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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
x        Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended March 24, 2015.
 
or
 
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 333-189912
 
ClubCorp Holdings, Inc.
(Exact name of registrant as specified in its charter)
Nevada
 
20-5818205
(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 x
 
 
 
Non-accelerated filer o
 
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 

As of April 23, 2015, the registrant had 64,734,780 shares of common stock outstanding, with a par value of $0.01.
 




TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CLUBCORP HOLDINGS, INC. 

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Twelve Weeks Ended March 24, 2015 and March 25, 2014

(In thousands, except per share amounts)
 
Twelve Weeks Ended
 
March 24, 2015
 
March 25, 2014
REVENUES:
 


 

Club operations
$
152,449


$
122,817

Food and beverage
48,749


42,306

Other revenues
874


600

Total revenues
202,072

 
165,723







DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
 


 

Club operating costs exclusive of depreciation
136,645


110,986

Cost of food and beverage sales exclusive of depreciation
17,002


14,480

Depreciation and amortization
22,813


16,446

Provision for doubtful accounts
59


(236
)
Loss on disposals of assets
3,220

 
2,069

Impairment of assets
56

 

Equity in loss (earnings) from unconsolidated ventures
32


(510
)
Selling, general and administrative
15,389


11,496

OPERATING INCOME
6,856


10,992







Interest and investment income
84


82

Interest expense
(16,131
)

(15,726
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(9,191
)

(4,652
)
INCOME TAX BENEFIT
4,916


864

LOSS FROM CONTINUING OPERATIONS
(4,275
)

(3,788
)
Loss from discontinued clubs, net of income tax benefit of $0 and $3 for the twelve weeks ended March 24, 2015 and March 25, 2014, respectively
(1
)


NET LOSS
(4,276
)

(3,788
)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
54


62

NET LOSS ATTRIBUTABLE TO CLUBCORP
$
(4,222
)

$
(3,726
)






NET LOSS
$
(4,276
)

$
(3,788
)
Foreign currency translation, net of tax
(603
)

(319
)
OTHER COMPREHENSIVE LOSS
(603
)

(319
)
COMPREHENSIVE LOSS
(4,879
)

(4,107
)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
54


62

COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP
$
(4,825
)

$
(4,045
)






WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC
64,255


63,762

WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED
64,255


63,762





EARNINGS (LOSS) PER COMMON SHARE, BASIC:



Loss from continuing operations attributable to ClubCorp
$
(0.07
)

$
(0.06
)
Loss from discontinued clubs attributable to ClubCorp
$


$

Net loss attributable to ClubCorp
$
(0.07
)

$
(0.06
)




EARNINGS (LOSS) PER COMMON SHARE, DILUTED:



Loss from continuing operations attributable to ClubCorp
$
(0.07
)

$
(0.06
)
Loss from discontinued clubs attributable to ClubCorp
$


$

Net loss attributable to ClubCorp
$
(0.07
)

$
(0.06
)
 
 
 
 
Cash distributions declared per common share
$
0.13

 
$
0.12

 
See accompanying notes to unaudited consolidated condensed financial statements

3



CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

As of March 24, 2015 and December 30, 2014

(In thousands of dollars, except share and per share amounts)
 
March 24, 2015
 
December 30, 2014
ASSETS
 

 
 

CURRENT ASSETS:
 

 
 

Cash and cash equivalents
$
72,539

 
$
75,047

Receivables, net of allowances of $5,011 and $5,424 at March 24, 2015 and December 30, 2014, respectively
69,824

 
65,337

Inventories
23,360

 
20,931

Prepaids and other assets
19,297

 
15,776

Deferred tax assets, net
27,568

 
26,574

Total current assets
212,588

 
203,665

Investments
5,653

 
5,774

Property and equipment, net (includes $9,332 and $9,422 related to VIEs at March 24, 2015 and December 30, 2014, respectively)
1,486,141

 
1,474,763

Notes receivable, net of allowances of $706 and $704 at March 24, 2015 and December 30, 2014, respectively
5,539

 
8,262

Goodwill
312,811

 
312,811

Intangibles, net
34,239

 
34,960

Other assets
27,508

 
24,836

TOTAL ASSETS
$
2,084,479

 
$
2,065,071

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

CURRENT LIABILITIES:
 

 
 

Current maturities of long-term debt
$
18,303

 
$
18,025

Membership initiation deposits - current portion
138,834

 
135,583

Accounts payable
38,979

 
31,948

Accrued expenses
43,136

 
44,424

Accrued taxes
23,176

 
21,903

Other liabilities
80,658

 
59,550

Total current liabilities
343,086

 
311,433

Long-term debt (includes $13,202 and $13,302 related to VIEs at March 24, 2015 and December 30, 2014, respectively)
971,023

 
965,187

Membership initiation deposits
204,076

 
203,062

Deferred tax liability, net
241,120

 
244,113

Other liabilities (includes $22,508 and $22,268 related to VIEs at March 24, 2015 and December 30, 2014, respectively)
117,562

 
120,417

Total liabilities
1,876,867

 
1,844,212

Commitments and contingencies (See Note 13)


 


 
 
 
 
EQUITY
 

 
 

Common stock of ClubCorp Holdings, Inc., $0.01 par value, 200,000,000 shares authorized; 64,614,355 and 64,443,332 issued and outstanding at March 24, 2015 and December 30, 2014, respectively
646

 
644

Additional paid-in capital
285,707

 
293,006

Accumulated other comprehensive loss
(4,893
)
 
(4,290
)
Retained deficit
(83,665
)
 
(79,443
)
Total stockholders’ equity
197,795

 
209,917

Noncontrolling interests in consolidated subsidiaries and variable interest entities
9,817

 
10,942

Total equity
207,612

 
220,859

TOTAL LIABILITIES AND EQUITY
$
2,084,479

 
$
2,065,071


See accompanying notes to unaudited consolidated condensed financial statements

4



CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

For the Twelve Weeks Ended March 24, 2015 and March 25, 2014

(In thousands of dollars)
 
Twelve Weeks Ended
 
March 24, 2015
 
March 25, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net loss
$
(4,276
)
 
$
(3,788
)
Adjustments to reconcile net loss to cash flows from operating activities:
 

 
 

Depreciation
22,120

 
16,338

Amortization
693

 
108

Asset impairments
56

 

Bad debt expense
63

 
(228
)
Equity in loss (earnings) from unconsolidated ventures
32

 
(510
)
Distribution from investment in unconsolidated ventures
88

 

Loss on disposals of assets
3,220

 
2,071

Debt issuance costs and amortization of term loan discount
755

 
579

Accretion of discount on member deposits
4,577

 
4,638

Amortization of above and below market rent intangibles
(85
)
 
(64
)
Equity-based compensation
1,102

 
832

Net change in deferred tax assets and liabilities
(3,987
)
 
(1,735
)
Net change in prepaid expenses and other assets
(6,087
)
 
(4,190
)
Net change in receivables and membership notes
(828
)
 
24,750

Net change in accounts payable and accrued liabilities
5,724

 
(52
)
Net change in other current liabilities
21,759

 
(9,965
)
Net change in other long-term liabilities
(4,442
)
 
676

Net cash provided by operating activities
40,484

 
29,460

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchase of property and equipment
(20,831
)
 
(12,425
)
Acquisition of clubs
(15,244
)
 
(10,903
)
Proceeds from dispositions
1,022

 
202

Net change in restricted cash and capital reserve funds
(43
)
 
(148
)
Net cash used in investing activities
(35,096
)
 
(23,274
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Repayments of long-term debt
(4,047
)
 
(3,100
)
Proceeds from revolving credit facility borrowings
6,000

 
11,200

Debt issuance and modification costs
(169
)
 

Distribution to owners
(8,385
)
 
(7,622
)
Distributions to noncontrolling interest
(1,071
)
 

Proceeds from new membership initiation deposits
92

 
164

Repayments of membership initiation deposits
(270
)
 
(530
)
Net cash (used in) provided by financing activities
(7,850
)
 
112

EFFECT OF EXCHANGE RATE CHANGES ON CASH
(46
)
 
(28
)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(2,508
)
 
6,270

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
75,047

 
53,781

CASH AND CASH EQUIVALENTS - END OF PERIOD
$
72,539

 
$
60,051

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
Cash paid for interest
$
8,162

 
$
1,028

Cash paid for income taxes
$
162

 
$
202


See accompanying notes to unaudited consolidated condensed financial statements

5



CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

For the Twelve Weeks Ended March 24, 2015 and March 25, 2014

(In thousands of dollars, except share amounts) 
 
Shares of Common Stock
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained 
Deficit
 
Noncontrolling
Interests in
Consolidated
Subsidiaries
 
Total
BALANCE - December 31, 2013
63,789,730

 
$
638

 
$
320,274

 
$
(1,070
)
 
$
(92,669
)
 
$
10,777

 
$
237,950

Issuance of shares related to equity-based compensation
427,071

 
4

 
(4
)
 

 

 

 

Distributions to owners declared

 

 
(7,726
)
 

 

 

 
(7,726
)
Equity-based compensation expense

 

 
832

 

 

 

 
832

Net loss

 

 

 

 
(3,726
)
 
(62
)
 
(3,788
)
Other comprehensive loss

 

 

 
(319
)
 

 

 
(319
)
BALANCE - March 25, 2014
64,216,801

 
$
642

 
$
313,376

 
$
(1,389
)
 
$
(96,395
)
 
$
10,715

 
$
226,949

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE - December 30, 2014
64,443,332

 
$
644

 
$
293,006

 
$
(4,290
)
 
$
(79,443
)
 
$
10,942

 
$
220,859

Issuance of shares related to equity-based compensation, net of forfeitures and shares withheld for taxes
171,023

 
2

 
(2
)
 

 

 

 

Distributions to owners declared

 

 
(8,399
)
 

 

 

 
(8,399
)
Equity-based compensation expense

 

 
1,102

 

 

 

 
1,102

Net loss

 

 

 

 
(4,222
)
 
(54
)
 
(4,276
)
Other comprehensive loss

 

 

 
(603
)
 

 

 
(603
)
Distributions to noncontrolling interest

 

 

 

 

 
(1,071
)
 
(1,071
)
BALANCE - March 24, 2015
64,614,355

 
$
646

 
$
285,707

 
$
(4,893
)
 
$
(83,665
)
 
$
9,817

 
$
207,612



See accompanying notes to unaudited consolidated condensed financial statements



6



NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 
(dollar amounts in thousands, except per share amounts or unless otherwise indicated)
 
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
 
ClubCorp Holdings, Inc. (“Holdings”) and its wholly owned subsidiaries CCA Club Operations Holdings, LLC (“Operations' Parent”) and ClubCorp Club Operations, Inc. (“Operations” and, together with Holdings and Operations' Parent, “ClubCorp”) were formed on November 10, 2010, as part of a reorganization (“ClubCorp Formation”) 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. As of March 24, 2015, the majority of Holdings' common stock was 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 30, 2014, ClubCorp USA, Inc., a wholly owned subsidiary of Holdings, completed the acquisition of 50 owned or operated private clubs through the purchase of all the equity interests in each of Sequoia Golf Holdings, LLC and Parthenon-Sequoia Ltd. (“Sequoia Golf”). We own, lease or operate through joint ventures 142 golf and country clubs and manage 12 golf and country clubs. Likewise, we own, lease or operate through a joint venture 46 business, sports and alumni clubs and manage three business, sports and alumni clubs. Our facilities are located in 26 states, the District of Columbia and two foreign countries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation—The consolidated condensed financial statements reflect the consolidated operations of ClubCorp, its wholly and majority owned subsidiaries and certain variable interest entities (“VIEs”) for which we are deemed to be the primary beneficiary. 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 (“GAAP”). All intercompany accounts have been eliminated.

The accompanying consolidated condensed financial statements have been prepared by Holdings and are unaudited. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted from the accompanying financial 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 Holdings for the year ended December 30, 2014.

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.

We 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, including Adjusted EBITDA (“Adjusted EBITDA”), a key financial measurement of segment profit and loss, is reviewed regularly by the chief operating decision maker to evaluate performance and allocate resources. See Note 12.

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 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 generally billed monthly and recognized in the period earned.
 
At a majority of our private clubs, members are expected to pay an initiation fee or deposit upon their acceptance as a member to the club. In general, initiation fees are not refundable, whereas initiation deposits 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 fees and deposits over the expected life of an active membership. 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 over the expected life of an active membership. The present

7



value of the refund obligation is recorded as a membership initiation deposit liability in the consolidated condensed balance sheets and accretes over the non-refundable 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.

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 over the expected life of an active membership.

The expected lives of active memberships are calculated annually, using historical attrition rates to determine the expected lives of active memberships. Periods in which attrition rates differ significantly from enrollment rates could have a material effect on our consolidated condensed financial statements by decreasing or increasing the expected lives of active memberships, which in turn would affect the length of time over which we recognize initiation fee and deposit revenues. During the twelve weeks ended March 24, 2015 and March 25, 2014, our estimated expected lives ranged from one to 20 years; the weighted-average expected life of a golf and country club membership was approximately seven years and the expected life of a business, sports and alumni club membership was approximately three years.

Membership initiation payments recognized within club operations revenue on the consolidated condensed statements of operations were $3.1 million and $3.0 million for the twelve weeks ended March 24, 2015 and March 25, 2014, respectively.

Foreign Currency—The functional currency of our entities located outside the United States 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, with no tax impact for all periods presented, as a component of comprehensive loss, until realized. No translation gains or losses have been reclassified into earnings for the twelve weeks ended March 24, 2015 or March 25, 2014. Realized foreign currency transaction gains and losses are reflected in the consolidated condensed statements of operations and comprehensive loss in club operating costs.

Income Taxes—We recognize the tax benefit from an uncertain tax position only if we conclude that 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 is not recognized. We use assumptions, estimates and our judgment in determining if the “more likely than not” standard has been met when developing our 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—We measure the cost of employee services rendered in exchange for equity-based compensation based upon the grant date fair market value of the respective equity-based awards. The value is recognized over the requisite service period, which is generally the vesting period. The following table shows total equity-based compensation expense included in the consolidated condensed statements of operations:
 
Twelve Weeks Ended
 
March 24, 2015
 
March 25, 2014
Club operating costs exclusive of depreciation
$
326

 
$
240

Selling, general and administrative
776

 
592

Pre-tax equity-based compensation expense
1,102

 
832

Less: benefit for income taxes
(387
)
 
(249
)
Equity-based compensation expense, net of tax
$
715

 
$
583


As of March 24, 2015, there was approximately $7.3 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, equity-based awards granted to employees, which is expected to be recognized over a weighted average period of approximately 2.0 years.

The Amended and Restated ClubCorp Holdings, Inc. 2012 Stock Award Plan (the “Stock Plan”) provides for an aggregate amount of no more than 4.0 million shares of common stock to be available for awards. The Stock Plan provides for the grant of stock options, restricted stock awards, restricted stock units, performance-based awards and other equity-based incentive awards. To date, we have granted restricted stock awards, restricted stock units (“RSUs”), and performance restricted stock units (“PSUs”) under the Stock Plan. As of March 24, 2015, approximately 2.7 million shares of common stock were available for future issuance under the Stock Plan.
On April 1, 2012, Holdings granted RSUs to certain executives under the Stock Plan. The RSUs vest based on satisfaction of both a time condition and a liquidity condition and are converted into shares of our common stock upon vesting.

8



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. On March 15, 2014, the required time period following our initial public offering (“IPO”) was satisfied and the liquidity vesting requirement was met, at which time one third of the RSUs granted were converted into 211,596 shares of our common stock. On April 1, 2014, 211,579 of the RSUs vested and were converted into shares of our common stock. The remaining 190,788 RSUs remained subject to time vesting requirements as of March 24, 2015, but vested and were converted into shares of our common stock on April 1, 2015.

On January 17, 2014, and on February 7, 2014, we granted 103,886 and 111,589 shares of restricted stock, under the Stock Plan, to certain officers and employees. Under the terms of the grants, the restrictions will be removed upon satisfaction of time vesting requirements, subject to the holder remaining employed by us.

On February 7, 2014, we granted 111,610 PSUs, under the Stock Plan, to certain officers and employees. Under the terms of the grants, the PSUs will convert into shares of our common stock upon satisfaction of (i) time vesting requirements and (ii) the applicable performance based thresholds.

On September 25, 2014, we granted a total of 14,952 shares of restricted stock to our independent directors, vesting one year from the date of grant.

On February 5, 2015, we granted 193,815 shares of restricted stock, under the Stock Plan, to certain officers and employees. Under the terms of the grants, the restrictions will be removed upon satisfaction of time vesting requirements, subject to the holder remaining employed by us. Also on February 5, 2015, we granted 138,219 PSUs, under the Stock Plan, to officers and employees. Under the terms of the grants, the PSUs will convert into shares of our common stock upon satisfaction of (i) time vesting requirements and (ii) the applicable performance based thresholds.

Prior to our IPO, unit awards were issued under a Management Profits Interest Program (“MPI”) which provided grants of time-vesting non-voting profits interests in Fillmore. In connection with the consummation of our IPO, the MPI participants surrendered all unit awards then held by them in exchange for an aggregate of 2,251,027 shares of Holdings' common stock previously held by Fillmore, all of which had vested as of March 24, 2015.

Recently Issued Accounting Pronouncements

In April 2014, the FASB issued Accounting Standards Update No. 2014-8 (“ASU 2014-8”), Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU No. 2014-8 amends guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity's financial results or a business activity classified as held for sale should be reported as discontinued operations. The amended guidance also expands the disclosure requirements for discontinued operations and adds new disclosures for individually significant dispositions that do not qualify as discontinued operations. We adopted ASU 2014-8 during the twelve weeks ended September 9, 2014. The amended guidance was adopted prospectively; thus, no changes were made to dispositions that were classified as discontinued operations prior to this adoption. During the normal course of business, we have closed certain clubs that were underperforming and terminated certain management agreements. We believe the future divestiture of an individual club will not qualify as a discontinued operation as it is unlikely to represent a strategic shift or have a major effect on our financial results. Our adoption of ASU 2014-8 did not have a material impact on our consolidated condensed financial position or results of operations. 

In May 2014, the FASB issued Accounting Standards Update No. 2014-9 (“ASU 2014-9”), Revenue from Contracts with Customers. ASU 2014-9 requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-9 is effective for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the impact that our adoption of ASU 2014-9 will have on our consolidated financial position or results of operations.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance on management's responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. ASU 2014-15 is effective for fiscal years, and interim reporting periods within those fiscal

9



years, beginning after December 15, 2016. The adoption of ASU 2014-15 is not expected to have a material impact on our consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update No. 2015-2 (“ASU 2015-2”), Consolidation (Topic 810)–Amendments to the Consolidation Analysis. ASU 2015-2 applies to entities in all industries and provides a new scope exception to registered money market funds and similar unregistered money market funds. It makes targeted amendments
to existing consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance. The targeted changes are designed to address most of the concerns of the asset management industry. However, entities across all industries will be impacted, particularly those that use limited partnerships. ASU 2015-2 is effective for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2015. We are still evaluating the impact that our adoption of ASU 2015-2 will have on our consolidated financial position or results of operations.

In April 2015, the FASB issued Accounting Standards Update No. 2015-3 (“ASU 2015-3”), Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-3 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-3 is effective for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2015. We are still evaluating the impact that our adoption of ASU 2015-3 will have on our consolidated financial statements.

3. VARIABLE INTEREST ENTITIES
 
Consolidated VIEs include three managed golf course properties and certain realty interests which we define as “Non-Core Development Entities”. 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 managed golf course property VIEs is financed through a loan payable of $0.9 million collateralized by assets of the entity totaling $4.0 million as of March 24, 2015. The other managed golf course property VIEs are financed through advances from us. Outstanding advances as of March 24, 2015 total $3.7 million compared to recorded assets of $6.3 million.

The VIE related to the Non-Core Development Entities is financed through notes which are payable through cash proceeds related to the sale of certain real estate held by the Non-Core Development Entities.
The following summarizes the carrying amount and classification of the VIEs' assets and liabilities in the consolidated condensed balance sheets as of March 24, 2015 and December 30, 2014, net of intercompany amounts:
 
 
March 24, 2015
 
December 30, 2014
Current assets
$
1,061

 
$
962

Fixed assets, net
9,332

 
9,422

Other assets
842

 
839

Total assets
$
11,235

 
$
11,223

 
 
 
 
Current liabilities
$
1,225

 
$
1,007

Long-term debt
13,202

 
13,302

Other long-term liabilities
20,878

 
20,718

Noncontrolling interest
5,816

 
5,886

Company capital
(29,886
)
 
(29,690
)
Total liabilities and equity
$
11,235

 
$
11,223

 
Recourse of creditors to these VIEs is limited to the assets of the VIE entities, which total $11.2 million and $11.2 million at March 24, 2015 and December 30, 2014, respectively.
 

10



4. INVESTMENTS
 
Equity method investments in golf and business club ventures total $1.2 million and $1.3 million at March 24, 2015 and December 30, 2014, respectively, and include one active golf club joint venture and one business club joint venture. Our share of earnings in the equity investments is included in equity in earnings (loss) from unconsolidated ventures in the consolidated condensed statements of operations.

We also have one equity method investment of 10.2% in Avendra, LLC, a purchasing cooperative of hospitality companies. The carrying value of the investment was $3.9 million and $4.0 million at March 24, 2015 and December 30, 2014, respectively. Our share of earnings in the equity investment is included in equity in earnings (loss) 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 receive net volume rebates and allowances. During the twelve weeks ended March 24, 2015 and March 25, 2014, we received no volume rebates and allowances. 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 CCI by affiliates of KSL was allocated to intangible assets of the joint venture and is being amortized over approximately 10 years beginning in 2007. The carrying value of these intangible assets was $3.6 million and $4.0 million at March 24, 2015 and December 30, 2014, respectively.
 
Our equity in net income from Avendra, LLC is shown below:
 
Twelve Weeks Ended
 
March 24, 2015
 
March 25, 2014
ClubCorp's equity in net income, excluding amortization
$
354

 
$
1,009

Amortization
(464
)
 
(464
)
ClubCorp's equity in net (loss) income
$
(110
)
 
$
545


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 March 24, 2015 and December 30, 2014:
 
 
March 24, 2015
 
December 30, 2014
 
Recorded Value
 
Fair Value
 
Recorded Value
 
Fair Value
Level 2 (1)
$
897,852

 
$
902,232

 
$
897,729

 
$
887,589

Level 3
57,149

 
47,906

 
51,534

 
41,648

Total
$
955,001

 
$
950,138

 
$
949,263

 
$
929,237

______________________

11




(1)
The recorded value for Level 2 Debt is presented net of the $3.3 million and $3.4 million discount as of March 24, 2015 and December 30, 2014, respectively, on the Secured Credit Facilities, as defined in Note 9.

All debt obligations are considered Level 3 except for the Secured Credit Facilities, as defined in Note 9, which are considered Level 2. 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.

Derivative Financial Instruments—Derivative financial instruments, which consist of interest rate cap agreements, are measured at fair value on a recurring basis. The impact of these interest rate caps is not material to our consolidated condensed financial statements.

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 March 24, 2015 and December 30, 2014.

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

Our assets and liabilities measured at fair value on a non-recurring basis include equity method investments, property and equipment, mineral rights, goodwill, trade names, liquor licenses, management contracts and other assets and liabilities recorded during business combinations. During the twelve weeks ended March 24, 2015 and March 25, 2014, there were no material impairments recorded. Assets and liabilities from business combinations were recorded on our consolidated condensed balance sheets at fair value at the date of acquisition. The key assumptions used in determining these values are considered Level 3 measurements. See Note 11.

6. PROPERTY AND EQUIPMENT
 
Property and equipment, including capital lease assets, at cost consists of the following at March 24, 2015 and December 30, 2014:

 
March 24, 2015
 
December 30, 2014
Land and non-depreciable land improvements
$
592,751

 
$
589,975

Depreciable land improvements
449,932

 
445,979

Buildings and recreational facilities
486,899

 
482,493

Machinery and equipment
231,259

 
225,103

Leasehold improvements
105,361

 
104,904

Furniture and fixtures
87,145

 
85,800

Construction in progress
14,168

 
6,284

 
1,967,515

 
1,940,538

Accumulated depreciation
(481,374
)
 
(465,775
)
Total
$
1,486,141

 
$
1,474,763


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. No impairments were recorded during the twelve weeks ended March 24, 2015 and March 25, 2014.


12



7. GOODWILL AND INTANGIBLE ASSETS
 
Intangible assets consist of the following at March 24, 2015 and December 30, 2014:
 
 
 
 
March 24, 2015
 
December 30, 2014
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
 
 
$
24,790

 


 
$
24,790

 
$
24,790

 


 
$
24,790

Liquor Licenses
 
 
2,070

 


 
2,070

 
2,042

 


 
2,042

Intangible assets with finite lives:
 
 
 

 
 

 
 

 
 

 
 

 
 

Member Relationships
2-7 years
 
2,866

 
$
(855
)
 
2,011

 
2,866

 
$
(539
)
 
2,327

Management Contracts
1-10 years
 
5,618

 
(1,102
)
 
4,516

 
5,698

 
(866
)
 
4,832

Trade names
2 years
 
1,100

 
(248
)
 
852

 
1,100

 
(131
)
 
969

Total
 
 
$
36,444

 
$
(2,205
)
 
$
34,239

 
$
36,496

 
$
(1,536
)
 
$
34,960

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
 
 
$
312,811

 
 
 
$
312,811

 
$
312,811

 
 
 
$
312,811

 
Intangible Assets—Intangible assets include trade names, liquor licenses, management contracts and member relationships. Intangible asset amortization expense was $0.7 million and $0.1 million for the twelve weeks ended March 24, 2015 and March 25, 2014, respectively. There were no material impairments recorded during the twelve weeks ended March 24, 2015 and March 25, 2014, respectively.

For each of the five years subsequent to 2014 and thereafter the amortization expense is expected to be as follows:
Year
Amount
Remainder of 2015
$
2,259

2016
1,996

2017
921

2018
758

2019
479

Thereafter
966

Total
$
7,379

    
Goodwill—The following table shows goodwill activity for our reporting units which are the same as our reportable segments. No impairments have been recorded for either reporting unit.
 
Golf & Country Clubs
 
Business, Sports & Alumni Clubs
 
Total
December 30, 2014
$
167,460

 
$
145,351

 
$
312,811

March 24, 2015
$
167,460

 
$
145,351

 
$
312,811

 

13



8. CURRENT AND LONG-TERM LIABILITIES
 
Current liabilities consist of the following at March 24, 2015 and December 30, 2014:

 
March 24, 2015
 
December 30, 2014
Accrued compensation
$
25,008

 
$
29,273

Accrued interest
9,952

 
7,428

Other accrued expenses
8,176

 
7,723

Total accrued expenses
$
43,136

 
$
44,424

 
 
 
 
Taxes payable other than federal income taxes (1)
$
23,176

 
$
21,903

Total accrued taxes
$
23,176

 
$
21,903

 
 
 
 
Advance event and other deposits
$
25,863

 
$
15,584

Unearned dues
23,146

 
12,819

Deferred membership revenues
10,951

 
10,937

Insurance reserves
8,880

 
8,464

Distributions to owners declared, but unpaid
8,425

 
8,384

Other current liabilities
3,393

 
3,362

Total other current liabilities
$
80,658

 
$
59,550

______________________

(1)
We had no federal income taxes payable as of March 24, 2015 and December 30, 2014.

Other long-term liabilities consist of the following at March 24, 2015 and December 30, 2014:

 
March 24, 2015
 
December 30, 2014
Uncertain tax positions
$
7,682

 
$
7,670

Deferred membership revenues
42,889

 
42,894

Casualty insurance loss reserves - long term portion
13,523

 
14,162

Above market lease intangibles
651

 
774

Deferred rent
28,415

 
27,838

Accrued interest on notes payable related to Non-Core Development Entities
22,419

 
22,174

Other
1,983

 
4,905

Total other long-term liabilities
$
117,562

 
$
120,417


9. DEBT AND CAPITAL LEASES

Secured Credit Facilities

Secured Credit Facilities—In 2010, Operations entered into the secured credit facilities (the “Secured Credit Facilities”). The credit agreement governing the Secured Credit Facilities was subsequently amended in 2012, 2013 and 2014. As of March 24, 2015, the Secured Credit Facilities were comprised of (i) a $901.1 million term loan facility, and (ii) a revolving credit facility with capacity of $135.0 million and $102.8 million available for borrowing, after deducting $26.2 million of standby letters of credit outstanding and $6.0 million of outstanding borrowings.
    
As of March 24, 2015, the interest rate on the term loan facility was a variable rate calculated as the higher of (i) 4.5% or (ii) an elected LIBOR plus a margin of 3.5% and the maturity date of the term loan facility is July 24, 2020.


14



All remaining revolving credit commitments under the revolving credit facility are related to a tranche which matures on September 30, 2018 and bears interest at a rate of LIBOR plus a margin of 3.0% per annum. Operations is required to pay a commitment fee on all undrawn amounts under the revolving credit facility and a fee on all outstanding letters of credit, payable quarterly in arrears.

On April 11, 2014, Operations entered into a fifth amendment to the credit agreement governing the Secured Credit Facilities to, amongst other matters, (i) provide an aggregate of $350.0 million, before a discount of $1.8 million, of additional senior secured term loans under the existing term loan facility, and (ii) amend the Senior Secured Leverage Ratio (the “Senior Secured Leverage Ratio”) as it relates to (a) payments of excess cash flow and (b) the financial covenant relating to the revolving credit commitments under the credit agreement. As long as commitments are outstanding under the revolving credit facility, we are subject to the Senior Secured Leverage Ratio which is defined as Consolidated Senior Secured Debt to Consolidated EBITDA (Adjusted EBITDA) and is calculated on a pro forma basis, giving effect to current period acquisitions as though they had been consummated on the first day of the period presented. Operations and its restricted subsidiaries are required to maintain a leverage ratio of no greater than 5.00:1.00 as of the end of each fiscal quarter. As of March 24, 2015, Operations' leverage ratio was 4.27:1.00.

On September 30, 2014, Operations entered into a sixth amendment to the credit agreement governing the Secured Credit Facilities to (i) provide an aggregate of $250.0 million, before a debt issuance discount of $1.9 million, of incremental senior secured term loans under the existing term loan facility, (ii) modify the interest rate on the term loan facility to a variable rate calculated as the higher of (a) 4.5% or (b) an elected LIBOR plus a margin of 3.5% and (iii) modify the accordion feature under the credit agreement to provide for, subject to lender participation, additional borrowings in revolving or term loan commitments, so long as the Senior Secured Leverage Ratio does not exceed 3.75:1.00.

Subsequent to the twelve weeks ended March 24, 2015, on April 7, 2015, we borrowed $41.0 million on the revolving credit facility. See Note 16.

As of April 23, 2015, the Secured Credit Facilities, were comprised of (i) a $901.1 million term loan facility, and (ii) a revolving credit facility with capacity of $135.0 million and $61.8 million available for borrowing after deducting $26.2 million of standby letters of credit outstanding and $47.0 million of outstanding borrowings.

Senior Notes

On November 30, 2010, Operations issued $415.0 million in senior unsecured notes (the “Senior Notes”), bearing interest at 10.0% and maturing December 1, 2018. On October 28, 2013, Operations repaid $145.3 million in aggregate principal of Senior Notes at a redemption price of 110.00%, plus accrued and unpaid interest thereon.

On April 11, 2014, Operations provided notice to the trustee for the Senior Notes that Operations had elected to redeem all of the remaining outstanding Senior Notes at a redemption price of 110.18%, plus accrued and unpaid interest thereon, on May 11, 2014. Operations irrevocably deposited with the trustee $309.2 million, which is the amount sufficient to fund the redemption and to satisfy and discharge Operations' obligations under the Senior Notes. The redemption premium of $27.5 million and the write-off of remaining unamortized debt issuance costs of $4.0 million was accounted for as loss on extinguishment of debt during the period incurred.
    
Mortgage Loans

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 March 24, 2015, we expect to meet the required conditions and currently intend to extend the loan with GECC to November 2017.

BancFirst—In May 2013, in connection with the acquisition of Oak Tree Country Club, we assumed a mortgage loan with BancFirst for $5.0 million with an original maturity of October 2014 and two twelve month options to extend the maturity through October 2016 upon satisfaction of certain conditions in the loan agreement. Effective October 1, 2014, we have extended the term of the loan to October 1, 2015. We expect to meet the required conditions and currently intend to extend the loan with BancFirst to October 2016.

15




Long-term borrowings and lease commitments as of March 24, 2015 and December 30, 2014, are summarized below: 
 
March 24, 2015
 
December 30, 2014
 
 
 
 
 
Carrying Value
Interest Rate
 
Carrying Value
Interest Rate
 
Interest Rate Calculation
 
Maturity
 
 
 
 
 
 
 
 
 
 
Secured Credit Facilities
 

 
 
 

 
 
 
 
 
Term Loan, gross of discount
901,106

4.50
%
 
901,106

4.50
%
 
Greater of (i) 4.5% or (ii) an elected LIBOR + 3.5%
 
2020
Revolving Credit Borrowings - ($135,000 capacity) (1)
6,000

3.25
%
 

3.26
%
 
LIBOR plus a margin of 3.0%
 
2018
Mortgage Loans
 

 
 
 

 
 
 
 
 
General Electric Capital Corporation
29,582

6.00
%
 
29,738

6.00
%
 
5.00% plus the greater of (i) three month LIBOR or (ii) 1%
 
2017
Notes payable related to certain Non-Core Development Entities
11,837

9.00
%
 
11,837

9.00
%
 
Fixed
 
(2)
Atlantic Capital Bank
3,293

4.50
%
 
3,333

4.50
%
 
Greater of (i) 3.0% + 30 day LIBOR or (ii) 4.5%
 
2015
BancFirst
4,151

4.50
%
 
4,266

4.50
%
 
Greater of (i) 4.5% or (ii) prime rate
 
2016
Other indebtedness
2,286

4.00% - 8.60%

 
2,360

4.00% - 8.60%

 
Fixed
 
Various
 
958,255

 
 
952,640

 
 
 
 
 
Capital leases
34,325

 
 
33,949

 
 
 
 
 
 
992,580

 
 
986,589

 
 
 
 
 
Less current portion
(18,303
)
 
 
(18,025
)
 
 
 
 
 
Less discount on the Secured Credit Facilities' Term Loan
(3,254
)
 
 
(3,377
)
 
 
 
 
 
Long-term debt
$
971,023

 
 
$
965,187

 
 
 
 
 
______________________

(1)
As of March 24, 2015, the revolving credit facility had capacity of $135.0 million, which was reduced by the $6.0 million outstanding balance and $26.2 million of standby letters of credit outstanding, leaving $102.8 million available for borrowing.

(2)
Notes payable and accrued interest related to certain Non-Core Development Entities are payable through the cash proceeds related to the sale of certain real estate held by these Non-Core Development Entities.


16



The amount of long-term debt maturing in each of the five years subsequent to 2014 and thereafter is as follows. This table reflects the contractual maturity dates as of March 24, 2015.
Year
Debt
 
Capital Leases
 
Total
Remainder of 2015
$
4,326

 
$
10,508

 
$
14,834

2016
4,658

 
10,700

 
15,358

2017
28,906

 
7,809

 
36,715

2018 (1)
6,338

 
4,100

 
10,438

2019
274

 
1,205

 
1,479

Thereafter
913,753

 
3

 
913,756

Total
$
958,255

 
$
34,325

 
$
992,580

______________________

(1)
As described above, subsequent to March 24, 2015, on April 7, 2015, we borrowed $41.0 million on the revolving credit facility. This amount is not included in the table above. As of April 23, 2015, the outstanding borrowings on the revolving credit facility were $47.0 million.

10. INCOME TAXES

Holdings files income tax returns in the U.S. federal jurisdiction, numerous state jurisdictions and in three foreign jurisdictions. Income taxes recorded are 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 subsidiaries of Holdings, owned through lower tier joint ventures, file separate tax returns for federal and state purposes.

Our annual 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. 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 weeks ended March 24, 2015 and March 25, 2014 was 53.5% and 18.6%, respectively. For the twelve weeks ended March 24, 2015, the effective tax rate differed from the statutory federal rate of 35.0% primarily due to state taxes and certain other permanent differences, while for the twelve weeks ended March 25, 2014, the effective tax rate differed from the statutory federal tax rate of 35.0% primarily due to state taxes, changes in uncertain tax positions and certain other permanent differences. The relative impact these items have on the effective tax rate varies based on the forecasted amount of pre-tax income or loss for the year.

As of March 24, 2015 and December 30, 2014, we have recorded $7.7 million and $7.7 million, respectively, of unrecognized tax benefits related to uncertain tax positions, including interest and penalties of $1.4 million, which are included in other liabilities in the consolidated condensed balance sheets for both periods. If we were to prevail on all uncertain tax positions, the net effect would be an income tax benefit of approximately $6.2 million, exclusive of any benefits related to interest and penalties.

During 2014, we completed an Internal Revenue Service (“IRS”) audit of certain components for the 2010 tax return, which included cancellation of indebtedness income related to the ClubCorp Formation. We are also subject to a variety of state income tax audits for years open under the statute of limitations and certain of our foreign subsidiaries are under audit in Mexico for the 2008 and 2009 tax years, as described below. No assessments have been received for our state income tax audits and no unrecognized tax benefits have been recorded related to these tax positions.

As of March 24, 2015, tax years 2010 - 2014 remain open under statute for U.S. federal and most state tax jurisdictions. In Mexico, the statute of limitations is generally five years from the date of the filing of the tax return for any particular year, including amended returns. Accordingly, in general tax years 2009 through 2014 remain open under statute; although certain prior years are also open as a result of the tax proceedings.

Certain of our Mexican subsidiaries are under audit by the Mexican taxing authorities for the 2008 and 2009 tax years. We have received two assessments, for approximately $3.0 million each, plus penalties and interest, for two of our Mexican subsidiaries under audit for the 2008 tax year. We have taken the appropriate procedural steps to vigorously contest these assessments through the appropriate Mexican administrative and judicial channels. As of March 24, 2015, we have not recorded a liability related to these uncertain tax positions as we believe it is more likely than not that we will prevail based on the merits of our positions. In 2014, we received an audit assessment for the 2009 tax year for another Mexican subsidiary, which we

17



protested with the Mexican taxing authorities through the appropriate administrative channel. We recorded a liability in 2014 related to an unrecognized tax benefit for $5.8 million, exclusive of penalties and interest. The unrecognized tax benefit has been recorded due to the technical nature of the tax filing position taken by our Mexican subsidiary and uncertainty around the ultimate outcome of this assessment, which we intend to continue to contest.

Management believes it is unlikely that our unrecognized tax benefits will significantly change within the next 12 months given the current status of the matters currently under examination by the Mexican tax authorities. However, as audit outcomes and the timing of related resolutions are subject to significant uncertainties, we will continue to evaluate the tax issues related to these assessments in future periods. In summary, we believe we are adequately reserved for our uncertain tax positions as of March 24, 2015.

11. NEW AND ACQUIRED CLUBS AND CLUB DIVESTITURES

New and Acquired Clubs

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

Rolling Green Country Club—On January 20, 2015, we purchased Rolling Green Country Club, a private golf club in Arlington Heights, Illinois, for a purchase price of $6.5 million and net cash consideration of $6.4 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:

 
January 20, 2015

Land, depreciable land improvements and property and equipment
$
6,554

Inventory
125

Other current liabilities and accrued taxes
(110
)
Long-term debt (obligation related to capital leases)
(193
)
Total
$
6,376


Ravinia Green Country Club—On January 13, 2015, we acquired Ravinia Green Country Club, a private golf club in Riverwoods, Illinois, for a purchase price and net cash consideration of $5.9 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:

 
January 13, 2015

Land, depreciable land improvements and property and equipment
$
6,034

Inventory and prepaid assets
30

Other current liabilities and accrued taxes
(186
)
Long-term debt (obligation related to capital leases)
(11
)
Total
$
5,867



18



Oro Valley Country Club—On December 4, 2014, we acquired Oro Valley Country Club, a private golf club in Oro Valley, Arizona, for a purchase price and net cash consideration of $3.1 million. We recorded the following major categories of assets and liabilities:

 
December 4, 2014

Land, depreciable land improvements and property and equipment
$
2,997

Inventory and prepaid assets
120

Intangibles, net
230

Other current liabilities and accrued taxes
(53
)
Long-term debt (obligation related to capital leases)
(225
)
Total
$
3,069


Sequoia Golf—On September 30, 2014, we completed the Sequoia Golf acquisition, which was executed through the Equity Purchase Agreement described in Note 1. On the date of acquisition, Sequoia Golf was comprised of 30 owned golf and country clubs and 20 leased or managed clubs. The total purchase price was $260.0 million, net of $5.6 million of cash acquired and after customary closing adjustments including net working capital. The acquisition was funded through net proceeds of $244.6 million, net of discount and debt issuance costs, from incremental term loan borrowings under the Secured Credit Facilities and from cash and cash equivalents. See Note 9 for further description of the incremental term loan borrowings.

The following summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

 
September 30, 2014

Receivables
$
10,204

Inventories, prepaids, notes receivable, current deferred tax assets and other assets
7,957

Land
54,990

Depreciable land improvements
88,025

Buildings and recreational facilities
46,931

Machinery and equipment and furniture and fixtures
26,954

Intangibles, net
9,756

Goodwill
54,352

Total assets acquired
299,169

Current liabilities
(22,266
)
Long-term debt (obligation related to capital leases)
(2,544
)
Long-term deferred tax liability, net
(14,263
)
Noncontrolling interests in consolidated subsidiaries
(89
)
Total liabilities and noncontrolling interests in consolidated subsidiaries
(39,162
)
Net assets acquired
$
260,007


The excess of the purchase price over the aggregate fair values of assets acquired and liabilities assumed was recorded as goodwill and allocated to the golf and country club reporting unit, which is the only reporting unit within our golf and country club segment. The goodwill recorded is primarily related to: (i) expected cost and revenue synergies from combining operations and expanding our reciprocal access programs and (ii) expected earnings growth due to increased discretionary capital spending. None of the goodwill recorded is deductible for tax purposes. The intangible assets recorded are related to member relationships and management contracts and have a weighted average amortization period of approximately 3 years. Machinery and equipment recorded above includes $4.0 million of assets which are accounted for as capital leases.

The estimated fair values of certain assets acquired and liabilities assumed, such as deferred tax liabilities and deferred tax assets, are preliminary and subject to change due to the complexity associated with estimating fair value. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.


19



Baylor Club—On April 30, 2014, we finalized the lease and management rights to the Baylor Club, an alumni club within the new Baylor University football stadium in Waco, Texas.

TPC Piper Glen—On April 29, 2014, we acquired Tournament Players Club (“TPC”) Piper Glen, a private golf club in Charlotte, North Carolina with a purchase price of $3.8 million for net cash consideration of $3.7 million. We recorded the following major categories of assets and liabilities:

 
April 29, 2014

Land, depreciable land improvements and property and equipment
$
3,833

Receivables and inventory
210

Other current liabilities and accrued taxes
(115
)
Long-term debt (obligation related to capital leases) and other liabilities
(197
)
Total
$
3,731


TPC Michigan—On April 29, 2014, we acquired TPC Michigan, a semi-private golf club in Dearborn, Michigan with a purchase price of $3.0 million for net cash consideration of $2.6 million. We recorded the following major categories of assets and liabilities:

 
April 29, 2014

Land, depreciable land improvements and property and equipment
$
3,643

Receivables, inventory and prepaid assets
235

Other current liabilities and accrued expenses
(624
)
Long-term debt (obligation related to capital leases)
(157
)
Deferred tax liability
(175
)
Membership initiation deposits
(370
)
Total
$
2,552


The Clubs of Prestonwood—On March 3, 2014, we acquired The Clubs of Prestonwood, a private golf club comprised of two properties, The Creek in Dallas, Texas and The Hills in nearby Plano, Texas, with a purchase price of $11.2 million for net cash consideration of $10.9 million. We recorded the following major categories of assets and liabilities:

 
March 3, 2014

Land, depreciable land improvements and property and equipment
$
14,742

Inventory and prepaid assets
97

Other current liabilities and accrued taxes
(362
)
Long-term debt (obligation related to capital leases)
(280
)
Deferred tax liability
(1,300
)
Membership initiation deposits and other liabilities
(1,994
)
Total
$
10,903


Club Dispositions

Clubs 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. 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. During the twelve weeks ended March 24, 2015, six management agreements were terminated, including a management agreement with Shoreby Club, a business and sports club located in Bratenahl, Ohio, a multi-course management agreement for Klein Creek Golf Club, a public golf course located in Winfield, Illinois, The Grove Country Club, a private country club located in Long Grove, Illinois, The Royal Fox Country Club and The Royal Hawk Country Club, private country clubs both located in St. Charles, Illinois, and a management agreement with Smoke Rise Country Club, a private country club located in Stone Mountain, Georgia. During the fiscal year ended December 30, 2014, five management agreements were terminated, including a management agreement with Hollytree Country Club, a private country

20



club located in Tyler, Texas, which terminated in July 2014, three management agreements acquired with the Sequoia Golf acquisition which terminated after acquisition, and a management agreement with Paragon Club of Hefei, a business club located in Hefei, China which terminated in December 2014. No gain or loss on divestiture was recorded. These divestitures did not qualify as discontinued operations.

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, including Adjusted EBITDA, our financial measure of segment profit and loss, is reviewed regularly by our chief operating decision maker to evaluate performance and allocate resources. Our chief operating decision maker is our Chief Executive Officer. We also use Adjusted EBITDA, on a consolidated basis, to assess our ability to service our debt, incur additional debt and meet our capital expenditure requirements. We believe that the presentation of Adjusted EBITDA is appropriate as it provides additional information to investors about our performance and investors and lenders have historically used EBITDA-related measures.

EBITDA is defined as net income before interest expense, income taxes, interest and investment income, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus or minus impairments, gain or loss on disposition and acquisition of assets, losses from discontinued operations, loss on extinguishment of debt, non-cash and other adjustments, equity-based compensation expense and an acquisition adjustment. The acquisition adjustment to revenues and Adjusted EBITDA within each segment represents estimated deferred revenue using current membership life estimates related to initiation payments that would have been recognized in the applicable period but for the application of purchase accounting in connection with the acquisition of CCI in 2006 by affiliates of KSL and the acquisition of Sequoia Golf on September 30, 2014. Adjusted EBITDA is based on the definition of Consolidated EBITDA as defined in the credit agreement governing the Secured Credit Facilities and may not be comparable to similarly titled measures reported by other companies. The credit agreement governing the Secured Credit Facilities contains certain financial covenants which require us to maintain specified financial ratios in reference to Adjusted EBITDA, after giving effect to the pro forma impact of acquisitions. The pro forma impact gives effect to all acquisitions in the four quarters ended March 24, 2015 as though they had been consummated on the first day of the second quarter of fiscal year 2014 and includes certain expected cost savings.

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.


21



The table below shows summarized financial information by segment for the twelve weeks ended March 24, 2015, and March 25, 2014:
 
 
Twelve Weeks Ended
 
March 24, 2015
 
March 25, 2014
Golf and Country Clubs
 

 
 

Revenues
$
158,988

 
$
127,743

Adjusted EBITDA
45,024

 
36,374

 
 
 
 
Business, Sports and Alumni Clubs
 

 
 

Revenues
$
41,047

 
$
38,406

Adjusted EBITDA
7,548

 
6,401

 
 
 
 
Other
 

 
 

Revenues
$
5,356

 
$
1,614

Adjusted EBITDA
(13,716
)
 
(10,780
)
 
 
 
 
Elimination of intersegment revenues and segment reporting adjustments
$
(3,319
)
 
$
(2,040
)
 
 
 
 
Total
 

 
 

Revenues
$
202,072

 
$
165,723

Adjusted EBITDA
38,856

 
31,995


 
As of
Total Assets
March 24, 2015
 
December 30, 2014
Golf and Country Clubs
$
1,514,307

 
$
1,483,856

Business, Sports and Alumni Clubs
90,096

 
92,525

Other
480,076

 
488,690

Consolidated
$
2,084,479

 
$
2,065,071


The following table presents revenue by product type for the twelve weeks ended March 24, 2015 and March 25, 2014:
 
March 24, 2015
 
March 25, 2014
Revenues by Type
 
 
 
Dues
$
108,004

 
$
87,496

Food and beverage
48,749

 
42,306

Golf
24,874

 
20,746

Other
20,445

 
15,175

Total
$
202,072

 
$
165,723



22



The table below provides a reconciliation of our net loss to Adjusted EBITDA for the twelve weeks ended March 24, 2015 and March 25, 2014:
 
 
March 24, 2015
 
March 25, 2014
Net loss
$
(4,276
)
 
$
(3,788
)
Interest expense
16,131

 
15,726

Income tax benefit
(4,916
)
 
(864
)
Interest and investment income
(84
)
 
(82
)
Depreciation and amortization
22,813

 
16,446

EBITDA
$
29,668

 
$
27,438

Impairments, disposition of assets and income (loss) from discontinued operations and divested clubs (1)
3,270

 
2,006

Non-cash adjustments (2)
463

 
462

Other adjustments (3)
2,511

 
196

Equity-based compensation expense (4)
1,102

 
832

Acquisition adjustment (5)
1,842

 
1,061

Adjusted EBITDA
$
38,856

 
$
31,995

______________________

(1)
Includes non-cash impairment charges related to property and equipment and intangible assets, loss on disposals of assets (including property and equipment disposed of in connection with renovations) and net loss or income from discontinued operations and divested clubs that do not qualify as discontinued operations.

(2)
Includes non-cash items related to purchase accounting associated with the acquisition of CCI in 2006 by affiliates of KSL and expense recognized for our long-term incentive plan related to fiscal years 2011 through 2013.

(3)
Represents adjustments permitted by the credit agreement governing the Secured Credit Facilities including cash distributions from equity method investments less equity in earnings recognized for said investments, income or loss attributable to non-controlling equity interests of continuing operations, franchise taxes, adjustments to accruals for unclaimed property settlements, acquisition costs, debt amendment costs, equity offering costs, other charges incurred in connection with the ClubCorp Formation and management fees, termination fee and expenses paid to an affiliate of KSL.

(4)
Includes equity-based compensation expense, calculated in accordance with GAAP, related to awards held by certain employees, executives and directors.

(5)
Represents estimated deferred revenue using current membership life estimates related to initiation payments that would have been recognized in the applicable period but for the application of purchase accounting in connection with the acquisition of CCI in 2006 and the acquisition of Sequoia Golf on September 30, 2014.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, operating income or net income (as determined in accordance with GAAP) as a measure of our operating results or net cash provided by operating activities (as determined in accordance with GAAP) as a measure of our cash flows or ability to fund our cash needs. Our measurement of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

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 March 24, 2015, we had capital commitments of $17.4 million at certain of our clubs.
 
We currently have sales and use tax audits in progress. 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.


23



Certain of our Mexican subsidiaries are under audit by the Mexican taxing authorities for the 2008 and 2009 tax years. We have received two assessments, for approximately $3.0 million each, plus penalties and interest, for two of our Mexican subsidiaries under audit for the 2008 tax year. We have taken the appropriate procedural steps to vigorously contest these assessments through the appropriate Mexican administrative and judicial channels. As of March 24, 2015, we have not recorded a liability related to these uncertain tax positions as we believe it is more likely than not that we will prevail based on the merits of our positions. In 2014, we received an audit assessment for the 2009 tax year for another Mexican subsidiary, which we protested with the Mexican taxing authorities through the appropriate administrative channel. We recorded a liability in 2014 related to an unrecognized tax benefit for $5.8 million, exclusive of penalties and interest. The unrecognized tax benefit has been recorded due to the technical nature of the tax filing position taken by our Mexican subsidiary and uncertainty around the ultimate outcome of this assessment, which we intend to continue to contest.

We are currently under audit by state income tax authorities. No assessments have been received for our state income tax audits and no unrecognized tax benefits have been recorded related to these tax positions.

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 March 24, 2015.

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 March 24, 2015, we have an immaterial amount 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.

14. EARNINGS PER SHARE
Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net (loss) income attributable to ClubCorp by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the dilutive effect of equity-based awards that may share in the earnings of ClubCorp when such shares are either issued or vesting restrictions lapse.
Presented below is basic and diluted EPS for the twelve weeks ended March 24, 2015 and March 25, 2014 (in thousands, except per share amounts):
 
Twelve Weeks Ended
 
March 24, 2015
 
March 25, 2014
 
Basic
 
Diluted
 
Basic
 
Diluted
Loss from continuing operations attributable to ClubCorp
$
(4,221
)
 
$
(4,221
)
 
$
(3,726
)
 
$
(3,726
)
Weighted-average shares outstanding
64,255

 
64,255

 
63,762

 
63,762

Effect of dilutive equity-based awards

 

 

 

Total Shares
64,255

 
64,255

 
63,762

 
63,762

Loss from continuing operations attributable to ClubCorp per share
$
(0.07
)
 
$
(0.07
)
 
$
(0.06
)
 
$
(0.06
)
For the twelve weeks ended March 24, 2015 and March 25, 2014 there are 0.2 million and 0.4 million potential common shares excluded from the calculation of diluted EPS because the effect of their inclusion would reduce our net loss per share and would be anti-dilutive. Certain of our outstanding restricted stock shares include rights to receive dividends that are subject to the risk of forfeiture if service requirements are not satisfied, thus these shares are not considered participating securities and are excluded from the basic weighted-average shares outstanding calculation. Restricted stock shares which have rights to receive dividends that are not subject to the risk of forfeiture are considered participating securities.


24



The following is a summary of dividends declared or paid during the periods presented:
Declaration Date
 
Dividend Per Share
 
Record Date
 
Total Amount
 
Payment Date
 
 
 
 
Fiscal Year 2014
 
 
 
 
 
 
December 10, 2013
 
$
0.12

 
January 3, 2014
 
$
7,654

 
January 15, 2014
March 18, 2014
 
$
0.12

 
April 3, 2014
 
$
7,725

 
April 15, 2014
 
 
 
 
 
 
 
 
 
Fiscal Year 2015
 
 
 
 
 
 
December 3, 2014
 
$
0.13

 
January 2, 2015
 
$
8,377

 
January 15, 2015
March 20, 2015
 
$
0.13

 
April 2, 2015
 
$
8,399

 
April 15, 2015

15. RELATED PARTY TRANSACTIONS

Effective October 1, 2013, we entered into a Financial Consulting Services Agreement with an affiliate of KSL, pursuant to which we are provided certain ongoing financial consulting services. No fees are payable under such agreement, however we have agreed to reimburse the affiliate of KSL for all reasonable out-of-pocket costs and expenses incurred in providing such services to us and certain of our affiliates up to $0.1 million annually. The expense associated with this agreement was not material for the twelve weeks ended March 24, 2015 and March 25, 2014.

Effective May 1, 2013, we entered into a consulting services agreement with an affiliate of KSL whereby we provide certain international golf-related consulting services in exchange for an annual fee of $0.1 million. The revenue associated with this contract was immaterial during the twelve weeks ended March 24, 2015 and March 25, 2014.
 
As of March 24, 2015, we had receivables of $0.2 million and payables of $0.7 million and as of December 30, 2014, we had receivables of $0.2 million and payables of $0.7 million, for outstanding advances from golf and business club ventures in which we have an equity method investment. We recorded $0.1 million and $0.1 million in the twelve weeks ended March 24, 2015 and March 25, 2014, respectively, in management fees from these ventures. As of March 24, 2015 and December 30, 2014, we had a receivable of $3.3 million and $2.3 million, respectively, for volume rebates from Avendra, LLC, the supplier firm in which we have an equity method investment. See Note 4.
 
We have entered into arrangements whereby members of certain resorts and clubs owned by affiliates of KSL can pay an upgrade charge to have access to our clubs and facilities. We have revenue sharing arrangements with such resorts and clubs whereby we agree to split the amount of the upgrade charges respectively with such entities. During the twelve weeks ended March 24, 2015 and March 25, 2014 the revenue associated with these arrangements was not material.

We have also entered into arrangements with affiliates of KSL, whereby we remit royalty payments we receive in connection with mineral leases at certain of our golf and country clubs. During the twelve weeks ended March 24, 2015 and March 25, 2014, royalty payments received in connection with these arrangements were not material.


25



16. SUBSEQUENT EVENTS

On March 20, 2015, our board of directors declared a cash dividend of $8.4 million, or $0.13 per share of common stock, to all common stockholders of record at the close of business on April 2, 2015. This dividend was paid on April 15, 2015.

Subsequent to the twelve weeks ended March 24, 2015, on April 7, 2015, we acquired a multi-club portfolio of six golf and country clubs for a combined purchase price of $43.8 million. Due to the timing of this acquisition, the purchase price allocation was not yet available for disclosure as of the date these financial statements were issued. This acquisition included four private clubs, one semi-private club and one public golf course, which consist of:

Golf and Country Clubs
Type of Club
Market
State
Golf
Holes
Bermuda Run Country Club
Private Country Club
Charlotte
NC
36
Brookfield Country Club
Private Country Club
Atlanta
GA
18
Firethorne Country Club
Private Country Club
Charlotte
NC
18
Temple Hills Country Club
Private Country Club
Nashville
TN
27
Ford's Colony Country Club
Semi-Private Golf Club
Richmond
VA
54
Legacy Golf Club at Lakewood Ranch
Public Golf
Bradenton
FL
18

Subsequent to the twelve weeks ended March 24, 2015, on April 7, 2015, we borrowed $41.0 million on the revolving credit facility. See Note 9.

26



ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with the consolidated condensed financial statements and related notes included in Item 1. Financial Statementsof this quarterly report and in conjunction with the audited consolidated financial statements, related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 30, 2014 contained in our annual report on Form 10-K (2014 Annual Report”).

Forward-Looking Statements

All statements (other than statements of historical facts) in this quarterly report on Form 10-Q regarding the prospects of the industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. These forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “should”, “expect”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”, “potential” or “continue” or the negatives of these terms or variations of them or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. Such statements reflect the current views of our management with respect to our operations, results of operations and future financial performance. The following factors are among those, but are not only those, that may cause actual results to differ materially from the forward-looking statements:
adverse conditions affecting the United States economy;

our ability to attract and retain club members;

changes in consumer spending patterns, particularly with respect to demand for products and services;

unusual weather patterns, extreme weather events and periodic and quasi-periodic weather patterns, such as the El Niño/La Niña Southern Oscillation;

material cash outlays required in connection with refunds or escheatment of membership initiation deposits;

impairments to the suitability of our club locations;

regional disruptions such as power failures, natural disasters or technical difficulties in any of the major areas in which we operate;

seasonality of demand for our services and facilities usage;

increases in the level of competition we face;

the loss of members of our management team or key employees;

increases in the cost of labor;

increases in other costs, including costs of goods, rent, water, utilities and taxes;

decreasing values of our investments;

illiquidity of real estate holdings;

our substantial indebtedness, which may adversely affect our financial condition and our ability to operate our business, react to changes in the economy or our industry and pay our debts, and which could divert our cash flows from operations for debt payments;

our need to generate cash to service our indebtedness;

the incurrence by us of substantially more debt, which could further exacerbate the risks associated with our substantial leverage;

27




restrictions in our debt agreements that limit our flexibility in operating our business;

our variable rate indebtedness could cause our debt service obligations to increase significantly;

timely, costly and unsuccessful development and redevelopment activities at our properties;

unsuccessful or burdensome acquisitions;

complications integrating acquired businesses and properties into our operations;

restrictions placed on our ability to limit risk due to joint ventures and collaborative arrangements;

insufficient insurance coverage and uninsured losses;

accidents or injuries which occur at our properties;

adverse judgments or settlements;

our failure to comply with regulations relating to public facilities or our failure to retain the licenses relating to our properties;

future environmental regulation, expenditures and liabilities;

changes in or failure to comply with laws and regulations relating to our business and properties;

failure in systems or infrastructure which maintain our internal and customer data, including as a result of cyber attacks;

sufficiency and performance of the technology we own or license;

write-offs of goodwill;

risks related to tax examinations by the IRS;

cancellation of indebtedness income resulting from cancellation of certain indebtedness;

the substantial ownership of our equity by the selling stockholder;

future sales of our common stock could cause the market price to decline;

certain provisions of our amended and restated articles of incorporation limit our stockholders’ ability to choose a forum for disputes with us or our directors, officers, employees or agents;

our stock price may change significantly;

our ability to declare and pay dividends;

securities analysts could publish information that negatively impacts our stock price and trading volume;

anti-takeover provisions could delay or prevent a change of control;

the actions of activist stockholders could negatively impact our business and such activism could impact the trading value and volatility of our securities;

as a “controlled company,” we rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies;


28



“emerging growth company” status as defined in the JOBS Act may impact attractiveness of our common stock to investors; and

other factors described herein and in our 2014 Annual Report filed with the Securities and Exchange Commission (“SEC”).

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this quarterly report on Form 10-Q. These forward-looking statements speak only as of the date of this quarterly report on Form 10-Q. We do not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless the securities laws require us to do so.

ClubCorp Formation

ClubCorp Holdings, Inc. (“Holdings”) and its wholly owned subsidiaries CCA Club Operations Holdings, LLC (“Operations' Parent”) and ClubCorp Club Operations, Inc. (“Operations” and, together with Holdings and Operations' Parent, “ClubCorp”) were formed on November 10, 2010, as part of a reorganization (“ClubCorp Formation”) 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.
As a result of the ClubCorp Formation in November 2010, our taxpayer status has changed due to taxable gains and certain tax attribute reductions triggered by the ClubCorp Formation that utilized our net operating loss carryforwards.

Overview
We are a leading owner-operator of private golf and country clubs and business, sports and alumni clubs in North America. As of March 24, 2015, our portfolio of 203 owned or operated clubs, with over 180,000 memberships, served over 430,000 individual members. Our operations are organized into two principal business segments: (1) golf and country clubs and (2) business, sports and alumni clubs. We own, lease or operate through joint ventures 142 golf and country clubs and manage 12 golf and country clubs. Likewise, we own, lease or operate through a joint venture 46 business, sports and alumni clubs and manage three business, sports and alumni clubs. We are the largest owner of private golf and country clubs in the United States and own the underlying real estate for 118 of our 154 golf and country clubs. Our golf and country clubs include 128 private country clubs, 16 semi-private clubs and ten public golf courses. Our business, sports and alumni clubs include 29 business clubs, 11 business and sports clubs, seven alumni clubs, and two sports clubs. Our facilities are located in 26 states, the District of Columbia and two foreign countries.

Our golf and country clubs are designed to appeal to the entire family, fostering member loyalty which we believe allows us to capture a greater share of our member households' discretionary leisure spending. Our business, sports and alumni clubs are designed to provide our members with private upscale locations where they can work, network and socialize. We offer our members privileges throughout our entire collection of clubs, and we believe that our diverse facilities, recreational offerings and social programming enhance our ability to attract and retain members across a number of demographic groups. We also have alliances with other clubs, resorts and facilities located worldwide through which our members can enjoy additional access, discounts, special offerings and privileges outside of our owned and operated clubs. Given the breadth of our products, services and amenities, we believe we offer a compelling value proposition to our members.

Factors Affecting our Business

A significant percentage of our revenue is derived from membership dues, and we believe these dues together with the geographic diversity of our clubs help to provide us with a recurring revenue base that limits the impact of fluctuations in regional economic conditions. We believe our efforts to position our clubs as focal points in communities with offerings that can appeal to the entire family has enhanced member loyalty and mitigated attrition rates in our membership base compared to the industry as a whole.
We believe the strength and size of our portfolio of clubs combined with the stability of our mass affluent membership base will enable us to maintain our position as an industry leader in the future. As the largest owner-operator of private golf and country clubs in the United States, we enjoy economies of scale and a leadership position. We expect to strategically expand and upgrade our portfolio through acquisitions and targeted capital investments. As part of our targeted capital investment program, we plan to focus on facility upgrades to improve our members' experience and the utilization of our facilities and amenities, which we believe will yield positive financial results.

29



Enrollment and Retention of Members
 
Our success depends on our ability to attract and retain members at our clubs and maintain or increase usage of our facilities. Historically, we have experienced varying levels of membership enrollment and attrition rates and, in certain areas, decreased levels of usage of our facilities. We devote substantial efforts to maintaining member and guest satisfaction, although many of the factors affecting club membership and facility usage are beyond our control.

We offer various programs at our clubs designed to minimize future attrition rates by increasing member satisfaction and usage. These include programs that are designed to engage current and newly enrolled members in activities and groups that go beyond their home club. Additionally, these programs may grant our members discounts on meals and other items in order to increase their familiarity with and usage of their club's amenities. One such program is O.N.E., an upgrade product that combines what we refer to as “comprehensive club, community and world benefits”. With this offering, members typically receive 50% off a la carte dining at their home club; preferential offerings to clubs in their community (including those owned by us), as well as at local spas, restaurants and other venues; and complimentary privileges currently to more than 300 golf and country, business, sporting and athletic clubs when traveling outside of their community with additional offerings and discounts to more than 1,000 renowned hotels, resorts, restaurants and entertainment venues. Excluding memberships acquired with the Sequoia Golf acquisition, as of March 24, 2015, approximately 47% of our memberships were enrolled in one or more of our upgrade programs, as compared to approximately 46% of memberships that were enrolled in one or more of our upgrade programs as of December 30, 2014. Including memberships acquired with the Sequoia Golf acquisition, as of March 24, 2015, approximately 44% of our memberships were enrolled in one or more of our upgrade programs, as compared to approximately 39% of memberships that were enrolled in one or more of our upgrade programs as of December 30, 2014. As of March 24, 2015, 128 of our clubs, including those acquired with the Sequoia Golf acquisition, offered O.N.E., compared to 89 as of December 30, 2014.

The following tables present our membership counts for same store and new or acquired clubs at the end of the periods indicated. References to percentage changes that are not meaningful, as new or acquired clubs include different clubs at each point in time, are denoted by “NM”.
 
 
March 24,
2015
 
December 30,
2014
 
Change
 
% Change
Golf and Country Clubs
 
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
 
85,009

 
84,884

 
125

 
0.1
 %
Managed same store clubs (1)
 
963

 
966

 
(3
)
 
(0.3
)%
New or acquired clubs, excluding managed clubs (2)
 
27,865

 
26,574

 
1,291

 
NM

Newly added managed clubs (3)
 
3,435

 
3,441

 
(6
)
 
NM

Total Golf and Country Clubs
 
117,272

 
115,865

 
1,407

 
1.2
 %
Business, Sports and Alumni Clubs
 
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
 
54,854

 
55,064

 
(210
)
 
(0.4
)%
Managed same store clubs (1)
 
6,082

 
6,236

 
(154
)
 
(2.5
)%
New or acquired clubs, excluding managed clubs (2)
 
1,873

 
1,651

 
222

 
NM

Newly added managed clubs (3)
 

 

 

 
NM

Total Business, Sports and Alumni Clubs (4)
 
62,809

 
62,951

 
(142
)
 
(0.2
)%
Total
 
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
 
139,863

 
139,948

 
(85
)
 
(0.1
)%
Managed same store clubs (1)
 
7,045

 
7,202

 
(157
)
 
(2.2
)%
New or acquired clubs, excluding managed clubs (2)
 
29,738

 
28,225

 
1,513

 
NM

Newly added managed clubs (3)
 
3,435

 
3,441

 
(6
)
 
NM

Total memberships at end of period (4)
 
180,081

 
178,816

 
1,265

 
0.7
 %
_______________________

(1)
See “Basis of Presentation—Same Store Analysis”. Membership counts exclude discontinued operations and divested clubs that do not qualify as discontinued operations.

(2)
New or acquired clubs, excluding managed clubs, include those clubs that we are operating currently which were acquired or opened in the twelve weeks ended March 24, 2015 and fiscal year 2014 consisting of: The Clubs of Prestonwood, TPC Michigan, TPC Piper Glen, Baylor Club, Oro Valley Country Club, Ravinia Green Country Club,

30



Rolling Green Country Club and 30 owned golf and country clubs, three leased golf and country clubs and one leased sports club acquired through the Sequoia Golf acquisition.

(3)
Newly added managed clubs include those clubs that we are operating currently which were added under management agreements in the twelve weeks ended March 24, 2015 and fiscal year 2014 consisting of: River Run Golf & Country Club, Sequoyah National Golf Club and eight managed golf and country clubs acquired through the Sequoia Golf acquisition.