ClubCorp Holdings, Inc. - FORM 10-Q

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EX-32.1 - EXHIBIT 32.1 - ClubCorp Holdings, Inc.	cch-20150616xex3211.htm
EX-31.2 - EXHIBIT 31.2 - ClubCorp Holdings, Inc.	cch-20150616xex3121.htm
EX-31.1 - EXHIBIT 31.1 - ClubCorp Holdings, Inc.	cch-20150616xex3111.htm
XML - IDEA: XBRL DOCUMENT - ClubCorp Holdings, Inc.	R9999.htm
EX-32.2 - EXHIBIT 32.2 - ClubCorp Holdings, Inc.	cch-20150616xex3221.htm

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 June 16, 2015.

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 July 17, 2015, the registrant had 64,743,668 shares of common stock outstanding, with a par value of $0.01.

TABLE OF CONTENTS



		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Unaudited consolidated condensed statements of operations and comprehensive loss for the twelve and twenty-four weeks ended June 16, 2015 and June 17, 2014	3
	Unaudited consolidated condensed balance sheets as of June 16, 2015 and December 30, 2014	4
	Unaudited consolidated condensed statements of cash flows for the twenty-four weeks ended June 16, 2015 and June 17, 2014	5
	Unaudited consolidated condensed statements of changes in equity for the twenty-four weeks ended June 16, 2015 and June 17, 2014	6
	Notes to unaudited consolidated condensed financial statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56


	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Procedures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59

Signatures.		60

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Twelve and Twenty-Four Weeks Ended June 16, 2015 and June 17, 2014

(In thousands, except per share amounts)



	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 16, 2015			June 17, 2014			June 16, 2015			June 17, 2014
REVENUES:
Club operations	$	184,812		$	146,253		$	337,261		$	269,070
Food and beverage	77,934			64,055			126,683			106,361
Other revenues	1,001			1,110			1,875			1,710
Total revenues	263,747			211,418			465,819			377,141

DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Club operating costs exclusive of depreciation	169,587			133,444			306,232			244,430
Cost of food and beverage sales exclusive of depreciation	25,124			20,458			42,126			34,938
Depreciation and amortization	24,241			16,799			47,054			33,245
Provision for doubtful accounts	444			382			503			146
Loss on disposals of assets	6,502			2,534			9,722			4,603
Impairment of assets	1,014			895			1,070			895
Equity in loss (earnings) from unconsolidated ventures	423			(323		)	455			(833		)
Selling, general and administrative	19,232			15,688			34,621			27,184
OPERATING INCOME	17,180			21,541			24,036			32,533

Interest and investment income	1,595			87			1,679			169
Interest expense	(16,286		)	(15,572		)	(32,417		)	(31,298		)
Loss on extinguishment of debt	—			(31,498		)	—			(31,498		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	2,489			(25,442		)	(6,702		)	(30,094		)
INCOME TAX (EXPENSE) BENEFIT	(2,711		)	7,966			2,205			8,830
LOSS FROM CONTINUING OPERATIONS	(222		)	(17,476		)	(4,497		)	(21,264		)
Loss from discontinued clubs, net of income tax (expense) benefit of $0 and ($2) for the twelve weeks ended June 16, 2015 and June 17, 2014, respectively, and $1 and $1 for the twenty-four weeks ended June 16, 2015 and June 17, 2014, respectively	(1		)	(1		)	(2		)	(1		)
NET LOSS	(223		)	(17,477		)	(4,499		)	(21,265		)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	27			(136		)	81			(74		)
NET LOSS ATTRIBUTABLE TO CLUBCORP	$	(196	)	$	(17,613	)	$	(4,418	)	$	(21,339	)

NET LOSS	$	(223	)	$	(17,477	)	$	(4,499	)	$	(21,265	)
Foreign currency translation, net of tax	(664		)	466			(1,267		)	147
OTHER COMPREHENSIVE (LOSS) INCOME	(664		)	466			(1,267		)	147
COMPREHENSIVE LOSS	(887		)	(17,011		)	(5,766		)	(21,118		)
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	27			(136		)	81			(74		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO CLUBCORP	$	(860	)	$	(17,147	)	$	(5,685	)	$	(21,192	)

WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC	64,392			63,964			64,324			63,863
WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED	64,392			63,964			64,324			63,863

EARNINGS (LOSS) PER COMMON SHARE, BASIC:
Loss from continuing operations attributable to ClubCorp	$	—		$	(0.28	)	$	(0.07	)	$	(0.33	)
Loss from discontinued clubs attributable to ClubCorp	$	—		$	—		$	—		$	—
Net loss attributable to ClubCorp	$	—		$	(0.28	)	$	(0.07	)	$	(0.33	)

EARNINGS (LOSS) PER COMMON SHARE, DILUTED:
Loss from continuing operations attributable to ClubCorp	$	—		$	(0.28	)	$	(0.07	)	$	(0.33	)
Loss from discontinued clubs attributable to ClubCorp	$	—		$	—		$	—		$	—
Net loss attributable to ClubCorp	$	—		$	(0.28	)	$	(0.07	)	$	(0.33	)

Cash distributions declared per common share	$	—		$	—		$	0.13		$	0.12

See accompanying notes to unaudited consolidated condensed financial statements

CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

As of June 16, 2015 and December 30, 2014

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



	June 16, 2015			December 30, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	50,388		$	75,047
Receivables, net of allowances of $5,043 and $5,424 at June 16, 2015 and December 30, 2014, respectively	88,803			65,337
Inventories	25,431			20,931
Prepaids and other assets	20,088			15,776
Deferred tax assets, net	17,776			26,574
Total current assets	202,486			203,665
Investments	4,813			5,774
Property and equipment, net (includes $9,199 and $9,422 related to VIEs at June 16, 2015 and December 30, 2014, respectively)	1,534,891			1,474,763
Notes receivable, net of allowances of $752 and $704 at June 16, 2015 and December 30, 2014, respectively	5,869			8,262
Goodwill	312,811			312,811
Intangibles, net	33,551			34,960
Other assets	23,953			24,836
TOTAL ASSETS	$	2,118,374		$	2,065,071

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	16,446		$	18,025
Membership initiation deposits - current portion	143,678			135,583
Accounts payable	41,606			31,948
Accrued expenses	36,028			44,424
Accrued taxes	17,813			21,903
Other liabilities	81,571			59,550
Total current liabilities	337,142			311,433
Long-term debt (includes $13,137 and $13,302 related to VIEs at June 16, 2015 and December 30, 2014, respectively)	1,018,542			965,187
Membership initiation deposits	203,945			203,062
Deferred tax liability, net	231,283			244,113
Other liabilities (includes $22,750 and $22,268 related to VIEs at June 16, 2015 and December 30, 2014, respectively)	119,624			120,417
Total liabilities	1,910,536			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; 64,732,012 and 64,443,332 issued and outstanding at June 16, 2015 and December 30, 2014, respectively	647			644
Additional paid-in capital	286,819			293,006
Accumulated other comprehensive loss	(5,557		)	(4,290		)
Retained deficit	(83,861		)	(79,443		)
Total stockholders’ equity	198,048			209,917
Noncontrolling interests in consolidated subsidiaries and variable interest entities	9,790			10,942
Total equity	207,838			220,859
TOTAL LIABILITIES AND EQUITY	$	2,118,374		$	2,065,071

See accompanying notes to unaudited consolidated condensed financial statements

CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

For the Twenty-Four Weeks Ended June 16, 2015 and June 17, 2014

(In thousands of dollars)



	Twenty-Four Weeks Ended
	June 16, 2015			June 17, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,499	)	$	(21,265	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation	45,673			33,029
Amortization	1,381			216
Asset impairments	1,070			895
Bad debt expense	515			142
Equity in loss (earnings) from unconsolidated ventures	455			(833		)
Gain on investment in unconsolidated ventures	(1,475		)	—
Distribution from investment in unconsolidated ventures	1,980			1,844
Loss on disposals of assets	9,722			4,653
Debt issuance costs and amortization of term loan discount	2,657			5,189
Accretion of discount on member deposits	9,261			9,377
Amortization of above and below market rent intangibles	(169		)	(140		)
Equity-based compensation	2,215			2,088
Redemption premium payment included in loss on extinguishment of debt	—			27,452
Net change in deferred tax assets and liabilities	(4,032		)	(11,105		)
Net change in prepaid expenses and other assets	(8,305		)	(6,573		)
Net change in receivables and membership notes	(15,779		)	15,781
Net change in accounts payable and accrued liabilities	3,140			(4,600		)
Net change in other current liabilities	23,038			(7,529		)
Net change in other long-term liabilities	(4,851		)	2,260
Net cash provided by operating activities	61,997			50,881
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(50,949		)	(35,459		)
Acquisition of clubs	(55,877		)	(17,187		)
Proceeds from dispositions	576			248
Net change in restricted cash and capital reserve funds	(14		)	(337		)
Return of capital in equity investments	—			29
Net cash used in investing activities	(106,264		)	(52,706		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(7,626		)	(275,566		)
Proceeds from new debt borrowings, net of loan discount	—			348,250
Repayments of revolving credit facility borrowings	—			(11,200		)
Proceeds from revolving credit facility borrowings	47,000			11,200
Redemption premium payment	—			(27,452		)
Debt issuance and modification costs	(1,506		)	(2,638		)
Distribution to owners	(16,784		)	(15,302		)
Distributions to noncontrolling interest	(1,071		)	—
Proceeds from new membership initiation deposits	330			451
Repayments of membership initiation deposits	(638		)	(803		)
Net cash provided by financing activities	19,705			26,940
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(97		)	19
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(24,659		)	25,134
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	75,047			53,781
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	50,388		$	78,915
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	26,285		$	18,716
Cash paid for income taxes	$	4,365		$	2,650
Non-cash investing and financing activities are as follows:
Capital lease	$	12,258		$	6,782

See accompanying notes to unaudited consolidated condensed financial statements

CLUBCORP HOLDINGS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

For the Twenty-Four Weeks Ended June 16, 2015 and June 17, 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	638,650	6		(6		)	—			—			—			—
Distributions to owners declared	—	—		(7,726		)	—			—			—			(7,726		)
Equity-based compensation expense	—	—		2,088			—			—			—			2,088
Net (loss) income	—	—		—			—			(21,339		)	74			(21,265		)
Other comprehensive income	—	—		—			147			—			—			147
BALANCE - June 17, 2014	64,428,380	$	644	$	314,630		$	(923	)	$	(114,008	)	$	10,851		$	211,194

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	288,680	3		(3		)	—			—			—			—
Distributions to owners declared	—	—		(8,399		)	—			—			—			(8,399		)
Equity-based compensation expense	—	—		2,215			—			—			—			2,215
Net loss	—	—		—			—			(4,418		)	(81		)	(4,499		)
Other comprehensive loss	—	—		—			(1,267		)	—			—			(1,267		)
Distributions to noncontrolling interest	—	—		—			—			—			(1,071		)	(1,071		)
BALANCE - June 16, 2015	64,732,012	$	647	$	286,819		$	(5,557	)	$	(83,861	)	$	9,790		$	207,838

See accompanying notes to unaudited consolidated condensed financial statements

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 June 16, 2015, approximately 29% 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”.

As of June 16, 2015, we own, lease or operate through joint ventures 148 golf and country clubs and manage 11 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. 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”).

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

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 received 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 twenty-four weeks ended June 16, 2015 and June 17, 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 $3.2 million and $6.2 million for the twelve and twenty-four weeks ended June 16, 2015, respectively, and $3.0 million and $6.1 million for the twelve and twenty-four weeks ended June 17, 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 (losses) and gains of $(0.7) million and $(1.3) million for the twelve and twenty-four weeks ended June 16, 2015, and $0.5 million and $0.1 million for the twelve and twenty-four weeks ended June 17, 2014, with no tax impact for all periods presented, are reported as a component of comprehensive loss, until realized. No translation gains or losses have been reclassified into earnings for the twelve and twenty-four weeks ended June 16, 2015 or June 17, 2014. Realized foreign currency transaction gains and losses are reflected in the consolidated condensed statements of operations and comprehensive loss in club operating costs.

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						Twenty-Four Weeks Ended
	June 16, 2015			June 17, 2014			June 16, 2015			June 17, 2014
Club operating costs exclusive of depreciation	$	336		$	557		$	662		$	797
Selling, general and administrative	777			699			1,553			1,291
Pre-tax equity-based compensation expense	1,113			1,256			2,215			2,088
Less: benefit for income taxes	(423		)	(115		)	(810		)	(364		)
Equity-based compensation expense, net of tax	$	690		$	1,141		$	1,405		$	1,724

As of June 16, 2015, there was approximately $6.3 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 1.9 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 June 16, 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. 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 vested on April 1, 2015 and 122,144 RSUs were converted into shares of our common stock, while 68,644 RSUs were forfeited by employees in lieu of the payment of income tax withholding obligations.

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, which shares vest 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 respective holders 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.

Subsequent to June 16, 2015, on June 25, 2015, we granted a total of 11,656 shares of restricted stock to our independent directors, which shares vest one year from the date of grant.

Recently Issued Accounting Pronouncements

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, 2017. 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 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 $4.3 million as of June 16, 2015. The other managed golf course property VIEs are financed through advances from us. Outstanding advances as of June 16, 2015 total $3.7 million compared to recorded assets of $6.6 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. Recourse of creditors to these VIEs is limited to the assets of the VIE entities, which total $11.8 million and $11.2 million at June 16, 2015 and December 30, 2014, respectively.

The following summarizes the carrying amount and classification of the VIEs' assets and liabilities in the consolidated condensed balance sheets as of June 16, 2015 and December 30, 2014, net of intercompany amounts:



	June 16, 2015			December 30, 2014
Current assets	$	1,736		$	962
Fixed assets, net	9,199			9,422
Other assets	848			839
Total assets	$	11,783		$	11,223

Current liabilities	$	1,552		$	1,007
Long-term debt	13,137			13,302
Other long-term liabilities	23,259			20,718
Noncontrolling interest	5,783			5,886
Company capital	(31,948		)	(29,690		)
Total liabilities and equity	$	11,783		$	11,223

4. INVESTMENTS

Equity method investments in golf and business club ventures total $1.2 million and $1.3 million at June 16, 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 $3.1 million and $4.0 million at June 16, 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 received net volume rebates and allowances totaling $2.5 million during the twelve and twenty-four weeks ended June 16, 2015 and $2.0 million during the twelve and twenty-four weeks ended June 17, 2014. 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 $3.1 million and $4.0 million at June 16, 2015 and December 30, 2014, respectively.

Our equity in net income from Avendra, LLC is shown below:



	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 16, 2015			June 17, 2014			June 16, 2015			June 17, 2014
ClubCorp's equity in net income, excluding amortization	$	—		$	791		$	354		$	1,800
Amortization	(463		)	(464		)	(927		)	(927		)
ClubCorp's equity in net (loss) income	$	(463	)	$	327		$	(573	)	$	873

Additionally, we recognized $1.5 million of return on our equity investment in Avendra within interest and investment income during the twelve and twenty-four weeks ended June 16, 2015. No return on our equity investment in Avendra was recorded during the twelve and twenty-four weeks ended June 17, 2014. All cash distributions from our equity investment are reported as distribution from investment in unconsolidated ventures within the operating section of our consolidated condensed statements of cash flows.

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 June 16, 2015 and December 30, 2014:



	June 16, 2015				December 30, 2014
	Recorded Value		Fair Value		Recorded Value		Fair Value
Level 2 (1)	$	897,976	$	901,106	$	897,729	$	887,589
Level 3	97,772		88,608		51,534		41,648
Total	$	995,748	$	989,714	$	949,263	$	929,237

______________________


(1)	The recorded value for Level 2 Debt is presented net of the $3.1 million and $3.4 million discount as of June 16, 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 borrowings under 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 June 16, 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. 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.

Property and Equipment—We recognized impairment losses to property and equipment of $1.0 million during the twelve and twenty-four weeks ended June 16, 2015, to adjust the carrying amount of certain property and equipment to its fair value of $0.7 million and we recognized impairment losses of $0.9 million during the twelve and twenty-four weeks ended June 17, 2014, to adjust the carrying amount of certain property and equipment to its fair value of $0.2 million due to continued and projected negative operating results at those clubs as well as changes in the expected holding period of certain fixed assets. The valuation methods used to determine fair value included an evaluation of the sales price of comparable real estate properties (‘‘Sales comparison approach’’), an analysis of discounted future cash flows using a risk-adjusted discount rate (‘‘Income Approach’’), and consideration of historical cost adjusted for economic obsolescence (‘‘Cost Approach’’). The fair value calculations associated with these valuations are classified as Level 3 measurements. See Note 6.

6. PROPERTY AND EQUIPMENT

Property and equipment, including capital lease assets, at cost consists of the following at June 16, 2015 and December 30, 2014:



	June 16, 2015			December 30, 2014
Land and non-depreciable land improvements	$	602,379		$	589,975
Depreciable land improvements	470,133			445,979
Buildings and recreational facilities	504,091			482,493
Machinery and equipment	246,213			225,103
Leasehold improvements	107,130			104,904
Furniture and fixtures	92,107			85,800
Construction in progress	9,139			6,284
	2,031,192			1,940,538
Accumulated depreciation	(496,301		)	(465,775		)
Total	$	1,534,891		$	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. See Note 5.

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill and other intangible assets consist of the following at June 16, 2015 and December 30, 2014:



		June 16, 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		$	(1,171	)	1,695		2,866		$	(539	)	2,327
Management Contracts	1-10 years	5,618		(1,358		)	4,260		5,698		(866		)	4,832
Trade names	2 years	1,100		(364		)	736		1,100		(131		)	969
Total		$	36,444	$	(2,893	)	$	33,551	$	36,496	$	(1,536	)	$	34,960

Goodwill		$	312,811				$	312,811	$	312,811				$	312,811

Intangible Assets—Intangible asset amortization expense was $0.7 million and $1.4 million for the twelve and twenty-four weeks ended June 16, 2015, respectively, and $0.1 million and $0.2 million for the twelve and twenty-four weeks ended June 17, 2014, respectively. There were no material impairments recorded during the twelve and twenty-four weeks ended June 16, 2015 and June 17, 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	$	1,571
2016	1,996
2017	921
2018	758
2019	479
Thereafter	966
Total	$	6,691

Goodwill—The following table shows goodwill activity for each of 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
June 16, 2015	$	167,460	$	145,351	$	312,811

8. CURRENT AND LONG-TERM LIABILITIES

Current liabilities consist of the following at June 16, 2015 and December 30, 2014:



	June 16, 2015		December 30, 2014
Accrued compensation	$	25,771	$	29,273
Accrued interest	2,558		7,428
Other accrued expenses	7,699		7,723
Total accrued expenses	$	36,028	$	44,424

Taxes payable other than federal income taxes (1)	$	17,813	$	21,903
Total accrued taxes	$	17,813	$	21,903

Advance event and other deposits	$	29,846	$	15,584
Unearned dues	27,871		12,819
Deferred membership revenues	11,675		10,937
Insurance reserves	8,752		8,464
Distributions to owners declared, but unpaid	27		8,384
Other current liabilities	3,400		3,362
Total other current liabilities	$	81,571	$	59,550

______________________


(1)	We had no federal income taxes payable as of June 16, 2015 and December 30, 2014.

Other long-term liabilities consist of the following at June 16, 2015 and December 30, 2014:



	June 16, 2015		December 30, 2014
Uncertain tax positions	$	8,130	$	7,670
Deferred membership revenues	44,688		42,894
Casualty insurance loss reserves - long term portion	12,700		14,162
Above market lease intangibles	528		774
Deferred rent	29,034		27,838
Accrued interest on notes payable related to Non-Core Development Entities	22,664		22,174
Other	1,880		4,905
Total other long-term liabilities	$	119,624	$	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, 2014 and 2015. As of June 16, 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 $57.8 million available for borrowing, after deducting $30.2 million of standby letters of credit outstanding and $47.0 million of outstanding borrowings.

As of June 16, 2015, the interest rate on the term loan facility is a variable rate calculated as the higher of (i) 4.25% or (ii) an elected LIBOR plus a margin of 3.25% and the maturity date of the term loan facility is July 24, 2020. Operations and its restricted subsidiaries are required to maintain a senior secured leverage ratio (the “Senior Secured Leverage Ratio”) of no greater than 5.00:1.00 as of the end of each fiscal quarter. As of June 16, 2015, Operations' Senior Secured Leverage Ratio was 4.43:1.00.

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.

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.

On May 28, 2015, Operations entered into a seventh amendment to the credit agreement governing the Secured Credit Facilities, which reduced the interest rate on the term loan facility to the higher of (a) 4.25% or (b) an elected LIBOR plus a margin of 3.25%. In conjunction with the seventh amendment, we incurred $1.3 million in debt modification costs, which were expensed in the period incurred.

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 twelve and twenty-four weeks ended June 17, 2014.

Mortgage Loans

Stonebriar / Monarch Loan—In July 2008, we entered into a secured mortgage loan with General Electric Capital Corporation for $32.0 million with an original maturity of July 2011 (the “Stonebriar / Monarch Loan”). During the fiscal year ended December 27, 2011, we extended the term of the loan to July 2012. During the fiscal year ended December 25, 2012, we extended the term of the loan to July 2013. Effective August 1, 2012, we amended the loan agreement 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. On June 11, 2015, we were notified that the Stonebriar / Monarch Loan was assigned to an affiliate of Blackstone Mortgage Trust, Inc. As of June 16, 2015, we expect to meet the required conditions and currently intend to extend the loan to November 2017.

Atlantic Capital Bank—In October 2010, we entered into a new mortgage loan with Atlantic Capital Bank for $4.0 million of debt maturing in 2015 with twenty-five year amortization. Effective May 6, 2015, we amended the loan agreement with Atlantic Capital Bank which extended the maturity to April 2020.

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.

Long-term borrowings and lease commitments as of June 16, 2015 and December 30, 2014, are summarized below:



	June 16, 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		4.25	%	$	901,106		4.50	%	As of June 16, 2015, greater of (i) 4.25% or (ii) an elected LIBOR + 3.25%; as of December 30, 2014, greater of (i) 4.5% or (ii) an elected LIBOR + 3.5%	2020
Revolving Credit Borrowings - ($135,000 capacity) (1)	47,000			3.19	%	—			3.26	%	LIBOR plus a margin of 3.0%	2018
Mortgage Loans
Stonebriar / Monarch Loan	29,425			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	3,253			4.50	%	3,333			4.50	%	Greater of (i) 3.0% + 30 day LIBOR or (ii) 4.5%	2020
BancFirst	4,038			4.50	%	4,266			4.50	%	Greater of (i) 4.5% or (ii) prime rate	2016
Other indebtedness	2,219			4.00% - 8.60%		2,360			4.00% - 8.60%		Fixed	Various
	998,878					952,640
Capital leases	39,240					33,949
	1,038,118					986,589
Less current portion	(16,446		)			(18,025		)
Less discount on the Secured Credit Facilities' Term Loan	(3,130		)			(3,377		)
Long-term debt	$	1,018,542				$	965,187

______________________


(1)	As of June 16, 2015, the revolving credit facility had capacity of $135.0 million, which was reduced by the $47.0 million outstanding balance and $30.2 million of standby letters of credit outstanding, leaving $57.8 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.

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 June 16, 2015.



Year	Debt		Capital Leases		Total
Remainder of 2015	$	780	$	8,709	$	9,489
2016	4,822		12,782		17,604
2017	29,062		9,659		38,721
2018	47,499		5,940		53,439
2019	434		2,054		2,488
Thereafter	916,281		96		916,377
Total	$	998,878	$	39,240	$	1,038,118

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 and twenty-four weeks ended June 16, 2015 and was 108.9% and 32.9%, respectively, compared to 31.3% and 29.3%, for the twelve and twenty-four weeks ended June 17, 2014, respectively. For the twelve and twenty-four weeks ended June 16, 2015, the effective tax rate differed from the statutory federal rate of 35.0% primarily due to state taxes and changes in uncertain tax positions, while for the twelve and twenty-four weeks ended June 17, 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 June 16, 2015 and December 30, 2014, we have recorded $8.1 million and $7.7 million, respectively, of unrecognized tax benefits related to uncertain tax positions, including interest and penalties of $2.4 million and $1.4 million, respectively, 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 $5.8 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 June 16, 2015, the statute of limitations has expired for U.S. federal income taxes for the 2010 tax year. However, the 2010 tax year remains open under statute for 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 judicial channels. 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. We have taken the appropriate procedural steps to contest the assessment through the Mexican judicial channels. We recorded a liability in 2014 related to an unrecognized tax benefit for $5.4 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 and being litigated in Mexico. 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 June 16, 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.

Southeast Portfolio—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 and net cash consideration of $43.6 million.



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

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:



	April 7, 2015
Receivables, net of allowances of $228	$	1,757
Inventories and notes receivable	646
Land	9,920
Depreciable land improvements	17,321
Buildings and recreational facilities	13,113
Machinery and equipment and furniture and fixtures	4,959
Current liabilities	(2,063		)
Long-term debt (obligation related to capital leases) and other liabilities	(2,020		)
Total	$	43,633

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

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.

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 and Management Agreement Terminations

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 twenty-four weeks ended June 16, 2015, seven 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, a management agreement with Smoke Rise Country Club, a private country club located in Stone Mountain, Georgia and a management agreement with Stone Creek Golf Club, a semi-private country club located in Ocala, Florida. During the fiscal year ended December 30, 2014, five management agreements were terminated, including a management agreement with Hollytree Country Club, a private country 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 June 16, 2015 as though they had been consummated on the first day of the third 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.

The table below shows summarized financial information by segment for the twelve and twenty-four weeks ended June 16, 2015, and June 17, 2014:



	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 16, 2015			June 17, 2014			June 16, 2015			June 17, 2014
Golf and Country Clubs
Revenues	$	213,617		$	167,186		$	372,569		$	294,895
Adjusted EBITDA	61,758			49,845			106,746			86,186

Business, Sports and Alumni Clubs
Revenues	$	46,035		$	42,630		$	87,082		$	81,036
Adjusted EBITDA	9,250			8,190			16,798			14,591

Other
Revenues	$	7,238		$	3,150		$	12,288		$	4,453
Adjusted EBITDA	(10,789		)	(8,294		)	(24,301		)	(19,074		)

Elimination of intersegment revenues and segment reporting adjustments	$	(3,384	)	$	(2,464	)	$	(6,801	)	$	(4,956	)
Revenues relating to divested clubs (1)	241			916			681			1,713

Total
Revenues	$	263,747		$	211,418		$	465,819		$	377,141
Adjusted EBITDA	60,219			49,741			99,243			81,703

______________________


(1)	When clubs are divested, the associated revenues are excluded from segment results for all periods presented.



	As of
Total Assets	June 16, 2015		December 30, 2014
Golf and Country Clubs	$	1,580,457	$	1,483,856
Business, Sports and Alumni Clubs	91,044		92,525
Other	446,873		488,690
Consolidated	$	2,118,374	$	2,065,071

The following table presents revenue by product type for the twelve and twenty-four weeks ended June 16, 2015 and June 17, 2014:



	Twelve Weeks Ended				Twenty-Four Weeks Ended
	June 16, 2015		June 17, 2014		June 16, 2015		June 17, 2014
Revenues by Type
Dues	$	113,597	$	90,528	$	221,602	$	178,024
Food and beverage	77,934		64,055		126,683		106,361
Golf	49,225		38,582		74,099		59,328
Other	22,991		18,253		43,435		33,428
Total	$	263,747	$	211,418	$	465,819	$	377,141

The table below provides a reconciliation of our net loss to Adjusted EBITDA for the twelve and twenty-four weeks ended June 16, 2015 and June 17, 2014:



	Twelve Weeks Ended						Twenty-Four Weeks Ended
	June 16, 2015			June 17, 2014			June 16, 2015			June 17, 2014
Net loss	$	(223	)	$	(17,477	)	$	(4,499	)	$	(21,265	)
Interest expense	16,286			15,572			32,417			31,298
Income tax expense (benefit)	2,711			(7,966		)	(2,205		)	(8,830		)
Interest and investment income	(1,595		)	(87		)	(1,679		)	(169		)
Depreciation and amortization	24,241			16,799			47,054			33,245
EBITDA	$	41,420		$	6,841		$	71,088		$	34,279
Impairments and disposition of assets (1)	7,516			3,429			10,792			5,498
Loss (income) from discontinued operations and divested clubs (2)	209			(120		)	372			(216		)
Loss on extinguishment of debt (3)	—			31,498			—			31,498
Non-cash adjustments (4)	463			463			926			925
Other adjustments (5)	7,780			5,362			10,290			5,558
Equity-based compensation expense (6)	1,113			1,256			2,215			2,088
Acquisition adjustment (7)	1,718			1,012			3,560			2,073
Adjusted EBITDA	$	60,219		$	49,741		$	99,243		$	81,703

______________________


(1)	Includes non-cash impairment charges related to property and equipment and intangible assets and loss on disposals of assets (including property and equipment disposed of in connection with renovations).


(2)	Net income or loss from discontinued operations and divested clubs that do not qualify as discontinued operations.


(3)	Includes loss on extinguishment of debt calculated in accordance with GAAP.


(4)	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.

(5)

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.


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


(7)	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 June 16, 2015, we had capital commitments of $16.0 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.

ClubCorp Holdings, Inc. - FORM 10-Q - July 23, 2015

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