of restricted cash at December 28, 2004 and September 6, 2005, respectively. The 2005 balance is comprised of cash which serves as collateral for letters of credit totaling $19.0 million representing collateral related to
insurance policies and letters of credit totaling $2.7 million representing collateral related to debt covenants (See Note 9). The letters of credit have one-year terms and, therefore, the related restricted cash is included in current assets.



Recent Pronouncements

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



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



In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
an amendment of APB Opinion No. 29. SFAS No. 153 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. APB Opinion No. 29, Accounting for
Nonmonetary Transactions, provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. Under APB Opinion No. 29, an exchange of a productive asset for a similar productive asset was based on
the recorded amount of the asset relinquished.



4



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##### Table of Contents

ClubCorp, Inc.

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SFAS No. 153 eliminates this exception and replaces it with an exception of exchanges of nonmonetary assets that
do not have commercial substance. We will apply the requirements of SFAS No. 153 on any future nonmonetary exchange transactions.



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 29 and FASB Statement
No. 3. SFAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. APB Opinion No. 20 Accounting Changes,
previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. We will apply the requirements of SFAS
No. 154 on any future accounting changes or error corrections.



Reclassifications

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



Stock-based compensation

Stock-based compensation is accounted for using Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees. Under APB 25, if the exercise price of the options is greater than or equal to the market price at the date of grant, no compensation expense is recorded. We have also adopted the disclosure-only
provisions of SFAS 123, Accounting for Stock-based Compensation for options issued, as amended by SFAS No. 148, Accounting for Stock Based Compensation  Transition and Disclosure.



During the thirty-six weeks ended September 6, 2005, in accordance with our Omnibus
Stock Plan, we granted 671,410 options to purchase common stock. There were no options to purchase common stock granted during the twelve weeks ended September 6, 2005. We granted 210,000 options to purchase common stock during the thirty-six
weeks ended September 7, 2004, of which, 60,000 options were granted during the twelve weeks ended September 7, 2004. Stock compensation expense related to options has not been recorded for any of the periods presented.



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



|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ---------------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                                                              |  | Twelve Weeks Ended |      |   | Thirty-six Weeks Ended |  
|                                                                                              |  | September 7, 2004  |      |   | September 6, 2005      |   |        | September 7, 2004 |  |   | September 6, 2005 |  
|Net income (loss) as reported                                                                 |  | $                  | 397  |   |                        | $ | 16,785 |                   |  | $ | (10,354           | ) |  | $ | 18,374 |  
|                                                                                              |  |                    |      |  
|Less: Total stock-based compensation expense determined under fair value method, net of taxes |  |                    | (390 | ) |                        |   | (705   | )                 |  |   | (1,725            | ) |  |   | (2,727 | )
|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  
|Pro forma net earnings (loss)                                                                 |  | $                  | 7    |   |                        | $ | 16,080 |                   |  | $ | (12,079           | ) |  | $ | 15,647 |  
|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  
|                                                                                              |  |                    |      |  
|Basic earnings (loss) per shareReported                                                      |  | $                  | 0.00 |   |                        | $ | 0.18   |                   |  | $ | (0.11             | ) |  | $ | 0.20   |  
|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  
|Basic earnings (loss) per sharePro Forma                                                     |  | $                  | 0.00 |   |                        | $ | 0.17   |                   |  | $ | (0.13             | ) |  | $ | 0.17   |  
|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  
|                                                                                              |  |                    |      |  
|Diluted earnings (loss) per shareReported                                                    |  | $                  | 0.00 |   |                        | $ | 0.18   |                   |  | $ | (0.11             | ) |  | $ | 0.19   |  
|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  
|Diluted earnings (loss) per sharePro Forma                                                   |  | $                  | 0.00 |   |                        | $ | 0.17   |                   |  | $ | (0.13             | ) |  | $ | 0.17   |  
|                                                                                              |  |                    |      |   |                        |   |        |                   |  |   |                   |   |  |   |        |  



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Note 2. Variable interest entities



During 1994, we 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, we accounted for our investment in the joint venture under the equity method, recording a majority of the ventures operating results. We are the general partner of the joint venture, however, we do not control a majority
ownership percentage; therefore, operating decisions would have to go to arbitration in the event of a split in voting. We 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 us and from
the real estate developer under management service agreements, which expire at the completion of the development. With the adoption of FIN 46R, we consolidated the joint venture beginning with our March 23, 2004 Condensed Consolidated Balance
Sheet, as the joint venture was determined to be a variable interest entity with us as its primary beneficiary. Due to the historical net operating losses of the joint venture in excess of the partners equity interests of the joint venture not
owned by us, no noncontrolling interests are reported in our September 6, 2005 Condensed Consolidated Balance Sheet. The investment was previously carried as a $19.8 million investment liability prior to consolidation.



The joint venture was financed by the assumption of debt of which $11.8 million is currently
outstanding and is included in long-term debt, along with accrued interest of approximately $11.7 million. The majority of the joint ventures debt is payable only out of distributable cash flow, as defined by the agreements. The notes are
subordinated and junior to other liens and are collateralized by the real estate owned by the joint venture. The creditors of the joint venture do not have recourse to our other assets.



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



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Note 3. Operating revenues



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



|                                                      |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|----------------------------------------------------- |  | ------------------ | ------- | ---------------------- | - | ----------------- |  | ----------------- | ------- |  | - | -------
|                                                      |  | Twelve Weeks Ended |         | Thirty-six Weeks Ended
|                                                      |  | September 7, 2004  |         | September 6, 2005      |   | September 7, 2004 |  | September 6, 2005
|Revenues from continuing operations:                  |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|Membership fees and deposits                          |  | $                  | 8,103   |                        | $ | 8,293             |  | $                 | 26,491  |  | $ | 24,896 
|Membership dues                                       |  |                    | 74,565  |                        |   | 77,596            |  |                   | 222,314 |  |   | 232,942
|Golf operations revenues (1)                          |  |                    | 43,565  |                        |   | 77,037            |  |                   | 121,568 |  |   | 160,825
|Food and beverage revenues                            |  |                    | 57,313  |                        |   | 60,927            |  |                   | 173,409 |  |   | 181,975
|Lodging revenues                                      |  |                    | 14,596  |                        |   | 15,815            |  |                   | 38,424  |  |   | 41,402 
|Other revenues (2)                                    |  |                    | 20,307  |                        |   | 34,653            |  |                   | 53,832  |  |   | 77,716 
|                                                      |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|Total operating revenues from continuing operations   |  | $                  | 218,449 |                        | $ | 274,321           |  | $                 | 636,038 |  | $ | 719,756
|                                                      |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|                                                      |  |                    |         |                       
|Revenues from discontinued operations:                |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|Membership fees and deposits                          |  | $                  | 38      |                        | $ | 26                |  | $                 | 119     |  | $ | 85     
|Membership dues                                       |  |                    | 1,981   |                        |   | 1,062             |  |                   | 6,866   |  |   | 3,232  
|Golf operations revenues                              |  |                    | 530     |                        |   | 364               |  |                   | 1,170   |  |   | 1,049  
|Food and beverage revenues                            |  |                    | 641     |                        |   | 367               |  |                   | 2,487   |  |   | 1,014  
|Other revenues                                        |  |                    | 843     |                        |   | 621               |  |                   | 2,692   |  |   | 1,896  
|                                                      |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|Total operating revenues from discontinued operations |  | $                  | 4,033   |                        | $ | 2,440             |  | $                 | 13,334  |  | $ | 7,276  
|                                                      |  |                    |         |                        |   |                   |  |                   |         |  |   |        
|                                                      |  |                    |         |                       
|Total operating revenues                              |  | $                  | 222,482 |                        | $ | 276,761           |  | $                 | 649,372 |  | $ | 727,032
|                                                      |  |                    |         |                        |   |                   |  |                   |         |  |   |        



|(1) | 2005 amounts include the impact of ticket sales, rental of corporate hospitality tents and concessions related to the 2005 U.S. Open.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(2) | 2005 amounts include the impact of merchandise sales related to the 2005 U.S. Open.
|--- | -----------------------------------------------------------------------------------



Note 4. Income tax provision



The income tax provision for the twelve weeks and thirty-six weeks ended September 7, 2004 and September 6, 2005 differ from amounts computed by applying the
U.S. Federal tax rate of 35% to income (loss) from operations before income taxes and minority interest primarily due to foreign and state income taxes, net of Federal benefit (provision), and the effect of consolidated operations of foreign and
other entities not consolidated for Federal income tax purposes. In addition, for the twelve weeks and thirty-six weeks ended September 6, 2005, we fully reserved all additional tax benefits from available carryforwards of net operating losses
generated during the periods and, therefore, recorded no income tax (provision) benefit related to federal income taxes. Therefore, the provisions for 2005 contain only foreign and state income taxes on the Condensed Consolidated Statement of
Operations.



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Note 5. Weighted average shares



|                                                      |  |                    |  |                        |  |                   |  |                  
|----------------------------------------------------- |  | ------------------ |  | ---------------------- |  | ----------------- |  | -----------------
|                                                      |  | Twelve Weeks Ended |  | Thirty-six Weeks Ended
|                                                      |  | September 7, 2004  |  | September 6, 2005      |  | September 7, 2004 |  | September 6, 2005
|Weighted average shares outstanding                   |  | 93,638,694         |  | 93,115,990             |  | 93,679,699        |  | 93,248,170       
|                                                      |  |                    |  |                       
|Incremental shares from assumed conversion of options |  | 864,292            |  | 1,317,071              |  |                  |  | 1,317,071        
|                                                      |  |                    |  |                        |  |                   |  |                  
|Diluted weighted average shares                       |  | 94,502,986         |  | 94,433,061             |  | 93,679,699        |  | 94,565,241       
|                                                      |  |                    |  |                        |  |                   |  |                  



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



The diluted weighted average shares exclude the impact of the assumed conversion of options to acquire 621,036 shares of common stock for the thirty-six weeks ended September 7, 2004, because they would be
anti-dilutive due to our net loss in the period.



Note 6. Property and
equipment



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



|                                          |  |                  |           |   |                  |   |           |  
|----------------------------------------- |  | ---------------- | --------- | - | ---------------- | - | --------- | -
|                                          |  | December 28,2004 |           |   | September 6,2005 |  
|Land and land improvements                |  | $                | 733,171   |   |                  | $ | 745,492   |  
|Buildings and recreational facilities     |  |                  | 499,570   |   |                  |   | 508,220   |  
|Leasehold improvements                    |  |                  | 105,823   |   |                  |   | 105,692   |  
|Furniture and fixtures                    |  |                  | 134,874   |   |                  |   | 140,858   |  
|Machinery and equipment                   |  |                  | 279,562   |   |                  |   | 301,103   |  
|Construction in progress                  |  |                  | 17,570    |   |                  |   | 20,797    |  
|                                          |  |                  |           |   |                  |   |           |  
|                                          |  |                  | 1,770,570 |   |                  |   | 1,822,162 |  
|Accumulated depreciation and amortization |  |                  | (632,392  | ) |                  |   | (686,433  | )
|                                          |  |                  |           |   |                  |   |           |  
|                                          |  | $                | 1,138,178 |   |                  | $ | 1,135,729 |  
|                                          |  |                  |           |   |                  |   |           |  



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Note 7. Disposal and impairment of long-lived assets



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



As of September 6, 2005, we had two properties classified as held for sale as well as one property divested in 2005. The balance sheet amounts related to these properties were reclassified to Other Current Assets
and Other Current Liabilities on the Consolidated Balance Sheets and were comprised of the following (dollars in thousands):



|                                         |  |                  |        |                  |   |       
|---------------------------------------- |  | ---------------- | ------ | ---------------- | - | ------
|                                         |  | December 28,2004 |        | September 6,2005
|Membership and other receivables, net    |  | $                | 641    |                  | $ | 982   
|Inventories                              |  |                  | 198    |                  |   | 160   
|Other current assets                     |  |                  | 98     |                  |   | 72    
|Property and equipment, net              |  |                  | 9,864  |                  |   | 9,885 
|Other assets                             |  |                  | 120    |                  |   | 74    
|                                         |  |                  |        |                  |   |       
|Total assets                             |  | $                | 10,921 |                  | $ | 11,173
|                                         |  |                  |        |                  |   |       
|                                         |  |                 
|Accounts payable and accrued liabilities |  | $                | 259    |                  | $ | 214   
|Other current liabilities                |  |                  | 706    |                  |   | 896   
|Long-term debt                           |  |                  | 2,879  |                  |   | 2,830 
|Other liabilities                        |  |                  | 401    |                  |   | 318   
|                                         |  |                  |        |                  |   |       
|Total liabilities                        |  | $                | 4,245  |                  | $ | 4,258 
|                                         |  |                  |        |                  |   |       



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



There was $0.8 million recorded for impairment of assets during the thirty-six weeks ended
September 6, 2005, none of which was recorded during the twelve weeks ended September 6, 2005. We recorded $0.4 million and $1.7 million for impairment of assets for the twelve weeks and thirty-six weeks ended September 7, 2004,
respectively.



Note 8. Comprehensive Income (Loss)



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



|                                        |  |                    |      |                        |                   |   |                   |  |   |                   |   |  |   |       
|--------------------------------------- |  | ------------------ | ---- | ---------------------- | ----------------- | - | ----------------- |  | - | ----------------- | - |  | - | ------
|                                        |  | Twelve Weeks Ended |      | Thirty-six Weeks Ended
|                                        |  | September 7, 2004  |      |                        | September 6, 2005 |   | September 7, 2004 |  |   | September 6, 2005
|Net income (loss)                       |  | $                  | 397  |                        |                   | $ | 16,785            |  | $ | (10,354           | ) |  | $ | 18,374
|Foreign currency translation adjustment |  |                    | (653 | )                      |                   |   | 887               |  |   | (3,216            | ) |  |   | 1,253 
|                                        |  |                    |      |                        |                   |   |                   |  |   |                   |   |  |   |       
|Total comprehensive income (loss)       |  | $                  | (256 | )                      |                   | $ | 17,672            |  | $ | (13,570           | ) |  | $ | 19,627
|                                        |  |                    |      |                        |                   |   |                   |  |   |                   |   |  |   |       



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Note 9. Long term debt



Under the provisions of certain of our debt agreements with Textron Financial Corporation (Textron), we are required to maintain debt
service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of September 6,
2005, the debt service coverage ratio was below the minimum level for two individual properties participating in the loan, thereby causing the entire loan ($53 million outstanding principal amount as of September 6, 2005) to be in technical
default. We cured the noncompliance by obtaining letters of credit totaling $2.7 million.



In addition to amounts reclassified to the current portion of long-term debt due to covenant noncompliance, we have approximately $56 million of unpaid principal maturing by the end of the third quarter of 2006 which
has also been classified as current. We are in negotiations with one of our lenders regarding a portion of this maturing debt to pay off the balance of approximately $37 million before year-end 2005 and obtain a new line of credit.



Note 10. Segment reporting



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



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



Resorts offer a wide variety of amenities including
golf courses, lodging and conference facilities, dining areas and other recreational facilities. Resorts are open to the public and offer optional membership. In 2005, resorts operations include the impact of hosting the 2005 U.S. Open at Pinehurst.



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



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



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



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



|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|-------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                                           |  | Continuing Operations |        
|                                                                           |  |                      
|                                                                           |  | Twelve Weeks Ended    |         |   | Thirty-six Weeks Ended |  
|                                                                           |  | September 7,2004      |         |   | September 6,2005       |   |         | September 7,2004 |  |   | September 6,2005 |  
|Operating revenues                                                         |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Country club and golf facilities                                           |  | $                     | 121,103 |   |                        | $ | 128,397 |                  |  | $ | 350,595          |   |  | $ | 364,786 |  
|Resorts                                                                    |  |                       | 51,210  |   |                        |   | 95,569  |                  |  |   | 139,895          |   |  |   | 199,417 |  
|Business and sports clubs                                                  |  |                       | 43,867  |   |                        |   | 45,206  |                  |  |   | 140,028          |   |  |   | 145,046 |  
|Other operations and services                                              |  |                       | 2,269   |   |                        |   | 5,149   |                  |  |   | 5,520            |   |  |   | 10,507  |  
|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Total operating revenues                                                   |  | $                     | 218,449 |   |                        | $ | 274,321 |                  |  | $ | 636,038          |   |  | $ | 719,756 |  
|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|                                                                           |  |                       |         |  
|EBITDA                                                                     |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Country club and golf facilities                                           |  | $                     | 27,824  |   |                        | $ | 28,341  |                  |  | $ | 83,486           |   |  | $ | 86,467  |  
|Resorts                                                                    |  |                       | 11,275  |   |                        |   | 27,548  |                  |  |   | 28,799           |   |  |   | 48,258  |  
|Business and sports clubs                                                  |  |                       | 5,092   |   |                        |   | 5,269   |                  |  |   | 20,569           |   |  |   | 21,763  |  
|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Reportable segment EBITDA                                                  |  | $                     | 44,191  |   |                        | $ | 61,158  |                  |  | $ | 132,854          |   |  | $ | 156,488 |  
|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|                                                                           |  |                       |         |  
|Reconciliation to income (loss) before income taxes and minority interest: |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|                                                                           |  |                       |         |  
|Reportable segment EBITDA                                                  |  |                       | 44,191  |   |                        | $ | 61,158  |                  |  | $ | 132,854          |   |  | $ | 156,488 |  
|Other operations and services operating revenues                           |  |                       | 2,269   |   |                        |   | 5,149   |                  |  |   | 5,520            |   |  |   | 10,507  |  
|Other operations and services operating costs and expenses                 |  |                       | (10,927 | ) |                        |   | (15,906 | )                |  |   | (40,931          | ) |  |   | (45,163 | )
|Depreciation and amortization                                              |  |                       | (19,660 | ) |                        |   | (19,472 | )                |  |   | (60,270          | ) |  |   | (58,157 | )
|Loss on disposals and impairment of assets                                 |  |                       | (1,187  | ) |                        |   | (899    | )                |  |   | (4,561           | ) |  |   | (2,255  | )
|Interest and investment income                                             |  |                       | 575     |   |                        |   | 927     |                  |  |   | 1,356            |   |  |   | 2,585   |  
|Interest expense                                                           |  |                       | (13,820 | ) |                        |   | (13,963 | )                |  |   | (41,344          | ) |  |   | (42,297 | )
|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) from operations before income taxes and minority interest    |  | $                     | 1,441   |   |                        | $ | 16,994  |                  |  | $ | (7,376           | ) |  | $ | 21,708  |  
|                                                                           |  |                       |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  



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|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|---------------------------------------------------------- |  | ----------------------- | ----- | - | ---------------------- | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                           |  | Discontinued Operations |      
|                                                           |  |                        
|                                                           |  | Twelve Weeks Ended      |       |   | Thirty-six Weeks Ended |  
|                                                           |  | September 7, 2004       |       |   | September 6, 2005      |   |       | September 7, 2004 |  |   | September 6, 2005 |  
|Operating revenues                                         |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|Country club and golf facilities                           |  | $                       | 1,429 |   |                        | $ | 1,268 |                   |  | $ | 3,729             |   |  | $ | 3,594 |  
|Resorts                                                    |  |                         |      |   |                        |   |      |                   |  |   |                  |   |  |   |      |  
|Business and sports clubs                                  |  |                         | 2,604 |   |                        |   | 1,172 |                   |  |   | 9,605             |   |  |   | 3,682 |  
|Other operations and services                              |  |                         |      |   |                        |   |      |                   |  |   |                  |   |  |   |      |  
|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|Total operating revenues                                   |  | $                       | 4,033 |   |                        | $ | 2,440 |                   |  | $ | 13,334            |   |  | $ | 7,276 |  
|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|                                                           |  |                         |       |  
|EBITDA                                                     |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|Country club and golf facilities                           |  | $                       | 168   |   |                        | $ | 112   |                   |  | $ | 219               |   |  | $ | (12   | )
|Resorts                                                    |  |                         |      |   |                        |   |      |                   |  |   |                  |   |  |   |      |  
|Business and sports clubs                                  |  |                         | 167   |   |                        |   | 158   |                   |  |   | 745               |   |  |   | 554   |  
|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|Reportable segment EBITDA                                  |  | $                       | 335   |   |                        | $ | 270   |                   |  | $ | 964               |   |  | $ | 542   |  
|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|                                                           |  |                         |       |  
|Reconciliation to income (loss) before income taxes:       |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|                                                           |  |                         |       |  
|Reportable segment EBITDA                                  |  | $                       | 335   |   |                        | $ | 270   |                   |  | $ | 964               |   |  | $ | 542   |  
|Other operations and services operating revenues           |  |                         |      |   |                        |   |      |                   |  |   |                  |   |  |   |      |  
|Other operations and services operating costs and expenses |  |                         | (208  | ) |                        |   | (118  | )                 |  |   | (695              | ) |  |   | (357  | )
|Depreciation and amortization                              |  |                         | (215  | ) |                        |   | (17   | )                 |  |   | (794              | ) |  |   | (137  | )
|Gain on disposals and impairment of assets                 |  |                         | 10    |   |                        |   | 567   |                   |  |   | 912               |   |  |   | 632   |  
|Interest and investment income                             |  |                         |      |   |                        |   |      |                   |  |   |                  |   |  |   | 1     |  
|Interest expense                                           |  |                         | (220  | ) |                        |   | (232  | )                 |  |   | (653              | ) |  |   | (571  | )
|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  
|Income (loss) from operations before income taxes          |  | $                       | (298  | ) |                        | $ | 470   |                   |  | $ | (266              | ) |  | $ | 110   |  
|                                                           |  |                         |       |   |                        |   |       |                   |  |   |                   |   |  |   |       |  



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|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                                           |  | Total Company      |        
|                                                                           |  |                   
|                                                                           |  | Twelve Weeks Ended |         |   | Thirty-six Weeks Ended |  
|                                                                           |  | September 7,2004   |         |   | September 6,2005       |   |         | September 7,2004 |  |   | September 6,2005 |  
|Operating revenues                                                         |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Country club and golf facilities                                           |  | $                  | 122,532 |   |                        | $ | 129,665 |                  |  | $ | 354,324          |   |  | $ | 368,380 |  
|Resorts                                                                    |  |                    | 51,210  |   |                        |   | 95,569  |                  |  |   | 139,895          |   |  |   | 199,417 |  
|Business and sports clubs                                                  |  |                    | 46,471  |   |                        |   | 46,378  |                  |  |   | 149,633          |   |  |   | 148,728 |  
|Other operations and services                                              |  |                    | 2,269   |   |                        |   | 5,149   |                  |  |   | 5,520            |   |  |   | 10,507  |  
|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Total operating revenues                                                   |  | $                  | 222,482 |   |                        | $ | 276,761 |                  |  | $ | 649,372          |   |  | $ | 727,032 |  
|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|EBITDA                                                                     |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Country club and golf facilities                                           |  | $                  | 27,992  |   |                        | $ | 28,453  |                  |  | $ | 83,705           |   |  | $ | 86,455  |  
|Resorts                                                                    |  |                    | 11,275  |   |                        |   | 27,548  |                  |  |   | 28,799           |   |  |   | 48,258  |  
|Business and sports clubs                                                  |  |                    | 5,259   |   |                        |   | 5,427   |                  |  |   | 21,314           |   |  |   | 22,317  |  
|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Reportable segment EBITDA                                                  |  | $                  | 44,526  |   |                        | $ | 61,428  |                  |  | $ | 133,818          |   |  | $ | 157,030 |  
|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Reconciliation to income (loss) before income taxes and minority interest: |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Reportable segment EBITDA                                                  |  | $                  | 44,526  |   |                        | $ | 61,428  |                  |  | $ | 133,818          |   |  | $ | 157,030 |  
|Other operations and services operating revenues                           |  |                    | 2,269   |   |                        |   | 5,149   |                  |  |   | 5,520            |   |  |   | 10,507  |  
|Other operations and services operating costs and expenses                 |  |                    | (11,135 | ) |                        |   | (16,024 | )                |  |   | (41,626          | ) |  |   | (45,520 | )
|Depreciation and amortization                                              |  |                    | (19,875 | ) |                        |   | (19,489 | )                |  |   | (61,064          | ) |  |   | (58,294 | )
|Loss on disposals and impairment of assets                                 |  |                    | (1,177  | ) |                        |   | (332    | )                |  |   | (3,649           | ) |  |   | (1,623  | )
|Interest and investment income                                             |  |                    | 575     |   |                        |   | 927     |                  |  |   | 1,356            |   |  |   | 2,586   |  
|Interest expense                                                           |  |                    | (14,040 | ) |                        |   | (14,195 | )                |  |   | (41,997          | ) |  |   | (42,868 | )
|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) from operations before income taxes and minority interest    |  | $                  | 1,143   |   |                        | $ | 17,464  |                  |  | $ | (7,642           | ) |  | $ | 21,818  |  
|                                                                           |  |                    |         |   |                        |   |         |                  |  |   |                  |   |  |   |         |  



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



Overview



ClubCorp, Inc. (referred to as ClubCorp®, the Company, we, us and our throughout this document) is a holding company incorporated under the laws of the State of Delaware that, through its subsidiaries, owns and operates premier golf and
business clubs and destination golf resorts. As of September 6, 2005, we operated 100 country clubs, golf clubs and public golf facilities, three destination golf resorts and 65 business, sports and business/sports clubs in 27 states,
Washington D.C. and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst®Resort and Country Club in Pinehurst, North Carolina, The Homestead®Resort in Hot Springs, Virginia, Barton Creek Resort and Country Club in Austin, Texas, Firestone®Country Club in Akron, Ohio, Mission Hills®Country Club near Palm
Springs, California, and The City Club on Bunker Hill in Los Angeles, California. Golf Digest, Golf Travel and other golf industry publications have consistently ranked several of our approximately 150 golf courses and destination golf
resorts among the best in the United States.



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



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



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



Our consolidated financial statements are presented on a 52/53 week fiscal year ending on the last Tuesday of December, with
the first three quarters consisting of 12 weeks each and the fourth quarter consisting of 16 or 17 weeks. The following discussion of our financial condition and results of operations for the 12 and 36 weeks ended September 7, 2004 and
September 6, 2005 should be read in conjunction with our Annual Report on Form 10-K for the year ended December 28, 2004, as filed with the Securities and Exchange Commission.



Critical Accounting Policies



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



Results of Operations



2005 U.S. Open



During the week of June 13-19, 2005, we hosted the U.S. Open at
Pinehurst. For the 12 and 36 weeks ended September 6, 2005, we generated operating revenues of approximately $41 million and $51 million, respectively, from merchandise sales, ticket sales and rental of corporate hospitality tents related to
the U.S. Open. Furthermore, for the 12 and 36 weeks ended September 6, 2005, we generated operating income of approximately $13 million. The results of operations from the U.S. Open are primarily reflected in our resorts segment; however, a
portion of the expenditures were incurred by corporate services and are reflected in other operations and services.



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##### Table of Contents

In addition to the effect on current year, we also incurred $3 million of expenses related to hosting the
U.S. Open in the three previous years for planning, maintenance and preparation. From inception-to-date, we have generated approximately $10 million of operating income from hosting the U.S. Open.



General



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



We employ same store analysis techniques for a variety of
management purposes. By our definition, facilities are evaluated yearly and considered same store once they have been fully operational for one year. Developing facilities and divested facilities are not classified as same store;
however, facilities held for sale and held and used are considered same store until they are divested. This distinction between developing and same store facilities allows us to separately analyze the operating results of our established and new
facilities. We believe this approach provides an effective analysis tool because it allows us to assess the results of our core operating strategies by tracking the performance of our same store facilities without the distortions that would be
caused by the inclusion of developing properties. Facilities divested during a period are removed from the same store classification for all periods presented. We analyze membership and lodging data on a same store basis as well, so that it is not
distorted by divestitures. We believe this provides a clearer picture of trends in our continuing operations.



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



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



12 Weeks Ended September 7, 2004 Compared to 12 Weeks Ended September 6, 2005



Consolidated Operations  Continuing Operations



Operating revenues increased in all three operating segments  country club and golf facilities, resorts and business
and sports clubs  ending the third quarter at a consolidated total of $274.3 million, an improvement of 26% over third quarter 2004. The increase in operating revenues was primarily due to generating $41 million from hosting the U.S. Open.
Country club and golf facilities operating revenue increased 6% over 2004, with the most significant contributions in dues income, golf operations and food and beverage revenue. Resorts operating revenue increased 87% over 2004 primarily related to
the U.S. Open. In addition to the U.S. Open, resorts operating revenues increased over 2004 primarily related to increases in golf operations, lodging and retail sales at Pinehurst and Barton Creek. Business and sports clubs operating revenue
increased 3% over 2004 primarily due to increased dues income and food and beverage private party revenue.



Operating costs and expenses for country club and golf facilities, resorts and business and sports clubs generally increased as a result of costs related
to increased operating revenues. Country club and golf facilities operating costs and expenses primarily increased in food and beverage, golf operations and golf course maintenance. Resorts operating costs and expenses primarily increased in golf
operations and retail as a result of hosting the U.S. Open. Business and sports clubs operating costs and expenses primarily increased in food and beverage operations.



Operating income increased in all three operating segments. Operating income for country club and golf facilities reflected
improved margins in food and beverage operations resulting from lower cost of goods as well as improved payroll costs offset by decreased margins in golf operations due to increased costs for golf course maintenance as well as higher payroll costs.
Resorts operating income reflected improved margins in golf operations due to hosting the U.S. Open at Pinehurst. In addition,



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##### Table of Contents

Pinehurst and Barton Creek had improved lodging margins due to higher average daily rate. Business and sports clubs operating income reflected a lower food
and beverage margin due to the increase in private party events which operate at a lower margin.



Consolidated OperationsDiscontinued Operations



The periods ended September 7, 2004 and September 6, 2005 include five properties divested in 2004, one property
divested in 2005 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $4.0 million in 2004 to $2.4 million in 2005. Net income (loss) from these properties improved $0.8
million from 2004 to 2005. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.



Segment and Other Information  12 Weeks



Country Club and Golf Facilities



The following tables present certain summary financial information for our
country club and golf facilities segment for the twelve weeks ended September 7, 2004 and September 6, 2005 (dollars in thousands):



|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |        
|-------------------------------------------------------------- |  | ---------------- | ------- | ---------------- | - | ------- |  | ---- | ------- |  | - | -------
|                                                               |  | Same Store       |         | Total           
|                                                               |  | Country Club and |         | Country Club and
|                                                               |  | Golf Facilities  |         | Golf Facilities 
|                                                               |  | 2004             |         | 2005             |   | 2004    |  | 2005
|Number of facilities at end of period in continuing operations |  |                  | 93      |                  |   | 93      |  |      | 95      |  |   | 98     
|Operating revenues                                             |  | $                | 114,529 |                  | $ | 119,865 |  | $    | 115,184 |  | $ | 122,127
|Recognition of membership fees and deposits                    |  |                  | 5,919   |                  |   | 6,237   |  |      | 5,919   |  |   | 6,270  
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |        
|Total operating revenues                                       |  | $                | 120,448 |                  | $ | 126,102 |  | $    | 121,103 |  | $ | 128,397
|Operating costs and expenses (1)                               |  |                  | 93,256  |                  |   | 98,330  |  |      | 93,279  |  |   | 100,056
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |        
|Segment EBITDA from continuing operations (1)                  |  | $                | 27,192  |                  | $ | 27,772  |  | $    | 27,824  |  | $ | 28,341 
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |        
|Segment EBITDA from discontinued operations                    |  | $                | 132     |                  | $ | 110     |  | $    | 168     |  | $ | 112    
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |        
|Total Segment EBITDA (1)                                       |  | $                | 27,324  |                  | $ | 27,882  |  | $    | 27,992  |  | $ | 28,453 
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |        



|(1) | Excludes intercompany consulting and support fees of $5.9 million and $5.9 million for Same Store and $6.5 million and $6.2 million for Total in the twelve weeks ended
September 7, 2004 and September 6, 2005, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing Operations. Total operating revenues increased from 2004 to 2005 for same store country club and golf facilities primarily due to increased membership dues, golf operations and food and beverage
revenues. Membership dues income increased 3% as a result of a dues price increase in early 2005. Golf operations revenue increased 3% due to increased pricing offset by a decrease in rounds played. Food and beverage a la carte and private party
revenues increased 7% and 15%, respectively, as a result of higher volume and pricing.



Segment EBITDA increased from 2004 to 2005 for same store country club and golf facilities as a result of increased operating revenues, offset by a related increase in operating costs and expenses. Operating costs and
expenses offset most of our revenue increases due to inflationary increases as well as increased spending on golf course maintenance. Operating margins for food and beverage improved due to lower cost of goods as well as improved management of
payroll costs. Although golf revenues have increased, expenses increased at a greater rate due primarily to golf course maintenance and payroll costs. These costs are primarily covered by our dues pricing increases. Depreciation and amortization
increased slightly from $11.2 million for 2004 to $11.6 million for 2005.



Discontinued Operations. The periods ended September 7, 2004 and September 6, 2005 include one managed property divested in 2004, one property divested in 2005 and one property currently held for sale
in discontinued operations.



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##### Table of Contents

Resorts



The following tables present certain summary financial data and lodging data for our resort segment for the twelve weeks ended September 7, 2004 and
September 6, 2005 (dollars in thousands, except number of facilities and lodging data):



|                                                                   |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|------------------------------------------------------------------ |  | ------------------ | ------ | - | ------------- | - | ------ | ---- |  | ---- | ------ |  | - | ------
|                                                                   |  | Same Store Resorts |        |   | Total Resorts
|                                                                   |  | 2004               |        |   | 2005          |   |        | 2004 |  | 2005
|Number of facilities at end of period in continuing operations (1) |  |                    | 3      |   |               |   | 3      |      |  |      | 3      |  |   | 3     
|Operating revenues                                                 |  | $                  | 49,789 |   |               | $ | 94,207 |      |  | $    | 49,789 |  | $ | 94,207
|Recognition of membership fees and deposits                        |  |                    | 1,421  |   |               |   | 1,362  |      |  |      | 1,421  |  |   | 1,362 
|                                                                   |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Total operating revenues                                           |  | $                  | 51,210 |   |               | $ | 95,569 |      |  | $    | 51,210 |  | $ | 95,569
|Operating costs and expenses (2)                                   |  |                    | 39,573 |   |               |   | 68,021 |      |  |      | 39,935 |  |   | 68,021
|                                                                   |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Segment EBITDA from continuing operations (2)                      |  | $                  | 11,637 |   |               | $ | 27,548 |      |  | $    | 11,275 |  | $ | 27,548
|                                                                   |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Segment EBITDA from discontinued operations                        |  | $                  |       |   |               | $ |       |      |  | $    |       |  | $ |      
|                                                                   |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Total Segment EBITDA (2)                                           |  | $                  | 11,637 |   |               | $ | 27,548 |      |  | $    | 11,275 |  | $ | 27,548
|                                                                   |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Lodging data (3 resorts) (1)                                       |  |                    |        |   |               |   |        |      |  |      |        |  |   |       
|Room nights available                                              |  |                    | 99,456 |   |               |   | 99,456 |      |  |      |        |  |   |       
|Room nights sold                                                   |  |                    | 64,928 |   |               |   | 67,231 |      |  |      |        |  |   |       
|Paid occupancy rate                                                |  |                    | 65.3   | % |               |   | 67.6   | %    |  |      |        |  |   |       
|Average daily rate (3)                                             |  | $                  | 178    |   |               | $ | 186    |      |  |      |        |  |   |       
|Revenue per occupied room (4)                                      |  | $                  | 708    |   |               | $ | 732    |      |  |      |        |  |   |       

---

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

|(2) | Excludes intercompany consulting and support fees of $2.1 million and $1.3 million for Same Store and Total in the twelve weeks ended September 7, 2004 and September 6,
2005, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



Continuing Operations. Total operating
revenues increased from 2004 to 2005 for same store resorts primarily due to increased revenues at Pinehurst principally in merchandise sales, ticket sales and rental of corporate hospitality tents during the hosting of the 2005 U.S. Open. The U.S.
Open week was seven days long with five of the days falling in our third quarter and resulted in $41 million of operating revenues during the third quarter. Excluding the impact of the U.S. Open, total operating revenues improved for the resorts
segment. Higher occupancy and revenue per occupied room at Pinehurst resulted in increased lodging and retail revenues. Barton Creek increased operating revenues 12% primarily due to increased occupancy and spending which has led to increased food
and beverage and lodging revenues. The Homestead operating revenues were flat comparing 2004 to 2005 with an increase in occupancy offset by a decrease in revenue per occupied room.



Segment EBITDA improved comparing 2004 to 2005 for same store resorts primarily due to profits from the U.S. Open which
generated incremental EBITDA of approximately $14 million and impacted golf operations and retail margins at Pinehurst. In addition to the U.S. Open, Pinehurst had improved operating margins for golf operations, lodging and retail sales primarily
due to improved management of payroll and other expenses offset by a decrease in food and beverage margins. Barton Creek had improved operating margins in lodging and golf operations primarily due to improved payroll management as well as decreased
golf course maintenance expenses as a percentage of revenues offset by a decrease in food and beverage margins. The Homestead had improved operating margins for food and beverage offset by a decrease in margins for golf operations, lodging and
retail sales. Depreciation and amortization remained steady at $3.8 million year-over-year.



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##### Table of Contents

Business and Sports Clubs



The following tables present certain summary financial information for our business and sports clubs segment for the twelve
weeks ended September 7, 2004 and September 6, 2005 (dollars in thousands):



|                                                               |  |                     |        |                  |   |        |  |      |        |  |   |       
|-------------------------------------------------------------- |  | ------------------- | ------ | ---------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                                               |  | Same Store Business |        | Total Business  
|                                                               |  | and Sports Clubs    |        | and Sports Clubs
|                                                               |  | 2004                |        | 2005             |   | 2004   |  | 2005
|Number of facilities at end of period in continuing operations |  |                     | 64     |                  |   | 64     |  |      | 64     |  |   | 64    
|Operating revenues                                             |  | $                   | 43,358 |                  | $ | 44,730 |  | $    | 43,358 |  | $ | 44,730
|Recognition of membership fees and deposits                    |  |                     | 509    |                  |   | 476    |  |      | 509    |  |   | 476   
|                                                               |  |                     |        |                  |   |        |  |      |        |  |   |       
|Total operating revenues                                       |  | $                   | 43,867 |                  | $ | 45,206 |  | $    | 43,867 |  | $ | 45,206
|Operating costs and expenses (1)                               |  |                     | 38,775 |                  |   | 39,937 |  |      | 38,775 |  |   | 39,937
|                                                               |  |                     |        |                  |   |        |  |      |        |  |   |       
|Segment EBITDA from continuing operations (1)                  |  | $                   | 5,092  |                  | $ | 5,269  |  | $    | 5,092  |  | $ | 5,269 
|                                                               |  |                     |        |                  |   |        |  |      |        |  |   |       
|Segment EBITDA from discontinued operations                    |  | $                   | 158    |                  | $ | 154    |  | $    | 167    |  | $ | 158   
|                                                               |  |                     |        |                  |   |        |  |      |        |  |   |       
|Total Segment EBITDA (1)                                       |  | $                   | 5,250  |                  | $ | 5,423  |  | $    | 5,259  |  | $ | 5,427 
|                                                               |  |                     |        |                  |   |        |  |      |        |  |   |       



|(1) | Excludes intercompany consulting and support fees of $2.4 million and $3.0 million for Same Store and Total, respectively in the twelve weeks ended September 7, 2004 and
September 6, 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing
Operations. Total operating revenues increased from 2004 to 2005 at same store business and sports clubs primarily due to increased food and beverage private party revenues and membership dues. Food and beverage private party revenues increased
5% due to an increase in both volume and pricing. Membership dues increased 2% primarily due to a dues price increase in early 2005.



Segment EBITDA increased at same store business and sports clubs comparing 2004 to 2005 due to increased revenue partially offset by a related increase in
operating costs and expenses, consisting primarily of food and beverage costs. Food and beverage margins declined due to a shift in mix towards more private party events which operate at a lower margin. Depreciation and amortization decreased from
$2.4 million in 2004 to $2.0 million in 2005.



Discontinued
Operations. The periods ended September 7, 2004 and September 6, 2005 include four properties divested in 2004 and one property currently held for sale in discontinued operations.



Other Operations and Services  Continuing
Operations



Other operations and services consist
primarily of real estate operations and our corporate services. Revenues increased primarily due to fees we receive from third-party developers based on a percentage of their real estate sales. Additionally, third quarter 2005 includes lot sales of
approximately $2.2 million.



Operating loss from other
operations and services increased comparing 2004 to 2005 primarily due to a recovery of previously accrued expenses during third quarter 2004 related to a legal settlement. In 2005, we also incurred approximately $1 million of expenses in corporate
services related to the hosting of the 2005 U.S. Open.



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##### Table of Contents

36 Weeks Ended September 7, 2004 Compared to 36 Weeks Ended September 6, 2005



Consolidated Operations  Continuing Operations



Operating revenues increased in all three operating segments  country
club and golf facilities, resorts and business and sports clubs  ending the 36 weeks ended September 6, 2005 at a consolidated total of $719.8 million, an improvement of 13% over the 36 weeks ended September 7, 2004. The increase in
operating revenues was primarily due to generating $51 million from hosting the U.S. Open. Country club and golf facilities operating revenue increased 4% over 2004, with the most significant contributions in dues income and food and beverage
revenue. These increases were partially offset by decreases in membership fees and deposits. Resorts operating revenues increased 43% over 2004 primarily related to the U.S. Open. In addition to the U.S. Open, resorts operating revenues increased
over 2004 primarily related to increases in golf operations, food and beverage, lodging and retail sales at Pinehurst and Barton Creek. Business and sports clubs operating revenue increased 4% primarily due to increased food and beverage revenue as
well as dues income.



Operating costs and expenses for country
club and golf facilities, resorts and business and sports clubs generally increased as a result of costs related to increased operating revenues. Country club and golf facilities operating costs and expenses primarily increased in food and beverage,
golf operations and golf course maintenance. Resorts operating costs and expenses increased in golf operations and retail primarily as a result of hosting the U.S. Open. Business and sports clubs operating costs and expenses primarily increased in
food and beverage operations.



Operating income increased in
all three operating segments. Operating income for country club and golf facilities reflected improved margins in food and beverage operations resulting from lower cost of goods as well as improved payroll costs offset by decreased margins in golf
operations due to increased costs for golf course maintenance as well as higher payroll costs. Resorts operating income reflected improved margins in golf operations due to hosting the U.S. Open at Pinehurst. In addition, Pinehurst and Barton Creek
had improved lodging and retail margins due to higher average daily rate and spending. Business and sports clubs operating income reflected a relatively flat food and beverage margin.



Consolidated OperationsDiscontinued Operations



The periods ended September 7, 2004 and September 6, 2005 include
five properties divested in 2004, one property divested in 2005 and two properties currently held for sale in discontinued operations. Operating revenues for these properties decreased from $13.3 million in 2004 to $7.3 million in 2005. Net income
(loss) from these properties improved $0.4 million from 2004 to 2005. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.



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##### Table of Contents

Segment and Other Information  36 Weeks



Country Club and Golf Facilities



The following tables present certain summary financial information for our
country club and golf facilities segment for the 36 weeks ended September 7, 2004 and September 6, 2005 (dollars in thousands):



|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |         |  
|-------------------------------------------------------------- |  | ---------------- | ------- | ---------------- | - | ------- |  | ---- | ------- |  | - | ------- | -
|                                                               |  | Same Store       |         | Total            |  
|                                                               |  | Country Club and |         | Country Club and |  
|                                                               |  | Golf Facilities  |         | Golf Facilities  |  
|                                                               |  | 2004             |         | 2005             |   | 2004    |  | 2005 |        
|Number of facilities at end of period in continuing operations |  |                  | 93      |                  |   | 93      |  |      | 95      |  |   | 98      |  
|Operating revenues                                             |  | $                | 329,720 |                  | $ | 340,270 |  | $    | 330,563 |  | $ | 345,972 |  
|Recognition of membership fees and deposits                    |  |                  | 20,032  |                  |   | 18,706  |  |      | 20,032  |  |   | 18,814  |  
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |         |  
|Total operating revenues                                       |  | $                | 349,752 |                  | $ | 358,976 |  | $    | 350,595 |  | $ | 364,786 |  
|Operating costs and expenses (1)                               |  |                  | 267,084 |                  |   | 273,918 |  |      | 267,109 |  |   | 278,319 |  
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |         |  
|Segment EBITDA from continuing operations (1)                  |  | $                | 82,668  |                  | $ | 85,058  |  | $    | 83,486  |  | $ | 86,467  |  
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |         |  
|Segment EBITDA from discontinued operations                    |  | $                | 402     |                  | $ | 301     |  | $    | 219     |  | $ | (12     | )
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |         |  
|Total Segment EBITDA (1)                                       |  | $                | 83,070  |                  | $ | 85,359  |  | $    | 83,705  |  | $ | 86,455  |  
|                                                               |  |                  |         |                  |   |         |  |      |         |  |   |         |  



|(1) | Excludes intercompany consulting and support fees of $17.8 million and $18.0 million for Same Store and $18.6 million and $18.6 million for Total in the 36 weeks ended
September 7, 2004 and September 6, 2005, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing Operations. Total operating revenues increased comparing 2004 to 2005 for same store country club and golf facilities primarily due to increased membership dues and food and beverage revenues.
Membership dues increased 4% as a result of a dues price increase. Food and beverage revenues increased 5% due to increased volume and pricing. Golf revenues have increased slightly due to increased pricing offset by a decrease in rounds played.
Paid rounds decreased primarily due to heavy rains on the West coast early in the year.



Segment EBITDA increased comparing 2004 to 2005 for same store country club and golf facilities as a result of increased operating revenues, partially offset by a related increase in operating costs and expenses.
Operating costs and expenses offset the majority of our revenue increases as the clubs had increased activity in 2005 but incurred increased costs due to inflationary increases as well as increased spending on golf course maintenance. The increase
in costs is primarily covered by our dues pricing increases. Food and beverage operating margins have improved slightly after a very slow start to the year due to improved cost of goods and improved management of payroll costs. Depreciation and
amortization increased slightly from $33.7 million for 2004 to $34.5 million for 2005.



Discontinued Operations. The periods ended September 7, 2004 and September 6, 2005 include one managed property divested in 2004, one property divested in 2005 and one property currently held for sale
in discontinued operations.



20



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##### Table of Contents

Resorts



The following tables present certain summary financial data and lodging data for our resort segment for the 36 weeks ended September 7, 2004 and
September 6, 2005 (dollars in thousands, except number of facilities and lodging data):



|                                                                   |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|------------------------------------------------------------------ |  | ------------------ | ------- | - | ------------- | - | ------- | ---- |  | ---- | ------- |  | - | -------
|                                                                   |  | Same Store Resorts |         |   | Total Resorts
|                                                                   |  | 2004               |         |   | 2005          |   |         | 2004 |  | 2005
|Number of facilities at end of period in continuing operations (1) |  |                    | 3       |   |               |   | 3       |      |  |      | 3       |  |   | 3      
|Operating revenues                                                 |  | $                  | 135,651 |   |               | $ | 195,325 |      |  | $    | 135,651 |  | $ | 195,325
|Recognition of membership fees and deposits                        |  |                    | 4,244   |   |               |   | 4,092   |      |  |      | 4,244   |  |   | 4,092  
|                                                                   |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Total operating revenues                                           |  | $                  | 139,895 |   |               | $ | 199,417 |      |  | $    | 139,895 |  | $ | 199,417
|Operating costs and expenses (2)                                   |  |                    | 110,211 |   |               |   | 151,159 |      |  |      | 111,096 |  |   | 151,159
|                                                                   |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Segment EBITDA from continuing operations (2)                      |  | $                  | 29,684  |   |               | $ | 48,258  |      |  | $    | 28,799  |  | $ | 48,258 
|                                                                   |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Segment EBITDA from discontinued operations                        |  | $                  |        |   |               | $ |        |      |  | $    |        |  | $ |       
|                                                                   |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Total Segment EBITDA (2)                                           |  | $                  | 29,684  |   |               | $ | 48,258  |      |  | $    | 28,799  |  | $ | 48,258 
|                                                                   |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Lodging data (3 resorts) (1)                                       |  |                    |         |   |               |   |         |      |  |      |         |  |   |        
|Room nights available                                              |  |                    | 298,368 |   |               |   | 298,368 |      |  |      |         |  |   |        
|Room nights sold                                                   |  |                    | 172,092 |   |               |   | 179,810 |      |  |      |         |  |   |        
|Paid occupancy rate                                                |  |                    | 57.7    | % |               |   | 60.3    | %    |  |      |         |  |   |        
|Average daily rate (3)                                             |  | $                  | 183     |   |               | $ | 189     |      |  |      |         |  |   |        
|Revenue per occupied room (4)                                      |  | $                  | 720     |   |               | $ | 738     |      |  |      |         |  |   |        

---

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

|(2) | Excludes intercompany consulting and support fees of $6.3 million and $3.9 million for Same Store and Total in the 36 weeks ended September 7, 2004 and September 6, 2005,
respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



Continuing Operations. Total operating
revenues increased comparing 2004 to 2005 for same store resorts. The primary reason for the increase was merchandise sales, ticket sales and rental of corporate hospitality tents resulting from Pinehursts hosting of the 2005 U.S. Open. The
U.S. Open week was seven days long and resulted in year-to-date revenues of $51 million. In addition to the U.S. Open, golf operations, food and beverage, lodging and retail revenues increased at Pinehurst and Barton Creek. Golf operations increased
primarily due to increased pricing at Pinehurst and increased pricing and rounds played at Barton Creek. Food and beverage a la carte and private party revenues increased a combined 3% as a result of higher occupancy and spending by social guests
during 2005 at Pinehurst and Barton Creek. Lodging revenues increased 8% as a result of increased room nights and higher average room rates than prior year at Pinehurst and Barton Creek. Retail revenues primarily increased as a result of higher
spending on U.S. Open related merchandise throughout the year.



Segment EBITDA improved comparing 2004 to 2005 for same store resorts primarily due to profits from the U.S. Open which generated incremental EBITDA of approximately $14 million and impacted golf operations and retail margins at Pinehurst.
In addition to the U.S. Open, Pinehurst had improved operating margins for golf operations, lodging and retail sales primarily due to improved management of payroll and other expenses offset by a slight decrease in food and beverage margins. Barton
Creek had improved operating margins in golf operations, lodging, food and beverage and retail primarily due to improved payroll management. The Homestead had improved operating margins for golf operations offset by a decrease in margins for food
and beverage, lodging and retail sales. Depreciation and amortization remained steady at $11.3 million year-over-year.



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##### Table of Contents

Business and Sports Clubs



The following tables present certain summary financial information for our business and sports clubs segment for the 36
weeks ended September 7, 2004 and September 6, 2005 (dollars in thousands):



|                                                               |  |                     |         |                  |   |         |  |      |         |  |   |        
|-------------------------------------------------------------- |  | ------------------- | ------- | ---------------- | - | ------- |  | ---- | ------- |  | - | -------
|                                                               |  | Same Store Business |         | Total Business  
|                                                               |  | and Sports Clubs    |         | and Sports Clubs
|                                                               |  | 2004                |         | 2005             |   | 2004    |  | 2005
|Number of facilities at end of period in continuing operations |  |                     | 64      |                  |   | 64      |  |      | 64      |  |   | 64     
|Operating revenues                                             |  | $                   | 138,477 |                  | $ | 143,591 |  | $    | 138,477 |  | $ | 143,591
|Recognition of membership fees and deposits                    |  |                     | 1,551   |                  |   | 1,455   |  |      | 1,551   |  |   | 1,455  
|                                                               |  |                     |         |                  |   |         |  |      |         |  |   |        
|Total operating revenues                                       |  | $                   | 140,028 |                  | $ | 145,046 |  | $    | 140,028 |  | $ | 145,046
|Operating costs and expenses (1)                               |  |                     | 119,459 |                  |   | 123,283 |  |      | 119,459 |  |   | 123,283
|                                                               |  |                     |         |                  |   |         |  |      |         |  |   |        
|Segment EBITDA from continuing operations (1)                  |  | $                   | 20,569  |                  | $ | 21,763  |  | $    | 20,569  |  | $ | 21,763 
|                                                               |  |                     |         |                  |   |         |  |      |         |  |   |        
|Segment EBITDA from discontinued operations                    |  | $                   | 557     |                  | $ | 549     |  | $    | 745     |  | $ | 554    
|                                                               |  |                     |         |                  |   |         |  |      |         |  |   |        
|Total Segment EBITDA (1)                                       |  | $                   | 21,126  |                  | $ | 22,312  |  | $    | 21,314  |  | $ | 22,317 
|                                                               |  |                     |         |                  |   |         |  |      |         |  |   |        



|(1) | Excludes intercompany consulting and support fees of $7.3 million and $8.9 million for Same Store and Total, respectively in the 36 weeks ended September 7, 2004 and
September 6, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continuing
Operations. Total operating revenues increased comparing 2004 to 2005 at same store business and sports clubs primarily due to increased food and beverage private party revenues and membership dues. Food and beverage private party revenues
increased 7% due to an increase in both volume and pricing. Membership dues increased 3% primarily due to a dues price increase in early 2005.



Segment EBITDA increased at same store business and sports clubs comparing 2004 to 2005 due to increased revenue partially offset by a related increase in
operating costs and expenses, primarily food and beverage costs. Food and beverage margins remained relatively flat when comparing 2004 to 2005. Depreciation and amortization decreased from $7.0 million in 2004 to $6.0 million in 2005.



Discontinued Operations. The periods ended September 7, 2004
and September 6, 2005 include four properties divested in 2004 and one property currently held for sale in discontinued operations.



Other Operations and Services  Continuing Operations



Other operations and services consist primarily of real estate operations and our corporate services. Revenues increased
primarily due to fees we receive from third-party developers based on a percentage of their real estate sales. Additionally, 2005 includes lot sales of approximately $3.4 million.



Operating loss from other operations and services remained flat comparing 2004 to 2005 primarily due to revenue increases
mentioned above as well as a rebate of previously incurred costs partially offset by increased insurance costs related to higher claims and the impairment of our investment in a consulting company. Additionally in 2005, we incurred approximately $1
million of expenses in corporate services related to the hosting of the 2005 U.S. Open.



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##### Table of Contents

Seasonality of Demand; Fluctuations in Quarterly Results



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



Liquidity and Capital
Resources



Our primary goal as it relates to liquidity and
capital resources is to attain and retain the right level of debt and cash to maintain our core properties, fund expansions at our current properties, and be poised for external growth in the marketplace. During the last few years, our focus has
been on strengthening our cash position and refinancing and reducing our debt in order to support these goals. Our debt was refinanced in 2003 and has been paid down to $672 million as of September 6, 2005. We have paid down approximately $42
million since December 28, 2004.



Historically, we have
financed our operations and cash needs primarily through cash flows from operations, debt and, to a lesser extent, proceeds from divestitures. We anticipate using cash flow from operations in 2005 principally to fund planned capital replacement
expenditures, to repay debt and to build cash reserves. We also expect to use our cash flow in 2005 to grow and expand our business through a combination of improvements and expansions of existing facilities, on which we have spent approximately $47
million year-to-date. Based on our current projections, we believe our current assets and cash flow from operations are sufficient to meet our anticipated working capital and operating needs for the next 12 months as well as support our anticipated
capital expenditures.



Debt



The majority of our outstanding debt at September 6, 2005 was
obtained as a result of a major refinancing that took place during 2003. The refinancings resulted in mortgage portfolios which had a combined principal amount of approximately $658 million, including both fixed and variable rate portions. The
combined refinancings were comprised of first mortgages on 40 properties and increased borrowings on two existing mortgage loans (see Note 9 of the Notes to Condensed Consolidated Financial Statements).



Under the provisions of certain of our debt agreements with Textron Financial
Corporation (Textron), we are required to maintain debt service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers
a default on the portfolio. As of September 6, 2005, the debt service coverage ratio was below the minimum level for two individual properties participating in the loan, thereby causing the entire loan ($53 million outstanding principal amount
as of September 6, 2005) to be in technical default. We cured the noncompliance by obtaining letters of credit totaling $2.7 million.



In addition to amounts reclassified to the current portion of long-term debt due to covenant noncompliance, we have approximately $56 million of unpaid
principal maturing by the end of the third quarter of 2006 which has also been classified as current. We are in negotiations with one of our lenders regarding a portion of this maturing debt to pay off the balance of approximately $37 million before
year-end 2005 and obtain a new line of credit.



Cash and Cash Flow



As a result of our debt
refinancing, we no longer have a line of credit. Consequently, we maintain a higher cash balance on hand to cover basic working capital requirements. Our unrestricted cash position was $94 million as of September 6, 2005 as compared to $96
million at December 28, 2004. As previously mentioned, we are in negotiations to pay off the balance of one of our property mortgages before year-end 2005 and obtain a new line of credit which would reduce our outstanding debt and decrease the
cash balance on our balance sheet.



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##### Table of Contents

Our cash flow from operations was $82.1 million for the 36 weeks ended September 6, 2005, an
increase of $10.6 million over 2004. In addition to our daily operating transactions, a key component of our annual operating cash comes from our membership programs. Membership deposits and fees represent advance initiation deposits for the right
to become a member. Membership deposits are generally not refundable until a fixed number of years (generally 30 years) after the date of acceptance as a member while membership fees are not refundable. Cash from deposits is used to fund our normal
operations. Revenue recognition of these deposits is deferred and amortized. In recent years, we have increasingly allowed new members to defer a portion of the payment of fees and deposits as an incentive for them to join. Although this practice
adversely affects the current amount of cash received for fees and deposits, it is subsequently offset through the receipt of recurring membership dues and other revenues received from these members.



We utilize cash to fund operations, maintain our properties, pay down our
debt and related interest, and, to a limited extent, buy back company stock. For the 36 weeks ended September 6, 2005, we reduced debt by nearly $42 million while only reducing our cash and cash equivalents by $2 million. For the remainder of
2005, we are considering additional investments in expanding our existing properties or acquiring new properties as well as prepaying or refinancing portions of our debt. We are in negotiations with one of our lenders regarding a possible
refinancing that will decrease interest rates while extending the maturity date. This negotiation relates to $59 million of unpaid principal that will currently mature in 2008.



Capital Spending



The nature of our business requires us to invest a significant amount of capital in our existing properties to maintain
them. For the 36 weeks ended September 6, 2005, we expended approximately $45 million in maintenance capital, and we anticipate spending approximately $68 million in fiscal 2005 for maintenance capital.



In addition to maintaining our properties, we also spend discretionary
capital to expand existing properties and to enter into new business opportunities. Capital expansion funding totaled approximately $2 million for the 36 weeks ended September 6, 2005.



Risks



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



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



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



| |  |  | Exercise of certain rights by our third party investor  During 1999, we sold 9,375,000 shares of common stock and warrants to acquire 1,012,500 shares of common stock to The
Cypress Group. Beginning in December 2004, we are obligated under certain defined conditions to offer to repurchase a portion of their outstanding shares if we are below a defined leverage ratio. Based on the calculation, we were above the stated
leverage ratio and were not required to offer to repurchase any shares during 2004. Furthermore, based on expected future operations, we do not anticipate falling below the stated leverage ratio level until at least December 2006. However, if our
actual future operating results differ materially from expectations, we could fall below the leverage ratio before December 2006 and could be required to offer to repurchase a portion of their shares of common stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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



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



Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments



During the 36 weeks ended September 6, 2005, there
were no material changes outside of the normal course of business to the quantitative and qualitative disclosures about contractual obligations, commitments, contingent liabilities and off-balance sheet arrangements previously reported in the Annual
Report on Form 10-K for the year ended December 28, 2004. See Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations  Off-Balance Sheet Arrangements, Contractual Obligations and
Commercial Commitments in the Form 10-K for December 28, 2004 for a detailed discussion.



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



This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended. All statements other than statements of historical fact should be considered forward-looking statements for purposes of these provisions, including statements that include projections of, or expectations about,
earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements
concerning our expectations regarding the attraction and retention of members and guests, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of
terminology such as may, will, expects, plans, anticipates, intends, believes, estimates, potential or continue, or the negative
thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct.
Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of
which are summarized in this section and in our Form 10-K for the year ended December 28, 2004.



Our success depends on our ability to attract and retain members at our clubs and maintain or increase usage of our facilities. We have experienced
varying levels of membership enrollment and attrition rates and, in certain areas, decreased levels of usage of our facilities during our operating history. Although management devotes substantial efforts to ensuring that members and guests are
satisfied, many of the factors affecting club membership and facility usage are beyond our control, including weather conditions, general economic conditions, changes in demand for golf and private club services and changes in the Federal 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.



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##### Table of Contents

Recently Issued Accounting Pronouncements



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



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



In December 2004, the FASB
issued SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29. SFAS No. 153 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets
exchanged. APB Opinion No. 29, Accounting for Nonmonetary Transactions, provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. Under APB Opinion No. 29, an exchange of
a productive asset for a similar productive asset was based on the recorded amount of the asset relinquished. SFAS No. 153 eliminates this exception and replaces it with an exception of exchanges of nonmonetary assets that do not have
commercial substance. We will apply the requirements of SFAS No. 153 on any future nonmonetary exchange transactions.



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 29 and FASB
Statement No. 3. SFAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. APB Opinion No. 20 Accounting
Changes, previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. We will apply the
requirements of SFAS No. 154 on any future accounting changes or error corrections.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



There were no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 28, 2004.



Item 4. Controls and Procedures



|Evaluation | of Disclosure Controls and Procedures
|---------- | -------------------------------------



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



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##### Table of Contents

Changes in Internal Controls



There has been no change in our internal control over financial reporting during the twelve weeks ended September 6,
2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



NONE.



Item 6. Exhibits



(a)
Exhibits

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

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

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

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



27



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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 20, 2005 |  |                |  | By:                                      |  | /s/Jeffrey P. Mayer
|      |  |                  |  |                |  | Jeffrey P. Mayer Chief Financial Officer