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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 30, 2003

or

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

CLUBCORP, INC.

(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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

The aggregate market value of the Registrant’s voting stock held by non-affiliates of the Registrant as of June 17, 2003, based on the appraised price of the Registrant’s Common Stock at that date, was $55,004,998.

The number of shares of the Registrant’s Common Stock outstanding as of March 29, 2004 was 93,708,720.

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Part I

General

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 December 30, 2003, we had approximately 190,000 memberships and operated 98 country clubs, golf clubs and public golf facilities, three destination golf resorts and 69 business, sports and business/sports clubs in 29 states and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst^® Resort and Country Club in North Carolina, The Homestead^® Resort in Virginia, Barton Creek Resort and Country Club in Austin, Texas, Firestone^® Country Club in Akron, Ohio, Mission Hills^® Country Club near Palm Springs, California, and The City Club on Bunker Hill in Los Angeles. Golf Digest, Golf Travel and other golf industry publications have consistently ranked several of our 169 golf courses and destination golf resorts among the best in the U.S.

Our operations are organized into three principal business segments: country club and golf facilities, resorts, and business and sports clubs. At the beginning of fiscal year 2003, we reclassified our international properties from other operations and services to their functional segments as either country club and golf facilities or business and sports clubs. Segment results for all periods presented have been restated to reflect this reclassification, which is consistent with changes in our internal management and organizational structure. 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 herein to us shall also include Country Clubs, Inc. and its successor corporations. For purposes of this document, unless otherwise indicated, these references to us also include our various subsidiaries. However, we and each of our subsidiaries are careful to maintain separate legal existence, and general references to us should not be interpreted in any way to reduce the legal distinctions 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, which was amended and restated on January 1, 1999, to become the ClubCorp Employee Stock Ownership Plan (the Amended Plan).

Throughout Item 1 of this document, financial and property information reflect consolidated totals. Included in these figures are amounts attributable to properties held for sale that are classified as discontinued operations under accounting principles generally accepted in the United States of America. Details of these properties are available in Annex A – “List of Facilities.”

Operations

Background and Philosophy

We were founded in 1957 to develop Brookhaven Country Club in the north Dallas area. Since that time, we have expanded our operations to 170 facilities. In 1967, we established our first business club on the belief that we could profitably expand our operations by applying our club management skills and member-oriented philosophy to a related line of business. In 1984, we entered the destination resort industry when we capitalized on a turn-around opportunity by acquiring Pinehurst, and currently operate three destination resorts. We commenced international operations in 1980 and currently operate nine facilities primarily in Mexico and Australia. In directing our growth since our formation, our management has emphasized quality service and facilities, endeavoring to exceed the expectations of our members and guests.

Mr. Robert H. Dedman, Sr., our founder and former Chairman and CEO, who passed away in August 2002, established ClubCorp on the belief that private clubs represented a significant business opportunity for a company that could combine professional development and management skills with the dedication to personal service necessary to attract and retain members. This commitment to professionalism and personal service is reflected in our member-oriented philosophy: create lasting value for members, guests,

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employees and financial partners by delivering personalized service and experiences that facilitate life-enhancing relationships, achieve world class results and create pride in belonging.

Our management and employees recognize that we are in a relationship business where member and guest satisfaction is essential to long-term growth and profitability. Underlying this philosophy are progressive human resource values and goals which we believe have resulted in superior customer service. Management believes that our member-oriented philosophy and culture set us apart from many of our competitors that focus on short-term returns that may jeopardize member satisfaction and long-term profitability. We are committed to maintaining our leadership position in the golf-related and business club segments by creating an environment where members, guests and employees are treated with respect, trust and honesty. Our policy is to not restrict membership in our facilities on the basis of race, religion, gender or other immutable characteristics.

From ClubCorp’s beginning, we have focused on assembling and maintaining an experienced management team. Our nine executive officers, including the Chairman of the Board, possess a significant amount of industry experience. We have also attempted to attract and retain qualified, dedicated managers for our clubs and resorts. These managers possess an average of ten years of experience with our facilities. Senior management believes that our success depends greatly upon the motivation, training and experience of our employees. We provide an extensive, proprietary system of in-house training and education for all of our employees that is designed to improve the quality of services provided to members and guests. See—“Employees.”

Nature of Operations

We operate country club and golf facilities, business and sports clubs and resorts through sole ownership, partial ownership and management agreements. In addition, we perform various corporate services internally and for managed properties and develop and sell real estate adjacent to our facilities. See—“Other Operations and Services.” With respect to our wholly-owned operations, in some cases we own the real property where the facility is operated and in other cases we lease the real property from third parties. See Item 2 – “Properties.” Management believes that our existing club, resort and other facilities and our base of club members represent a significant value to us. For example, certain of our country clubs that were developed many years ago are now located in densely populated areas where land of sufficient size to develop a new facility would be prohibitively expensive.

The success of our business is dependent on our ability to attract new members, retain existing members and maintain or increase levels of club usage by members and guests. Although we devote significant resources to promote our facilities and services, many of the factors affecting club membership and usage are beyond our control. Local and federal government laws, including income tax regulations applicable to us and our club members and guests, can adversely influence membership activity. See—”Government Regulation and Environmental Matters.” Changes in consumer tastes and preferences, local, regional and national economic conditions, including levels of disposable income, weather and demographic trends can also have an adverse impact on club membership and usage. See Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Operating Results- Seasonality of Demand; Fluctuations in Quarterly Results.”

Country Club and Golf Facilities

Our portfolio of 98 country club and golf facilities is comprised of 90 private and semi-private country and golf clubs with approximately 79,000 memberships as of December 30, 2003, in addition to eight public golf facilities. Our country club and golf facilities are located in 19 states and two foreign countries, providing us with a geographically diverse revenue base. We have focused our operations in this segment on private and semi-private clubs because of our expertise in managing membership-based facilities, the relative competitive position of such clubs as compared to public courses and the stability of recurring membership dues as a primary revenue source.

Country Clubs. Our 73 private country clubs generally provide one or more golf courses and a number of the following: dining rooms, lounge areas, meeting rooms, grills, ballrooms, tennis courts, swimming pools and pro shops. Our private country clubs include Firestone, host of the 2002 Senior PGA Championship and the World Golf Championships-NEC Invitational for 2003 through 2005, Mission Hills, home of the LPGA’s annual Kraft-Nabisco Championship, and Indian Wells Country Club near Palm Springs, California, one of the four golf courses which hosts the Bob Hope Chrysler Classic. Our current international operations include the Jack Nicklaus Signature Course at Vista Vallarta Club de Golf in Puerto Vallarta, Mexico, site of the 2002 World Golf Championships-EMC World Cup.

Golf Clubs. Our 17 semi-private golf clubs generally offer both private and public play, a driving range and food and beverage concessions. Our semi-private golf clubs include Nags Head Golf Links in North Carolina and Golden Bear Golf Club at Indigo Run in South Carolina.

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Public Golf Facilities. Our eight public golf facilities are daily fee courses that offer a “member for the day” experience and generally provide many of the same amenities, facilities and services as our semi-private golf clubs. The refocusing of our business strategy has resulted in the divestiture of 15 public golf facilities over the last two fiscal years. Daily fee facilities include the Bear’s Best courses, which were formed through a joint venture with Jack Nicklaus’ Golden Bear Golf, Inc. Our two Bear’s Best courses in Las Vegas and Atlanta, respectively, feature replicas of some of the most famous Nicklaus-designed golf holes.

Operating revenues for our country club and golf facilities segment consist primarily of membership revenues (comprised primarily of membership dues, and to a lesser extent, recognition of deferred membership fees and deposits), golf revenues and food and beverage sales. In 2003, our country club and golf facilities segment generated operating revenues of $495.8 million (53.7% of our total revenues) and segment operating income of $39.3 million. See Note 10 to the Notes to Consolidated Financial Statements.

Resorts

Each of our three destination resorts focus on delivering quality golf resort lifestyle experiences and the following: lodging and conference facilities, dining and lounge areas, golf, tennis, recreational facilities, European style spas and other resort amenities.

Pinehurst. Acquired in 1984, Pinehurst is the largest golf resort in the world and is a National Historic Landmark. Pinehurst includes eight championship 18-hole golf courses, including the highly acclaimed Pinehurst Course No. 2 (ranked second in Golf Digest’s America’s 100 Greatest Public Courses in 2003-2004), and approximately 500 guest rooms and suites in three separate facilities, including 85 managed rooms to which we have access. In addition to a 31,000 square foot spa facility, Pinehurst also has a golf school, 24 tennis courts, two outdoor swimming pools, nine dining venues, seven retail venues and approximately 55,000 square feet of conference space, which enables the resort to accommodate large group functions. Pinehurst hosted the 1999 U.S. Open and has been awarded the right to host the U.S. Open again in 2005, the shortest interval between hosting at a single facility in the last 50 years. They have also been selected to host the 2007 U.S. Men’s Amateur Championship. In Golf Digest’s America’s Top 75 Golf Resorts (2002), Pinehurst was ranked fourth. Pinehurst also has a private country club that at December 30, 2003 had 5,381 memberships.

The Homestead. Acquired in 1993, The Homestead is a National Historic Landmark. The Homestead includes over 500 guest rooms and suites, three 18-hole championship golf courses, including the Cascades course (ranked fourth in Golf Digest’s America’s 100 Greatest Public Courses in 2003- 2004), a golf school, equestrian center, gun club, six tennis courts, an indoor and an outdoor swimming pool, nine downhill ski runs and over 72,000 square feet of conference space, including a new 20,000 square foot grand ballroom facility. The Homestead also has a nationally recognized spa and nine dining facilities. In Golf Digest’s America’s Top 75 Golf Resorts (2002), The Homestead was ranked eighth. At December 30, 2003, the Homestead had 169 memberships.

Barton Creek. Acquired in 1996, Barton Creek is a premier luxury resort in Austin, Texas. Barton Creek includes 300 guest rooms and suites, four championship 18-hole golf courses, including Fazio Canyons and Fazio Foothills, the number one and four rated public access courses in Texas by Golfweek magazine in 2003, 11 tennis courts, four dining facilities, more that 30,000 square feet of meeting space, including a ballroom, a 150 seat amphitheater, and a luxurious spa. In Golf Digest’s America’s Top 75 Golf Resorts (2002), Barton Creek was ranked 35^th. Barton Creek also includes a private golf club that at December 30, 2003 had 2,493 memberships.

Our resorts segment also includes our sports marketing division, Pinehurst Championship Management, which manages the operations of high profile golf tournaments at Pinehurst and other locations. Operating revenues for our resorts segment consist primarily of lodging revenues, food and beverage sales, golf and merchandise revenues, other amenities and recreation revenues and membership fees. In 2003, our resort segment generated operating revenues totaling $196.9 million (21.3% of our total revenues) and segment operating income of $18.9 million. See Note 10 to the Notes to Consolidated Financial Statements.

Business and Sports Clubs

Our portfolio of 69 business and sports clubs is comprised of 48 business clubs, 17 business/sports clubs and four sports clubs, with a combined total of approximately 102,000 memberships as of December 30, 2003. These facilities are located in 22 states and one foreign country. Each of our business clubs includes dining rooms, bar areas and private meeting rooms. In addition, most of our business clubs are equipped with state-of-the-art media and telecommunications equipment, providing a technologically-enabled work area. Our sports clubs provide an array of facilities which generally include racquetball and squash courts, jogging tracks, exercise areas, weight machines, aerobic studios, swimming pools and, occasionally, tennis and basketball courts. Business/sports clubs combine the ambiance and amenities of our business clubs with the facilities of our premier sports clubs. Our business and sports clubs include the City Club on Bunker Hill, The Athletic and Swim Club at Equitable Center in New York City, The Metropolitan Club in Chicago, the Citrus Club in Orlando and The Buckhead Club in Atlanta. Operating revenues for business and sports clubs segment consist primarily of monthly membership dues and food and beverage sales. In 2003, our business and sports clubs segment

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generated operating revenues of $222.4 million (24.1% of our total revenues) and segment operating income of $9.8 million. See Note 10 to the Notes to Consolidated Financial Statements.

Other Operations and Services

Real Estate Operations. We sell fractional ownership interests at selected properties through our Owners Club program and develop and sell residential real estate adjacent to our golf facilities. We implemented the Owners Club concept as a way to combine membership in our private clubs with an ownership interest in vacation homes. Members may reserve vacation time at their home club or at affiliate Owners Clubs based on availability. In addition, membership provides such amenities as golf privileges, tennis, dining, and spa facilities. Our principal Owners Club locations are The Homestead, Barton Creek, and Hilton Head in South Carolina. Given the downturn in the nation’s economy and our strategic initiative to focus on our core businesses, it is unlikely that we will significantly expand our real estate operations in the near term future.

Corporate Services. We perform a number of services on a company-wide basis, including certain centralized marketing, accounting, technology support and purchasing functions. We publish Private Clubs^®, an award winning bi-monthly magazine which showcases our member and guest facilities and strategic partner relationships through feature articles and advertising.

Expansion and Development

Since the beginning of fiscal year 1999, we have invested over $400 million to complete capital expansions at many of our facilities. Many of these expansions stem from the belief that several of our properties have excess capacity that can be used to increase long-term profitability while maintaining member satisfaction. During fiscal year 2002, we completed a number of projects, including the construction of a state-of-the-art spa at Pinehurst, a new Jack Nicklaus-designed golf course at The Hills of Lakeway in Austin, Texas, and the redesign of one of the golf courses at Firestone Country Club by renowned golf architect Tom Fazio. In addition, we have expanded many of our clubhouses, athletic and dining facilities, as well as completing our business club transformation project. As a result of these completed investments, we significantly reduced our discretionary capital expenditure levels in 2003 and focused on capital replacement expenditures that we felt were necessary to maintain the high level of quality expected by members and guests at our facilities. We intend to keep this focus for 2004 and do not anticipate significant expansion efforts until 2005 or later.

Historically, we have also expanded our operations through strategic acquisitions and development projects such that we have grown from one country club to an extensive list of 170 facilities that now include business clubs, resorts and athletic clubs both domestically and internationally. However, in the last three fiscal years we have re-oriented our strategic focus onto our core businesses and divested various non-strategic assets. Given the state of the nation’s economy and the uncertainty that it has caused for our business, our current focus is to increase our emphasis on maintaining and improving our existing core businesses for the immediate future. However, it is anticipated that beginning in 2005, the company will begin to grow and expand its business through a combination of improvements and expansions of existing facilities and acquisitions of additional properties. Unit growth is likely in 2004 by entering into management contracts or lease agreements, while in 2005 and beyond, growth could take the form of both ownership and management opportunities, principally in the golf and resort segments.

Sales and Marketing

We own and operate a diverse base of country clubs, business clubs and resorts. Based on the specific attributes of each club and its local market, we attempt to position our golf and business clubs, from the premium-end to the entry level of the specific market segments in which they compete, making the club experience available to a variety of target demographics. Our resorts are positioned as “one of a kind” properties with a broad range of activities and services.

As part of our corporate services, we develop and implement national marketing and promotional programs, control trademarks and trademark licensing agreements, engage public relations firms and advertising agencies, coordinate communications with media sources and develop collateral materials. We believe that these coordinated activities provide highly effective, complementary programs to the sales efforts at our individual clubs and resorts.

Our clubs offer integrated programs beyond the physical club. We sponsor the Associate Clubs^® Program, providing members of clubs owned, leased or managed by us with access to other clubs outside a certain radius of the member’s club. Signature Gold was added in 2001 as a new level of Associate membership, providing enhanced privileges at a select group of our properties. In 2003, we offered an enhanced Signature Gold program with expanded benefits (including food and beverage) to those members. In cities where multiple Associate Clubs are located, membership in a Society is often available. Society membership provides privileges in many

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clubs within the same metropolitan area without any radius restrictions and also provides additional benefits such as concierge services and VIP seating at local events.

We believe there are significant opportunities to increase revenues by marketing our interrelated products and services to our existing customer base. We seek to develop and accentuate the unique aspects of our resorts, like Pinehurst, and country clubs, like Firestone, in order to attract repeat customers, encourage group guests to return individually and increase rates charged for our services and amenities.

To promote our facilities, we publish Private Clubs magazine, which reaches the majority of the members at our clubs and resorts in addition to our affiliate clubs and resorts. The magazine’s focus is on golf, travel, food, wine, recreation and other aspects of the “private club experience.” Regular features include unusual destinations and travel tips, profiles of members who are business leaders, club profiles, wine reviews, recipes from club chefs, golf and tennis tips, solutions to health and fitness concerns and humor. The readership of Private Clubs was ranked number 21 in median household income among 92 publications included in the 2003 Mendelsohn Affluent Head of Household Survey, conducted annually by Mendelsohn Media Research, Inc., an independent media research firm. The magazine also has an online edition available at www.privateclubs.com.

We host a number of professional golf tournaments that not only generate additional revenue but also enhance our name recognition and that of our clubs and resorts. During 2003, our facilities hosted several nationally recognized golf tournaments affiliated with, among others, the PGA Tour, the Champions Tour, the LPGA Tour, the Nationwide Tour and the PGA of America. Some of the most notable tournaments our facilities hosted during 2003 were the Bob Hope Chrysler Classic at Indian Wells, the Kraft-Nabisco Championship at Mission Hills, the World Golf Championship-NEC Invitational at Firestone Country Club, the Kinko’s Classic of Austin at The Hills Country Club, and the Chick-fil-A Charity Championship at Eagle’s Landing Country Club. Firestone will also host the 2004 and 2005 World Golf Championships-NEC Invitational. Pinehurst has been awarded the right to host the 2005 U.S. Open, which will be held at the resort for the second time in seven years.

We believe we have established a strong rapport with numerous professional organizations including the following:

Relationships such as these have enabled us to bring distinctive tournaments and events, such as the U.S. Open and the Senior PGA Championship, as well as numerous other prestigious events, to our clubs and resorts throughout the world. We also host many United States Tennis Association and Intercollegiate Tennis Association events, including the Omni Hotels Intercollegiate Tennis Championships, along with other athletic activities such as swimming, diving, lawn bowling and croquet.

Government Regulation and Environmental Matters

We are subject to a wide range of federal, state and local environmental laws and regulations, including those governing discharges into the air and water, the storage of petroleum substances and chemicals, the handling and disposal of wastes, and the remediation of contamination arising from spills and releases. Our operations are subject to numerous other laws and regulations, including occupational health and safety, labor and alcoholic beverage control laws and laws relating to access for disabled persons. Changes to these laws or regulations could adversely affect us. We have policies in place designed to bring or keep our facilities in compliance, and audit procedures to inspect for compliance with all current federal, state and local environmental laws. We are not

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aware of and have not been informed by the Environmental Protection Agency or any state or local governmental authority of any non-compliance or violation of any environmental laws, ordinances or regulations likely to be material to us, and we believe that we are in substantial compliance with all such laws, ordinances and regulations applicable to our facilities and operations. See Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Operating Results.”

We are subject to the Fair Labor Standards Act and various federal and state laws governing such matters as minimum wage requirements, overtime and other working conditions and citizenship requirements. The salaries of certain of our personnel are based on the federal minimum wage and adopted increases in the minimum wage have historically increased our labor costs. Historically, we have tried to pass these increased labor costs to our customers through various price increases. In addition, we are subject to certain state “dram-shop” laws, which provide a person injured by an intoxicated individual the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated individual. We are also subject to the Americans with Disabilities Act of 1990, which, among other things, created federally mandated access and use requirements. We believe we are operating in substantial compliance with applicable laws and regulations governing our operations.

We have operations in a number of states that regulate the licensing of restaurants and resorts, including liquor license grants, by requiring registration, disclosure statements and compliance with specific standards of conduct. While we believe that we are, and will continue to be, in substantial compliance with these requirements, there can be no assurance that these requirements will not change or that any such change will not adversely affect us.

Competition

We operate in a highly competitive industry and our clubs and resorts compete primarily on the basis of management expertise, reputation, featured facilities, quality and breadth of services and price. With respect to our resorts, we compete on a national and international level with numerous hotel and resort companies. Competition in this part of the industry is intense and there can be no assurance that such competition will not adversely affect revenues, costs or operating income of our resorts. Our country club and golf facilities compete on a local and regional level with other country club and golf facilities and our business and sports clubs compete on a local and regional level with high-end restaurants and other clubs. The level of competition in these lines of business varies from region to region and is subject to change as existing facilities are renovated or new facilities are developed. An increase in the number or quality of similar clubs and other facilities in a particular region could significantly increase competition, which could have a material adverse effect on our results from that region. Our results of operations also could be affected by a number of additional competitive factors, including the availability of, and demand for, alternative forms of recreation.

We also compete for the operation of golf courses with national and regional golf course management companies, and, less frequently, with individuals and small ventures that typically own one or more golf courses. There are many opportunities for consolidation in the highly fragmented golf course ownership industry in the U.S. and the industry has seen a high level of consolidation in recent years. Though we are not currently focusing on the acquisition of additional facilities, we have made a significant number of acquisitions in the past and we have, and in the future we may, experience increased competition in the acquisition of premier properties. In the acquisition of golf courses, companies compete primarily on the basis of price and their reputation for operating golf courses. Many of our competitors have substantially greater capital resources than we do, sometimes providing them the ability to pay substantially more for the type of facilities consistent with those in our portfolio and strategy.

Throughout the 1990’s and in 2000, there was a substantial increase in the development of public golf facilities in the U.S. Competition in this market has intensified and the increase in availability of daily fee courses has adversely affected demand in portions of the semi-private and private club market. According to the National Golf Foundation, the growth in supply of available golf courses, fueled by the daily fee market, has outpaced growth in the number of golfers in recent years. Although new course construction declined in 2002 and 2003 due to the slowdown in the nation’s economy and the acknowledgement of overbuilding in certain markets, a resurgence in development activity and additional decreases in the average number of golfers per course could adversely affect our business and results of operations. Conversely, this period of overbuilding could eventually benefit us in the long run, as companies with less financial resources and management experience may be forced to sell their properties at discounted values.

In the operation of our facilities, we compete on the basis of our reputation to deliver value through the quality of the facility and quality of services provided to our members and guests. We believe we compete favorably with respect to these factors. Our Associate Clubs^® Program with tiered membership levels, allows members of a club in one market to utilize our clubs in different markets, thus enhancing the value of club membership. Because of our large number of facilities, members are provided access to a large number of facilities and are able to take advantage of our diverse mix and large number of clubs. We believe this program

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affords us a competitive advantage over competitors that do not maintain similar programs and over other competitors that have similar programs, but fewer facilities.

Employees

As of December 30, 2003, we employed approximately 12,000 full-time and 7,000 part-time employees in our operations. The success of our business is dependent in part on our ability to attract and retain experienced management and other employees on economic terms. We believe that our employees represent an important asset; however, we are not dependent upon any single employee, or a small group of employees, whose loss would have a material adverse effect on us. Although we believe that our labor relations are good, increased labor and benefit costs or deterioration in our labor relations could adversely affect our operating results.

Customers

We are not dependent upon a single customer, or a few customers, whose loss would have a material adverse effect on us. In addition, for the fiscal year ended December 30, 2003, there is no customer to which we had sales equal to 10% or more of our consolidated operating revenues and whose loss would have a material adverse effect on us.

Intellectual Property

We have registered various service marks, including the names CLUBCORP, CCA, CLUBRESORTS, ASSOCIATE CLUBS, PINEHURST, THE HOMESTEAD, BARTON CREEK, PRIVATE CLUBS and THE SOCIETY with the U.S. Patent and Trademark Office, and have applied with the U.S. Patent and Trademark Office for the registration of various other service marks. In addition, we have registered certain of our service marks in a number of foreign countries. We regard our service marks as valuable assets and intend to protect such service marks vigorously against infringement.

Available Information

We file annual, quarterly and special reports and other information with the Securities and Exchange Commission (the SEC). All documents may be located at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 or you may obtain information on the operation of the Public Reference Room by calling 1-800-SEC-0330. Our SEC filings are also available to the public through a link at our internet site www.clubcorp.com or at the SEC’s internet site www.sec.gov.

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We owned and/or operated 170 golf facilities, business and sports clubs and resorts as of December 30, 2003 one of which is classified as a discontinued operation as it is held for sale. The following table provides a profile of the composition of our portfolio of facilities from December 27, 2000 to December 30, 2003:

Additions, Divestitures and Reclassifications of Facilities ⁽¹⁾

We continually monitor the performance, composition and characteristics of our portfolio of facilities and actively manage our portfolio through expansions, additions (acquisitions and other investments) and dispositions. We divest a facility when it no longer has strategic value or the potential to contribute to our growth, and an appropriate opportunity for divestiture is available.

Facilities divested include expired or terminated lease arrangements or management agreements that generally have shorter terms than joint venture agreements or other forms of ownership. We generally include a termination clause in our management agreements which impose a financial penalty, paid to us by the managed owner, to discourage early termination of management agreements.

Our properties are located throughout the U.S. and primarily in Australia and Mexico internationally. In the U.S., a significant portion of our properties are located in Texas, California, Florida and the Southeastern U.S. Due to our concentration of golf facilities in these markets, our operating and financial performance is subject to the regional weather patterns and changes in economic conditions in these areas. See Item 7 – “Factors That May Affect Future Operating Results – Seasonality of Demand; Fluctuations in Quarterly Results.” For a complete list of our facilities, see Annex A – “List of Facilities.”

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We own, lease or manage the facilities in our portfolio. The following table summarizes the number and reclassifications in the type of our facilities operated for the periods indicated:

At December 30, 2003, our portfolio included 170 facilities, of which we owned 79 facilities, leased 66 facilities, partially owned and managed 15 facilities, and managed 10 facilities. Our various ownership interests in, and other relationships with, the facilities in our portfolio reflect a number of strategic and management considerations. We own the majority of our country club and golf facilities while we lease substantially all of the real property where our business and sports clubs operate. This distinction reflects the fact that a particular piece of real property such as a golf course can be essential to the operation of a golf facility and, therefore, it is generally in our interest to own or have a long-term management or lease contract for such property. A business club facility, on the other hand, generally can be located in any one of a number of locations and moved from one location to another as long as it remains convenient to its members. Therefore, we believe it is generally not necessary for us to have a long-term interest in the properties where our business and sports clubs are located.

For our leased facilities, including our corporate offices in Dallas, Texas, we generally pay a monthly base rent, as well as charges for real estate taxes, common area maintenance and various other items. In some cases, we must also pay a percentage of gross receipts or positive net cash flow. In most instances, we have full authority over the operation of the leased facilities, except in some cases where the owner remains responsible for major structural repairs or for property insurance or real estate taxes.

We are subject to certain pending or threatened litigation and other claims. After review and consultation with legal counsel, we believe that any potential liability from these matters would not materially affect our consolidated financial position and results of operations. See Note 13 of the Notes to Consolidated Financial Statements.

During the fourth quarter of fiscal year 2003, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise.

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Part II

There is currently no public market or publicly available quotations of value for our common stock. In connection with the Amended Plan, we have engaged an independent financial advisory firm, Houlihan Lokey Howard and Zukin Financial Advisors, Inc., to render a semi-annual opinion on the fair market value of our stock (at the end of our second quarter and year-end). This fair market value is based upon a multiple of our recurring cash flows from operations, with certain exceptions for specific assets, including certain long-term investments valued at the lower of cost or market. Under this arrangement, the stock valuation process is independent of our Board of Directors and management.

At our option, we have historically purchased stock from shareholders when offered for sale back to us on a limited basis. The Stockholder’s Agreement with The Cypress Group L.L.C. (see Item 7 – “Liquidity and Capital Resources - Equity”) limits our stock repurchases, without their prior authorization, to $2.5 million per year from the Dedman Stockholders (Nancy Dedman, Robert H. Dedman, Jr., Patricia Dedman Dietz, and the Dedman Foundation and related trusts), $5.0 million per year for certain charitable and non-profit organizations, and $2.5 million per year from all other shareholder groups. The Redemption Right of the Amended Plan is not limited by this agreement.

We have never paid cash dividends on our common stock and management expects to continue its policy of retaining earnings for use in our business, and accordingly, does not expect to pay cash dividends in the foreseeable future. As of March 29, 2004, there were approximately 350 holders of record of our common stock.

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Set forth below are the selected consolidated statement of operations and balance sheet data for each of the fiscal years in the five year period ended December 30, 2003 (1). The table presented below should be read in conjunction with Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 7a—“Quantitative and Qualitative Disclosures about Market Risk” and Item 8—“Financial Statements and Supplementary Data” (dollars in thousands, except membership and lodging data).

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Forward-Looking Statements

This Annual Report on Form 10-K 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 “Factors That May Affect Future Operating Results”.

The following discussion and analysis should be read in conjunction with Item 6—“Selected Financial Data,” Item 7a— “Quantitative and Qualitative Disclosures about Market Risk” as well as Item 8—“Financial Statements and Supplementary Data.”

Overview

General

We are a holding company incorporated under the laws of the State of Delaware that, through our subsidiaries, owns and operates premier golf and business clubs and destination golf resorts. Our operations are organized into three principal business segments: country club and golf facilities, resorts and business and sports clubs. At the beginning of fiscal year 2003, we reclassified our international properties from other operations and services to their functional segments as either country club and golf facilities or business and sports clubs. Segment results for all periods presented have been restated to reflect this reclassification, which is consistent with changes in our internal management and organizational structure. Other operations that are not assigned to a principal business segment include our real estate operations and our corporate services. We operate our properties through sole ownership, partial ownership (including joint venture interests), operating leases and management agreements.

Our Consolidated Financial Statements are presented on a 52/53 week fiscal year, with the first three quarters consisting of 12 weeks each and the fourth quarter consisting of 16 or 17 weeks. The financial statements included in Item 8 for the year ended December 30, 2003 are comprised of 52 weeks, with the first three quarters consisting of 12 weeks each and the fourth quarter consisting of 16 weeks.

Our revenues consist primarily of revenues derived from golf operations, food and beverage operations, lodging, membership dues and recognition of deferred membership fees and deposits. All revenue sources are recognized in the period earned, which is generally at the time of sale or when the service is provided (See “Membership Fees and Deposits” below). Operating costs and expenses consist of employee compensation, food and beverage costs and general and administrative costs. All operating costs are expensed as incurred.

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The following table presents our consolidated operating revenues attributable to each of our business segments for fiscal years 2001, 2002 and 2003 (dollars in thousands):

Critical Accounting Policies and Estimates

Our management has discussed the development and calculation of the following critical accounting policies and estimates with the audit committee of our board of directors and the audit committee has reviewed our disclosure of them in this section:

Membership Fees and Deposits. At the majority of our private clubs, members are expected to pay an advance initiation fee or deposit upon their acceptance as a member to the club. These initiation fees and deposits vary in amount based on a variety of factors such as the supply and demand for our services in each particular market, number of golf courses or breadth of amenities available to the members and the prestige of having the right to membership of the club. The majority of membership deposits sold are not refundable until a fixed number of years (generally 30) after the date of acceptance as a member, and are expected to cover our cost of providing services to the member over the course of the individual’s membership. Because of the refundable nature of our deposits and the fact that few of our clubs have membership caps, we believe that revenue related to deposits should be recognized over the average expected life of an active membership. This stance is supported by our prior correspondence with the SEC on this matter in 1998. For membership deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized as membership fees and deposits revenue on a straight-line basis over the average expected life of an active membership (currently six years for golf and resort memberships and five years for business and sports club memberships). The present value of the refund obligation is recorded as a membership deposit liability in our consolidated balance sheet and accretes over the nonrefundable term using the effective interest method with an interest rate defined as our weighted average borrowing rate adjusted to reflect a 30 year time frame. The accretion is included in interest expense. The majority of our membership fees are not refundable and are deferred and recognized over the average expected life of an active membership.

The calculation of the average expected life of an active membership is a critical estimate in the recognition of revenues and expenses associated with membership fees and deposits. Average expected life of an active membership is calculated separately for business and sports clubs and country clubs, golf and resort facilities combined by taking the inverse of the total number of members lost in a particular period divided by the total number of members at the end of the prior period. This base-level calculation is performed each fiscal year, and a 10-year rolling average of each year’s data is used to determine the final average expected life of an active membership. Periods in which attrition rates differ significantly from enrollment rates could have a material effect on our Consolidated Financial Statements by decreasing or increasing the average expected life of an active membership, which in turn would affect the length of time over which we recognize revenues and expenses associated with our membership fees and deposits. Because membership fees and deposits generally have minimal direct incremental costs associated with them, a change in our average expected life of an active membership would likely materially affect our operations and EBITDA, a non-GAAP measure that is utilized by both management and external parties to measure our financial performance. Although individual years’ calculations have generated results that deviate from the mean, since the adoption of this policy in fiscal year 1998, the average expected life of an active membership has not changed based on our 10-year rolling average.

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During 2003, we transferred the accounting of our deposits and fees from a consolidated level to the entity level. No material changes were made in the methodology of calculating the amortization; the calculation was merely transferred down to a lower subsidiary reporting level. Adjustments identified in this process were not considered material to any prior fiscal quarter or year previously reported and totaled approximately $3.5 million in expense for the current year.

For the year ended December 30, 2003, membership fees and deposits of $33.7 million for country club and golf facilities, $6.2 million for resorts and $2.5 million for business and sports clubs, offset by a charge of $2.7 million for other operations and services, respectively, were recognized as revenue in our Consolidated Statement of Operations.

Impairment of Long-Lived Assets. In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, our long-lived assets to be held and used and to be disposed of are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment charges are recorded as a component of operating income or loss in our Consolidated Statement of Operations.

For assets held for sale, fair value is determined using information on known purchase price commitments from potential buyers, less estimated incremental direct costs to sell the property in question. Changes in purchase prices due to market conditions, a potential buyer’s due diligence process or other factors beyond our control such as the emergence of unanticipated selling costs can materially affect estimates of fair value and the amount of impairment charges recorded in a particular period.

For assets to be held and used, we perform a recoverability test to determine if the future undiscounted cash flows over our expected holding period for the property exceed the carrying amount of the assets of the property in question. If the recoverability test is not met, fair value is determined by comparing the carrying value of the property to its future discounted cash flows using a risk-adjusted discount rate. Future cash flows of each property are determined using management’s projections of the performance of a given property based on its past performance and expected future performance given changes in marketplace, local operations and other factors both in our control and out of our control. Additionally, we review current property appraisals when available to assess recoverability. Actual results that differ from these estimates can generate material differences in impairment charges recorded, and ultimately, net income or loss in our Consolidated Statement of Operations and the carrying value of properties on our Consolidated Balance Sheet.

For the year ended December 30, 2003, impairment charges of $1.8 million for country club and golf facilities and $1.2 million for business and sports clubs, respectively, were recognized as a component of operating income or loss in our Consolidated Statement of Operations.

Valuation Allowance for Deferred Income Tax Assets. Our valuation allowance relates to the deferred tax assets arising from our federal income tax net operating loss carryforwards and capital loss carryforwards. Historically, our valuation allowance has been evaluated based on our projections of future taxable income and capital gains over the periods in which the net operating and capital losses will be carried forward combined with tax planning strategies. During 2003, we again recorded taxable losses. . In accordance with guidance in SFAS No. 109 and industry practice, when a pattern of taxable losses presents itself over a period of time, it is hard to overcome that pattern and argue that future years will have taxable income. In addition, changes in the tax law prohibited us from utilizing certain tax planning strategies. Therefore, in 2003, we reverted to more objective evidence in our evaluation, basing our analysis solely on carrybacks and future reversals of existing taxable temporary differences, as well as certain tax planning strategies. We recorded a charge to income of $65 million to write down the value of our NOLs to a balance of $77 million. See Note 14 to the Consolidated Financial Statements and “Factors That May Affect Future Operating Results – Income Taxes.”

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Results of Operations

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

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

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

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

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

Year Ended December 30, 2003 Compared to Year Ended December 31, 2002

Consolidated Operations – Continuing Operations

Operating revenues decreased from $936.5 million in 2002 to $911.5 million in 2003 as a result of i) divestitures, ii) continued economic uncertainty and iii) exceptionally rainy weather at several of our golf properties in the eastern United States. This decrease was comprised of operating revenue decreases of $30.0 million in our other operations and services, and $4.4 million at our business and sports clubs, offset by increases of $7.6 million at our country club and golf facilities and $1.8 million at our resorts. Included in these segment variances are divestitures of facilities that accounted for $3.7 million of the net revenue decrease mentioned above.

Loss on disposals and impairment of assets was $30.9 million in 2002 as compared to $8.8 million in 2003. In 2002, losses on the divestiture of six properties and the retirement and disposal of certain other assets resulted in net losses on disposals of $19.7 million. In 2003, we retired or disposed of properties resulting in net losses of $5.8 million. Impairment losses of $11.2 million and $3.0 million were recorded in 2002 and 2003, respectively, to write-down the carrying value of certain properties.

Excluding the impact of disposals and impairment of assets, operating income increased from $14.8 million in 2002 to $30.3 million in 2003. This increase was due to a decline in operating costs and expenses of $45.1 million, partially offset by increased depreciation and amortization of $3.5 million and the decline in revenues mentioned above. Operating costs and expenses declined as a result of expense controls in operations and cost cutting initiatives undertaken in our corporate office. Depreciation and amortization increased as a result of the completion of capital expansion and development activity at our existing properties.

Loss from continuing operations before income taxes and minority interest decreased from $76.7 million in 2002 to $51.7 million in 2003. This improvement was primarily due to the increase in operating income mentioned above and decreased loss on

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disposals and impairments of assets, offset by higher interest expense and financing costs of $74.5 million in 2003 compared to $62.5 million in 2002. The increase in interest expense was due to higher average levels of outstanding debt and a write off $10.6 million in unamortized financing costs related to our previous credit facility, partially offset by lower interest rates. See “Liquidity and Capital Resources.”

Discontinued Operations

At December 30, 2003, the operations of 36 divested properties and one property currently held for sale were included in discontinued operations. Operating revenues for these properties decreased from $55.0 million in 2002 to $12.1 million in 2003 as the majority of our divestitures are over one year old. This decrease reflects that we have substantially completed our efforts to dispose of non-strategic properties. Segment operating income (loss) before income taxes improved from a loss of $18.6 million in 2002 to an income of $6.0 million in 2003. We divested 21 properties and classified 11 more as held for sale in 2002 compared to 19 divestitures with one held for sale in 2003. In 2002, the loss on disposals and impairment of assets was $15.9 million and in 2003, the gain on disposal of assets was $7.5 million related to divested properties.

Segment and Other Information

Country Club and Golf Facilities

The following tables present certain summary financial and membership information for our country club and golf facilities segment for 2002 and 2003 (dollars in thousands):

Continuing Operations. Total operating revenues increased $5.4 million from 2002 to 2003 for same store country club and golf facilities. This increase was primarily due to increased membership dues of $2.8 million, golf operations of $1.4 million and an increase in other recreation revenue of $1.3 million. Membership dues increased as a result of price increases and a slight reversal in membership trends. Positive membership trends from third quarter have continued through year end. Golf operations increased due to increased volume in the fourth quarter of 2003. Other recreation revenue increased due to higher usage of tennis, athletics, spa and other amenities offered at our private country clubs. Total operating revenues for total country club and golf facilities had a larger increase than the same store results from 2002 to 2003 due to facilities that we developed in 2002 that are reflecting a full year of operations in 2003.

Segment operating income increased $0.9 million from 2002 to 2003 for same store country club and golf facilities as a result of increased operating revenues discussed above, offset by, increased operating costs and expenses of $2.0 million and increased depreciation and amortization of $2.5 million. Operating costs and expenses were impacted in the prior year by a litigation accrual of $3.2 million relating to an arbitration decision at one of our country clubs. Offsetting this in the current year, we increased our inter-company consulting fee after restructuring our bank debt. The increased fee resulted in approximately $6 million of additional expense that was eliminated at the corporate level. Depreciation and amortization

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increased due to expansion projects completed at our properties. Total country club and golf facilities segment operating income increased due to developing facilities.

Discontinued Operations. The operations of 25 divested country club and golf facilities are included in discontinued operations. Segment operating loss from these properties improved $1.3 million for total country club and golf facilities from 2002 to 2003 primarily as a result of the divestiture of underperforming and non-strategic properties.

Resorts

The following tables present certain summary financial data and lodging data for our resort segment for 2002 and 2003 (dollars in thousands, except facility and lodging data):

Continuing Operations. Operating revenues increased $2.0 million from 2002 to 2003 at same store resorts. This increase is primarily due to increased revenues of $3.0 million for food and beverage, $0.6 million for recognition of membership fees and deposits and $1.7 million for other recreation, offset by decreases in golf operations of $2.4 million. Food and beverage private party revenues increased primarily at Barton Creek reflecting the impact of higher occupancy rates. Recognition of membership fees increased as a result of the positive membership trends at Pinehurst. Other recreation revenue, primarily spa revenue, increased due to the opening of The Spa at Pinehurst in second quarter 2002. Golf operations revenues declined primarily due to a decrease in rounds and reduced spending by resort guests at Pinehurst. In addition, golf instruction revenues declined due to the termination of an agreement with a golf teaching center. General economic uncertainty, discounting of rates to drive occupancy and extremely poor weather conditions factored into the decrease in average daily revenue per occupied room.

Segment operating income increased from 2002 to 2003 in the amount of $2.5 million. The increase is due to increased revenue discussed above and decreased operating costs and expenses of $1.3 million, offset by increased depreciation and amortization of $0.7 million. The decrease in operating costs and expenses were the result of expense controls in operations in response to the decline in revenues, as well as overhead reductions resulting from cost cutting initiatives implemented in the second half of 2002 and into 2003. Depreciation and amortization increased due to the completion of expansion projects.

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Total resorts segment operating income decreased $2.3 million primarily due to severance for a national sales team that was eliminated and expenses related to the 2005 U.S. Open at Pinehurst.

Discontinued Operations. Discontinued operations are comprised of the management fees of one divested resort property. The management agreement for this property was terminated in 2002.

Business and Sports Clubs

The following tables present certain summary financial and membership information for our business and sports clubs segment for 2002 and 2003 (dollars in thousands,):

Continuing Operations. Operating revenues decreased $4.4 million from 2002 to 2003 at same store business and sports clubs. This decrease was primarily due to lower food and beverage sales of $2.7 million, recognition of membership fees and deposits of $1.3 million and membership dues of $0.7 million. Although membership retention levels have improved from those experienced in the last two fiscal years, we continue to experience slight attrition in member counts due to continued economic uncertainty. These trends have resulted in decreased membership dues and decreased recognition of membership fees and deposits. Food and beverage revenues decreased primarily as a result of decreases in private parties stemming from lower membership and reduced corporate spending at our clubs.

Segment operating income increased $0.3 million at same store business and sports clubs from 2002 to 2003. This increase was primarily due to decreased operating costs and expenses of $4.4 million, offset by the decrease in revenues mentioned above. Operating margins were positively impacted by improved food and beverage margins due to expense controls in purchasing and operations, in addition to a decline in rent expense. Rent expense has declined due to the renegotiation of certain of our facilities’ lease agreements with their respective landlords, in addition to a decline in contingent rent payments.

Discontinued Operations. The operations of nine divested properties and one club currently held for sale are included in discontinued operations. Segment operating loss from these properties improved $0.4 million at total business and sports clubs from 2002 to 2003.

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Other Operations and Services – Continuing Operations

Operating loss for our real estate operations improved to $1.3 million in 2003 from a loss of $5.4 million in 2002. The $4.1 million improvement is primarily due to cost cutting initiatives in the administrative and sales and marketing functions as well as other expenses of our real estate operations totaling $5.0 million.

We recognized additional employee benefit expenses of $5.9 million in 2003 to accrue for vacation earned by employees. This amount is in addition to the $1.7 million reserve established during the fourth quarter of 2002. We also recorded a charge of $1.2 million for severance related to downsizing, $1.7 million additional reserves related to health insurance and charges totaling $4.1 million related to three lawsuits to cover incurred litigation fees and settlement charges. See Note 13 in the Notes to Consolidated Financial Statements.

Year Ended December 31, 2002 Compared to Year Ended December 25, 2001

Consolidated Operations – Continuing Operations

Despite fourth quarter gains over the prior year when operations were significantly impacted by the September 11, 2001 terrorist attacks, operations declined in 2002 as a result of continued economic uncertainty. Operating revenues decreased from $943.4 million in 2001 to $936.5 million in 2002. This decrease was comprised of operating revenue decreases of $6.3 million in our country club and golf facilities and $5.9 million at our business and sports clubs, offset by increases of $3.7 million at our other operations and services and $1.6 million at our resorts. Included in these segment variances are divestitures of facilities that accounted for $21.8 million of the net revenue decrease mentioned above.

Loss on disposals and impairment of assets was $51.9 million in 2001 as compared to $30.9 million in 2002. In 2002, losses on the divestiture of six properties and the retirement and disposal of certain other assets resulted in net losses on disposals of $24.7 million. In 2001, losses on disposals were $26.0 million as a result of the disposal of equity investments in ETC, ClubLink, and Lifecast.com. In addition, the combined divestiture of 16 properties and the disposal of certain other assets during 2001 resulted in net losses on disposals of $25.9 million. Impairment losses of $6.2 million were recorded in 2002, respectively, to write-down the carrying value of certain properties.

Excluding the impact of disposals and impairment of assets, operating income decreased from $31.7 million in 2001 to $14.8 million in 2002. This decrease was due to the decline in revenues mentioned above and increased operating costs and expenses of $12.9 million, partially offset by decreased selling, general and administrative expenses of $3.7 million. Operating costs and expenses increased as a result of increases in golf operation expenses of $11.6 million and increased property taxes and insurance of $6.5 million, partially offset by decreased real estate expenses of $6.6 million. The decrease in selling, general and administrative expenses was primarily due to cost cutting initiatives undertaken in our corporate office and other administrative functions during 2002.

Loss from operations before income taxes and minority interest increased from $75.1 million in 2001 to $76.7 million in 2002. This increase was primarily due to the decrease in operating income mentioned above and higher interest expense of $4.7 million, partially offset by fewer losses on disposals and impairment of assets. The increase in interest expense was due to higher average levels of outstanding debt, partially offset by a decrease in variable interest rates throughout the year. In addition, loan fee amortization increased due to several amendments to our combined credit facility and additions to debt of approximately $55 million. See “Liquidity and Capital Resources.”

At the beginning of fiscal year 2002, we reclassified Daufuskie Island Club and Resort and its related properties, which were sold in June 2002, from our resorts segment to our country club and golf facilities segment due to the reduction in services offered at the property in anticipation of its divestiture.

Discontinued Operations

The operations of 36 divested properties and one property currently held for sale are included in discontinued operations. Operating revenues for these properties decreased from $65.5 million in 2001 to $55.0 million in 2002. Results of operations for 2002 and 2001 have been restated to properly reflect properties divested during 2003.

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Segment and Other Information

Country Club and Golf Facilities

The following tables present certain summary financial and membership information for our country club and golf facilities segment for 2001 and 2002 (dollars in thousands):