UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 3, 2013.

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 333-173127

ClubCorp Club Operations, Inc.

(Exact name of registrant as specified in its charter)



Delaware		27-3894784
(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)		(Zip Code)

(972) 243-6191

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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



Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		Smaller reporting company o
(Do not check if a smaller reporting company)

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

The registrant's shares of common stock are not traded on an exchange or in any public market. As of October 15, 2013, the number of the shares outstanding of the registrant's common stock was 1,000.

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TABLE OF CONTENTS



		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Unaudited consolidated condensed statements of operations and comprehensive income (loss) for the twelve and thirty-six weeks ended September 3, 2013 and September 4, 2012	1
	Unaudited consolidated condensed balance sheets as of September 3, 2013 and December 25, 2012	2
	Unaudited consolidated condensed statements of cash flows for the thirty-six weeks ended September 3, 2013 and September 4, 2012	3
	Unaudited consolidated condensed statements of changes in equity for the thirty-six weeks ended September 3, 2013 and September 4, 2012	4
	Notes to unaudited consolidated condensed financial statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	52

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	54
Item 6.	Exhibits	54

Signatures.		55

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLUBCORP CLUB OPERATIONS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Twelve and Thirty-Six Weeks Ended September 3, 2013 and September 4, 2012

(In thousands of dollars)



	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012			September 3, 2013			September 4, 2012
REVENUES:
Club operations	$	143,487		$	131,557		$	394,696		$	372,292
Food and beverage	50,809			47,778			148,615			141,303
Other revenues	539			662			2,203			2,164
Total revenues	194,835			179,997			545,514			515,759

DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Club operating costs exclusive of depreciation	127,732			117,333			354,570			335,337
Cost of food and beverage sales exclusive of depreciation	17,185			15,780			49,179			45,952
Depreciation and amortization	17,030			17,592			49,497			53,926
Provision for doubtful accounts	1,102			983			2,004			2,216
Loss on disposals of assets	2,745			2,536			6,376			3,456
Impairment of assets	24			—			1,905			770
Equity in earnings from unconsolidated ventures	(424		)	(349		)	(966		)	(959		)
Selling, general and administrative	11,250			9,679			31,747			30,325
OPERATING INCOME	18,191			16,443			51,202			44,736

Interest and investment income	80			29			224			86
Interest expense	(19,254		)	(19,831		)	(57,911		)	(59,510		)
Other income	—			92			—			1,823
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(983		)	(3,267		)	(6,485		)	(12,865		)
INCOME TAX (EXPENSE) BENEFIT	(3,887		)	1,601			(1,460		)	(49		)
LOSS FROM CONTINUING OPERATIONS	(4,870		)	(1,666		)	(7,945		)	(12,914		)
Loss from discontinued clubs, net of income tax (expense) benefit of $(2) and $1,232 for the twelve weeks ended September 3, 2013 and September 4, 2012, respectively, and $2 and $1,260 for the thirty-six weeks ended September 3, 2013 and September 4, 2012, respectively	(4		)	(10,571		)	(5		)	(10,575		)
NET LOSS	(4,874		)	(12,237		)	(7,950		)	(23,489		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(129		)	(15		)	(131		)	(169		)
NET LOSS ATTRIBUTABLE TO CLUBCORP	$	(5,003	)	$	(12,252	)	$	(8,081	)	$	(23,658	)

NET LOSS	(4,874		)	(12,237		)	(7,950		)	(23,489		)
Foreign currency translation, net of tax	(1,430		)	1,582			(988		)	1,111
OTHER COMPREHENSIVE (LOSS) INCOME	(1,430		)	1,582			(988		)	1,111
COMPREHENSIVE LOSS	(6,304		)	(10,655		)	(8,938		)	(22,378		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(129		)	(15		)	(131		)	(169		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP	$	(6,433	)	$	(10,670	)	$	(9,069	)	$	(22,547	)

See accompanying notes to unaudited consolidated condensed financial statements

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CLUBCORP CLUB OPERATIONS, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

As of September 3, 2013 and December 25, 2012

(In thousands of dollars, except share and per share amounts)



	September 3, 2013			December 25, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	43,226		$	81,851
Receivables, net of allowances of $3,295 and $2,626 at September 3, 2013 and December 25, 2012, respectively	84,230			51,580
Inventories	16,409			14,361
Prepaids and other assets	14,962			12,199
Deferred tax assets	8,076			8,076
Total current assets	166,903			168,067
Investments	9,110			11,166
Property and equipment, net (includes $9,598 and $9,870 related to VIEs at September 3, 2013 and December 25, 2012, respectively)	1,239,899			1,223,539
Notes receivable, net of allowances of $652 and $563 at September 3, 2013 and December 25, 2012, respectively	4,468			3,183
Goodwill	258,459			258,459
Intangibles, net	30,512			31,958
Other assets	28,120			23,224
TOTAL ASSETS	$	1,737,471		$	1,719,596

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	11,376		$	24,988
Membership initiation deposits - current portion	105,810			91,398
Accounts payable	27,876			27,441
Accrued expenses	45,509			35,989
Accrued taxes	20,772			16,637
Other liabilities	80,903			52,915
Total current liabilities	292,246			249,368
Long-term debt (includes $1,424 and $1,571 related to VIEs at September 3, 2013 and December 25, 2012, respectively)	773,967			756,532
Membership initiation deposits	204,012			202,630
Deferred tax liability	206,206			208,993
Other liabilities	131,914			129,009
Total liabilities	1,608,345			1,546,532
Commitments and contingencies (See Note 13)

EQUITY
Common stock of ClubCorp Club Operations, Inc., Inc., $1.00 par value, 1,000 shares authorized, issued and outstanding at September 3, 2013 and December 25, 2012	1			1
Additional paid-in capital	178,310			213,310
Accumulated other comprehensive loss	(1,660		)	(672		)
Retained deficit	(58,221		)	(50,140		)
Total stockholders’ equity	118,430			162,499
Noncontrolling interests in consolidated subsidiaries and variable interest entities	10,696			10,565
Total equity	129,126			173,064
TOTAL LIABILITIES AND EQUITY	$	1,737,471		$	1,719,596

See accompanying notes to unaudited consolidated condensed financial statements

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CLUBCORP CLUB OPERATIONS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

For the Thirty-Six Weeks Ended September 3, 2013 and September 4, 2012

(In thousands of dollars)



	Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,950	)	$	(23,489	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation	47,521			47,393
Amortization	1,977			6,826
Asset impairments	1,905			5,973
Bad debt expense	2,014			2,256
Equity in earnings from unconsolidated ventures	(966		)	(959		)
Distribution from investment in unconsolidated ventures	2,429			1,346
Loss on disposals of assets	6,376			10,113
Amortization of debt issuance costs	1,550			1,388
Accretion of discount on member deposits	14,149			13,836
Amortization of surface rights bonus revenue	—			(1,823		)
Amortization of above and below market rent intangibles	115			176
Net change in deferred tax assets and liabilities	(3,509		)	(6,039		)
Net change in prepaid expenses and other assets	(5,241		)	(2,766		)
Net change in receivables and membership notes	(28,659		)	(19,858		)
Net change in accounts payable and accrued liabilities	7,104			6,521
Net change in other current liabilities	30,561			28,079
Net change in other long-term liabilities	(2,516		)	(2,872		)
Net cash provided by operating activities	66,860			66,101
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(42,066		)	(31,467		)
Acquisitions of clubs	(10,785		)	(3,570		)
Proceeds from dispositions	90			393
Proceeds from insurance	—			1,978
Net change in restricted cash and capital reserve funds	34			97
Return of capital in equity investments	592			—
Net cash used in investing activities	(52,135		)	(32,569		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(21,999		)	(10,797		)
Proceeds from new debt borrowings	10,713			—
Purchase of interest rate cap agreement	—			(8		)
Debt issuance and modification costs	(6,684		)	(167		)
Distribution to owners	(35,000		)	—
Proceeds from new membership initiation deposits	760			552
Repayments of membership initiation deposits	(1,030		)	(455		)
Net cash used in financing activities	(53,240		)	(10,875		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(110		)	787
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(38,625		)	23,444
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	81,851			50,317
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	43,226		$	73,761

See accompanying notes to unaudited consolidated condensed financial statements

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CLUBCORP CLUB OPERATIONS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

For the Thirty-Six Weeks Ended September 3, 2013 and September 4, 2012

(In thousands of dollars)



	Total			Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Equity (Deficit)			Noncontrolling Interests in Consolidated Subsidiaries
BALANCE - December 27, 2011	$	198,409		$	1	$	213,310		$	(2,562	)	$	(23,564	)	$	11,224
Net (loss) income	(23,489		)	—		—			—			(23,658		)	169
Other comprehensive income	1,111			—		—			1,111			—			—
BALANCE - September 4, 2012	$	176,031		$	1	$	213,310		$	(1,451	)	$	(47,222	)	$	11,393

BALANCE - December 25, 2012	$	173,064		$	1	$	213,310		$	(672	)	$	(50,140	)	$	10,565
Distributions to owners	(35,000		)	—		(35,000		)	—			—			—
Net (loss) income	(7,950		)	—		—			—			(8,081		)	131
Other comprehensive loss	(988		)	—		—			(988		)	—			—
BALANCE - September 3, 2013	$	129,126		$	1	$	178,310		$	(1,660	)	$	(58,221	)	$	10,696

See accompanying notes to unaudited consolidated condensed financial statements

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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollar amounts in thousands, unless otherwise indicated)

1. ORGANIZATION

ClubCorp Club Operations, Inc. (“ClubCorp”) is a holding company that was formed on November 10, 2010, as part of a reorganization of ClubCorp, Inc. (“CCI”), which was effective as of November 30, 2010 for the purpose of operating and managing golf and country clubs, business, sports and alumni clubs. ClubCorp has two reportable segments (1) golf and country clubs and (2) business, sports and alumni clubs. ClubCorp is a wholly owned subsidiary of CCA Club Operations Holdings, LLC (“Parent”), which is a wholly owned subsidiary of ClubCorp Holdings, Inc. (“Holdings”). As of October 15, 2013, the majority of Holdings' common stock is owned by Fillmore CCA Investment, LLC (“Fillmore”), which is wholly owned by an affiliate of KSL Capital Partners, LLC (“KSL”), a private equity fund that invests primarily in the hospitality and leisure business. ClubCorp, together with its subsidiaries, may be referred to as “we,” “us,” “our,” or the “Company.”

On September 25, 2013, Holdings completed an initial public offering in which it sold 13,200,000 shares of common stock and Fillmore sold 4,800,000 shares. The offering generated net proceeds to Holdings of approximately $168.8 million after deducting underwriting discounts and commissions and estimated offering expenses. Holdings subsequently contributed the net proceeds to the Company. We did not receive any proceeds from the sale of shares of common stock offered by Fillmore. See further discussion in Note 16.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation—The consolidated condensed financial statements reflect the consolidated operations of ClubCorp, its subsidiaries and certain variable interest entities (“VIEs”). The consolidated condensed financial statements presented herein reflect our financial position, results of operations, cash flows and changes in equity in conformity with accounting principles generally accepted in the United States, or “GAAP”. All intercompany accounts have been eliminated.

The accompanying consolidated condensed financial statements have been prepared by ClubCorp and are unaudited. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP 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 25, 2012.

We believe that the accompanying consolidated condensed financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. 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.

Use of Estimates—The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes. Actual results could differ materially from such estimated amounts.

Revenue Recognition—Revenues from club operations, food and beverage and merchandise sales are recognized at the time of sale or when the service is provided and are reported net of sales taxes.

Revenues from membership dues are billed monthly and recognized in the period earned. The monthly dues are expected to cover the cost of providing membership services.

The majority of membership initiation deposits sold are not refundable until a fixed number of years (generally 30) after the date of acceptance of a member. We recognize revenue related to membership initiation deposits over the expected life of an active membership which is approximately six years for golf and country club memberships and approximately four years for business, sports and alumni club memberships. For membership initiation deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized within club operations revenue on the consolidated condensed statements of operations, on a straight-line basis over the expected life of an active membership. The present value of the refund obligation is recorded as a membership initiation deposit liability in the consolidated condensed balance sheets and accretes over the nonrefundable term using the effective interest method with an interest rate defined as our incremental borrowing rate adjusted to reflect a 30-year time frame. The accretion is included in interest expense.

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The majority of membership initiation fees sold are not refundable and are deferred and recognized within club operations revenue on the consolidated condensed statements of operations, on a straight line basis over the expected life of an active membership.

Membership initiation fees and deposits recognized within club operations revenue on the consolidated condensed statements of operations was $4.2 million and $12.2 million for the twelve and thirty-six weeks ended September 3, 2013, respectively, and $3.5 million and $10.5 million, for the twelve and thirty-six weeks ended September 4, 2012, respectively.

Notes Receivable, Net of Allowances—Notes receivable reflect amounts due from our financing of membership initiation fees and deposits and typically range from one to six years in original maturity. We recognize interest income as earned and provide an allowance for doubtful accounts. This allowance is based on factors including the historical trends of write-offs and recoveries, the financial strength of the member and projected economic and market conditions.

Foreign Currency—The functional currency of our entities located outside the United States of America is the local currency. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the current exchange rate in effect at period-end. All foreign income and expenses are translated at the monthly weighted-average exchange rates during the year. Translation gains and losses are reported separately as a component of comprehensive loss, until realized. No translation gains or losses have been reclassified into earnings for the twelve and thirty-six weeks ended September 3, 2013 and September 4, 2012. Realized foreign currency transaction gains and losses are reflected in the consolidated condensed statements of operations and comprehensive income (loss) in club operating costs.

Income Taxes—We recognize the tax benefit from an uncertain tax position only if it is “more likely than not” that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. If the position drops below the “more likely than not” standard, the benefit can no longer be recognized. Assumptions, judgment and the use of estimates are required in determining if the “more likely than not” standard has been met when developing the provision for income taxes. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

Equity‑Based Awards—Equity‑based unit awards were previously issued under a Management Profits Interest Program (“MPI”) which constituted grants of time-vesting non-voting profits interests in Fillmore. These awards entitled participants to participate in the appreciation of the value of Fillmore above an applicable threshold and thereby share in its future profits. Fillmore converted previously issued Class B units into Class A units, subject to remaining vesting periods, in connection with the ClubCorp Formation. Fillmore also granted 10,000.00 Class C units in connection with the ClubCorp Formation. As of September 3, 2013, there were 9,100.00 Class C units and 10,039.44 Class A units (including Converted Units) outstanding.

MPI participants could receive a distribution upon the occurrence of a liquidity event or upon the declaration of a distribution or dividend payment, in each case in accordance with the terms of the distribution “waterfall” set forth in Fillmore’s Second Amended and Restated LLC Agreement. Because the distributions would be contingent on the value of Holdings at the time of such liquidity event, distribution, or dividend payment, no expense has been recognized relating to such awards as of September 3, 2013. In connection with the consummation of Holdings' initial public offering on September 25, 2013, the MPI participants, including our executives, employees, directors and consultants surrendered all Class A units (including Converted Units) and Class C units held by them in exchange for an aggregate of 2,251,027 shares of Holdings' common stock previously held by Fillmore, a portion of which will be restricted, subject to remaining time vesting requirements.

On April 1, 2012, Holdings granted 12,552 Restricted stock units (“RSUs”) to certain executives under the ClubCorp Holdings, Inc. 2012 Stock Award Plan, which was amended and restated as of August 14, 2013 (the “Stock Plan”), and allows the holders to receive and maintain an interest in us, which interest may be measured by the value of the common stock of Holdings. The RSUs vest based on satisfaction of both a time condition subject to the holders' continued employment and a liquidity condition. The time condition is satisfied with respect to one‑third of the RSUs on each of the first three anniversaries of the grant date, subject to the holder remaining employed by us. The liquidity condition is satisfied upon the earlier of a change of control (as defined in the Stock Plan) or after a period of time following the effective date of an initial public offering by us.

Because the vesting of RSUs is contingent on the satisfaction of a liquidity condition, no expense has been recognized relating to such awards as of September 3, 2013. After giving effect to the 50 for 1 forward stock split effected on August 2, 2013 and the 1.0113946 for 1 forward stock split effected on September 6, 2013, 613,963 RSUs remain outstanding as of September 3, 2013. On March 15, 2014, the required time period following Holding's initial public offering will be satisfied and the liquidity vesting requirement will be met, at which time all then outstanding RSUs will be converted into shares of common stock, a portion of which will be restricted, subject to remaining time vesting requirements.

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Subsequent to Holdings' initial public offering, we expect to record equity-based compensation expense of approximately $14.0 million during the fourth quarter of 2013 related to the unit awards previously issued and outstanding under the MPI program and all outstanding RSUs granted under the Stock Plan, to the extent the time vesting conditions have been satisfied. See Note 16.

Recently Issued Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-02 (“ASU 2013-02”), Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The update clarifies how to report the effect of significant reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012 and is to be applied prospectively. Our adoption of this ASU in the first quarter of 2013 did not materially change the presentation of our consolidated condensed financial statements.

In February 2013, the FASB issued Accounting Standards Update No. 2013-04 (“ASU 2013-04”), Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed as the Reporting Date. ASU No. 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in the update also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-04 is not expected to have a material impact on our consolidated condensed financial statements.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11 (“ASU 2013-11”), Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU No. 2013-11 clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on our consolidated condensed financial statements.

3. VARIABLE INTEREST ENTITIES

Consolidated VIEs include three managed golf course properties. We have determined we are the primary beneficiary of these VIEs as we have the obligation to absorb the majority of losses from and direct activities of these operations. One of these VIEs is financed through a loan payable of $1.1 million collateralized by assets of the entity totaling $4.1 million as of September 3, 2013. The other VIEs are financed through advances from us. Outstanding advances as of September 3, 2013 total $3.3 million compared to recorded assets of $6.9 million.

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The following summarizes the carrying amount and classification of the VIEs’ assets and liabilities in the consolidated condensed balance sheets as of September 3, 2013 and December 25, 2012, net of intercompany amounts:



	September 3, 2013		December 25, 2012
Current assets	$	1,431	$	858
Fixed assets, net	9,598		9,870
Total assets	$	11,029	$	10,728

Current liabilities	$	1,486	$	1,024
Long-term debt	1,424		1,571
Other long-term liabilities	567		594
Noncontrolling interest	6,053		6,260
Company capital	1,499		1,279
Total liabilities and equity	$	11,029	$	10,728

Recourse of creditors to the three VIEs is limited to the assets of the managed golf operations and their management entities, which total $11.0 million and $10.7 million at September 3, 2013 and December 25, 2012, respectively.

4. INVESTMENTS

Equity method investments in golf and business club ventures total $1.4 million and $1.3 million at September 3, 2013 and December 25, 2012, respectively, and include two golf club joint ventures and one business club joint venture. Our share of earnings in the equity investments is included in equity in earnings from unconsolidated ventures in the consolidated condensed statements of operations.

During the twelve weeks ended June 12, 2012, we determined that one of our equity method investments had a decrease in value that was other than temporary. We recognized an impairment loss of $0.7 million during the twelve weeks ended June 12, 2012 to adjust its carrying amount to its fair value. See Note 5. We recognized no additional impairment losses in the twelve weeks ended September 4, 2012 and we have not recognized any impairment losses in the twelve and thirty-six weeks ended September 3, 2013.

Additionally, we have one equity method investment of 10.2% in Avendra, LLC, a purchasing cooperative of hospitality companies. The carrying value of the investment was $7.3 million and $9.4 million at September 3, 2013 and December 25, 2012, respectively. Our share of earnings in the equity investment is included in equity in earnings from unconsolidated ventures in the consolidated condensed statements of operations. We have contractual agreements with the joint venture to provide procurement services for our clubs for which we received net volume rebates and allowances totaling $0.0 million and $2.1 million during the twelve and thirty-six weeks ended September 3, 2013, respectively, and $0.0 million and $1.9 million during the twelve and thirty-six weeks ended September 4, 2012, respectively. The difference between the carrying value of the investment and our share of the equity reflected in the joint venture’s financial statements at the time of the acquisition of the Company by affiliates of KSL was allocated to intangible assets of the joint venture and amortized over approximately 10 years beginning in 2007. The carrying value of these intangible assets was $6.6 million and $8.0 million at September 3, 2013 and December 25, 2012, respectively.

Our equity in net income from the investment described in the preceding paragraph is shown below:



	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012			September 3, 2013			September 4, 2012
ClubCorp's equity in net income, excluding amortization	$	885		$	771		$	2,372		$	2,325
Amortization	(463		)	(463		)	(1,390		)	(1,390		)
ClubCorp's equity in net income	$	422		$	308		$	982		$	935

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5. FAIR VALUE

GAAP establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

Level 1—unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company;

Level 2—inputs that are observable in the marketplace other than those inputs classified as Level 1; and

Level 3—inputs that are unobservable in the marketplace and significant to the valuation.

We maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant to the fair value calculation. We recognize transfers between levels of the fair value hierarchy on the date of the change in circumstances that caused the transfer.

Fair Value of Financial Instruments

Debt—We estimate the fair value of our debt obligations, excluding capital lease obligations, as follows, as of September 3, 2013 and December 25, 2012:



	September 3, 2013				December 25, 2012
	Recorded Value		Fair Value		Recorded Value		Fair Value
Level 2	$	716,106	$	758,878	$	719,575	$	765,744
Level 3	41,926		42,026		37,790		37,790
Total	$	758,032	$	800,904	$	757,365	$	803,534

We use quoted prices for identical or similar liabilities to value debt obligations classified as Level 2. We use adjusted quoted prices for similar liabilities to value debt obligations classified as Level 3. Key inputs include: 1) the determination that certain other debt obligations are similar, 2) nonperformance risk, and 3) interest rates. Changes or fluctuations in these assumptions and valuations will result in different estimates of value. The use of different techniques to determine the fair value of these debt obligations could result in different estimates of fair value at the reporting date.

The carrying value of other financial instruments including cash, cash equivalents, receivables, notes receivable, accounts payable and other short-term and long-term assets and liabilities approximate their fair values as of September 3, 2013 and December 25, 2012.

Assets and Liabilities Measured Fair Value on a Non-recurring Basis

Property and Equipment—We recognized impairment losses to property and equipment of $1.9 million during the twelve weeks ended June 11, 2013, to adjust the carrying amount of certain property and equipment to its fair value of $0.3 million due to continued and projected negative operating results as well as changes in the expected holding period of certain fixed assets. We did not recognize any material impairment losses in the twelve weeks ended September 3, 2013. The valuation method used to determine fair value was based on an analysis of discounted future free cash flows using a risk-adjusted discount rate (‘‘Income Approach’’), and based on cost adjusted for economic obsolescence (‘‘Cost Approach’’). The fair value calculations associated with these valuations are classified as Level 3 measurements. See Note 6.

Equity Method Investments—During the twelve weeks ended June 12, 2012, we determined that one of our equity method investments had a decrease in value that was other than temporary. We recognized an impairment loss of $0.7 million during the twelve weeks ended June 12, 2012 to adjust its carrying amount to its fair value. The valuation method used to determine fair value was based on a third party valuation unobservable in the marketplace. This valuation is considered a Level 3 measurement. See Note 4. We recognized no additional impairment losses in the twelve weeks ended September 4, 2012 and we have not recognized any impairment losses in the twelve and thirty-six weeks ended September 3, 2013.

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6. PROPERTY AND EQUIPMENT

Property and equipment at cost consists of the following at September 3, 2013 and December 25, 2012:



	September 3, 2013			December 25, 2012
Land and non-depreciable land improvements	$	532,096		$	531,265
Depreciable land improvements	337,051			325,688
Buildings and recreational facilities	413,759			401,607
Machinery and equipment	180,145			164,005
Leasehold improvements	85,751			84,444
Furniture and fixtures	70,017			64,960
Construction in progress	9,478			2,912
	1,628,297			1,574,881
Accumulated depreciation	(388,398		)	(351,342		)
Total	$	1,239,899		$	1,223,539

We evaluate property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. We recognized impairment losses to property and equipment of $1.9 million during the twelve weeks ended June 11, 2013, to adjust the carrying amount of certain property and equipment to its fair value of $0.3 million due to continued and projected negative operating results as well as changes in the expected holding period of certain fixed assets. We did not recognize any material impairment losses in the twelve weeks ended September 3, 2013. See Note 5.

We recognized impairment losses to property and equipment of $0.1 million in the twelve weeks ended June 12, 2012. We did not recognize any impairment losses in the twelve weeks ended September 4, 2012.

7. GOODWILL AND INTANGIBLE ASSETS

Intangible assets consist of the following at September 3, 2013 and December 25, 2012:



		September 3, 2013							December 25, 2012
Asset	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets with indefinite lives:
Trade names		$	24,850	$	—		$	24,850	$	24,850	$	—		$	24,850
Liquor Licenses		4,416		—			4,416		3,886		—			3,886
Intangible assets with finite lives:
Member Relationships	7 years	19,068		(17,970		)	1,098		19,068		(16,084		)	2,984
Management Contracts	9 years	598		(469		)	129		598		(421		)	177
Other	7 years	426		(407		)	19		426		(365		)	61
Total		$	49,358	$	(18,846	)	$	30,512	$	48,828	$	(16,870	)	$	31,958

Goodwill		$	258,459				$	258,459	$	258,459				$	258,459

Intangible Assets—Intangible assets include trade names, liquor licenses and member relationships. Intangible asset amortization expense was $0.7 million and $2.0 million during the twelve and thirty-six weeks ended September 3, 2013, respectively, and $2.3 million and $6.8 million for the twelve and thirty-six weeks ended September 4, 2012, respectively.

We evaluate goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount may not be fully recoverable.

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During the twelve and thirty-six weeks ended September 4, 2012, we entered into an agreement to sell a business, sports and alumni club for expected proceeds of $5.9 million. See Note 11. We evaluated goodwill for impairment in conjunction with this agreement. Based on this analysis, no impairment of goodwill was required prior to entering into the sales agreement. As a result of the classification of assets related to this property as held for sale, we allocated $6.5 million of goodwill to this property and subsequently recognized a loss on disposal of goodwill for this amount. This loss is presented in loss from discontinued operations in the consolidated condensed statements of operations and comprehensive loss.

The following table shows goodwill activity by reporting unit. No impairments have been recorded for either reporting unit during the twelve and thirty-six weeks ended September 3, 2013.



	Golf & Country Clubs		Business, Sports & Alumni Clubs			Total
December 27, 2011	$	113,108	$	151,851		$	264,959
Loss on disposal - discontinued operations	$	—	$	(6,500	)	$	(6,500	)
December 25, 2012	$	113,108	$	145,351		$	258,459
September 3, 2013	$	113,108	$	145,351		$	258,459

8. CURRENT AND LONG-TERM LIABILITIES

Current liabilities consist of the following at September 3, 2013 and December 25, 2012:



	September 3, 2013		December 25, 2012
Accrued compensation	$	24,049	$	24,060
Accrued interest	12,521		4,957
Other accrued expenses	8,939		6,972
Total accrued expenses	$	45,509	$	35,989

Taxes payable other than federal income taxes	$	20,425	$	16,170
Federal income taxes payable	347		467
Total accrued taxes	$	20,772	$	16,637

Advance deposits from members	$	22,053	$	12,489
Prepaid dues	30,694		11,916
Deferred membership revenues	16,777		16,519
Insurance reserves	8,333		8,659
Other current liabilities	3,046		3,332
Total other current liabilities	$	80,903	$	52,915

Other long-term liabilities consist of the following at September 3, 2013 and December 25, 2012:



	September 3, 2013		December 25, 2012
Uncertain tax positions	$	55,546	$	52,713
Deferred membership revenues	38,266		41,218
Casualty insurance loss reserves - long term portion	11,571		10,936
Above market lease intangibles	1,576		2,040
Deferred rent	22,349		19,127
Other	2,606		2,975
Total other long-term liabilities	$	131,914	$	129,009

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9. DEBT AND CAPITAL LEASES

General Electric Capital Corporation (“GECC”)—In July 2008, we entered into a secured mortgage loan with GECC for $32.0 million with an original maturity of July 2011. During the fiscal year ended December 27, 2011, we extended the term of the loan to July 2012. Effective August 1, 2012, we amended the loan agreement with GECC which extended the maturity to November 2015 with two additional twelve month options to extend through November 2017 upon satisfaction of certain conditions of the loan agreement. As of September 3, 2013, we expect to meet the required conditions and currently intend to extend the loan with GECC to November 2017.

BancFirst—In connection with the acquisition of Oak Tree Country Club in May 2013, we assumed a mortgage loan with BancFirst for $5.0 million. See Note 11. The loan has an original maturity of October 2014 with two twelve month options to extend the maturity through October 2016 upon satisfaction of certain conditions in the loan agreement. As of September 3, 2013, we expect to meet the required conditions and currently intend to extend the loan with BancFirst to October 2016. The loan is collateralized by the assets of the club, which had a book value of $8.1 million as of September 3, 2013. The interest rate is the greater of 4.5% or the prime rate. We incurred an immaterial amount of debt issuance costs in conjunction with the assumption of this mortgage loan. These costs have been capitalized and are being amortized over the term of the loan.

2010 Secured Credit Facilities—On November 30, 2010 we entered into secured credit facilities (the “Secured Credit Facilities”). These facilities were originally comprised of (i) a $310.0 million term loan facility and (ii) a revolving credit facility with a maximum borrowing limit of $50.0 million, which included letter of credit and swing line facilities. The credit agreement included incremental facilities, whereby we had the option to increase the term loan facility by up to $50.0 million and the revolving credit facility by up to an additional $25.0 million, both subject to conditions and restrictions in the credit agreement. The term loan facility was scheduled to mature on November 30, 2016 and the revolving credit facility expires on November 30, 2015. The interest rate on the Secured Credit Facilities was originally the higher of (i) 6.0% or (ii) an elected LIBOR plus a margin of 4.5%.

On November 16, 2012, we entered into an amendment to the credit agreement governing the Secured Credit Facilities, which reduced the interest rate on the term loan facility to the higher of (i) 5.0% or (ii) an elected LIBOR plus a margin of 3.75%. This amendment did not apply to the revolving credit facility or any incremental facilities.

On July 24, 2013, we entered into a second amendment to the credit agreement governing the Secured Credit Facilities to reduce the interest rate on the term loan facility, increase the principal borrowed under the term loan facility, extend the maturity date of the term loan facility, eliminate the quarterly principal payment requirement under the term loan facility, increase the amount of permissible incremental facilities and modify certain financial covenants and non-financial terms and conditions associated with the credit agreement governing the Secured Credit Facilities.

The interest rate on the term loan facility was reduced to the higher of (i) 4.25% or (ii) an elected LIBOR plus a margin of 3.25%, with an additional reduction to the higher of (i) 4.0% or (ii) an elected LIBOR plus a margin of 3.0%, upon successful completion of an initial public offering with proceeds of at least $50.0 million, which condition was satisfied subsequent to the twelve weeks ended September 3, 2013 on September 25, 2013, by our receipt, by way of contribution from Holdings, the amount of more than $50.0 million in proceeds from the completion of an initial public offering by Holdings. The term loan facility principal balance was increased to $301.1 million. The maturity date of the term loan facility was extended to July 24, 2020. In addition to the $19.6 million of standby letters of credit outstanding, capacity available under the incremental facilities was increased to $135.0 million in new revolving credit, plus $75.0 million in new revolving credit and term loan combined, with additional capacity for incremental revolving credit and/or term loan commitments thereafter if certain financial covenants are met.

The total leverage and interest coverage ratio financial covenants were replaced in the second amendment with a new senior secured leverage ratio covenant (the “Senior Secured Leverage Ratio”). The Senior Secured Leverage Ratio, as defined in the credit agreement, requires us and our restricted subsidiaries to maintain a leverage ratio of no greater than 4.00:1.00 for each fiscal quarter ended on or after June 30, 2013. As of September 3, 2013, our leverage ratio was 1.99:1.00.

We may be required to prepay the outstanding term loan facility by a percentage of excess cash flows, as defined by the Secured Credit Facilities, each fiscal year end after their annual consolidated financial statements are delivered, which percentage may decrease or be eliminated depending on the results of the Senior Secured Leverage Ratio test at the end of each fiscal year.

This second amendment was accounted for as a debt modification. We incurred additional debt issuance costs of $4.4 million, which have been capitalized and are being amortized over the remaining term of the loan.

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On August 30, 2013, we entered into a third amendment to the credit agreement governing the Secured Credit Facilities to conditionally secure the $135.0 million incremental revolving credit facility. The third amendment became effective on September 30, 2013, subsequent to the satisfaction of certain conditions, including the receipt by us, by way of contribution from Holdings, of more than $150.0 million of proceeds from the completion of an initial public offering by Holdings. The $135.0 million revolving credit commitments mature five years from the effective date of the third amendment and borrowings will bear interest at a rate of LIBOR plus a margin of 3.0% per annum. Additionally, the third amendment reduced the existing $50.0 million revolving credit facility to $19.6 million, the amount of standby letters of credit outstanding as of the effective date of the third amendment.

In conjunction with this third amendment, we will incur total additional debt issuance costs of $3.4 million, which will be capitalized and will be amortized over the remaining term of the new revolving credit facility.

Long-term borrowings and lease commitments of the Company as of September 3, 2013 and December 25, 2012, are summarized below:



	September 3, 2013					December 25, 2012
	Carrying Value			Interest Rate		Carrying Value			Interest Rate		Interest Rate Calculation	Maturity

Senior Notes	$	415,000		10.00	%	$	415,000		10.00	%	Fixed	2018
Secured Credit Facilities
Term Loan	301,106			4.25	%	304,575			5.00	%	As of September 3, 2013, greater of (i) 4.25% or (ii) an elected LIBOR + 3.25%; as of December 25, 2012, greater of (i) 5.0% or (ii) an elected LIBOR + 3.75%	2020
Revolving Credit Borrowings ($50,000 capacity) (1)	—			6.00	%	—			6.00	%	Greater of (i) 6.0% or (ii) an elected LIBOR + 4.5%	2015
Mortgage Loans
General Electric Capital Corporation	30,521			6.00	%	30,992			6.00	%	5.00% plus the greater of (i) three month LIBOR or (ii) 1%	2017
Atlantic Capital Bank	3,547			4.50	%	3,653			4.50	%	Greater of (i) 3.0% + 30 day LIBOR or (ii) 4.5%	2015
BancFirst	4,804			4.50	%	—			—		Greater of (i) 4.50% or prime rate	2016
Other indebtedness	3,054			5.75% - 8.00%		3,145			5.75% - 8.00%		Fixed	Various

	758,032					757,365
Capital leases	27,311					24,155
	785,343					781,520
Less current portion	(11,376		)			(24,988		)
	$	773,967				$	756,532

__________


(1)	As of September 3, 2013, $19.6 million of standby letters of credit reduced the availability under the revolving credit borrowings.

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The amount of long-term debt maturing in each of the five years subsequent to 2012 and thereafter is as follows:



Year	Debt		Capital Leases		Total
Remainder of 2013	$	541	$	2,952	$	3,493
2014	1,517		9,586		11,103
2015	4,728		7,823		12,551
2016	4,567		4,616		9,183
2017	28,885		1,965		30,850
Thereafter	717,794		369		718,163
Total	$	758,032	$	27,311	$	785,343

10. INCOME TAXES

We join in the filing of a consolidated federal income tax return with Holdings, our indirect parent. We record income taxes based on the separate return method determined as if we were not included in a consolidated return. Income taxes recorded by us are further adjusted to the extent losses or other deductions cannot be utilized in the consolidated federal income tax return. We file state tax returns on a separate company basis or unitary basis as required by law. Additionally, certain of our subsidiaries owned through lower tier joint ventures file separate tax returns for federal and state purposes.

Our tax expense or benefit recognized in our interim financial statements is determined by multiplying the year-to-date income or loss by the annual effective tax rate, which is an estimate of the expected relationship between tax expense or benefit for the full year to the pre-tax income or loss for the full year (pre-tax income or loss excluding unusual or infrequently occurring discrete items). Our effective income tax rate for the twelve and thirty-six weeks ended September 3, 2013 was 395.4% and (22.5)%, respectively, compared to 49.0% and (0.4)%, for the twelve and thirty-six weeks ended September 4, 2012, respectively. For the twelve and thirty-six weeks ended September 3, 2013 and September 4, 2012, the effective tax rate differed from the U.S. statutory federal income tax rate of 35% primarily due to state taxes, changes in uncertain tax positions and certain other permanent differences. The relative impact that the preceding items have on the effective tax rate varies based on the amount of pre-tax income forecast for the year as well as whether that pre-tax amount is profit or loss.

We are subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Our annualized effective income tax rate is determined by the level and composition of pre-tax income and the mix of income subject to varying foreign, state and local taxes.

As of September 3, 2013 and December 25, 2012, we have recorded $55.5 million and $52.7 million, respectively, of unrecognized tax benefits related to uncertain tax positions, which are included in other liabilities in the consolidated condensed balance sheets.

We are currently undergoing an Internal Revenue Service audit of certain components of the tax return for the year ended December 28, 2010, which includes the consummation of the ClubCorp Formation. In addition, certain of our foreign subsidiaries are under audit in Mexico for the 2008 and 2009 tax years. It is reasonably possible that within the next 12 months our unrecognized tax benefits will be impacted by the resolution of some or all of the matters currently under audit by the U.S. and Mexican taxing authorities. However, as audit outcomes and the timing of audit resolutions are subject to significant uncertainty given the current status of the U.S. and Mexican tax examinations, we are unable to estimate the possible amount of change in the unrecognized tax benefits, if any, that may occur within the next 12 months as a result of the above examinations.

11. CLUB ACQUISITIONS, CLUB DISPOSITIONS AND DISCONTINUED OPERATIONS

Club Acquisitions

Assets and liabilities from business combinations were recorded on our consolidated balance sheets at fair value at the date of acquisition. The results of operations of such businesses have been included in the consolidated statements of operations since their date of acquisition.

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Cherry Valley Country Club—On June 18, 2013, we acquired Cherry Valley Country Club, a private country club located in Skillman, New Jersey, in exchange for net cash consideration of $5.6 million. We recorded the following major categories of assets and liabilities, which are subject to change until our information is finalized, no later than twelve months from the acquisition date:



Land, property and equipment	$	5,976
Prepaid assets	121
Inventory	179
Long-term debt	(311		)
Other liabilities	(408		)
Total	$	5,557

Oak Tree Country Club—On May 22, 2013, we acquired Oak Tree Country Club, a private country club located in Edmond, Oklahoma, in exchange for net cash consideration of $5.2 million. We assumed debt of $5.0 million in connection with the acquisition. We recorded the following major categories of assets and liabilities, which are subject to change until our information is finalized, no later than twelve months from the acquisition date:



Land, property and equipment	$	12,108
Receivables, prepaid assets and other assets	662
Inventory	233
Current maturities of long-term debt	(468		)
Long-term debt	(4,486		)
Deferred tax liability	(722		)
Membership initiation deposits and other liabilities	(2,099		)
Total	$	5,228

Hartefeld National Golf Club—On April 18, 2012, we acquired Hartefeld National Golf Club, a private country club located in Avondale, Pennsylvania. We recorded the following major categories of assets and liabilities in exchange for consideration of $3.6 million:



Land, property and equipment	$	3,999
Prepaid real estate taxes	31
Inventory	112
Deferred revenue and other liabilities	(572		)
Total	$	3,570

Revenues and operating income associated with acquired clubs were as follows for the twelve and thirty-six weeks ended September 3, 2013 and September 4, 2012.



	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012			September 3, 2013		September 4, 2012
Revenues	$	5,246		$	1,119		$	7,935	$	2,035
Operating (loss) income	$	(12	)	$	(37	)	$	253	$	—

The pro forma information related to these acquisitions is not material to our historical results of operations.

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Club Dispositions

Subsidiaries may be divested when we determine they will be unable to provide a positive contribution to cash flows from operations in future periods and/or when they are determined to be non-strategic holdings for the Company. Gains from divestitures are recognized in the period in which operations cease and losses are recognized when we determine that the carrying value is not recoverable and exceeds fair value.

Glendale Racquet Club, Inc.—On September 27, 2012, we sold certain assets and liabilities of Glendale Racquet Club, Inc., a sports club located in Milwaukee, Wisconsin, to an unrelated third party for $5.9 million. The sale resulted in a pre-tax loss of $11.1 million recorded in the twelve weeks ended September 4, 2012 including a $6.5 million loss recognized for goodwill allocated to this entity. See Note 7. These losses are included in loss from discontinued operations in the consolidated condensed statements of operations and comprehensive loss.

One additional business, sports and alumni club was discontinued in the twelve and thirty-six weeks ended September 4, 2012 for a pre-tax gain of $0.1 million. We did not discontinue any clubs in the twelve and thirty-six weeks ended September 3, 2013.

There were no assets held for sale at September 3, 2013 or December 25, 2012.

Discontinued Club Operations

Operations of the clubs that have been disposed along with the held for sale property were reclassified to discontinued operations on the consolidated condensed statements of operations. Summarized financial information for these clubs is as follows:



	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012			September 3, 2013			September 4, 2012
Revenues	$	—		$	983		$	—		$	3,561
Operating expenses, excluding loss on disposals and impairments of assets	—			(1,094		)	(9		)	(3,444		)
(Loss) gain on disposals and impairments of assets	(2		)	(11,670		)	2			(11,861		)
Interest expense	—			(22		)	—			(91		)
Loss from discontinued club operations, before taxes	(2		)	(11,803		)	(7		)	(11,835		)
Income tax (expense) benefit	(2		)	1,232			2			1,260
Net loss from discontinued clubs	$	(4	)	$	(10,571	)	$	(5	)	$	(10,575	)

12. SEGMENT INFORMATION

We currently have two reportable segments: (1) golf and country clubs and (2) business, sports and alumni clubs. These segments are managed separately and discrete financial information is reviewed regularly by the chief operating decision maker to evaluate performance and allocate resources. Our chief operating decision maker is our Chief Executive Officer.

Golf and country club 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 to members and their guests. Golf clubs provide both private and public golf play and usually offer fewer other recreational amenities. Public golf facilities are open to the public and generally provide the same services as golf clubs.

Business, sports and alumni club operations consist of business clubs, business/sports clubs, sports clubs and alumni 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. Alumni clubs provide the same amenities as business clubs while targeting alumni and staff of universities.

We also disclose other (“Other”), which consists of other business activities including ancillary revenues related to alliance arrangements, a portion of the revenue associated with upgrade offerings, reimbursements for certain costs of operations at managed clubs, corporate overhead expenses, and shared services. Other also includes corporate assets such as cash, goodwill, intangible assets, and loan origination fees.

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We evaluate segment performance and allocate resources based on Segment EBITDA. We define Segment EBITDA as net income before discontinued operations, interest and investment income, interest expense, income taxes, gain or loss on disposal, acquisition and impairment of assets, gain on extinguishment of debt and depreciation and amortization. Additionally, Segment EBITDA differs from Adjusted EBITDA which is used in calculating the Company's compliance with debt covenants. These additional items are excluded to determine Segment EBITDA:


•	translation gains and losses;


•	proceeds from business interruption insurance;


•	severance payments;


•	expenses related to accruals for unclaimed property settlements;


•	management fees and expenses paid to an affiliate of KSL;


•	acquisition costs;


•	amortization of step-up in certain equity method investments;


•	expenses related to the November 30, 2010 reorganization (“ClubCorp Formation”);


•	expenses related to adjustments in accruals for certain environmental compliance obligations incurred prior to 2011;


•	expenses related to adjustments in accruals for certain property tax increases prior to 2011;


•	expenses related to an arbitration award arising out of a dispute related to a series of agreements first entered into in 1999 related to the acquisition and development of a golf course property;


•	expenses accrued under our long-term incentive plan; and


•	certain other incidental expenses.

Segment EBITDA for all periods presented has been calculated using this definition. Segment EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on GAAP and is not necessarily a measure of our cash flows or ability to fund our cash needs. Our measurements of Segment EBITDA may not be comparable to similarly titled measures reported by other companies.

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The table below shows summarized financial information by segment for continuing operations for the twelve and thirty-six weeks ended September 3, 2013 and September 4, 2012:



	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012			September 3, 2013			September 4, 2012
Golf and Country Clubs
Revenues	$	155,847		$	143,865		$	426,217		$	404,152
Segment EBITDA	43,091			39,738			121,551			112,661

Business, Sports and Alumni Clubs
Revenues	$	36,628		$	36,420		$	116,124		$	114,428
Segment EBITDA	4,717			5,386			18,843			19,500

Other
Revenues	$	3,766		$	1,212		$	7,339		$	1,755
Segment EBITDA	(6,973		)	(6,852		)	(25,259		)	(22,694		)

Elimination of intersegment revenues	$	(1,406	)	$	(1,500	)	$	(4,166	)	$	(4,576	)

Total
Revenues	$	194,835		$	179,997		$	545,514		$	515,759
Segment EBITDA	40,835			38,272			115,135			109,467

							As of
Total Assets							September 3, 2013			December 25, 2012
Golf and Country Clubs							$	1,268,066		$	1,222,966
Business, Sports and Alumni Clubs							85,083			79,678
Other							384,322			416,952
Consolidated							$	1,737,471		$	1,719,596

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The table below provides a reconciliation of our Segment EBITDA to loss from continuing operations before income taxes for the twelve and thirty-six weeks ended September 3, 2013 and September 4, 2012:



	Twelve Weeks Ended						Thirty-Six Weeks Ended
	September 3, 2013			September 4, 2012			September 3, 2013			September 4, 2012
Total Segment EBITDA	$	40,835		$	38,272		$	115,135		$	109,467
Interest and investment income	80			29			224			86
Interest expense	(19,254		)	(19,831		)	(57,911		)	(59,510		)
Loss on disposals and impairment of assets	(2,769		)	(2,536		)	(8,281		)	(4,226		)
Depreciation and amortization	(17,030		)	(17,592		)	(49,497		)	(53,926		)
Foreign currency transaction gain (loss)	92			(47		)	(2		)	(77		)
Severance payments	(31		)	(77		)	(87		)	(261		)
Management fees and expenses paid to an affiliate of KSL	(270		)	(273		)	(804		)	(814		)
Acquisition costs	(677		)	(126		)	(879		)	(475		)
Amortization of step-up in certain equity method investments	(464		)	(464		)	(1,390		)	(1,409		)
ClubCorp Formation costs	—			(1		)	—			(51		)
Environmental compliance costs	(58		)	(27		)	(208		)	(27		)
Long term incentive plan	(656		)	(384		)	(1,383		)	(1,150		)
Other	(781		)	(210		)	(1,402		)	(492		)
Loss from continuing operations before income taxes	$	(983	)	$	(3,267	)	$	(6,485	)	$	(12,865	)

13. COMMITMENTS AND CONTINGENCIES

We routinely enter into contractual obligations to procure assets used in the day to day operations of our business. As of September 3, 2013, we had capital commitments of $13.5 million at certain of our clubs.

We currently have sales and use tax audits and federal tax audits of certain foreign subsidiaries in progress. See Note 10. We believe the potential for a liability related to the outcome of these audits may exist. However, we believe that the outcome of these audits would not materially affect our consolidated condensed financial statements.

The Company is currently undergoing an Internal Revenue Service audit of certain components of the tax return for the year ended December 28, 2010, which includes the consummation of the ClubCorp Formation. Should the estimates and judgments used in the ClubCorp Formation prove to be inaccurate, our financial results could be materially affected. See Note 10.

We are currently undergoing audits related to unclaimed property. We believe the potential for a liability related to the outcome of these audits is probable and we have estimated and recorded an immaterial amount within accrued expenses on the consolidated condensed balance sheet as of September 3, 2013.

Each of our properties is subject to real and personal property taxes. If local taxing authorities reassess the taxable value of certain properties in accordance with local and state regulations, we may be subject to additional property tax assessments, penalties and interest. At September 3, 2013, we have $2.1 million recorded in accrued taxes on the consolidated condensed balance sheet related to certain of these properties. While the outcome of such reassessments cannot be predicted with certainty, we believe that any potential liability from these matters would not materially affect our consolidated condensed financial statements.

We are subject to certain pending or threatened litigation and other claims that arise in the ordinary course of business. While the outcome of such legal proceedings and other claims cannot be predicted with certainty, after review and consultation with legal counsel, we believe that any potential liability from these matters would not materially affect our consolidated condensed financial statements.

We guarantee principal amounts on loans made by a lender to purchasers of certain real estate interests in case of default. These loans have remaining terms of approximately one to two years. The total principal amount outstanding on these

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loans as of September 3, 2013 is $0.3 million. As of September 3, 2013, we were indemnified by a third party from losses on these guarantees in the event of default. The fair value of the guarantees is immaterial.

14. FINANCIAL STATEMENTS OF GUARANTORS

In November 2010, we issued $415.0 million of senior unsecured notes. The senior unsecured notes are fully and unconditionally guaranteed on a joint and several basis by certain of our subsidiaries (“Guarantor Subsidiaries”), each of which is one hundred percent owned by ClubCorp. The senior unsecured notes are not guaranteed by other subsidiaries (“Non-Guarantor Subsidiaries”).

Set forth below is the consolidating condensed financial information presenting the results of operations and comprehensive income, financial position and cash flows of ClubCorp, the Guarantor Subsidiaries on a consolidated basis and the Non-Guarantor Subsidiaries on a consolidated basis, along with the eliminations necessary to arrive at the information for ClubCorp on a consolidated basis.

Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among ClubCorp, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. For this presentation, investments in subsidiaries are accounted for using the equity method of accounting.

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Consolidating Condensed Statements of Operations and Comprehensive Income (Loss)

For the Twelve Weeks Ended September 3, 2013

(In thousands of dollars)



	ClubCorp			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated
REVENUES:
Club operations	$	—		$	133,828		$	9,979		$	(320	)	$	143,487
Food and beverage	—			47,666			3,143			—			50,809
Other revenues	—			857			1			(319		)	539
Total revenues	—			182,351			13,123			(639		)	194,835

DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Club operating costs exclusive of depreciation	284			118,717			9,370			(639		)	127,732
Cost of food and beverage sales exclusive of depreciation	—			16,063			1,122			—			17,185
Depreciation and amortization	—			15,758			1,272			—			17,030
Provision for doubtful accounts	—			1,048			54			—			1,102
Loss on disposals of assets	—			2,619			126			—			2,745
Impairment of assets	—			24			—			—			24
Equity in earnings from unconsolidated ventures	—			(424		)	—			—			(424		)
Selling, general and administrative	—			11,250			—			—			11,250
OPERATING (LOSS) INCOME	(284		)	17,296			1,179			—			18,191

Interest and investment income	12,833			278			11			(13,042		)	80
Interest expense	(13,450		)	(16,844		)	(2,002		)	13,042			(19,254		)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(901		)	730			(812		)	—			(983		)
INCOME TAX (EXPENSE) BENEFIT	(683		)	(3,485		)	281			—			(3,887		)
LOSS FROM CONTINUING OPERATIONS	(1,584		)	(2,755		)	(531		)	—			(4,870		)
Income (loss) from discontinued clubs, net of tax	—			30			(34		)	—			(4		)
Equity in net loss of subsidiaries	(3,419		)	—			—			3,419			—
NET LOSS	(5,003		)	(2,725		)	(565		)	3,419			(4,874		)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			38			(167		)	—			(129		)
NET LOSS ATTRIBUTABLE TO CLUBCORP	$	(5,003	)	$	(2,687	)	$	(732	)	$	3,419		$	(5,003	)

NET LOSS	(5,003		)	(2,725		)	(565		)	3,419			(4,874		)
Foreign currency translation, net of tax	—			—			(1,430		)	—			(1,430		)
Equity in other comprehensive loss of subsidiaries	(1,430		)	—			—			1,430			—
OTHER COMPREHENSIVE LOSS	(1,430		)	—			(1,430		)	1,430			(1,430		)
COMPREHENSIVE LOSS	(6,433		)	(2,725		)	(1,995		)	4,849			(6,304		)
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			38			(167		)	—			(129		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP	$	(6,433	)	$	(2,687	)	$	(2,162	)	$	4,849		$	(6,433	)

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Consolidating Condensed Statements of Operations and Comprehensive Income (Loss)

For the Thirty-Six Weeks Ended September 3, 2013

(In thousands of dollars)



	ClubCorp			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated
REVENUES:
Club operations	$	—		$	364,188		$	31,665		$	(1,157	)	$	394,696
Food and beverage	—			138,912			9,703			—			148,615
Other revenues	—			3,240			1			(1,038		)	2,203
Total revenues	—			506,340			41,369			(2,195		)	545,514

DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Club operating costs exclusive of depreciation	284			329,200			27,281			(2,195		)	354,570
Cost of food and beverage sales exclusive of depreciation	—			45,822			3,357			—			49,179
Depreciation and amortization	—			45,651			3,846			—			49,497
Provision for doubtful accounts	—			1,910			94			—			2,004
Loss on disposals of assets	—			6,046			330			—			6,376
Impairment of assets	—			1,905			—			—			1,905
Equity in earnings from unconsolidated ventures	—			(966		)	—			—			(966		)
Selling, general and administrative	—			31,747			—			—			31,747
OPERATING (LOSS) INCOME	(284		)	45,025			6,461			—			51,202

Interest and investment income	38,500			816			35			(39,127		)	224
Interest expense	(41,058		)	(49,970		)	(6,010		)	39,127			(57,911		)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(2,842		)	(4,129		)	486			—			(6,485		)
INCOME TAX BENEFIT (EXPENSE)	698			(1,823		)	(335		)	—			(1,460		)
(LOSS) INCOME FROM CONTINUING OPERATIONS	(2,144		)	(5,952		)	151			—			(7,945		)
Loss from discontinued clubs, net of tax	—			(3		)	(2		)	—			(5		)
Equity in net loss of subsidiaries	(5,937		)	—			—			5,937			—
NET (LOSS) INCOME	(8,081		)	(5,955		)	149			5,937			(7,950		)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			207			(338		)	—			(131		)
NET LOSS ATTRIBUTABLE TO CLUBCORP	$	(8,081	)	$	(5,748	)	$	(189	)	$	5,937		$	(8,081	)

NET (LOSS) INCOME	(8,081		)	(5,955		)	149			5,937			(7,950		)
Foreign currency translation, net of tax	—			—			(988		)	—			(988		)
Equity in other comprehensive loss of subsidiaries	(988		)	—			—			988			—
OTHER COMPREHENSIVE LOSS	(988		)	—			(988		)	988			(988		)
COMPREHENSIVE LOSS	(9,069		)	(5,955		)	(839		)	6,925			(8,938		)
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			207			(338		)	—			(131		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP	$	(9,069	)	$	(5,748	)	$	(1,177	)	$	6,925		$	(9,069	)

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Consolidating Condensed Statements of Operations and Comprehensive Income (Loss)

For the Twelve Weeks Ended September 4, 2012

(In thousands of dollars)



	ClubCorp			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated
REVENUES:
Club operations	$	—		$	122,660		$	9,194		$	(297	)	$	131,557
Food and beverage	—			44,915			2,863			—			47,778
Other revenues	—			928			64			(330		)	662
Total revenues	—			168,503			12,121			(627		)	179,997

DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Club operating costs exclusive of depreciation	—			109,021			8,939			(627		)	117,333
Cost of food and beverage sales exclusive of depreciation	—			14,760			1,020			—			15,780
Depreciation and amortization	—			16,325			1,267			—			17,592
Provision for doubtful accounts	—			867			116			—			983
Loss on disposals of assets	—			2,425			111			—			2,536
Equity in earnings from unconsolidated ventures	—			(349		)	—			—			(349		)
Selling, general and administrative	—			9,679			—			—			9,679
OPERATING INCOME	—			15,775			668			—			16,443

Interest and investment income	12,834			236			1			(13,042		)	29
Interest expense	(14,476		)	(16,431		)	(1,966		)	13,042			(19,831		)
Other income	—			92			—			—			92
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(1,642		)	(328		)	(1,297		)	—			(3,267		)
INCOME TAX BENEFIT (EXPENSE)	5,191			(3,117		)	(473		)	—			1,601
INCOME (LOSS) FROM CONTINUING OPERATIONS	3,549			(3,445		)	(1,770		)	—			(1,666		)
Loss from discontinued clubs, net of tax	—			(1,479		)	(9,092		)	—			(10,571		)
Equity in net loss of subsidiaries	(15,801		)	—			—			15,801			—
NET LOSS	(12,252		)	(4,924		)	(10,862		)	15,801			(12,237		)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			44			(59		)	—			(15		)
NET LOSS ATTRIBUTABLE TO CLUBCORP	$	(12,252	)	$	(4,880	)	$	(10,921	)	$	15,801		$	(12,252	)

NET LOSS	(12,252		)	(4,924		)	(10,862		)	15,801			(12,237		)
Foreign currency translation, net of tax	—			—			1,582			—			1,582
Equity in other comprehensive income of subsidiaries	1,582			—			—			(1,582		)	—
OTHER COMPREHENSIVE INCOME	1,582			—			1,582			(1,582		)	1,582
COMPREHENSIVE LOSS	(10,670		)	(4,924		)	(9,280		)	14,219			(10,655		)
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			44			(59		)	—			(15		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP	$	(10,670	)	$	(4,880	)	$	(9,339	)	$	14,219		$	(10,670	)

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Consolidating Condensed Statements of Operations and Comprehensive Income (Loss)

For the Thirty-Six Weeks Ended September 4, 2012

(In thousands of dollars)



	ClubCorp			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated
REVENUES:
Club operations	$	—		$	343,681		$	29,772		$	(1,161	)	$	372,292
Food and beverage	—			132,437			8,866			—			141,303
Other revenues	—			3,075			64			(975		)	2,164
Total revenues	—			479,193			38,702			(2,136		)	515,759

DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Club operating costs exclusive of depreciation	—			311,758			25,715			(2,136		)	335,337
Cost of food and beverage sales exclusive of depreciation	—			42,916			3,036			—			45,952
Depreciation and amortization	—			50,113			3,813			—			53,926
Provision for doubtful accounts	—			2,041			175			—			2,216
Loss on disposals of assets	—			3,311			145			—			3,456
Impairment of assets	—			770			—			—			770
Equity in earnings from unconsolidated ventures	—			(959		)	—			—			(959		)
Selling, general and administrative	—			30,325			—			—			30,325
OPERATING INCOME	—			38,918			5,818			—			44,736

Interest and investment income	38,500			706			7			(39,127		)	86
Interest expense	(43,437		)	(49,544		)	(5,656		)	39,127			(59,510		)
Other income	—			1,823			—			—			1,823
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(4,937		)	(8,097		)	169			—			(12,865		)
INCOME TAX BENEFIT (EXPENSE)	4,688			(4,445		)	(292		)	—			(49		)
LOSS FROM CONTINUING OPERATIONS	(249		)	(12,542		)	(123		)	—			(12,914		)
Loss from discontinued clubs, net of tax	—			(1,481		)	(9,094		)	—			(10,575		)
Equity in net loss of subsidiaries	(23,409		)	—			—			23,409			—
NET LOSS	(23,658		)	(14,023		)	(9,217		)	23,409			(23,489		)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			108			(277		)	—			(169		)
NET LOSS ATTRIBUTABLE TO CLUBCORP	$	(23,658	)	$	(13,915	)	$	(9,494	)	$	23,409		$	(23,658	)

NET LOSS	(23,658		)	(14,023		)	(9,217		)	23,409			(23,489		)
Foreign currency translation, net of tax	—			—			1,111			—			1,111
Equity in other comprehensive income of subsidiaries	1,111			—			—			(1,111		)	—
OTHER COMPREHENSIVE INCOME	1,111			—			1,111			(1,111		)	1,111
COMPREHENSIVE LOSS	(22,547		)	(14,023		)	(8,106		)	22,298			(22,378		)
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			108			(277		)	—			(169		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP	$	(22,547	)	$	(13,915	)	$	(8,383	)	$	22,298		$	(22,547	)

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Consolidating Condensed Balance Sheet

As of September 3, 2013

(In thousands of dollars, except share and per share amounts)

ClubCorp

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Eliminations

Consolidated

ASSETS

CURRENT ASSETS:

ClubCorp Club Operations, Inc. 10-Q