10-K 1 holdings-20141230x10k.htm 10-K Holdings-2014.12.30-10K


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-K
 
x        Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 30, 2014.
 
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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x 
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x 



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 
The aggregate market value of the voting common equity held by non-affiliates of the registrant, based on the closing price of $18.43 per share as reported on June 17, 2014 (the last business day of the registrant’s most recently completed second fiscal quarter) was $554,933,855.
As of March 5, 2015, the registrant had 64,637,147 shares of common stock outstanding, with a par value of $0.01.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 30, 2014 are incorporated by reference herein into Part III, Items 10 through 14, of this Annual Report.
 



TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART I — BUSINESS FACTORS

ITEM 1.    BUSINESS

Throughout this annual report on Form 10-K (“Form 10-K”), we refer to ClubCorp Holdings, Inc., together with its subsidiaries, as “we”, “us”, “our”, “ClubCorp” or the “Company”. Our fiscal year consists of a 52/53 week period ending on the last Tuesday of December. References to fiscal years 2014, 2013 and 2012 relate to the 52-week fiscal year ended December 30, 2014, the 53-week fiscal year ended December 31, 2013 and the 52-week fiscal year ended December 25, 2012, respectively.

Summary

We are a membership-based leisure business and a leading owner-operator of private golf and country clubs and business, sports and alumni clubs in North America. As of December 30, 2014, our portfolio of 207 owned or operated clubs, with over 180,000 memberships, serving over 400,000 individual members. Our facilities are located in 26 states, the District of Columbia and two foreign countries. ClubCorp began with one country club in Dallas, Texas with the premise of providing a first-class club membership experience. We later expanded to encompass multiple locations, making us one of the first companies to enter into the business of professional ownership and operation of private golf and country clubs. In 1966, we established our first business club with the belief that we could profitably apply our principle of delivering quality service and member satisfaction in a related line of business. In December 2006, we were acquired by affiliates of KSL Capital Partners, LLC (“KSL”), a private equity firm specializing in travel and leisure businesses. In September 2013, ClubCorp became a public equity filer on the New York Stock Exchange (the “NYSE”) under the stock symbol “MYCC”. On September 30, 2014, we completed the acquisition of 50 owned or operated private clubs (“Sequoia Golf”).

ClubCorp’s Diverse Portfolio of Owned and Operated Clubs

    
Our operations are organized into two principal business segments: (1) golf and country clubs and (2) business, sports and alumni clubs. For fiscal year 2014, golf and country clubs accounted for 79% of our total club revenue and business, sports and alumni clubs accounted for 21% of our total club revenue.

Our golf and country club segment includes a broad variety of clubs designed to appeal to a diverse group of individuals and families who lead an active lifestyle and seek a nearby outlet for golf, tennis, swimming and other activities. We are the largest owner of private golf and country clubs in the United States and own the underlying real estate for 116 of our 157 golf and country clubs (consisting of over 27 thousand acres of real estate). We own, lease or operate through joint ventures 140 golf and country clubs and manage 17 golf and country clubs. Our golf and country clubs include 130 private country clubs, 16 semi-private clubs and 11 public golf courses. Our golf and country clubs are designed to appeal to the entire family,

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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 club segment is designed to provide our members with private upscale locations where they can work, network and socialize. We own, lease or operate through a joint venture 46 business, sports and alumni clubs and manage four business, sports and alumni clubs. Our business, sports and alumni clubs include 29 business clubs, 12 business and sports clubs, 7 alumni clubs, and 2 sports clubs. Our business clubs are generally located in office towers or business complexes and cater to business executives, professionals and entrepreneurs with a desire to entertain clients, expand their business networks, work and socialize. Our sports clubs include a variety of fitness and racquet facilities. Our alumni clubs are associated with universities with large alumni networks, and are designed to provide a connection between the university and its alumni and faculty. For example, the Baylor Club, which opened during fiscal year 2014, is located in the recently constructed football stadium of Baylor University and serves as a gathering spot for alumni, faculty and staff, along with the Waco, Texas professional, civic and social community.

We execute three primary growth strategies: (1) organic growth, (2) reinvention and (3) acquisitions.

Organic growth. As the largest owner-operator of private golf and country clubs in the United States, we believe that our expansive portfolio of clubs allows us to drive membership growth by providing a compelling value proposition through product variety. In 1999, we began leveraging the breadth and geographic diversity of our clubs by offering our members various upgrade offerings to take advantage of our portfolio of clubs and variety of amenities. We have created membership programming, such as our Optimal Network Experience (“O.N.E.”) product which provides members access to benefits and special offerings in their local community, network-wide and beyond, in addition to benefits at their home club. We offer our members privileges throughout our 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. As of December 30, 2014, approximately 46% of our memberships, excluding Sequoia Golf memberships, were enrolled in one or more of our upgrade programs, and incremental dues revenue, on a consolidated basis, relating to our upgrade programs accounted for approximately $37.6 million of our total dues revenue for fiscal year 2014.

Reinvention. Through a combination of consumer research, experimentation, capital investment and relevant programming, we have sought to “reinvent” the modern club experience to promote greater usage of our facilities. We believe that higher usage results in additional ancillary spend, such as food and beverage purchases, and improved member retention. For fiscal years 2007 through 2014, we have invested more than $480.0 million of capital to better position and maintain our clubs in their respective markets. This represents an investment of approximately 7.9% of our total revenues, for such period, to reinvent, upgrade, maintain, replace and build new and existing facilities and amenities focused on enhancing our members’ experience. From 2007 through 2014, we “reinvented” 33 golf and country clubs and 21 business, sports and alumni clubs through capital investment. In fiscal year 2015, we plan to invest approximately $20.0 million on major reinvention projects across nine same-store golf and country clubs and four same-store business, sports and alumni clubs. Additionally, we plan to invest approximately $15.0 million to reinvent certain clubs obtained in the Sequoia Golf acquisition and approximately $7.1 million to reinvent our recent single-club acquisitions. These planned renovations will bring a mixture of contemporary, indoor and outdoor dining, resort-style pool amenities, enhanced private event space and improved golf practice and fitness facilities designed to improve our members’ experience.

Acquisitions. We believe the ability to offer access to our collection of clubs provides us a significant competitive advantage in pursuing acquisitions and that the fragmented nature of the private club industry presents significant opportunities for us to expand our portfolio by leveraging our operational expertise and by taking advantage of market conditions. On September 30, 2014, we completed the acquisition of Sequoia Golf for a purchase price of $260.0 million, net of cash acquired and after customary closing adjustments. On the date of acquisition, Sequoia Golf was comprised of 30 owned golf and country clubs and 20 leased or managed clubs. Following the acquisition, our network of private clubs increased, expanding the geographic cluster model and solidifying market penetration in Atlanta, Georgia and Houston, Texas. In addition, from fiscal year 2010 through 2014, we have spent approximately $70.0 million to acquire 14 golf and country clubs and over $2.0 million to develop two new alumni clubs, further expanding our portfolio of clubs and broadening the reach of our network. We believe there are many attractive acquisition opportunities available and we continually evaluate and selectively pursue these opportunities to expand our business.


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As shown in the following charts, for fiscal year 2014, golf and country clubs accounted for 79% of our total club revenue and business, sports and alumni clubs accounted for 21% of our total club revenue. The following charts provide a breakdown of total revenues for fiscal year 2014. Membership dues totaled $408.4 million, representing 46.0% of our total revenues.
Club Revenue by Segment
Total Revenue by Type

General

Membership-Based Leisure Business with Significant Recurring Revenue. We operate with the central purpose of building relationships and enriching the lives of our members. We focus on creating a dynamic and exciting setting for our members by providing them an environment in which they can engage in a variety of leisure, recreational, social and networking activities. We believe our clubs have become an integral part of many of our members’ lives and, as a result, the vast majority of our members retain their memberships each year, even during the recession that primarily impacted us during 2008-2010 (the “recession”).

Our large base of memberships creates a stable recurring revenue stream. As of December 30, 2014, our owned and operated clubs had over 180,000 memberships, including over 400,000 individual members. For fiscal year 2014, membership dues totaled $408.4 million, representing 46.0% of our total revenues. During the same time period, our membership retention, excluding Sequoia Golf memberships, was 83.7% in golf and country clubs and 77.3% in business, sports and alumni clubs for a blended retention rate of 81.0%. The following charts present our membership counts and annualized retention rates for our two business segments for the past 10 years:


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Membership Counts and Annualized Retention Rates

The proven strength and resiliency of our mass affluent membership base from peak to trough is an attractive attribute of our business. We believe that if our members remain satisfied with their club experience, they will remain loyal and frequent users of our clubs, reducing our sensitivity to adverse economic conditions and providing us with operating leverage in favorable economic conditions and a recovering real estate market.

Further, according to our fiscal year 2014 data, the average number of visits per same store membership at one of our clubs is 33 visits per year with an average spend of $4,512 per year, including dues. The average number of visits per same store golf membership at one of our clubs is 60 visits per year with an average spend of $8,155 per year, including dues. Revenue per average membership has steadily increased over the past four years growing 4.7% on a compounded basis and totaling $4,732, $5,014, $5,237, $5,591 and $5,692 for fiscal years 2010, 2011, 2012, 2013 and 2014, respectively. For all fiscal years presented, we calculate average membership using the membership count at the beginning and end of the relevant fiscal year; however, fiscal year 2014 excludes clubs acquired through the Sequoia Golf acquisition.

We believe that the demographics of our mass affluent membership base are also an important attribute of our business. According to data provided by Buxton, a database and mapping service, based on the addresses of our members, an analysis of our golf and country club members, excluding certain managed clubs acquired in the Sequoia Golf acquisition, indicates that they have an average annual household income of $180,000 to $200,000 and a primary home value of $515,000 to $615,000. An analysis from the same database of our business, sports and alumni club members indicates that they have an average annual household income of $150,000 to $175,000 and a primary home value of $435,000 to $540,000. We believe that these demographic profiles were more resilient during the recession, and we believe our members will spend more in an improving economy and recovering real estate market than the general population.

Nationally-Recognized and Award-Winning Clubs. Our golf and country clubs, with approximately 194 18-hole course equivalents as of December 30, 2014, represent the core assets of our company and are strategically concentrated in sunbelt markets and other major metropolitan areas. We believe that our clubs are among the top private golf clubs within their respective markets based on the quality of our facilities, breadth of amenities and number of relevant programs and events. These clubs are anchored by our golf courses, of which approximately one third are designed by some of the world’s best-known golf course architects, including Jack Nicklaus, Arnold Palmer, Tom Fazio, Pete Dye, Arthur Hills, Gary Player, Robert

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von Hagge, Bruce Devlin and Robert Trent Jones. Likewise, a number of our clubs have won national and local awards and have appeared on national and local “best of” lists for golf, tennis and dining including:

•
Firestone Country Club in Akron, Ohio—“Top 50 Private Clubs” (2010‑2011 Golf World)

•
LPGA International in Daytona Beach, Florida—“America’s Top 50 Courses for Women” (2013 Golf Digest)

•
Aspen Glen Club in Carbondale, Colorado, Southern Trace Country Club in Shreveport, Louisiana, The Hills Country Club at Lakeway in Austin, Texas, Firestone Country Club in Akron, Ohio, Diamante Country Club in Hot Springs Village, Arkansas and Oak Tree Country Club in Edmond, Oklahoma—each named in their respective states “Best-in-State” (2014 Golf Digest)

•
Brookhaven Country Club in Dallas, Texas—“Best Overall Family Club” in Dallas/Fort Worth and “The Best in Private Clubs” List (2014 Avid Golfer Magazine)

•
Vista Vallarta Club de Golf in Puerto Vallarta, Mexico—“Best Caribbean and Mexico Courses” (2014 Golfweek)

The operations and maintenance of our golf courses and facilities have led to our selection as host of several high-profile events, leading to local and national media recognition as well as event revenue, club utilization and membership sales. In the past year, the following events were played at our courses:

•
The World Golf Championships—Bridgestone Invitational at Firestone Country Club in Akron, Ohio

•
The Insperity Invitational (Champions Tour)—The Woodlands Country Club Tournament Course in The Woodlands, Texas

•
The LPGA Kraft Nabisco Championship at Mission Hills Country Club in Rancho Mirage, California

•
The LPGA Shootout at Las Colinas Country Club in Irving, Texas

•
The Web.com Midwest Classic Presented by Cadillac at Nicklaus Golf Club at LionsGate in Overland Park, Kansas

Outside of our golf offering, our clubs provide a variety of additional amenities and services that we believe appeal to the whole family, such as well-appointed clubhouses, a variety of dining venues, event and meeting spaces, tennis facilities, exercise studios, personal training, spa services, resort-style pools and water features and outdoor gathering spaces. We offer over 800 tennis courts across more than 85 clubs, and our Brookhaven Country Club features a nationally-recognized private tennis facility.

Many of our 50 business, sports and alumni clubs are located in the heart of the nation’s influential business districts, with locations in 15 of the top 25 metropolitan statistical areas, and offer an urban location for professionals to network with colleagues, conduct business and socialize with friends. We believe our business clubs are choice locations for regional and local business and civic receptions with business amenities to support these events. These clubs also host numerous upscale private events, such as weddings, bar and bat mitzvahs and holiday parties. These events generate traffic flow through our clubs, helping to drive membership sales and club utilization. In addition, the seven alumni clubs we operate offer a unique setting for alumni and faculty to share common heritage and experiences.

Expansive Portfolio of Clubs and Alliances Providing Scale. As the largest owner-operator of private golf and country clubs in the United States, we believe that our expansive portfolio of clubs allows us to drive membership growth by providing a compelling value proposition through product variety. By clustering our clubs, many of our members have local access to both urban business-focused clubs as well as suburban family-oriented clubs. For an incremental monthly charge, our reciprocal access program gives our members access to our owned and operated clubs, as well as the facilities of others with which we have an alliance relationship, both domestically and internationally. For example, a member of one of our Dallas-Fort Worth area clubs who participates in the O.N.E. offering could travel to Palm Springs, California and play at the Dinah Shore Tournament Course at our Mission Hills Country Club. As of December 30, 2014, approximately 46% of our memberships, excluding Sequoia Golf memberships, were enrolled in one or more of our upgrade programs, as compared to approximately 43% of memberships as of the end of the prior fiscal year. Further, at the 89 clubs that offer O.N.E., approximately 74% of our golf memberships, excluding Sequoia Golf memberships, were enrolled in one or more of our upgrade programs. Incremental dues revenue, on a consolidated basis, relating to our upgrade programs accounted for approximately $37.6 million of our total dues revenue for fiscal year 2014, compared to approximately $34.5 million for fiscal year 2013. By providing members with

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numerous services and amenities that extend beyond their home clubs to all of the clubs we own and operate and the clubs with which we have alliances, we believe we can drive membership growth and create a key market differentiator which would be difficult for our competitors to replicate. We believe we have an opportunity to increase our revenue related to upgrade programs as we continue to introduce these products to our clubs, including those clubs acquired with the Sequoia Golf acquisition.

Our established alliances feature leisure-oriented businesses including hotels such as The Ritz-Carlton, Hotel Del Coronado, Mandarin Oriental, and Omni Hotels and Resorts including La Costa Resort and Spa, and Barton Creek Resort & Spa; ski resorts such as Squaw Valley, Vail and Whistler Blackcomb; and restaurants such as Emeril Lagasse and The Capital Grille, as well as numerous other venues worldwide that provide discounts, upgrades and complimentary items or services. For example, our members receive 10% or more off best-available rates at select hotels and resorts, as well as special access and VIP packages to events such as The Masters and the U.S. Open Golf and Tennis Championships.

We believe the size of our portfolio of clubs provides us with significant economies of scale, creating operational synergies across our clubs and enabling us to consolidate our human resources, sales and marketing, accounting and technology departments. We also benefit from centralized purchasing to receive preferred pricing on supplies, equipment and insurance.

Diversification. As a result of our size and geographic diversity, our operating revenues and cash flows are not reliant on any one club or geographic region. Our 10 largest clubs by revenue accounted for 21.5% of our club revenues for fiscal year 2014, as shown in the following chart:
Club
 
Location
 
Revenue
(in thousands)
 
% of Club
Revenue
Firestone Country Club
 
Ohio
 
$
26,425

 
3.0
%
The Clubs of Kingwood at Kingwood
 
Texas
 
$
22,862

 
2.6
%
Mission Hills Country Club
 
California
 
$
21,414

 
2.4
%
Coto De Caza Golf & Racquet Club
 
California
 
$
20,822

 
2.4
%
Gleneagles Country Club
 
Texas
 
$
20,614

 
2.3
%
Stonebriar Country Club
 
Texas
 
$
19,556

 
2.2
%
Brookhaven Country Club
 
Texas
 
$
17,122

 
1.9
%
Braemar Country Club
 
California
 
$
14,451

 
1.6
%
The Hills Country Club at Lakeway
 
Texas
 
$
14,326

 
1.6
%
Anthem Golf & Country Club
 
Arizona
 
$
13,312

 
1.5
%
 
 
 
 
$
190,904

 
21.5
%
We have strategic concentrations of golf and country clubs in Texas, California, Georgia and Florida, representing 32.2%, 19.4%, 6.1% and 5.7%, respectively, of total club revenue for fiscal year 2014. Due to the Sequoia Golf acquisition on September 30, 2014, the concentration of total club revenue in Texas and Georgia increased to 33.4% and 9.5%, respectively, for the sixteen weeks ended December 30, 2014. While we have greater presence in these states where climates are typically conducive to year-round play, we believe that the broad geographic distribution of our portfolio of clubs helps mitigate the impact of adverse regional weather patterns and fluctuations in regional economic conditions. To allow for maximization of golf rounds, we employ a corporate director of agronomy and regional golf superintendents who oversee our strong agronomic practices, helping to extend golf play throughout the climate zones in which we operate.

Ownership and Control of Golf and Country Clubs. We own the real estate of 116 of our 157 golf and country clubs and believe we have an advantage over other clubs as we retain the ability to maximize the value of our clubs and business. By owning the real estate underlying our clubs, we have been able to implement capital plans that inure to our benefit and generate positive returns on our investments. Owning many of our assets also gives us the flexibility to recycle our capital by selling underperforming clubs or non-essential tracts of land.

Seasoned Management Team. We have a highly experienced professional management team. Our six current executive officers had a combined 161 years of related career experience, including on average 20 years of hospitality and club specific experience through the end of fiscal year 2014. Eric Affeldt has acted as President and Chief Executive Officer for ClubCorp since December 2006 and has over 24 years of experience leading golf and resort companies, including as president and chief executive officer of KSL Fairways Golf Corporation, as well as general manager for Doral Golf Resort & Spa in Miami and PGA West and La Quinta Resort & Club in California. Curt McClellan, our Chief Financial Officer and Treasurer, has been with our company since November 2008 and is responsible for leading the corporate finance and accounting teams. Our Chief Operating Officer, Mark Burnett, has over 26 years of experience managing golf and country clubs and leading golf

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and resort companies, including serving as chief operating officer for American Golf Corporation and president and chief executive officer and chief operating officer of KSL Fairways Golf Corporation.

We have also attracted and retained qualified general managers for our clubs. Our club general managers average approximately 10 years of service with us. These managers are tasked with the day-to-day responsibility of running the clubs and executing the strategic direction of senior management.

Our management team continues to drive new membership sales, mitigate attrition and generate cash flows by delivering value to our members through modernization and enhancement of our clubs and upgrade programs, improving operating efficiencies and expanding our portfolio through acquisitions. As a result, from fiscal years 2010 to 2014, total revenue and adjusted EBITDA increased by 6.5% and 7.0%, respectively, on a compounded annual basis.

Business Strategy

Attracting and retaining members while increasing member usage by providing the highest quality club experience are the biggest drivers of our revenue growth. We execute three primary growth strategies: (1) organic growth, (2) reinvention and (3) acquisitions.

Organic growth. Our organic growth strategy is focused on employing an experienced membership sales force, leveraging our portfolio and alliance offerings and developing new and relevant programming.

Employ Experienced Membership Sales Force—We employ approximately 190 club-based, professional sales personnel who are further supported by an array of regional and corporate sales and marketing teams. Our sales team receives comprehensive initial and ongoing sales training through our internally developed “Bell Notes” training program that we believe addresses all elements of the sales process from member prospecting to closing the sale and onboarding the new member. Our sales efforts are driven at an individual club, regional and national level. Club level membership sales are targeted to individual households in the local community and bolstered by referrals from existing members, real estate brokers and developers. Regional sales management ensures sales plan execution and identifies additional prospecting opportunities that match the demographic data of existing club members such as household income or the propensity to play golf. Our national sales and marketing team is led by four corporate professionals who each have more than 20 years of tenure and collectively have over 100 years of experience with us. Their efforts include creating core and strategic membership offerings and corporate rate memberships.

We periodically obtain feedback from our membership base to effectively understand current membership demographics and preferences to better target member prospects. For example, in 2012, with the improving macro-economic environment, we launched a national family legacy program that allows members to invite extended family to join any of our clubs with promotional pricing. As of December 30, 2014, we had approximately 1,700 memberships enrolled in this program. In April 2009, we implemented regional young executive programs, primarily in our Dallas and Houston clubs, with special pricing that feature multi-club access and professional networking events. As of December 30, 2014, we had over 1,600 memberships enrolled in the young executive programs. We believe our well-trained and incentivized sales team will continue to drive membership growth, and we believe we are well-positioned to capitalize on improving economic conditions.

Leverage Our Portfolio and Alliance Offerings—We offer a variety of products, services and amenities through upgrade offerings that provide members access to our portfolio of clubs and leverage our alliances with other clubs, resorts and facilities both domestically and internationally.

In fiscal year 2010, we strategically introduced our O.N.E. product and have continued to market it aggressively across most of our golf and country clubs. O.N.E. is a 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 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. These programs are designed to increase our recurring monthly revenues while providing a value proposition to our members that helps drive increased usage of our facilities. Eighty-nine of our clubs offer O.N.E. to their members. Over 50% of our new members joined under our O.N.E. offering at clubs where it is offered as compared to 35% of new members who purchased upgraded product offerings prior to the introduction of the O.N.E. offering. Further, over 70% of our new golf members joined under our O.N.E. offering at clubs where it is offered. At the end of fiscal year 2014, use of our facilities by members outside of their home club increased by 43% as a result of the introduction of the O.N.E. offering. Food and beverage revenues increased 30% from fiscal years 2010 to 2014, excluding clubs acquired under the Sequoia Golf

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acquisition, which we largely attribute to our enhanced dining venues and offerings, including the O.N.E. product, the recovering economy and greater consumer spend. We continue to evaluate opportunities for further expansion of the O.N.E. product into additional geographic areas and acquired clubs.

We have established alliances with other leisure-oriented businesses, whereby members of our clubs have usage privileges or receive special pricing at such properties. We target alliances with recognized brands that appeal to our members. According to the 2013 U.S. Affluent Travel and Leisure report by Resonance, the Ritz-Carlton, with whom we have an alliance, is ranked in the top five preferred brands for affluent households and is the premier brand for high net worth households. Other leading brand alliances include but are not limited to La Costa Resort and Spa, Barton Creek Resort & Spa and other Omni hotels and resorts, Pinehurst Resort, hotels such as Hotel Del Coronado and Mandarin Oriental, ski resorts such as Squaw Valley, Vail and Whistler-Blackcomb, and restaurants such as Emeril Lagasse and The Capital Grille, as well as numerous other alliances that provide discounts, complimentary upgrades, services or items. The benefits offered are generally paid for by our members at the time of use. We have revenue sharing arrangements with some of these properties, and we do not incur any fees or additional costs to enter into such alliances.

We market and promote our member benefits through our in-house marketing tools, including member e-newsletters and e-communications, our internally developed online Benefits Finder, other social media applications and our quarterly-distributed proprietary Private Clubs magazine. Our strategic alliance partners also support our marketing efforts with targeted advertisement, including direct mail. We make reservations convenient for members by providing an in-house concierge (ClubLine), and by offering access to an inventory of VIP tickets through our own web portal (TicketLine). Members may also directly access discounted hotel rates of up to 40% off retail rates at thousands of hotels worldwide through an online tool (Find Hotels) connecting members to a wholesale travel company with whom we have an alliance arrangement. We continually seek additional reciprocal arrangements and alliances with other hospitality‑oriented businesses that can further enhance our members’ variety of choices extending beyond their home club.

Develop New and Relevant Programming—Members who frequently utilize our facilities typically tend to spend more at our clubs and remain members longer. As a result, we believe that there are significant opportunities to increase operating revenues by making our clubs more relevant to our members. We use a reporting tool we refer to as the “Member Dashboard” to analyze and drive member activity and club utilization. The Member Dashboard identifies members’ visits and allows us to personally engage with our members and encourage them to use their club and its amenities. We capture a member’s interest profile when the member joins a club and we study member usage patterns and obtain feedback from our members periodically to keep our offerings relevant to members’ changing lifestyles. Our goal is to provide numerous opportunities for all members and their families to utilize our facilities.

Key elements of our strategy have included making our golf and country clubs more family friendly and accessible. To make it more convenient for members to learn the game of golf, we have expanded practice facilities, enhanced teaching programs and created “Fastee Courses” where tees are placed forward to shorten the yardage of each hole to ease play and reduce the time commitment. We have also added family-oriented water recreation facilities in our pool areas, refitted fitness centers and redesigned our food and beverage outlets to be more contemporary and casual allowing for anytime usage. Many of our golf and country clubs offer summer camps and other youth programming, including junior golf leagues and swim teams. We believe these program offerings have been well received by both new and existing members, with an increase in ancillary revenue per average membership, excluding clubs acquired through the Sequoia Golf acquisition, of 3.2% for fiscal year 2014 compared to fiscal year 2013 and 7.1% for fiscal year 2013 compared to fiscal year 2012.

Many of our facilities contain significant banquet and catering facilities for use by both members and non-members alike. We host events ranging from weddings, to bar and bat mitzvahs, to business meetings, to civic organization gatherings, which often serve as the first introduction of our clubs to prospective members. Our extensive portfolio of business, sports and alumni clubs also provides our members access to a network of other civic and business leaders, and our clubs endeavor to host high profile social and civic events in order to become central to the community in which we operate.

Members also participate in clubs within their club, whereby members with similar interests come together for recreational, educational, charitable, social and business-oriented purposes. We believe this reinforces the club becoming integral to the lives of our members. Our individual clubs also benefit from member participation on their board of governors and numerous committees providing us valuable feedback and recommendations for further improvements to our program offerings. We will continue to promote activities and events occurring at members’ home clubs, and believe we can further tailor our programming to address members’ particular preferences and interests.

Reinvention. We believe our ability to conceptualize, fund and execute club reinventions gives us a significant competitive advantage over member-owned and individual privately-owned clubs, which may have difficulty gaining member

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consensus and financial backing to execute such improvements. In 2007, we embarked on the “reinvention” of our clubs through strategic capital investment projects designed to drive membership sales, facility usage and member retention. We believe this strategy results in increased member visits during various parts of the day for both business and pleasure, allowing our clubs to serve multiple purposes depending on the individual needs of our members. Additionally, our investments have enabled us to make appropriate price adjustments.

Elements of reinvention capital expenditures include “Touchdown Rooms”, which are small private meeting rooms allowing members to hold impromptu private meetings while leveraging the other services of their club. “Anytime Lounges” provide a contemporary and casual atmosphere to work and network, while “Media Rooms” provide state-of-the-art facilities to enjoy various forms of entertainment. Additional reinvention elements include refitted fitness centers, enhanced pool area amenities such as shade cabanas, pool slides and splash pads, redesigned golf practice areas for use by beginners to avid golfers, and newly created or updated indoor and outdoor dining and social gathering areas designed to take advantage of the expansive views and natural beauty of our clubs.

From fiscal years 2007 to 2014, we invested more than $480.0 million, or approximately 7.9% of total revenue, to reinvent, upgrade, maintain, replace and build new and existing facilities and amenities. Much of our invested capital included adding reinvention elements to many of our clubs, including the construction or remodeling of approximately 20 fitness facilities and 73 dining venues, the addition of five family-oriented outdoor water related amenities and improvements to approximately 1,100 holes of golf. As of December 30, 2014, 54 of our clubs, including 33 golf and country clubs and 21 business, sports and alumni clubs, were considered “major reinvention” clubs and received significant reinvention capital. We define “major reinvention” clubs as those clubs receiving $750,000 or more gross capital spend on a project basis.

Examples of major reinvention clubs include but are not limited to:

•Firestone Country Club in Akron, Ohio

•Gleneagles Country Club in Dallas, Texas

•Coto De Caza Golf & Racquet Club in Coto De Caza, California

•Cardinal Club in Raleigh, North Carolina

•The University of Texas Club in Austin, Texas

•The Houston Club in Houston, Texas

•The City Club Los Angeles in Los Angeles, California

We believe the benefits of reinvention include an increase in revenue as a result of an increase in member usage, increase in member spend per visit, and an increase in new memberships. For instance, the recent renovation at Gleneagles Country Club near Dallas, Texas is an example of how we profit from major renovation projects. From mid-2012 through early 2014, we invested approximately $3.8 million to renovate the clubhouse as part of our reinvention strategy. We believe this investment contributed to a 14.6% and 7.3% increase in revenue and membership count, respectively, for fiscal year 2014, compared to pre-construction revenue and membership count for fiscal year 2012. Additionally, we believe the reinvention contributed incremental adjusted EBITDA of $1.4 million for fiscal year 2014.

At our business clubs, we have benefited from landlord contributions towards the cost of our business club reinvention. Landlords often see our clubs as amenities that improve the building’s overall appeal for its tenants and, as such, are willing to help fund improvements. From fiscal years 2007 through 2014, we received landlord contributions at 19 of our 21 reinvented business, sports and alumni clubs totaling approximately $27.4 million, representing approximately 38% of the total reinvention investment in our business, sports and alumni clubs. Additionally, we expect approximately $1.3 million in tenant improvement allowances attributable to reinvention projects occurring during fiscal year 2015 under the terms of the respective lease agreements. We believe that these leasehold improvements also favorably position us to capitalize on the improving economy.

The reinvention capital investments made at City Club Los Angeles in Los Angeles, California further demonstrate how we profited from such projects. From mid 2012 through early 2014, we invested approximately $10.9 million, of which $4.2 million was funded by the landlord for tenant improvements, to relocate and reinvent the club. We believe this investment contributed to a 28.7% and 17.8% increase in revenue and membership count, respectively, for fiscal year 2014, compared to

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pre-construction revenue and membership count for fiscal year 2012. Additionally, we believe the reinvention contributed incremental adjusted EBITDA of $1.3 million for fiscal year 2014.

Our reinvention concept is based on consumer research, through which we analyzed how members were using our facilities, why members joined and why some subsequently resigned. This research was utilized to develop physical and programming changes to better suit our members’ preferences and needs. Based on visits per average membership, in fiscal year 2014, our members visited our same store reinvented golf and country clubs an average of 34.0% more frequently than members of non-reinvented clubs and members visited our same store reinvented business, sports and alumni clubs an average of 20.2% more frequently than non-reinvented clubs.

During fiscal years 2014 and 2013, we spent $32.1 million and $26.0 million, respectively, on reinvention capital. We believe these additional major reinvention projects represent opportunities to increase revenues and generate a positive return on our investment, although we cannot guarantee such returns. In 2015, we plan to invest approximately $20.0 million on major reinvention projects across nine same-store golf and country clubs and four same-store business, sports and alumni clubs. Additionally, we plan to invest approximately $15.0 million to reinvent certain clubs obtained in the Sequoia Golf acquisition and approximately $7.1 million to reinvent recent single-club acquisitions. We will continue to identify and prioritize capital projects for fiscal years 2016 and beyond to add reinvention elements.

Acquisitions. Acquisitions allow us to expand our portfolio and network offerings. We believe the ability to offer access to our collection of clubs provides us a significant competitive advantage in pursuing acquisitions. Newly acquired clubs may also generally benefit from additional capital and implementation of our reinvention strategy. We believe that the unique benefits that we have to offer, such as a policy which does not assess members for capital improvements as well as our ability to consummate acquisitions and improve operations, provide us a unique competitive advantage in pursuing potential transactions. We believe there are many attractive acquisition opportunities available and we continually evaluate and selectively pursue these opportunities to expand our business. We actively communicate with other club operators, their lenders and boards of directors who may seek to dispose of their club properties or combine membership rosters at a single club location. We also evaluate joint ventures and management opportunities that allow us to expand our operations and increase our recurring revenue base without substantial capital outlay. When we do make strategic acquisitions, we do so only after an evaluation to satisfy ourselves that we can add value given our external growth experience, facility assessment capabilities, operational expertise and economies of scale. For example, in the second fiscal quarter of 2013, we acquired Oak Tree Golf & Country Club, a private country club located in Edmond, Oklahoma, for approximately $10.2 million, including $5.0 million of assumed debt, and subsequently invested $3.4 million in reinvention elements. Revenues increased approximately 25.0% for fiscal year 2014 compared to fiscal year 2012, the last complete fiscal year prior to our acquisition. Additionally, the club's membership count increased 45.8% from the second quarter of 2013 to December 30, 2014. During fiscal year 2014, the club contributed $3.0 million in adjusted EBITDA.

From fiscal years 2010 through 2014, we have spent approximately $70.0 million to acquire the 14 golf and country clubs shown in the table below.
Year
 
Club
 
Location
 
Number of Clubs
 
Number of Holes
2010
 
Country Club of the South
 
Georgia
 
1
 
18
2011
 
The Hamlet Golf & Country Club
Willow Creek Golf & Country Club
Wind Watch Golf & Country Club
 
New York
 
3
 
54
 
 
Canterwood Golf & Country Club
 
Washington
 
1
 
18
2012
 
Hartefeld National Golf Club
 
Pennsylvania
 
1
 
18
2013
 
Oak Tree Country Club
 
Oklahoma
 
1
 
36
 
 
Cherry Valley Country Club
 
New Jersey
 
1
 
18
 
 
Chantilly National Golf & Country Club
 
Virginia
 
1
 
18
2014
 
Prestonwood Country Club - The Creek
Prestonwood Country Club - The Hills
 
Texas
 
2
 
36
 
 
TPC Piper Glen
 
North Carolina
 
1
 
18
 
 
TPC Michigan
 
Michigan
 
1
 
18
 
 
Oro Valley Country Club
 
Arizona
 
1
 
18


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Subsequent to December 30, 2014, we purchased two golf and country clubs in the Chicago, Illinois area. On January 13, 2015, we purchased Ravinia Green Country Club, a private golf club in Riverwoods, Illinois and on January 20, 2015, we purchased Rolling Green Country Club, a private golf club in Arlington Heights, Illinois. Additionally, from fiscal years 2010 through 2014, we spent over $2.0 million to develop two new alumni clubs.

On September 30, 2014, we completed the acquisition of Sequoia Golf, adding 50 owned or operated private clubs, for a purchase price of $260.0 million, net of $5.6 million of cash acquired and after customary closing adjustments including net working capital. On the date of acquisition, Sequoia Golf was comprised of 30 owned golf and country clubs and 20 clubs which were leased or managed. The acquisition increased our network of private clubs, expanded the geographic cluster model, and solidified market penetration in Atlanta, Georgia and Houston, Texas.

In addition to our domestic initiatives, we believe there is a market to extend our private club expertise through international management arrangements. As of December 30, 2014, we managed one business club in Beijing, China and, going forward, we will consider selectively expanding our international operations.

Industry and Market Opportunity

Our company is a membership-based leisure business closely tied to consumer discretionary spending. We believe that we compete for these discretionary consumer dollars against such businesses as amusement parks, spectator sports, ski and mountain resorts, fitness and recreational sports centers, gaming and casinos, hotels and restaurants. We believe that we will benefit from the recovery taking place in the leisure industry as evidenced by recent trends in gross domestic product (“GDP”) growth within our industry. According to the Bureau of Economic Analysis (“BEA”), from 2012 to 2013, leisure and hospitality industry’s GDP growth increased by 2.0%.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________
 
Source: Bureau of Economic Analysis.
 
 

(1)
Leisure represents the BEA defined industry of arts, entertainment, recreation, accommodation and food services.

(2)
GDP represents value added; according to the BEA, value added by industry is a measure of the contribution of each industry to the nation’s GDP.

Favorable Macro-Economic Trends. We believe that our industry and business are generally affected by macro-economic conditions and trends. Evidence of those trends from calendar year 2008 to 2014 include the S&P 500 increasing 159%, home sales volume (including new home and existing home sales) increasing from 9.8 million to 10.3 million, according to the Bureau of the Census and the National Association of Realtors, median home prices of existing homes increasing from $175,000 in 2008 to $209,500 at the end of December 2014, according to the National Association of Realtors, and the consumer discretionary spend increasing from $10.0 trillion to $12.1 trillion, as reported by the BEA. We believe that as the economy continues to recover from recession lows, our industry will continue to benefit. For most of the past two years, the

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consumer sentiment index has remained above its five year average, according to Thomson Reuters/University of Michigan. We believe that as consumer confidence and disposable income increase, our clubs will benefit from increased leisure and discretionary dollars spent as individuals and families look to expand recreational activities and social interactions.

______________________
______________________
Source: Thomson Reuters and University of Michigan.
Source: Bureau of Economic Analysis.
    
Improving Real Estate Conditions. We believe improving economic conditions and improvements in local housing markets reinforce the foundation for membership growth. Although some of the metropolitan areas where we operate clubs were disproportionately affected by the recession, related to the decline in home prices and increase in foreclosure rates, our membership base remained resilient, which we believe can be attributed to our favorable membership demographics. Economic indicators, such as increased consumer confidence, discretionary spending and home sales and construction, support an environment where we believe prospective members will choose to join our clubs.

Membership growth is, in part, driven by sales of homes in neighborhoods where our clubs are located as those who purchase homes in those areas are more likely to join the neighboring country club. For example, membership at Trophy Club Country Club, near Dallas, Texas, increased 22% from 2010 to 2014, during which time the local municipality approved approximately 1,000 new home construction permits for neighborhoods located within a 20 mile radius of the club. The following charts present our total membership counts, excluding Sequoia Golf memberships, and national home sales volume for the past 10 years:

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Total Membership Trend Compared to Home Sales Trend
______________________
Source: National Association Of Realtors® (existing home sales), Census Bureau (new home sales).

In our business, sports and alumni clubs segment, improvements in the commercial leasing market support the attraction of new members. For example, in 2011, occupancy in the Urban Centre Towers in Tampa Bay, Florida, where our Centre Club is located, was 77.7%. As of December 30, 2014, occupancy has increased to 88.4%, and our membership count at the Centre Club increased 13.3% over the same period. We believe our alumni clubs are less impacted by local economic conditions as the membership tends to draw from a larger geographical area.

Affluent Demographic. According to data provided by Buxton, a database and mapping service, our members reside in locations where the average household income is in excess of $150,000. According to the Resonance Report for 2013, which relies on estimates from the Bureau of Labor Statistics, households with income of $150,000 or greater account for 36% of all consumer spending on social, recreation and health club memberships. We believe this mass affluent demographic’s share of discretionary spending is beneficial to our business.

Golf Industry Overview

The operational and financial performance of our clubs has been, and we believe will continue to be, influenced by local, regional and national U.S. macro-economic trends. We primarily own and operate private golf and country clubs for which we believe demand is generally more resilient to economic cycles than public golf facilities and other hospitality assets, which we believe can be attributed to our favorable membership demographics.

Golf Industry Trends. We believe that golf industry trends are favorable to our private club membership model. The golf industry is characterized by varied ownership structures, including properties owned by corporations, member equity owners, developers, municipalities and others. Reports prepared by the National Golf Foundation (“NGF”) show that during the 1990’s and early 2000’s, the industry suffered an overbuilding of public golf facilities. Over 3,160 public golf facilities opened from 1990 through 2000, increasing the supply of public golf by 39%. Golfer growth could not keep pace with the new supply generated during this time period. NGF also reports that 2013 represented the eighth consecutive year in which total facility closures outnumbered openings, with a net reduction of 144 18-hole equivalent courses in 2013. Based on a count by NGF, 2013 year-end U.S. golf supply totaled 15,516 facilities comprised of 11,505 public facilities and 4,011 private golf clubs.


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Golf Facilities in The U.S.
Net Change in Total Golf Course Supply
______________________
______________________
Source: National Golf Foundation (2014 information not available)
Source: National Golf Foundation (2014 information not available)

Golfer Trends. According to NGF estimates, core and avid golfers represent more than 50% of total golfers and represented approximately 94.0% of the $26.3 billion spent on golf in 2012. We believe that core and avid golfers are the most likely golfers to become private club members and according to private club trends last reported by NGF, private golf clubs have an average golfer spend of approximately $2,000 per year versus public courses that have an average golfer spend of approximately $650 per year. Further, NGF has reported that the typical private club member is 55 years old with an annual household income of approximately $125,000 whereas the typical public golfer is 47 years old with an annual household income of approximately $95,000.

According to publications by NGF, the private golf club industry captures a more affluent segment of baby boomers than the industry as a whole, and we believe baby boomers will play a significant role in the future of the golf industry. Further, NGF believes that there is a pipeline of qualified member prospects with similar characteristics as our current members and almost half of total golfers are under the age of 40.

Spend per Golfer
Golfers by Age
 
______________________
______________________
Source: National Golf Foundation
Source: National Golf Foundation


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Business Club Industry Overview

While there is no specific industry designation for our business, sports and alumni clubs, we believe utilization of our clubs is comparable to the restaurant and hospitality industries. Our business clubs are located in 15 of the top 25 Metropolitan Statistical Areas ranked by population. Our business clubs include dining rooms, bar areas and private meeting rooms which allow members to entertain clients, conduct business and host social and corporate events.

We believe that a favorable economic backdrop increases business activity (as measured by corporate profits and the success of the capital markets) and will positively affect the demand for our business clubs. According to the BEA, corporate profits from current production (also known as operating or economic profits) increased 4.6% in 2013 and 7.0% in 2012. Similarly, the S&P 500 Index, a proxy for the performance of the broader public equity capital markets, has recently witnessed significant returns. On a total return basis, the S&P 500 is up 75% over the past three years.
______________________
Source: Bureau of Economic Analysis.

We anticipate that a continued influx of jobs into our key markets of operations will drive increased demand for our food and beverage and hospitality amenities and offerings. We believe the locations of our business clubs, which also serve as anchors to commercial towers and business centers, position us to capture increased spend from the growing work force that is recovering from the recession. Additionally, as business activity increases for working professionals, we believe private corporate sponsored events are likely to become more sought after.

Competition

While our principal direct competitors are other golf, country or business clubs with similar facilities, we also compete for discretionary leisure spending with other types of recreational facilities and forms of entertainment including restaurants, sports attractions, hotels and vacation travel.

We are the largest owner-operator of private golf and country clubs in the United States, with more than twice as many private golf and country clubs as the closest competitor, according to NGF. Overall, the golf industry is a highly fragmented competitive landscape with approximately 3,900 private golf clubs in the United States, of which approximately 16% were under corporate management according to NGF’s 2014 year-end data. The data further concludes that the top 10 golf management companies, including ClubCorp, owned or managed over 300 golf clubs, or about 8% of the total private golf club market at the end of calendar year 2014. In fact, according to NGF, at the end of 2014 only three other companies owned or operated more than 25 private golf clubs in the United States with Troon Golf LLC, Century Golf Partners and U.S. Air Force Services Agency reporting a total of 56, 28, and 25, respectively.

We believe most of our competition is regionally or locally based and the level of competition for any one of our clubs depends on its location and proximity to other golf facilities relative to the location of our members. In several of our strategically concentrated markets, such as those in Texas, Georgia, California and Florida, our ownership of multiple facilities allows us to offer access to multiple clubs both locally and beyond. While others have attempted to create their own access and benefit programs, we believe our product offerings would be difficult to replicate on a similar scale, given the size of our portfolio of clubs, geographic diversity of our clubs and our numerous alliances with other clubs, resorts and facilities.


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Competition for our business, sports and alumni clubs is dependent on the individual market, and the needs of the individual member. For members looking for a private dining experience, nearby restaurants are our primary competition. For members looking for places to conduct business, our competition includes other facilities that provide meeting space such as hotels and convention centers as well as places such as fast casual restaurants and coffee bars, where people can conveniently meet and conduct informal meetings and access the internet. For people looking for a place to hold a private party such as a wedding, our competition includes other catering facilities such as hotels and resort facilities.

Seasonality

We consider the year-round recurring dues revenue stream to be one of the primary advantages of private club ownership. Golf and country club operations are seasonal in nature, with peak season beginning in mid-May and running through mid-September in most regions. Usage at our golf and country clubs declines significantly during the first and fourth fiscal quarters, when colder temperatures and shorter days reduce the demand for outdoor activities. However, the seasonality of revenues for many of our golf and country clubs is partially mitigated by our strategic concentration in regions with traditionally warmer climates such as Texas, Georgia, California and Florida. While nearly all of our golf and country clubs experience at least some seasonality, due to the recurring nature of our year-round membership dues income, seasonality has a muted impact on our overall performance as compared to daily fee public golf facilities. Many of our golf and country clubs also offer other amenities such as dining, indoor tennis and fitness facilities, which provide revenue streams that are typically less affected by seasonality than our golf operations revenues. Our business clubs are less seasonal in nature, but typically generate a greater share of their annual revenues in the fourth quarter due to the holiday and year-end party season. In addition, the first, second and third fiscal quarters each consist of twelve weeks, whereas the fourth fiscal quarter consists of sixteen or seventeen weeks of operations. As a result of these factors, we usually generate a disproportionate share of our revenues and cash flows in the second, third and fourth fiscal quarters of each year and have lower revenues and profits in the first fiscal quarter.

Sales and Marketing

We promote our clubs through extensive marketing and sales programs that are designed to appeal to our existing members, prospective members or underrepresented demographic groups. For example, we responded to the younger age of prospective members in the industry with targeted membership programs for young executives. We have also designed programming and events geared toward women and invested in family amenities that broaden the appeal of our clubs. Additionally, we advertise through social media and print advertisements in a variety of national, regional and local magazines and newspapers. We also showcase our facilities, products and services through our award‑winning quarterly lifestyle magazine, Private Clubs. Private Clubs has won or been recognized as a finalist for the MAGGIE Award for Best Magazine in the Associations/Trade & Consumer Division each year since 2009. We distribute our magazine to our member households, clubs and strategic alliance partners who subscribe, in order to showcase our facilities, products and services and other content relevant to our current and prospective members. Recent technology advancements include the mobile edition of our Private Clubs magazine, mobile tee times and electronic billing.

In 2014, our clubs served as the site of several national and regional golf events and received national awards and recognition. Three clubs received national television coverage while serving as the site of high-profile golf events, including: Firestone Country Club, site of the World Golf Championships - Bridgestone Invitational; Mission Hills Country Club, site of the LPGA Kraft Nabisco Championship (one of the four major tournaments on the LPGA Tour); and Las Colinas Country Club, site of the inaugural North Texas LPGA Shootout. Other significant golf events held at our clubs included the Web.com Midwest Classic at Nicklaus Golf Club at Lionsgate and the Insperity Invitational (Champions Tour) at The Woodlands Country Club Tournament Course.

Regulation

Environmental, Health and Safety. Our facilities and operations are subject to a number of environmental laws. As a result, we may be required to incur costs to comply with the requirements of these laws, such as those relating to water resources, discharges to air, water and land, the handling and disposal of solid and hazardous waste, and the cleanup of properties affected by regulated materials. Under these and other environmental requirements, we may be required to investigate and clean up hazardous or toxic substances or chemical releases from current or formerly owned or operated facilities. Environmental laws typically impose cleanup responsibility and liability without regard to whether the relevant entity knew of or caused the presence of the contaminants. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under such laws, and from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Our facilities are also subject to risks associated with mold, asbestos and other indoor

19


building contaminants. The costs of investigation, remediation or removal of regulated materials may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use, transfer or obtain financing for our property. We may be required to incur costs to remediate potential environmental hazards, mitigate environmental risks in the future, or comply with other environmental requirements.

In addition, in order to improve, upgrade or expand some of our golf and country clubs, we may be subject to environmental review under the National Environmental Policy Act and, for projects in California, the California Environmental Quality Act. Both acts require that a specified government agency study any proposal for potential environmental impacts and include in its analysis various alternatives. Our improvement proposals may not be approved or may be approved with modifications that substantially increase the cost or decrease the desirability of implementing the project.

We are also subject to regulation by the United States Occupational Safety and Health Administration and similar health and safety laws in other jurisdictions. These regulations impact a number of aspects of operations, including golf course maintenance and food handling and preparation.

Zoning and Land Use. The ownership and operation of our facilities, as well as our re-development and expansion of clubs, subjects us to federal, state and local laws regulating zoning, land development, land use, building design and construction, and other real estate-related laws and regulations.

Access. Our facilities and operations are subject to the Americans with Disabilities Act of 1990, as amended by the ADA Amendments Act of 2008 (the “ADA”). The rules implementing the ADA have been further revised by the ADA Amendments Act of 2008, which included additional compliance requirements for golf facilities and recreational areas. The ADA generally requires that we remove architectural barriers when readily achievable so that our facilities are made accessible to people with disabilities. Noncompliance could result in imposition of fines or an award of damages to private litigants. Federal legislation or regulations may further amend the ADA to impose more stringent requirements with which we would have to comply.

Other. We are also subject to various local, state and federal laws, regulations and administrative practices affecting our business. We must comply with provisions regulating health and safety standards, equal employment, minimum wages, and licensing requirements and regulations for the sale of food and alcoholic beverages.

Employees

As of March 5, 2015, we had approximately 16,900 employees, of which 13,500 are located at our golf and country clubs, 3,050 are located at our business, sports and alumni clubs and 350 are part of our corporate and regional staff. Other than a small group of golf course maintenance staff at two of our clubs, all of our employees are non-union. We believe we have a good working relationship with our employees and have yet to experience an interruption of business as a result of labor disputes.

Insurance

We believe that our properties are covered by adequate property, casualty and commercial liability insurance with what we believe are commercially reasonable deductibles and limits for our industry. We also carry other insurance, including directors and officers liability insurance, fiduciary coverage and workers’ compensation. Changes in the insurance market over the past few years have increased the risk that affordable insurance may not be available to us in the future. While our management believes that our insurance coverage is adequate, if we were held liable for amounts and claims exceeding the limits of our insurance coverage or outside the scope of our insurance coverage, our business, results of operations and financial condition could be materially and adversely affected.

Intellectual Property

We have registered or claim ownership of a variety of trade names, service marks, copyrights and trademarks for use in our business, including, but not limited to: Associate Club; Associate Clubs; Building Relationships and Enriching Lives; Canongate Golf Clubs; ClubCater; ClubCorp; ClubCorp Charity Classic; ClubCorp Resorts; Club Corporation of America; ClubLine; Club Resorts; Club Without Walls; Fastee Course; Membercard; My Club. My Community. My World.; Private Clubs; The Society; The World Leader in Private Clubs; and Warm Welcomes, Magic Moments and Fond Farewells. While there can be no assurance that we can maintain registration or ownership for the marks, we are not currently aware of any facts that would negatively impact our continuing use of any of the above trade names, service marks or trademarks. We consider our intellectual property rights to be important to our business and actively defend and enforce them.

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Geographic Information

Financial information about geographic area is set forth in Note 14 of the Notes to Consolidated Financial Statements under Part II, Item 8: “Financial Statements” of this annual report on Form 10-K.

Available Information

We file with or furnish to the Securities and Exchange Commission (“SEC”) reports, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”). These reports are available free of charge on our corporate website (www.clubcorp.com) as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. From time to time, we use our corporate website as a channel of distribution for material information about the Company. Investors and other interested persons should routinely check our website for such information. Information provided on our website is not part of this Form 10-K or our other filings. Copies of any materials we file with the SEC can be obtained at www.sec.gov or at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the public reference room is available by calling the SEC at 1-800-SEC-0330.

ITEM 1A.    RISK FACTORS

Risks Relating to Our Business
We may not be able to attract and retain club members, which could harm our business, financial condition and results of operations.

Our success depends on our ability to attract and retain members at our clubs and maintain or increase usage of our facilities. Changes in consumer tastes and preferences, particularly those affecting the popularity of golf and private dining, and other social and demographic trends could adversely affect our business. Historically, we have experienced varying levels of membership enrollment and attrition rates and, in certain areas, decreased levels of usage of our facilities. Significant periods where attrition rates exceed enrollment rates or where facilities usage is below historical levels would have a material adverse effect on our business, results of operations and financial condition. For fiscal year 2014, 46.0% of our total revenues came from recurring membership dues. For the same period, 22.7% of our business, sports and alumni club memberships (approximately 13,800 memberships) and 16.3% of our golf and country club memberships (approximately 14,000 memberships) were resigned, excluding any resignations from Sequoia Golf memberships. After the addition of new memberships, on a same store basis, our business, sports and alumni clubs experienced a 0.6% net gain in memberships, excluding managed clubs and a 1.3% net gain in memberships for managed clubs. Our golf and country clubs, also on a same store basis, experienced a 0.9% net gain in memberships, excluding managed clubs and a 6.2% net gain in memberships for managed clubs. If we cannot attract new members or retain our existing members, our business, financial condition and results of operations could be harmed.

Changes in consumer spending patterns, particularly discretionary expenditures for leisure, recreation and travel, are susceptible to factors beyond our control that may reduce demand for our products and services.

Consumer spending patterns, particularly discretionary expenditures for leisure, recreation and travel, are particularly susceptible to factors beyond our control that may reduce demand for our products and services, including demand for memberships, golf, vacation and business travel and food and beverage sales. These factors include:

•
low consumer confidence;

•
depressed housing prices;

•
changes in the desirability of particular locations, residential neighborhoods, office space or travel patterns of members;

•
decreased corporate budgets and spending and cancellations, deferrals or renegotiations of group business (e.g., industry conventions);

•
natural disasters, such as earthquakes, tornadoes, hurricanes, wildfires and floods;


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•
outbreaks of pandemic or contagious diseases, such as avian or swine flu;

•
war, terrorist activities or threats and heightened travel security measures instituted in response to these events;

•
the financial condition of the airline, automotive and other transportation-related industries and its impact on travel; and

•
volatility in energy prices and the impact on consumers employed within energy-related industries.

These factors and other global, national and regional conditions can adversely affect, and from time to time have adversely affected, individual properties, particular regions or our business as a whole. For example, during the recession, many businesses dramatically decreased the number of corporate events and meetings hosted at facilities such as convention centers, hotels, business clubs, golf clubs, resorts and retreats in an effort to cut costs and in response to public opinion relating to excess corporate spending, which negatively impacted the amount of business for such facilities, including certain of our facilities. Any one or more of these factors could limit or reduce demand or the rates our clubs are able to charge for memberships or services, which could harm our business and results of operations.

Economic recessions or downturns could negatively affect our business, financial condition and results of operations.

A substantial portion of our revenue is derived from discretionary or leisure spending by our members and guests and such spending can be particularly sensitive to changes in general economic conditions. The recession led to slower economic activity, increased unemployment, concerns about inflation and energy costs, decreased business and consumer confidence, reduced corporate profits and capital spending, adverse business conditions and lower levels of liquidity in many financial markets, which negatively affected our business, financial condition and results of operations. For example, for fiscal years 2014, 2013, 2012, 2011 and 2010, we experienced annualized attrition (i.e., members who resign) in membership count, excluding the impact of Sequoia Golf memberships, of 16.3%, 16.3%, 16.4%, 15.9% and 17.2%, respectively, in our golf and country clubs and 22.7%, 22.8%, 22.9%, 23.5%, and 24.2%, respectively, in our business, sports and alumni clubs. A renewed economic downturn in the United States may lead to increases in unemployment and loss of consumer confidence which may translate into resignations of existing members, a decrease in the rate of new memberships and reduced spending by our members. As a result, our business, financial condition and results of operations may be materially adversely affected by a renewed economic downturn.

Our businesses will remain susceptible to future economic recessions or downturns, and any significant adverse shift in general economic conditions, whether local, regional, national or global, may have a material adverse effect on our business, financial condition and results of operations. During such periods of adverse economic conditions, we may be unable to increase membership dues or the price of our products and services and may experience increased rates of resignations of existing members, a decrease in the rate of new member enrollment or reduced spending by our members, any of which may result in, among other things, decreased revenues and financial losses. In addition, during periods of adverse economic conditions, we may have difficulty accessing financial markets or face increased funding costs, which could make it more difficult or impossible for us to obtain funding for additional investments and harm our results of operations.

Unusual weather patterns and extreme weather events, as well as periodic and quasi-periodic weather patterns, such as those commonly associated with the El Niño/La Niña-Southern Oscillation, could adversely affect the value of our golf courses or negatively impact our business and results of operations.

Our operations and results are susceptible to non-seasonal and severe weather patterns. Extreme weather events or patterns in a given region, such as heavy rains, prolonged snow accumulations, extended heat waves and high winds, could reduce our revenues for that region by interrupting activities at affected properties which could negatively impact our business and results of operations.

One factor that specifically affects our real estate investments in golf courses is the availability of water. Turf grass conditions must be satisfactory to attract play on our golf courses, which requires significant amounts of water. Our ability to irrigate a golf course could be adversely impacted by a drought or other cause of water shortage, such as the recent drought affecting the southern and western United States and associated government imposed water restrictions. A severe drought of extensive duration experienced in regard to a large number of properties could adversely affect our business and results of operations.

We also have a high concentration of golf clubs in Texas, Georgia, California and Florida, which can experience periods of unusually hot, cold, dry or rainy weather due to a variety of periodic and quasi-periodic global climate phenomenon, such as the El Niño/La Niña-Southern Oscillation. For example, during 2011, we incurred $0.4 million, or 10.0%, higher golf

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course maintenance utility expenses for the fiscal period starting on June 15, 2011 and ending on September 6, 2011 compared to the corresponding fiscal period in 2010, due primarily to unusually hot and severe drought conditions in certain portions of the southern United States. If these phenomenon and their impacts on weather patterns persist for extended periods of time, our business and results of operations could be harmed.

We could be required to make material cash outlays in future periods if the number of initiation deposit refund requests we receive materially increases or if we are required to surrender unclaimed initiation deposits to state authorities under applicable escheatment laws.

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. Initiation fees, which are more typical for our business clubs and mid-market golf and country clubs, are generally nonrefundable. In contrast to initiation fees, initiation deposits, which are typical in our more prestigious golf and country clubs, paid by members upon joining one of our clubs are fully refundable after a fixed number of years, typically 30 years, and upon the occurrence of other contract-specific conditions. Historically, only a small percentage of initiation deposits eligible to be refunded have been requested by members. As of December 30, 2014, the amount of initiation deposits that are eligible to be refunded currently within the next 12 months is $135.6 million on a gross basis. When refunds are made, we must fund the payment of such amounts from our available cash. If the number of refunds dramatically increases in the future, our financial condition could suffer and the funding requirement for such refunds could strain our cash on hand or otherwise force us to reduce or delay capital expenditures, reduce or eliminate planned dividend payments, sell assets or operations or seek additional capital in order to raise the cash necessary to make such refunds. As of December 30, 2014, the discounted value of initiation deposits that may be refunded in future years (not including the next 12 months) is $203.1 million. For more information on our initiation deposit amounts, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”.

While we will make a refund to any member whose initiation deposit is eligible to be refunded, we may be subject to various states’ escheatment laws with respect to initiation deposits that have not been refunded to members. All states have escheatment laws and generally require companies to remit to the state cash in an amount equal to unclaimed and abandoned property after a specified period of dormancy, which is typically 3 to 5 years. We currently do not remit to states any amounts relating to initiation deposits that are eligible to be refunded to members based upon our interpretation of the applicability of such laws to initiation deposits. The analysis of the potential application of escheatment laws to our initiation deposits is complex, involving an analysis of constitutional and statutory provisions and contractual and factual issues. While we do not believe that initiation deposits must be escheated, we may be forced to remit such amounts if we are challenged and fail to prevail in our position.

In addition, most of the states in which we conduct business have hired third-party auditors to conduct unclaimed and abandoned property audits of our operations. Certain categories of property, such as uncashed payroll checks or uncashed vendor payments, are escheatable in the ordinary course of business and we have entered into closing agreements with the majority of the states regarding the escheatment of cash amounts for such categories and have remitted these amounts to the respective states; however, the audits have not been terminated. We have been in ongoing communication with several states represented by such auditors, who are demanding additional and detailed information and records related to initiation deposits. If a state were to initiate legal proceedings under its applicable laws in order to have us remit initiation deposits eligible to be refunded to certain members that have not been previously refunded to such members during the state's dormancy period, we expect to vigorously defend our position on the matter. However, if we are ultimately unsuccessful in arguing our right to continue holding such amounts, we may be forced to pay such amounts to the claiming state(s). While we believe we have strong arguments against any potential claims for the escheatment of unclaimed initiation deposits made under state escheatment laws, if a material portion of the initiation deposits otherwise eligible to be refunded were awarded or remitted to any state(s), our financial condition could be materially and adversely affected and we may be required to reduce or delay capital expenditures, reduce or eliminate planned dividend payments, sell assets or operations or seek additional capital in order to raise the corresponding cash required to satisfy such amounts. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet such obligations or that these actions would be permitted under the terms of our existing or future debt agreements.

Our ability to attract and retain members depends heavily on successfully locating our clubs in suitable locations, and any impairment of a club location, including any decrease in member or customer traffic, could impact our results of operations.

Our approach to identifying clubs in suitable locations typically favors locations where our facilities are or can become a part of the community. As a result, our clubs are typically located near urban and residential centers that we believe are consistent with our members’ lifestyle choices. Memberships and sales at these locations are derived, in part, from proximity to key local landmarks, business centers, facilities and residential areas. We may be forced to close clubs or club locations may become unsuitable due to, and such clubs’ results of operations may be harmed by, among other things:

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•
economic downturns in a particular area;

•
competition from nearby recreational or entertainment venues;

•
changing demographics in a particular market or area;

•
changing lifestyle choices of consumers in a particular market; and

•
the closing or declining popularity of other businesses and entertainment venues located near our clubs.

Changes in areas around our club locations could render such locations unsuitable and cause memberships at such clubs to decline, which would harm our results of operations.

We have significant operations concentrated in certain geographic areas, and any disruption in the operations of our clubs in any of these areas could harm our results of operations.

As of December 30, 2014, we operated multiple clubs in several metropolitan areas, including 33 in the greater Atlanta, Georgia region, 19 near Houston, Texas, 17 in and around Dallas, Texas and 10 in the greater Los Angeles, California region. As a result, any prolonged disruption in the operations of our clubs in any of these markets, whether due to technical difficulties, power failures or destruction or damage to the clubs as a result of a natural disaster, fire or any other reason, could harm our results of operations or may result in club closures. In addition, some of the metropolitan areas where we operate clubs could be disproportionately affected by regional economic conditions, such as declining home prices and rising unemployment. Concentration in these markets increases our exposure to adverse developments related to competition, as well as economic and demographic changes in these areas.

Seasonality may adversely affect our business and results of operations.

Our quarterly results fluctuate as a result of a number of factors. Usage of our golf and country club facilities declines significantly during the first and fourth quarters, when colder temperatures and shorter days reduce the demand for outdoor activities. Our business clubs typically generate a greater share of their annual revenues in the fourth quarter, which includes the holiday and year-end party season. In addition, the first, second and third fiscal quarters each consist of twelve weeks, whereas the fourth quarter consists of sixteen or seventeen weeks. As a result of these factors, we usually generate a disproportionate share of our revenues and cash flows in the second, third and fourth quarters of each year and have lower revenues and cash flows in the first quarter. This seasonality means our business and results of operations are disproportionately vulnerable to the occurrence of other risks during the periods of increased member usage due to the larger percentage of revenues we generate during such times.

Competition in the industry in which we compete could have a material adverse effect on our business and results of operations.

We operate in a highly competitive industry, and compete primarily on the basis of reputation, featured facilities, location, quality and breadth of member product offerings and price. As a result, competition for market share in the industry in which we compete is significant. In order to succeed, we must take market share from local and regional competitors and sustain our membership base in the face of increasing recreational alternatives available to our existing and prospective members.

Our business clubs compete on a local and regional level with restaurants and other business and social clubs. The number and variety of competitors in this business varies based on the location and setting of each facility, with some situated in intensely competitive upscale urban areas characterized by frequent innovations in the products and services offered by competing restaurants and other business, dining and social clubs. In addition, in most regions, these businesses are in constant flux as new restaurants and other social and meeting venues open or expand their amenities. As a result of these characteristics, the supply in a given region often exceeds the demand for such facilities, and any increase in the number or quality of restaurants and other social and meeting venues, or the products and services they provide, in a given region could significantly impact the ability of our clubs to attract and retain members, which could harm our business and results of operations.

Our golf and country club facilities compete on a local and regional level with other country clubs and golf facilities. The level of competition in the golf and country club business varies from region to region and is subject to change as existing facilities are renovated or new facilities are developed. An increase in the number or quality of similar clubs and other facilities

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in a particular region could significantly increase competition, which could have a negative impact on our business and results of operations.

Our results of operations also could be affected by a number of additional competitive factors, including the availability of, and demand for, alternative venues for recreational pursuits, such as multi-use sports and athletic centers. In addition, member-owned and individual privately-owned clubs may be able to create a perception of exclusivity that we have difficulty replicating given the diversity of our portfolio and the scope of our holdings. To the extent these alternatives succeed in diverting actual or prospective members away from our facilities or affect our membership rates, our business and results of operations could be harmed.

Our future success is substantially dependent on the continued service of our senior management and key employees.

The loss of the services of our senior management could make it more difficult to successfully operate our business and achieve our business goals. We also may be unable to retain existing management and key employees, including club managers, membership sales and support personnel, which could result in harm to our member and employee relationships, loss of expertise or know-how and unanticipated recruitment and training costs. In addition, we have not obtained key man life insurance policies for any of our senior management team. As a result, it may be difficult to cover the financial loss if we were to lose the services of any members of our senior management team. The loss of members of our senior management team or key employees could have an adverse effect on our business and results of operations.

Our large workforce subjects us to risks associated with increases in the cost of labor as a result of increased competition for employees, higher employee turnover rates and required wage increases and health benefit coverage, lawsuits or labor union activity.

Labor is our primary property‑level operating expense. As of December 30, 2014, we employed approximately 15,800 hourly-wage and salaried employees at our clubs and corporate offices. For fiscal year 2014, labor-related expense accounted for 48.6% of our total operating expense. We may face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates, or increases in the federal or state minimum wage or other employee benefit costs. For example, if the federal minimum wage were increased significantly, we would have to assess the financial impact on our operations as we have a large population of hourly employees. If labor-related expenses increase, our operating expense could increase and our business, financial condition and results of operations could be harmed.

We are subject to the Fair Labor Standards Act and various federal and state laws governing such matters as minimum wage requirements, overtime compensation and other working conditions, citizenship requirements, discrimination and family and medical leave. In recent years, a number of companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits may be threatened or instituted against us from time to time, and we may incur substantial damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations.

From time to time, we have also experienced attempts to unionize certain of our non-union employees. While these efforts have achieved only limited success to date, we cannot provide any assurance that we will not experience additional and more successful union activity in the future. In addition, future legislation could amend the National Labor Relations Act to make it easier for unions to organize and obtain collectively bargained benefits, which could increase our operating expenses and negatively affect our financial condition and results of operations.

Increases in our cost of goods, rent, water, utilities and taxes could reduce our operating margins and harm our business, financial condition and results of operations.

Increases in operating costs due to inflation and other factors may not be directly offset by increased revenue. Our most significant operating costs, other than labor, are our cost of goods, water, utilities, rent and property taxes. Many, and in some cases all, of the factors affecting these costs are beyond our control.

Our cost of goods such as food and beverage costs account for a significant portion of our total property-level operating expense. Cost of goods represented 14.9% of our total operating expense for fiscal year 2014. While we have not experienced material increases in the cost of goods, if our cost of goods increased significantly and we are not able to pass along those increased costs to our members in the form of higher prices or otherwise, our operating margins would suffer, which would have an adverse effect on our business, financial condition and results of operations.


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In addition, rent accounts for a significant portion of our property-level operating expense. Rent expense represented 3.9% of our total operating expense for fiscal year 2014. Significant increases in our rent costs would increase our operating expense and our business, financial condition and results of operations may suffer.

Utility costs, including water, represented 5.5% of our total operating expense for fiscal year 2014. The prices of utilities are volatile, and shortages sometimes occur. In particular, municipalities are increasingly placing restrictions on the use of water for golf course irrigation and increasing the cost of water. Significant increases in the cost of our utilities, or any shortages, could interrupt or curtail our operations and lower our operating margins, which could have a negative impact on our business, financial condition and results of operations.

Each of our properties is subject to real and personal property taxes. During fiscal year 2014, we paid approximately $14.2 million in property taxes. The real and personal property taxes on our properties may increase or decrease as tax rates change and as our clubs are assessed or reassessed by taxing authorities. If real and personal property taxes increase, our financial condition and results of operations may suffer.

We have concentrated our investments in golf-related and business real estate and facilities, which are subject to numerous risks, including the risk that the values of our investments may decline if there is a prolonged downturn in real estate values.

Our operations consist almost entirely of golf-related and business club facilities that encompass a large amount of real estate holdings. Accordingly, we are subject to the risks associated with holding real estate investments. A prolonged decline in the popularity of golf-related or business club services, such as private dining, could adversely affect the value of our real estate holdings and could make it difficult to sell facilities or businesses.

Our real estate holdings (including our long-term leaseholds) are subject to risks typically associated with investments in real estate. The investment returns available from equity investments in real estate depend in large part on the amount of income earned, expenses incurred and capital appreciation generated by the related properties. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, real estate, insurance, zoning, tax and eminent domain laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and time-consuming to expand, modify or renovate older properties. Under eminent domain laws, governments can take real property. Sometimes this taking is for less compensation than the owner believes the property is worth. Any of these factors could have an adverse impact on our business, financial condition or results of operations.

The illiquidity of real estate may make it difficult for us to dispose of one or more of our properties or negatively affect our ability to profitably sell such properties.

We may from time to time decide to dispose of one or more of our real estate assets. Because real estate holdings generally, and clubs like ours in particular, are relatively illiquid, we may not be able to dispose of one or more real estate assets on a timely basis. In some circumstances, sales may result in investment losses which could adversely affect our financial condition. The illiquidity of our real estate assets could mean that we continue to operate a facility that management has identified for disposition. Failure to dispose of a real estate asset in a timely fashion, or at all, could adversely affect our business, financial condition and results of operations.

Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to plan for and react to changes in the economy, our industry or our business and prevent us from meeting our indebtedness obligations.

As of December 30, 2014, we were significantly leveraged and our total debt balance was approximately $983.2 million. Our substantial degree of leverage could have important consequences for our investors, including the following:

•
it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, product development, debt service requirements, acquisitions or general corporate or other purposes;

•
a substantial portion of our cash flows from operations is dedicated to the payment of principal and interest on our indebtedness and will not be available for other purposes, including our operations, strategic initiatives, capital expenditures, dividends, acquisitions and other business opportunities;

•
the debt service requirements of our indebtedness could make it more difficult for us to satisfy our financial obligations;


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•
certain of our borrowings, including borrowings under the secured credit facilities entered into by our subsidiary ClubCorp Club Operations, Inc. (“Operations”) on November 30, 2010, as amended (the “Secured Credit Facilities”), are at variable rates of interest, exposing us to the risk of increased interest rates;

•
it may limit our flexibility in planning for, or our ability to adjust to, changes in our business or the industry in which we operate, and place us at a competitive disadvantage compared to our competitors that have less debt; and

•
we may be vulnerable to a downturn in general economic conditions or in our business, or we may be unable to carry out capital spending that is important to our growth.

We may not be able to generate sufficient cash to service all of our indebtedness and be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot guarantee that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, reduce or eliminate planned dividend payments, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot guarantee that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements. In the absence of the requisite operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The credit agreement governing the Secured Credit Facilities restricts our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. If we cannot make scheduled payments on our debt, we will be in default and, as a result:

•
our debt holders could declare all outstanding principal and interest to be due and payable;

•
the lenders under the Secured Credit Facilities could terminate their commitments to lend us money and foreclose against the assets securing their borrowings; and

•
we could be forced into bankruptcy or liquidation.

Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks described above.

While the terms of the credit agreement governing the Secured Credit Facilities limit, but do not fully prohibit us from doing so, we may be able to incur substantial additional indebtedness in the future. As of December 30, 2014, $111.3 million was available for borrowing under the revolving credit facility under the Secured Credit Facilities. The credit agreement governing the Secured Credit Facilities also provides for, subject to lender participation, additional borrowings in revolving or term loan commitments if certain covenants are met. If new debt is added to our current debt levels, the related risks that we now face could intensify.

Restrictive covenants may adversely affect our operations.

The credit agreement governing the Secured Credit Facilities contains various covenants that limit our ability to, among other things:

•
incur or guarantee additional indebtedness;

•
pay dividends or distributions on capital stock or redeem or repurchase capital stock;

•
make or hold any investments (including acquisitions, loans and advances);

•
sell stock of our subsidiaries;

•
conduct sales and other dispositions of property and assets;


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•
create, incur, assume or suffer to exist any liens on any of our assets;

•
enter into transactions with affiliates; and

•
enter into mergers or consolidations.

In addition, the restrictive covenants in the credit agreement governing the Secured Credit Facilities requires us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot guarantee that we will meet them. A breach of any of these covenants could result in a default under the credit agreement governing the Secured Credit Facilities. Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the Secured Credit Facilities could proceed against the collateral granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under the Secured Credit Facilities. If the lenders under the Secured Credit Facilities accelerate the repayment of borrowings, and we cannot guarantee that we will have sufficient assets to repay the Secured Credit Facilities and our other indebtedness, or borrow sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.

Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Certain of our borrowings, primarily borrowings under the Secured Credit Facilities, are subject to variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. As of December 30, 2014, the interest rate on the term loan facility under the Secured Credit Facilities was the higher of (i) 4.5% (“Floor”) or (ii) an elected LIBOR plus a margin of 3.5% (less the impact of an interest rate cap agreement, expiring in May 2015, that limits our exposure on the elected LIBOR to 1.0% on a notional amount of $200.0 million). This term loan facility is effectively subject to the Floor until LIBOR exceeds 1.0%. As of December 30, 2014, LIBOR was below 1.0%, such that a hypothetical 0.5% increase in LIBOR applicable to this term loan facility would not result in an increase in interest expense.

Timing, budgeting and other risks could delay our efforts to develop, redevelop or renovate the properties that we own, or make these activities more expensive, which could reduce our profits or impair our ability to compete effectively.

We must regularly expend capital to construct, maintain and renovate the properties that we own in order to remain competitive, pursue our business strategies, maintain and build the value and brand standards of our properties and comply with applicable laws and regulations. In addition, we must periodically upgrade or replace the furniture, fixtures and equipment necessary to operate our business. These efforts are subject to a number of risks, including:

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construction delays or cost overruns (including labor and materials) that may increase project costs;

•
obtaining zoning, occupancy and other required permits or authorizations;

•
governmental restrictions on the size or kind of development;

•
force majeure events, including earthquakes, tornadoes, hurricanes or floods;

•
design defects that could increase costs; and

•
environmental concerns which may create delays or increase costs.

These projects create an ongoing need for cash, which if not generated by operations or otherwise obtained is subject to the availability of credit in the capital markets. Our ability to spend the money necessary to maintain the quality of our properties is significantly impacted by the cost and availability of capital, over which we have little control.

The timing of capital improvements can affect property performance, including membership sales, retention and usage, particularly if we need to close golf courses or a significant number of other facilities, such as ballrooms, meeting spaces or dining areas. Moreover, the investments that we make may fail to improve the performance of the properties in the manner that we expect.


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If we are not able to begin operating properties as scheduled, or if investments harm or fail to improve our performance, our ability to compete effectively would be diminished and our business and results of operations could be adversely affected.

We may seek to expand through acquisitions of and investments in other businesses and properties, or through alliances, which could disrupt our ongoing business, divert our management and adversely affect our results of operations.

We continually evaluate opportunities to expand our business through strategic and complementary acquisitions of attractive properties. In many cases, we will be competing for these opportunities with third parties that may have substantially greater financial resources than we do. Acquisitions or investments in businesses, properties or assets as well as alliances with third parties are subject to risks that could affect our business, including risks related to:

•
spending cash, incurring debt, or issuing equity;
•
assuming contingent liabilities;
•
creating additional expenses; or
•
diversion of management’s time and attention.
We cannot assure you that we will be able to identify opportunities or complete transactions on commercially reasonable terms or at all, or that we will actually realize any anticipated benefits from such acquisitions, investments or alliances. Similarly, we cannot assure you that we will be able to obtain financing for acquisitions or investments on attractive terms or at all, or that the ability to obtain financing will not be restricted by the terms of the Secured Credit Facilities or other indebtedness we may incur.

The success of any such acquisitions or investments will also depend, in part, on our ability to integrate the acquisition or investment with our existing operations. We may experience difficulty with integrating acquired businesses, properties or other assets into our operations as planned, including difficulties relating to:

•
diversion of management time and focus from operating our business to integration challenges;
•
geographic diversity;
•
integrating information technology and other systems and personnel;
•
retaining members; and
•
unanticipated liabilities or litigation.
Our inability to address these difficulties or other risks encountered in connection with any acquisitions and investments, including our acquisition of Sequoia Golf, could cause us to fail to realize the anticipated synergies and benefits of such acquisitions or investments, and materially harm our business, financial condition and results of operations.

We depend on third parties in our joint ventures and collaborative arrangements, which may limit our ability to manage risk.

As of December 30, 2014, we owned or operated nine properties or businesses in partnership with other entities, including joint ventures relating to six of our golf facilities, one of our business clubs and certain realty interests which we define as “Non-Core Development Entities”. We may in the future enter into further joint ventures or other collaborative arrangements related to additional properties. Our investments in these joint ventures may, under certain circumstances, involve risks not otherwise present in our business, including the risk that our partner may become bankrupt, the risk that we may not be able to sell or dispose of our interest as a result of buy/sell rights that may be imposed by the joint venture agreement, the risk that our partner may have economic or other interests or goals that are inconsistent with our interests and goals and the risk that our partner may be able to veto actions which may be in our best interests. Consequently, actions by a partner might subject clubs owned by the joint venture to additional risk. Additionally, we may be unable to take action without the approval of our partners, or our partners could take actions binding on the joint venture without our consent. Any of the foregoing could have a negative impact on the joint venture or its results of operations, and subsequently on our business or results of operations.


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Our insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.

We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to businesses in our industry. We carry commercial liability, fire, flood, earthquake, catastrophic wind and extended insurance coverage, as applicable, from solvent insurance carriers on all of our properties. We believe that the policy specifications and insured limits are adequate for foreseeable losses with terms and conditions that are reasonable and customary for similar properties and that all of our existing golf and business clubs are insured within industry standards. Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we can obtain in the future or restrict our ability to buy insurance coverage at reasonable rates. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any deductible and/or self-insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.

In the event of a substantial loss, the insurance coverage that we carry may not be sufficient to pay the full value of our financial obligations or the replacement cost of any lost investment. As a result, we could lose some or all of the capital we have invested in a property, as well as the anticipated future revenues from the property. Additionally, we could remain obligated for performance guarantees in favor of third-party property owners or for their debt or other financial obligations and we may not have sufficient insurance to cover awards of damages resulting from our liabilities. If the insurance that we carry does not sufficiently cover damages or other losses, our business, financial condition and results of operations could be harmed.

In addition, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. For example, we maintain business interruption insurance, but there can be no assurance that the coverage for a severe or prolonged business interruption at one or more of our clubs would be adequate. Moreover, we believe that insurance covering liability for violations of wage and hour laws is generally not available. These losses, if they occur, could have a material adverse effect on our business, financial condition and results of operations.

Accidents or injuries in our clubs or in connection with our operations may subject us to liability, and accidents or injuries could negatively impact our reputation and attendance, which would harm our business, financial condition and results of operations.

There are inherent risks of accidents or injuries at our properties or in connection with our operations, including injuries from premises liabilities such as slips, trips and falls. If accidents or injuries occur at any of our properties, we may be held liable for costs related to the injuries. We maintain insurance of the type and in the amounts that we believe are commercially reasonable and that are available to businesses in our industry, but there can be no assurance that our liability insurance will be adequate or available at all times and in all circumstances. There can also be no assurance that the liability insurance we have carried in the past was adequate or available to cover any liability related to previous incidents. Our business, financial condition and results of operations could be harmed to the extent claims and associated expenses resulting from accidents or injuries exceed our insurance recoveries.

Adverse litigation judgments or settlements could impair our financial condition and results of operations or limit our ability to operate our business.

In the normal course of our business, we are often involved in various legal proceedings. The outcome of these proceedings cannot be predicted. If any of these proceedings were to be determined adversely to us or a settlement involving a payment of a material sum of money were to occur, there could be a material adverse effect on our financial condition and results of operations. Additionally, we could become the subject of future claims by third parties, including current or former members, guests who use our properties, our employees or regulators. Any significant adverse litigation judgments or settlements could limit our ability to operate our business and negatively impact our financial condition and results of operations.


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The failure to comply with regulations relating to public facilities or the failure to retain licenses relating to our properties may harm our business and results of operations.

Our business is subject to extensive federal, state and local government regulation in the various jurisdictions in which our clubs are located, including regulations relating to alcoholic beverage control, public health and safety, environmental hazards and food safety. Alcoholic beverage control regulations require each of our clubs to obtain licenses and permits to sell alcoholic beverages on the premises. The failure of a club to obtain or retain its licenses and permits would adversely affect that club’s operations and profitability. We may also be subject to dram shop statutes in certain states, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Even though we are covered by general liability insurance, a settlement or judgment against us under a dram shop lawsuit in excess of liability coverage could have a material adverse effect on our operations.

We are also subject to the ADA which, among other things, may require certain renovations to our facilities to comply with access and use requirements. A determination that we are not in compliance with the ADA or any other similar law or regulation could result in the imposition of fines or an award of damages to private litigants. While we believe we are operating in substantial compliance, and will continue to remove architectural barriers in our facilities when readily achievable, in accordance with current applicable laws and regulations, there can be no assurance that our expenses for compliance with these laws and regulations will not increase significantly and harm our business, financial condition and results of operations.

Businesses operating in the private club industry are also subject to numerous other federal, state and local governmental regulations related to building and zoning requirements and the use and operation of clubs, including changes to building codes and fire and life safety codes, which can affect our ability to obtain and maintain licenses relating to our business and properties. If we were required to make substantial modifications at our clubs to comply with these regulations, our business, financial condition and results of operations could be negatively impacted.

Our operations and our ownership of property subject us to environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.

Our properties and operations are subject to a number of environmental laws. As a result, we may be required to incur costs to comply with the requirements of these laws, such as those relating to water resources, discharges to air, water and land; the handling and disposal of solid and hazardous waste; and the cleanup of properties affected by regulated materials. Under these and other environmental requirements, we may be required to investigate and clean up hazardous or toxic substances or chemical releases from current or formerly owned or operated facilities. Environmental laws typically impose cleanup responsibility and liability without regard to whether the relevant entity knew of or caused the presence of the contaminants. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under such laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Our club facilities are also subject to risks associated with mold, asbestos and other indoor building contaminants. The costs of investigation, remediation or removal of regulated materials may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use, transfer or obtain financing regarding our property. We may be required to incur costs to remediate potential environmental hazards, mitigate environmental risks in the future, or comply with other environmental requirements.

In addition, some projects to improve, upgrade or expand our golf clubs may be subject to environmental review under the National Environmental Policy Act and, for projects in California, the California Environmental Quality Act. Both acts require that a specified government agency study any proposal for potential environmental impacts and include in its analysis various alternatives. Our improvement proposals may not be approved or may be approved with modifications that substantially increase the cost or decrease the desirability of implementing the project.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may harm our business, investments and results of operations.

We are subject to laws and regulations enacted by national, state and local governments. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time-consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have an adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, by any of the persons referred to above could have a material adverse effect on our business, investments and results of operations.


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A failure in our systems or infrastructure which maintain our internal and customer data, or those of our third-party service providers, including as a result of cyber attacks, could result in faulty business decisions or harm to our reputation or subject us to costs, fines or lawsuits.

Certain information relating to our members and guests, including personally identifiable information and credit card numbers, is collected and maintained by us, or by third-parties with which we do business or which facilitate our business activities. This information is maintained for a period of time for various business purposes, including maintaining records of member preferences to enhance our customer service and for billing, marketing and promotional purposes. We also maintain personally identifiable information about our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our members expect that we will adequately protect their personal information, and the regulations applicable to security and privacy are increasingly demanding, both in the United States and in other jurisdictions where we operate. Privacy regulation is an evolving area in which different jurisdictions (within or outside the United States) may subject us to inconsistent compliance requirements. Compliance with applicable privacy regulations may increase our operating costs or adversely impact our ability to service our members and guests and market our properties and services to our members and guests.

To date we have not experienced any material losses relating to cyber attacks, computer viruses or other systems or infrastructure failures. While we have cyber security procedures in place, given the evolving nature of these threats, there can be no assurance that we will not suffer material losses in the future due to cyber attacks or other systems or infrastructure failures. A theft, loss, misappropriation, fraudulent or unlawful use of customer, employee or company data, including in connection with one or more cyber attacks on us or one of our third-party providers, could harm our reputation, result in loss of members or business disruption or result in remedial and other costs, fines or lawsuits. In addition, non-compliance with applicable privacy regulations by us (or in some circumstances non-compliance by third-parties engaged by us) could result in fines or restrictions on our use or transfer of data. Any of these matters could adversely affect our business, financial condition or results of operations.

The operation of our business relies on technology, and operational risks may disrupt our businesses, result in losses or limit our growth.

We depend heavily upon our information technology systems in the operation of our business. We invest in and license technology and systems for property management, procurement, membership records and specialty programs. We believe that we have designed, purchased and installed appropriate information systems to support our business. There can be no assurance, however, that our information systems and technology will continue to be able to accommodate our requirements and growth, or that the cost of maintaining such systems will not increase from its current level. Such a failure to accommodate our requirements and growth, or an increase in costs related to maintaining and developing such information systems, including associated labor costs, could have a material adverse effect on us. Further, there can be no assurance that as various systems and technologies become outdated or new technology is required that we will be able to replace or introduce them as quickly as our competitors or within budgeted costs and time-frames. In addition, we rely on third-party service providers for certain aspects of our business. Additionally, while we have cyber security procedures in place, a security breach could disrupt our business and have a material adverse effect on us. Any interruption or deterioration in the performance of our information systems could impair the quality of our operations and could impact our reputation and hence adversely affect our business and limit our ability to grow.

We may be required to write-off a portion of our intangible assets with finite lives, indefinite lived intangible assets, goodwill, and/or long-lived asset balances as a result of declines in our business, results of operations, or a prolonged and severe economic recession.

We classify intangible assets into three categories: (1) intangible assets with finite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. Under accounting principles generally accepted in the United States (“GAAP”), we are required to review goodwill and indefinite lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable. GAAP also requires that we test long-lived assets and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”. Declines in our business, results of operations, or a severe prolonged economic downturn could result in impairment charges related to our intangible assets with finite lives, indefinite lived intangible assets, goodwill, and/or long-lived asset, which would negatively impact our results of operations.


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We are subject to tax examinations of our tax returns by the Internal Revenue Service (“IRS”) and other tax authorities. An adverse outcome of any such audit or examination by the IRS or other tax authority could have a material adverse effect on our results of operations, financial condition and liquidity.

We are subject to ongoing tax examinations of our tax returns by the IRS and other tax authorities in various jurisdictions and may be subject to similar examinations in the future. We regularly assess the likelihood of adverse outcomes resulting from ongoing tax examinations to determine the adequacy of our provision for uncertain tax positions. These assessments can require considerable estimates and judgments; for example intercompany transactions associated with provision of services and cost sharing arrangements are complex and affect our tax liabilities. 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.

In addition, 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. 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. Additionally, during fiscal year 2014, we received an audit assessment for the 2009 tax year for another Mexican subsidiary, which we have protested with the Mexican taxing authorities through the appropriate administrative channel. Subsequently, we recorded a liability 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 result of our protest of this assessment.

Management believes it is unlikely that our unrecognized tax benefits will significantly change within the next 12 months given the current status in particular of the matters currently under examination by the Mexican tax authorities. A difference in the ultimate resolution of tax uncertainties from what is currently estimated could have a material adverse effect on our operating results and financial condition.

Risks Relating to Our Capital Structure
We are controlled by affiliates of KSL, whose interests may be different than the interests of other investors.

As of December 30, 2014, affiliates of KSL beneficially owned approximately 51% of our common stock. As a result, investment funds associated with or designated by affiliates of KSL will continue to have the ability to elect members of our Board of Directors and thereby may be able to influence our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence or modification of debt by us, amendments to our amended and restated articles of incorporation and amended and restated bylaws and the entering into of extraordinary transactions, and their interests may not in all cases be aligned with your interests. In addition, KSL’s affiliates may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you. For example, KSL’s affiliates may be interested in making acquisitions that increase our indebtedness or in selling revenue-generating assets. Additionally, in certain circumstances, acquisitions of debt at a discount by purchasers that are related to a debtor can give rise to cancellation of indebtedness income to such debtor for U.S. federal income tax purposes.

KSL is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.

Our amended and restated articles of incorporation provide that none of KSL’s affiliates or any director who is not employed by us, or affiliates of such director, will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. KSL’s affiliates also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. So long as affiliates of KSL continue to own a significant amount of our combined voting power, even if such amount is less than 50%, KSL will continue to be able to influence our decisions and, so long as KSL’s affiliates collectively own at least 5% of all outstanding shares of our stock entitled to vote generally in the election of directors, they will be able to nominate individuals to our Board of Directors pursuant to our amended and restated articles of incorporation. In addition, KSL’s affiliates will be able to influence the outcome of all matters requiring stockholder approval and prevent a change of control or a change in the composition of our Board of Directors and could preclude any unsolicited acquisition of us. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of our company and ultimately might affect the market price of our common stock.


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Our stock price may experience significant volatility, and you may not be able to resell shares of our common stock at or above the price you paid, or at all, and you could lose all or part of your investment as a result.

The trading price of our common stock may be volatile. The stock market experiences significant volatility from time to time. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at or above the price you paid due to a number of factors including the following:

•
results of operations that vary from the expectations of securities analysts and investors;

•
results of operations that vary from those of our competitors;

•
changes in expectations as to our future financial performance and corporate structure, including financial estimates and investment recommendations by securities analysts and investors;

•
declines in the market prices of stocks generally;

•
strategic actions by us or our competitors;

•
announcements by us or our competitors of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments;

•
changes in general economic or market conditions or trends in our industry or markets;

•
changes in business or regulatory conditions;

•
future sales of our common stock or other securities;

•
investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives;

•
the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

•
announcements relating to litigation or regulatory investigations or actions;

•
guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

•
the sustainability of an active trading market for our stock;

•
changes in accounting principles; and

•
other events or factors, including those resulting from natural disasters, war, acts of terrorism or responses to these events.

These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

We cannot assure you that we will continue to declare and pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

In December 2013, our Board of Directors adopted a policy to pay, subject to the satisfaction of certain conditions and the availability of funds, a regular quarterly cash dividend at an indicated annual rate of $0.48 per share of common stock, subject to quarterly declaration. On December 3, 2014, our Board of Directors approved an 8% increase in the quarterly dividend, resulting in an indicated annual dividend of $0.52 per share of common stock. The payment of such quarterly dividends and any other future dividends will be at the discretion of our Board of Directors and is subject to our compliance

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with applicable law, and depends on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements and in any preferred stock, business prospects and other factors that our Board of Directors may deem relevant. There can be no assurance that we will continue to pay any dividend in the future. If we do not pay dividends, the price of our common stock must appreciate for investors to realize a gain on their investment in ClubCorp. This appreciation may not occur and our stock may in fact depreciate in value.

If securities analysts do not publish research or reports about our business or if they downgrade our stock or our industry, our stock price and trading volume could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business or industry. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.

The future sale of shares of our common stock in the public market, or the perception that such sales could occur, including under our shelf registration statement on Form S-3 declared effective on October 31, 2014, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell securities in the future at a time and at a price that we deem appropriate.

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of securities in connection with investments or acquisitions may result in dilution to our shareholders.

Our amended and restated articles of incorporation designate the Eighth Judicial District Court of Clark County, Nevada, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and therefore limit our stockholders’ ability to choose a forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated articles of incorporation provide that, to the fullest extent permitted by law, and unless we consent to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada shall be the sole and exclusive forum for any (i) derivative action or proceeding brought in the name or right of the corporation or on its behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to the corporation or any of our stockholders, (iii) any action arising or asserting a claim arising pursuant to any provision of Chapters 78 or 92A of the Nevada Revised Statutes (“NRS”) or any provision of our articles of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our articles of incorporation or bylaws or (v) any action asserting a claim governed by the internal affairs doctrine. Our amended and restated articles of incorporation further provide that any person purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed, to the fullest extent permitted by law, to have notice of and consented to the foregoing provision.

We believe the choice-of-forum provision in our amended and restated articles of incorporation will help provide for the orderly, efficient and cost-effective resolution of Nevada-law issues affecting us by designating courts located in the State of Nevada (our state of incorporation) as the exclusive forum for cases involving such issues. However, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it believes to be favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents. While there is no Nevada case law addressing the enforceability of this type of provision, Nevada courts have on prior occasion found persuasive authority in Delaware case law in the absence of Nevada statutory or case law specifically addressing an issue of corporate law. The Court of Chancery of the State of Delaware ruled in June 2013 that choice-of-forum provisions of a type similar to those included in our amended and restated articles of incorporation are not facially invalid under corporate law and constitute valid and enforceable contractual forum selection clauses. However, if a court were to find the choice-of-forum provision in our amended and restated articles of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.


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Anti-takeover provisions in our organizational documents could delay or prevent a change of control.

Certain provisions of our amended and restated articles of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider to be in its best interest, including attempts that might result in a premium over the market price for the shares held by our stockholders. These provisions provide, among other things:

•
a classified Board of Directors with staggered three-year terms;

•
the ability of our Board of Directors to issue one or more series of preferred stock with voting or other rights or preferences that could have the effect of impeding the success of an attempt to acquire us or otherwise effect a change of control;

•
advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at stockholder meetings;

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the right of KSL’s affiliates, determined in proportion to their collective ownership of our common stock, to nominate at least a certain percentage of the members of our Board of Directors;

•
certain limitations on convening special stockholder meetings and stockholder action by written consent;

•
that, except in limited circumstances specified in our amended and restated articles of incorporation, if KSL’s affiliates own less than 40% of the voting power of our capital stock entitled to vote in the election of directors, then certain provisions of our amended and restated articles of incorporation may be amended only by the affirmative vote of the holders (which must include at least one of certain specified affiliates of KSL, so long as affiliates of KSL beneficially own, in the aggregate, at least 5% of the voting power of our capital stock entitled to vote generally in the election of directors) of at least two-thirds of the voting power of our outstanding capital stock entitled to vote on such amendment; and

•
that if KSL’s affiliates own less than 40% of the voting power of our capital stock entitled to vote in the election of directors, then our stockholders may adopt amendments to our amended and restated bylaws only by the affirmative vote of the holders (which must include at least one of certain specified KSL’s affiliates, so long as KSL’s affiliates beneficially own, in the aggregate, at least 5% of the voting power of our capital stock entitled to vote generally in the election of directors) of at least two-thirds of the voting power of our outstanding capital stock entitled to vote on such amendment.

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.

Our business could be negatively affected because of actions of activist stockholders.
    
Publicly traded companies have increasingly become subject to campaigns by investors seeking to increase stockholder value by advocating corporate actions such as corporate restructuring, increased borrowing, special dividends, stock repurchases, and the sale of assets. We have recently seen some activist investors take ownership positions in our common stock and initiate communications with us. Notwithstanding our current stockholder composition and other factors, it is possible that activist stockholders may attempt to influence the Company to take such corporate actions or may take other measures such as seeking to gain representation on our Board of Directors. Responding to such campaigns could be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from executing our business plan. Our business could be negatively affected because of the actions of activist stockholders, and such activism could impact the trading value and volatility of our securities.


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We are a “controlled company” within the meaning of the NYSE rules and the rules of the SEC. As a result, we qualify for, and intend to continue to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

As of March 5, 2015, affiliates of KSL control a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

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the requirement that a majority of our Board of Directors consist of “independent directors” as defined under the rules of the NYSE;

•
the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

•
the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•
the requirement for an annual performance evaluation of the compensation and nominating and corporate governance committees.

We intend to continue to utilize these exemptions. As a result, we may not have a majority of independent directors, our nominating and corporate governance committee, and compensation committee may not consist entirely of independent directors and such committees may not be subject to mandatory annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Subject to a permitted phase-in schedule, we will be required to have a majority of our Board of Directors, as well as our entire compensation and nominating and corporate governance committees, consist of ‘‘independent directors’’ once affiliates of KSL control less than a majority of the voting power of our common stock.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act enacted on April 5, 2012 (the ‘‘JOBS Act’’). For as long as we continue to be an emerging growth company, we may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies, including, among other things:

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exemption from the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act of 2002;

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reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;

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exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements; and

•
exemption from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless the SEC otherwise determines, any future audit rules that may be adopted by the Public Company Accounting Oversight Board.

We will be an emerging growth company until December 25, 2018, or until the earliest of (i) the last day of the fiscal year in which we have annual gross revenue of $1 billion or more, (ii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iii) the date on which we are deemed to be a large accelerated filer under the federal securities laws. We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

Under the JOBS Act, emerging growth companies are also permitted to elect to delay adoption of new or revised accounting standards until companies that are not subject to periodic reporting obligations are required to comply, if such

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accounting standards apply to non-reporting companies. We have made an irrevocable decision to opt out of this extended transition period for complying with new or revised accounting standards.
    
We cannot predict if investors will find our common stock less attractive if we continue to rely on the exemptions described above. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to comply with the laws and regulations affecting public companies, particularly after we are no longer an emerging growth company.

As a public company, particularly after we cease to qualify as an emerging growth company, we will incur significant legal, accounting and other expenses, including costs associated with public company reporting and corporate governance requirements, in order to comply with the rules and regulations imposed by the Sarbanes-Oxley Act, as well as rules implemented by the SEC and NYSE. Our management and other personnel devote a substantial amount of time to these compliance initiatives and our legal and accounting compliance costs have increased since becoming a public equity filer. We also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers.

For example, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls over financial reporting and disclosure controls and procedures. In particular, as a public company, we are required to perform system and process evaluations and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. As described above, as an emerging growth company, we may not need to comply with the auditor attestation provisions of Section 404 for several years. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 requires that we incur substantial accounting expense and that management expend time on compliance-related issues. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause our stock price to decline.

When the available exemptions under the JOBS Act, as described above, cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with the requirements of the JOBS Act. We cannot predict or estimate the amount of additional costs we may incur as a result of operating as a public company or the timing of such costs.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. The words “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 are used in this Form 10-K to identify forward-looking statements. Except for historical information contained herein, the matters addressed in this Form 10-K are forward-looking statements. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies.

These forward-looking statements are made based on our management’s expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. These uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.

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;

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

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

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

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impairments to the suitability of our club locations;

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

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seasonality of demand for our services and facilities usage;

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increases in the level of competition we face;

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

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increases in the cost of labor;

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

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decreasing values of our investments;

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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;

•
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;

39



•
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;

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

•
the other factors described elsewhere in this Form 10-K, included under the headings “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” and “Quantitative and Qualitative Disclosures About Market Risk” or as described in other documents and reports we file with the SEC.

Forward-looking statements speak only of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the SEC.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

As of March 5, 2015, our portfolio consists of 203 clubs located in 26 states, the District of Columbia and two foreign countries. Our golf and country clubs include 128 private country clubs, 16 semi-private clubs and 10 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. We own, lease or operate through joint ventures 142 and manage 12 golf and country clubs. Likewise, we own, lease or operate through a joint venture 46 and manage three business, sports and alumni clubs. We are the largest owner of private golf

40


and country clubs in the United States and own the underlying real estate for 118 of our golf and country clubs (consisting of over 27 thousand acres of real estate) and one of our business, sports and alumni clubs.

We believe our leased corporate office space in Dallas, Texas, and the clubs in our portfolio are well maintained and occupy sufficient space to meet our operating needs. During the normal course of business, we evaluate lease terms and club locations and may elect to relocate or combine locations as we see fit.

The following tables illustrate our clubs by segment, location, type of club, and size either in terms of golf holes for golf and country clubs or approximate square footage for business, sports and alumni clubs, as of March 5, 2015. Subject to certain exceptions, the obligations under the Secured Credit Facilities are secured by mortgages on material fee-owned clubs.
Golf and Country Clubs Segment by
Region
Type of Club (1)
Market
State
Golf
Holes
California Region
 
 
 
 
Airways Golf Club
Public Golf
Fresno
CA
18
Aliso Viejo Golf Club
Private Country Club
Los Angeles
CA
18
Braemar Country Club
Private Country Club
Los Angeles
CA
27
Canyon Crest Country Club
Private Country Club
Los Angeles
CA
18
Coto De Caza Golf & Racquet Club
Private Country Club
Los Angeles
CA
36
Crow Canyon Country Club
Private Country Club
San Francisco
CA
18
Desert Falls Country Club
Private Country Club
Palm Springs
CA
18
Empire Ranch Golf Club
Public Golf
Sacramento
CA
18
Granite Bay Golf Club
Private Country Club
Sacramento
CA
18
Indian Wells Country Club
Private Country Club
Palm Springs
CA
36
Mission Hills Country Club
Private Country Club
Palm Springs
CA
54
Morgan Run Club & Resort
Private Country Club
Santa Fe
CA
27
Old Ranch Country Club
Private Country Club
Los Angeles
CA
18
Porter Valley Country Club
Private Country Club
Los Angeles
CA
18
Rancho Vista Golf Club
Public Golf
Los Angeles
CA
18
Shadow Ridge Country Club
Private Country Club
San Diego
CA
18
Spring Valley Lake Country Club
Private Country Club
Los Angeles
CA
18
Teal Bend Golf Club
Public Golf
Sacramento
CA
18
Turkey Creek Golf Club
Public Golf
Sacramento
CA
18
Georgia Region
 
 
 
 
Atlanta National Golf Club
Private Country Club
Atlanta
GA
18
Bear's Best Atlanta
Public Golf
Atlanta
GA
18
Bentwater Golf Club
Private Country Club
Atlanta
GA
18
Braelinn Golf Club
Private Country Club
Atlanta
GA
18
Canongate I Golf Club
Private Country Club
Atlanta
GA
36
Cateechee Golf Club
Public Golf
Atlanta
GA
18
Chapel Hills Golf Club
Private Country Club
Atlanta
GA
18
Country Club of Gwinnett
Semi-Private Golf Club
Atlanta
GA
18
Country Club of the South
Private Country Club
Atlanta
GA
18
Eagle Watch Golf Club
Private Country Club
Atlanta
GA
18
Eagles Landing Country Club
Private Country Club
Atlanta
GA
27
Flat Creek Country Club
Private Country Club
Atlanta
GA
27
Georgia National Golf Club
Private Country Club
Atlanta
GA
18
Hamilton Mill Golf Club
Private Country Club
Atlanta
GA
18
Healy Point Country Club
Private Country Club
Macon
GA
18
Heron Bay Golf Club
Private Country Club
Atlanta
GA
18
Laurel Springs Golf Club
Private Country Club
Atlanta
GA
18
Mirror Lake Golf Club
Private Country Club
Atlanta
GA
36
Northwood Country Club
Private Country Club
Atlanta
GA
18
Olde Atlanta Golf Club
Private Country Club
Atlanta
GA
18

41


Golf and Country Clubs Segment by
Region
Type of Club (1)
Market
State
Golf
Holes
Planterra Ridge Golf Club
Private Country Club
Atlanta
GA
18
Polo Golf and Country Club
Private Country Club
Atlanta
GA
18
River Forest Country Club
Private Country Club
Forsyth
GA
18
Sun City Peachtree Golf Club
Private Country Club
Atlanta
GA
18
The Frog
Public Golf
Atlanta
GA
18
The Manor Golf and Country Club
Private Country Club
Atlanta
GA
18
Traditions of Braselton
Private Country Club
Atlanta
GA
18
White Columns Country Club
Private Country Club
Atlanta
GA
18
White Oak Golf Club
Private Country Club
Atlanta
GA
36
Whitewater Creek Country Club
Private Country Club
Atlanta
GA
18
Windermere Golf Club
Private Country Club
Atlanta
GA
18
Texas Region
 
 
 
 
April Sound Country Club
Private Country Club
Houston
TX
27
Bay Oaks Country Club
Private Country Club
Houston
TX
18
Brookhaven Country Club
Private Country Club
Dallas
TX
54
Canongate Lake Windcrest
Private Country Club
Houston
TX
18
Canongate Magnolia Creek
Private Country Club
Houston
TX
27
Canongate South Shore Harbour
Private Country Club
Houston
TX
27
Canongate The Oaks and Panther Trail
Private Country Club
Houston
TX
36
Canyon Creek Country Club
Private Country Club
Dallas
TX
18
Fair Oaks Ranch Golf & Country Club
Private Country Club
San Antonio
TX
36
Flintrock Golf Club at Lakeway
Private Country Club
Austin
TX
18
Gleneagles Country Club
Private Country Club
Dallas
TX
36
Hackberry Creek Country Club
Private Country Club
Dallas
TX
18
Hearthstone Country Club
Private Country Club
Houston
TX
27
Lakeway Country Club
Private Country Club
Austin
TX
36
Las Colinas Country Club
Private Country Club
Dallas
TX
18
Lost Creek Country Club
Private Country Club
Austin
TX
18
Oakmont Country Club
Private Country Club
Dallas
TX
18
Prestonwood Country Club - The Creek
Private Country Club
Dallas
TX
18
Prestonwood Country Club - The Hills
Private Country Club
Dallas
TX
18
Shady Valley Golf Club
Private Country Club
Dallas
TX
18
Stonebriar Country Club
Private Country Club
Dallas
TX
36
Stonebridge Country Club
Private Country Club
Dallas
TX
18
The Club at Cimarron
Private Country Club
Mission
TX
18
The Club at Falcon Point
Private Country Club
Houston
TX
18
The Clubs of Kingwood at Deerwood
Private Country Club
Houston
TX
18
The Clubs of Kingwood at Kingwood
Private Country Club
Houston
TX
72
The Hills Country Club at Lakeway
Private Country Club
Austin
TX
18
The Ranch Country Club at Stonebridge
Private Country Club
Dallas
TX
27
The Woodlands Country Club Palmer Course & Tennis Center
Private Country Club
Houston
TX
27
The Woodlands Country Club Player Course
Private Country Club
Houston
TX
18
The Woodlands Country Club Tournament Course
Private Country Club
Houston
TX
18
Timarron Country Club
Private Country Club
Dallas
TX
18
Trophy Club Country Club
Private Country Club
Dallas
TX
36
Walnut Creek Country Club
Private Country Club
Dallas
TX
36
Wildflower Country Club
Private Country Club
Temple
TX
18
Willow Creek Golf Club
Private Country Club
Houston
TX
18

42


Golf and Country Clubs Segment by
Region
Type of Club (1)
Market
State
Golf
Holes
West Region
 
 
 
 
Anthem Golf & Country Club
Private Country Club
Phoenix
AZ
18
Aspen Glen Club
Private Country Club
Rocky Mountain
CO
18
Bear's Best Las Vegas
Public Golf
Las Vegas
NV
18
Black Bear Golf Club
Private Country Club
Denver
CO
18
Blackstone Country Club
Private Country Club
Denver
CO
18
Canterwood Golf & Country Club
Private Country Club
Seattle
WA
18
Canyon Gate Country Club
Private Country Club
Las Vegas
NV
18
Fort Collins Country Club
Private Country Club
Denver
CO
18
Gainey Ranch Golf Club
Private Country Club
Phoenix
AZ
27
Ironwood Club at Anthem
Private Country Club
Phoenix
AZ
18
Mill Creek Country Club
Private Country Club
Seattle
WA
18
Oro Valley Country Club
Private Country Club
Tuscon
AZ
18
Seville Golf & Country Club
Private Country Club
Phoenix
AZ
18
Midwest Region
 
 
 
 
Firestone Country Club
Private Country Club
Akron
OH
63
Knollwood Country Club
Private Country Club
South Bend
IN
36
Nicklaus Golf Club at LionsGate
Private Country Club
Kansas City
KS
18
Oak Pointe Country Club
Private Country Club
Detroit
MI
36
Quail Hollow Country Club
Private Country Club
Cleveland
OH
36
Ravinia Green Country Club
Private Country Club
Chicago
IL
18
Rolling Green Country Club
Private Country Club
Chicago
IL
18
Silver Lake Country Club
Private Country Club
Akron
OH
18
TPC Michigan
Semi-Private Golf Club
Detroit
MI
18
Mid-Atlantic Region
 
 
 
 
Bluegrass Yacht & Country Club
Private Country Club
Nashville
TN
18
Chantilly National Golf and Country Club
Private Country Club
Centreville
VA
18
Devils Ridge Golf Club
Private Country Club
Raleigh/Durham
NC
18
Greenbrier Country Club
Private Country Club
Norfolk
VA
18
Jefferson Lakeside Country Club
Private Country Club
Richmond
VA
18
Lochmere Golf Club
Semi-Private Golf Club
Raleigh/Durham
NC
18
Nags Head Golf Club
Semi-Private Golf Club
Outer Banks
NC
18
Neuse Golf Club
Semi-Private Golf Club
Raleigh/Durham
NC
18
Piedmont Club
Private Country Club
Washington, DC
VA
18
River Creek Club
Private Country Club
Washington, DC
VA
18
River Run Golf & Country Club
Private Country Club
Charlotte
NC
18
Sequoyah National
Semi-Private Golf Club
Whittier
NC
18
Stonehenge Golf & Country Club
Private Country Club
Richmond
VA
18
The Currituck Golf Club
Semi-Private Golf Club
Outer Banks
NC
18
TPC Piper Glen
Private Country Club
Charlotte
NC
18
Northeast Region
 
 
 
 
Cherry Valley Country Club
Private Country Club
Skillman
NJ
18
Diamond Run Golf Club
Private Country Club
Pittsburgh
PA
18
Hamlet Golf & Country Club
Private Country Club
Long Island
NY
18
Hartefeld National Golf Club
Private Country Club
Avondale
PA
18
Ipswich Country Club
Private Country Club
Boston
MA
18
Treesdale Golf & Country Club
Private Country Club
Pittsburgh
PA
27
Willow Creek Golf & Country Club
Public Golf
Long Island
NY
18
Wind Watch Golf & Country Club
Semi-Private Golf Club
Long Island
NY
18

43


Golf and Country Clubs Segment by
Region
Type of Club (1)
Market
State
Golf
Holes
Southeast Region
 
 
 
 
Canebrake Country Club
Private Country Club
Hattiesburg
MS
18
Country Club Of Hilton Head
Private Country Club
Hilton Head
SC
18
Countryside Country Club
Private Country Club
Clearwater
FL
27
Debary Golf & Country Club
Semi-Private Golf Club
Orlando
FL
18
Deercreek Country Club
Private Country Club
Jacksonville
FL
18
Diamante Golf Club
Private Country Club
Hot Springs Village
AR
18
East Lake Woodlands Country Club
Private Country Club
Oldsmar
FL
36
Golden Bear Golf Club at Indigo Run
Semi-Private Golf Club
Hilton Head
SC
18
Haile Plantation Golf & Country Club
Private Country Club
Gainesville
FL
18
Hunter's Green Country Club
Private Country Club
Tampa
FL
18
LPGA International
Semi-Private Golf Club
Daytona Beach
FL
36
Monarch Country Club
Private Country Club
Palm Beaches
FL
18
Oak Tree Country Club
Private Country Club
Edmond
OK
36
Queens Harbour Yacht & Country Club
Semi-Private Golf Club
Jacksonville
FL
18
Regatta Bay Golf and Country Club
Private Country Club
Destin
FL
18
Southern Trace Country Club
Private Country Club
Shreveport
LA
18
Stone Creek Golf Club
Semi-Private Golf Club
Ocala
FL
18
Tampa Palms Golf & Country Club
Private Country Club
Tampa
FL
18
The Golf Club at Indigo Run
Private Country Club
Hilton Head
SC
18
Woodside Plantation Country Club
Private Country Club
Aiken
SC
45
International Region
 
 
 
 
Cozumel Country Club
Semi-Private Golf Club
Cozumel
Mexico
18
Marina Vallarta Club de Golf
Semi-Private Golf Club
Puerto Vallarta
Mexico
18
Vista Vallarta Club de Golf
Semi-Private Golf Club
Puerto Vallarta
Mexico
36
Total Golf & Country Clubs
 
 
 
3,429
_________________________

(1)
Public golf courses are open to the general public. Semi-private golf clubs offer memberships in addition to limited public play.

Business, Sports and Alumni Clubs
Segment by Region
Business Type
Market
State
Square
Footage (1)
California Region
 
 
 
 
Center Club
Business Club
Los Angeles
CA
22,000
City Club Los Angeles
Business Club
Los Angeles
CA
27,000
Silicon Valley Capital Club
Business/Sports Club
San Jose
CA
14,000
University Club atop Symphony Towers
Business Club
San Diego
CA
18,000
Georgia Region
 
 
 
 
Buckhead Club
Business Club
Atlanta
GA
18,000
Peachtree City Tennis
Sports Club
Atlanta
GA
9,000
The Commerce Club
Business Club
Atlanta
GA
26,000
Texas Region
 
 
 
 
Baylor Club
Alumni Club
Waco
TX
18,000
Greenspoint Club
Business/Sports Club
Houston
TX
40,000
Houston City Club
Business/Sports Club
Houston
TX
130,000
La Cima Club
Business Club
Dallas
TX
15,000
Plaza Club
Business Club
San Antonio
TX
19,000

44


Business, Sports and Alumni Clubs
Segment by Region
Business Type
Market
State
Square
Footage (1)
Texas Tech University Club
Alumni Club
Lubbock
TX
20,000
The Downtown Club at Houston Center
Business/Sports Club
Houston
TX
55,000
The Downtown Club at Met
Business/Sports Club
Houston
TX
110,000
The Houston Club
Business Club
Houston
TX
16,000
The University of Texas Club
Alumni Club
Austin
TX
34,000
Tower Club
Business Club
Dallas
TX
29,000
West Region
 
 
 
 
Columbia Tower Club
Business Club
Seattle
WA
29,000
Midwest Region
 
 
 
 
Dayton Racquet Club
Business/Sports Club
Dayton
OH
28,000
Metropolitan Club
Business/Sports Club
Chicago
IL
60,000
Mid-America Club
Business Club
Chicago
IL
34,000
Skyline Club
Business Club
Detroit
MI
20,000
Skyline Club
Business Club
Indianapolis
IN
16,000
The Club at Key Center
Business/Sports Club
Cleveland
OH
34,000
Mid-Atlantic Region
 
 
 
 
Cardinal Club
Business Club
Raleigh/Durham
NC
24,000
Carolina Club
Alumni Club
Chapel Hill
NC
15,000
City Club of Washington
Business Club
Washington, DC
DC
17,000
Club Le Conte
Business Club
Knoxville
TN
18,000
Crescent Club
Business Club
Memphis
TN
14,000
Piedmont Club
Business Club
Winston-Salem
NC
14,000
Tower Club Tysons Corner
Business Club
Vienna
VA
23,000
Town Point Club
Business Club
Norfolk
VA
18,000
Northeast Region
 
 
 
 
Boston College Club
Alumni Club
Boston
MA
17,000
Pyramid Club
Business Club
Philadelphia
PA
21,000
Rivers Club
Business/Sports Club
Pittsburgh
PA
69,000
The Athletic & Swim Club at Equitable Center
Sports Club
New York City
NY
25,000
University of Massachusetts Club
Alumni Club
Boston
MA
26,000
Southeast Region
 
 
 
 
Capital City Club
Business Club
Columbia
SC
21,000
Capital City Club
Business Club
Montgomery
AL
24,000
Centre Club
Business Club
Tampa
FL
14,000
Citrus Club
Business/Sports Club
Orlando
FL
27,000
Commerce Club
Business Club
Greenville
SC
16,000
Harbour Club
Business Club
Charleston
SC
18,000
The Summit Club
Business Club
Birmingham
AL
19,000
Tower Club
Business Club
Ft. Lauderdale
FL
11,000
University Center Club at Florida State
Alumni Club
Tallahassee
FL
64,000
University Club
Business/Sports Club
Jacksonville
FL
28,000
International Region
 
 
 
 
Capital Club
Business Club
Beijing
China
60,000
Total Business, Sports and Alumni Clubs
 
 
 
1,444,000
_________________________

(1)
Business, sport and alumni club size is represented in approximate square footage.

ITEM 3.    LEGAL PROCEEDINGS


45


From time to time, we are involved in litigation that we believe is of the type common to companies engaged in our line of business, including commercial disputes, disputes with members regarding their membership agreements, employment issues and claims relating to personal injury and property damage. We are not involved in any pending legal proceedings that we believe would likely have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 4.  MINE SAFETY DISCLOSURES
 
Not applicable.

PART II—FINANCIAL INFORMATION

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF COMMON EQUITY

Market Information
    
Our common stock has traded on the NYSE under the symbol “MYCC” since September 20, 2013. Prior to that time, there was no public market for our common stock. As of March 5, 2015, 64,637,147 shares of common stock were outstanding, held by approximately 90 holders of record which does not reflect holders who beneficially own our common stock held in nominee or street name.
    
The following table sets forth, for the quarterly reporting periods indicated, the high and low intraday sales prices per share for the our common stock, as reported by the NYSE:

 
Common Stock Market Price
 
High
 
Low
Fiscal Year 2013
 
 
 
Fourth Quarter
$
17.93

 
$
13.51

Fiscal Year 2014
 
 
 
First Quarter
19.76

 
16.81

Second Quarter
19.40

 
17.14

Third Quarter
18.89

 
16.36

Fourth Quarter
20.10

 
16.75



Dividend Policy and Limitations
    
In December 2013, our Board of Directors adopted a policy to pay, subject to the satisfaction of certain conditions and the availability of funds, a regular quarterly cash dividend at an indicated annual rate of $0.48 per share of common stock, subject to quarterly declaration. On December 3, 2014, our Board of Directors approved an 8% increase in the quarterly dividend, resulting in indicated annual dividend of $0.52 per share of common stock.

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
 
 
 
(in thousands)
 
Fiscal Year 2013
 
 
 
 
 
 
December 26, 2012
 
$
0.69

 
December 26, 2012
 
$
35,000

 
December 27, 2012
December 10, 2013
 
$
0.12

 
January 3, 2014
 
$
7,654

 
January 15, 2014
 
 
 
 
 
 
 
 
 
Fiscal Year 2014
 
 
 
 
 
 
March 18, 2014
 
$
0.12

 
April 3, 2014
 
$
7,725

 
April 15, 2014
June 25, 2014
 
$
0.12

 
July 7, 2014
 
$
7,731

 
July 15, 2014
September 9, 2014
 
$
0.12

 
October 3, 2014
 
$
7,731

 
October 15, 2014
December 3, 2014
 
$
0.13

 
January 2, 2015
 
$
8,377

 
January 15, 2015




Our ability to pay dividends depends in part on our receipt of cash distributions from our operating subsidiaries, which may be restricted from distributing us cash as a result of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants under any existing and future outstanding indebtedness we or our subsidiaries incur. In particular, the ability of our subsidiaries to distribute cash to us is limited by covenants in the credit agreement governing the Secured Credit Facilities. The payment of such quarterly dividends and any future dividends will be at the discretion of our Board of Directors.

Issuer Purchases of Equity Securities

During the sixteen weeks ended December 30, 2014, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act.

Securities Authorized for Issuance Under Equity Compensation Plans

Set forth below is certain information, as of December 30, 2014, about the Company’s common stock authorized for issuance under the Company's equity compensation plan.

 
 
Number of securities to be
issued upon exercise of outstanding options, warrants and rights
 
Weighted-average exercise price of outstanding options, warrants and rights
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
Plan Category
 
(a)
 
(b)
 
(c)
 
Equity compensation plans approved by security holders
 
967,289

 (1)
$
—

(2)
3,032,711

(3)
Equity compensation plans not approved by security holders
 
—

 
$
—

 
—

 
Total
 
967,289

 
—

 
3,032,711

 

(1)
Represents shares reserved for issuance related to outstanding restricted stock awards, restricted stock units, performance-based awards, net of forfeitures.

(2)
All shares reserved for issuance under the Stock Plan have no exercise price.

(3)
Represents shares reserved for issuance under the Stock Plan other than shares reserved for issuance related to existing awards.


47


Stock Performance Graph

The total return graph below is presented for the period from September 20, 2013, the day our common stock began trading on the New York Stock Exchange, through December 30, 2014. The comparison assumes that $100 was invested at the market close on September 20, 2013 in: 1) our common stock (“MYCC”), 2) The Russell 2000, 3) The Standard & Poor’s 500 Stock Index and 4) the S&P Leisure Time Select Industry Index. We included the S&P Leisure Time Select Industry Index as we believe we compete in the leisure industry. The total return graph assumes that all dividends were reinvested on the day of payment.

Total Return Stock Performance Graph

This performance graph is not deemed filed with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless such filings specifically incorporate the performance graph by reference therein.
        
ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth our selected financial data for the periods presented. Our fiscal year consists of a 52/53 week period ending on the last Tuesday of December. For 2014, 2012, 2011 and 2010, our fiscal years were comprised of the 52 weeks ended December 30, 2014, December 25, 2012, December 27, 2011 and December 28, 2010, respectively. For 2013, our fiscal year was comprised of the 53 weeks ended December 31, 2013.

The statements of operations data set forth below for fiscal years 2014, 2013 and 2012 and the balance sheet data as of December 30, 2014 and December 31, 2013, are derived from our audited consolidated financial statements that are included elsewhere herein. The statements of operations data set forth below for fiscal years 2011 and 2010 and the balance sheet data as of December 25, 2012, December 27, 2011 and December 28, 2010, are derived from our consolidated financial statements that are not included elsewhere herein.


48


This selected financial data should be read in conjunction with “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and the related notes included elsewhere herein.
 
Fiscal Years Ended
 
December 30, 2014
 
December 31, 2013
 
December 25, 2012
 
December 27, 2011
 
December 28, 2010 (1)
 
(dollars in thousands, except per share amounts)
Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
Club operations
$
629,180

 
$
579,751

 
$
535,274

 
$
513,282

 
$
495,424

Food and beverage
251,838

 
231,673

 
216,269

 
203,508

 
189,391

Other revenues
3,137

 
3,656

 
3,401

 
3,172

 
2,882

Total revenues
884,155

 
815,080

 
754,944

 
719,962

 
687,697

Club operating costs exclusive of depreciation
568,171

 
527,787

 
483,653

 
468,577

 
451,286

Cost of food and beverage sales exclusive of depreciation
81,165

 
74,607

 
68,735

 
64,256

 
59,671

Depreciation and amortization
80,792

 
72,073

 
78,286

 
93,035

 
91,700

Provision for doubtful accounts
2,733

 
3,483

 
2,765

 
3,350

 
3,194

Loss (gain) on disposals of assets
10,518

 
8,122

 
10,904

 
9,599

 
(5,380
)
Impairment of assets
2,325

 
6,380

 
4,783

 
1,173

 
8,936

Equity in earnings from unconsolidated ventures
(1,404
)
 
(2,638
)
 
(1,947
)
 
(1,487
)
 
(1,309
)
Selling, general and administrative
73,870

 
64,073

 
45,343

 
52,382

 
38,946

Operating income
65,985

 
61,193

 
62,422

 
29,077

 
40,653

Interest and investment income
2,585

 
345

 
1,212

 
138

 
714

Interest expense
(65,209
)
 
(83,669
)
 
(89,369
)
 
(84,746
)
 
(61,236
)
(Loss) gain on extinguishment of debt
(31,498
)
 
(16,856
)
 
—

 
—

 
334,423

Other income
—

 
—

 
2,132

 
3,746

 
3,929

(Loss) income from continuing operations before income taxes
(28,137
)
 
(38,987
)
 
(23,603
)
 
(51,785
)
 
318,483

Income tax benefit (expense)
41,469

 
(1,681
)
 
7,528

 
16,421

 
(57,107
)
Income (loss) from continuing operations
$
13,332

 
$
(40,668
)
 
$
(16,075
)
 
$
(35,364
)
 
$
261,376

Loss from discontinued Non-Core Entities, net of tax
—

 
—

 
—

 
—

 
(8,270
)
Loss from discontinued clubs, net of tax
(3
)
 
(12
)
 
(10,917
)
 
(258
)
 
(443
)
Net income (loss)
$
13,329

 
$
(40,680
)
 
$
(26,992
)
 
$
(35,622
)
 
$
252,663

Net loss attributable to discontinued Non-Core Entities' noncontrolling interests
—

 
—

 
—

 
—

 
1,966

Net income attributable to noncontrolling interests
(103
)
 
(212
)
 
(283
)
 
(575
)
 
(346
)
Net income (loss) attributable to ClubCorp
$
13,226

 
$
(40,892
)
 
$
(27,275
)
 
$
(36,197
)
 
$
254,283

Per share data (2):
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding, basic
63,941

 
54,172

 
50,570

 
50,570

 
50,570

Weighted average shares outstanding, diluted
64,318

 
54,603

 
50,570

 
50,570

 
50,570

 
 
 
 
 
 
 
 
 
 
Earnings per common share, basic:
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations attributable to ClubCorp
$
0.21

 
$
(0.75
)
 
$
(0.32
)
 
$
(0.71
)
 
$
5.16

 
 
 
 
 
 
 
 
 
 
Earnings per common share, diluted:
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations attributable to ClubCorp
$
0.21

 
$
(0.75
)
 
$
(0.32
)
 
$
(0.71
)
 
$
5.16

 
 
 
 
 
 
 
 
 
 
Cash distributions declared per common share (3)
$
0.49

 
$
0.79

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
75,047

 
$
53,781

 
$
81,965

 
$
50,480

 
$
56,754

Land and non-depreciable land improvements
589,975

 
530,212

 
531,265

 
512,260

 
536,503

Total assets
2,065,071

 
1,736,217

 
1,720,547

 
1,733,474

 
1,774,059

Long-term debt (net of current portion)
965,187

 
638,112

 
768,369

 
784,109

 
783,916

Total long-term liabilities
1,532,779

 
1,211,197

 
1,327,827

 
1,354,286

 
1,367,037

Total equity
$
220,859

 
$
237,950

 
$
143,082

 
$
169,126

 
$
202,598

__________________________


49


(1)
The statements of operations and balance sheet data reflect the ClubCorp Formation from November 30, 2010 (as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations— ClubCorp Formation”), which was treated as a reorganization of entities under common control. Prior to November 30, 2010, ClubCorp, Inc. (“CCI”) was a holding company that through its subsidiaries owned and operated golf and country clubs and business, sports and alumni clubs, two full-service resorts and certain other equity and realty interests. The two full service resorts and such other equity, realty and future royalty interests are referred to as the “Non-Core Entities”. The gain on extinguishment of debt was recognized as lenders under certain facilities forgave debt in conjunction with the ClubCorp Formation.
(2)
All share and per share amounts reflect a 1,000 for 1 forward stock split of our common stock that took place on March 15, 2012, a 50 for 1 forward stock split that took place on August 2, 2013 and a 1.0113946 for 1 forward stock split that took place on September 6, 2013.
(3)    The following is a summary of dividends declared during the periods presented:
Declaration Date
 
Dividend Per Share
 
Record Date
 
Total Amount
 
Payment Date
 
 
 
(in thousands)
 
Fiscal Year 2013
 
 
 
 
 
 
December 26, 2012
 
$
0.69

 
December 26, 2012
 
$
35,000

 
December 27, 2012
December 10, 2013
 
$
0.12

 
January 3, 2014
 
$
7,654

 
January 15, 2014
 
 
 
 
 
 
 
 
 
Fiscal Year 2014
 
 
 
 
 
 
March 18, 2014
 
$
0.12

 
April 3, 2014
 
$
7,725

 
April 15, 2014
June 25, 2014
 
$
0.12

 
July 7, 2014
 
$
7,731

 
July 15, 2014
September 9, 2014
 
$
0.12

 
October 3, 2014
 
$
7,731

 
October 15, 2014
December 3, 2014
 
$
0.13

 
January 2, 2015
 
$
8,377

 
January 15, 2015

ITEM 7.    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 audited consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” of this report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 1A. Risk Factors” or in other sections of this report.

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 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 December 30, 2014, our portfolio of 207 owned or operated clubs, with over 180,000 memberships, served over 400,000 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 140 golf and country clubs and manage 17 golf and country clubs. Likewise, we own, lease or operate through a joint venture 46 business, sports and alumni clubs and manage four 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 116 of our 157 golf and country clubs and one of our 50 business, sports and alumni clubs. Our golf and country clubs include 130 private country clubs, 16 semi-private clubs and eleven public golf courses. Our

50


business, sports and alumni clubs include 29 business clubs, 12 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.
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. Periods where attrition rates exceed enrollment rates or where facility usage is below historical levels could have a material adverse effect on our business, operating results and financial position.

We offer various programs at our clubs designed to minimize future attrition rates by increasing member satisfaction and usage. These programs 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. As of December 30, 2014, approximately 46% of our memberships, excluding memberships acquired with the Sequoia Golf acquisition, were enrolled in one or more of our upgrade programs, as compared to approximately 43% of memberships that were enrolled in one or more of our upgrade programs as of December 31, 2013. Further, at the 89 clubs that offer O.N.E., approximately 74% of our golf memberships, excluding Sequoia Golf memberships, were enrolled in one or more of our upgrade programs. We believe we have an opportunity to increase our revenue related to upgrade programs as we continue to introduce these offerings to our clubs, including those clubs acquired with the Sequoia Golf acquisition.


51


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 are denoted by “NM”.
 
 
December 30,
2014
 
December 31,
2013
 
Change
 
% Change
Golf and Country Clubs
 
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
 
82,312

 
81,569

 
743

 
0.9
%
Managed same store clubs (1)
 
966

 
910

 
56

 
6.2
%
New or acquired clubs, excluding managed clubs (2)
 
29,146

 
1,959

 
27,187

 
NM

Newly added managed clubs (3)
 
4,788

 
—

 
4,788

 
NM

Total Golf and Country Clubs
 
117,212

 
84,438

 
32,774

 
38.8
%
Business, Sports and Alumni Clubs
 
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
 
55,064

 
54,733

 
331

 
0.6
%
Managed same store clubs (1)
 
6,759

 
6,672

 
87

 
1.3
%
New or acquired clubs, excluding managed clubs (2)
 
1,651

 
—

 
1,651

 
NM

Newly added managed clubs (3)
 
—

 
—

 
—

 
NM

Total Business, Sports and Alumni Clubs (4)
 
63,474

 
61,405

 
2,069

 
3.4
%
Total
 
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
 
137,376

 
136,302

 
1,074

 
0.8
%
Managed same store clubs (1)
 
7,725

 
7,582

 
143

 
1.9
%
New or acquired clubs, excluding managed clubs (2)
 
30,797

 
1,959

 
28,838

 
NM

Newly added managed clubs (3)
 
4,788

 
—

 
4,788

 
NM

Total memberships at end of period (4)
 
180,686

 
145,843

 
34,843

 
23.9
%
_______________________

(1)
See “Basis of Presentation—Same Store Analysis” for a definition of 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 which were acquired or opened in fiscal years 2014 and 2013 consisting of: Oak Tree Country Club, Cherry Valley Country Club, Chantilly National Golf and Country Club, Prestonwood Country Club, TPC Michigan, TPC Piper Glen, Baylor Club, Oro Valley 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 which were added under management agreements in fiscal years 2014 and 2013 consisting of: River Run Golf & Country Club, Sequoyah National and 13 managed golf and country clubs acquired through the Sequoia Golf acquisition.

(4)
Does not include certain international club memberships.


52


 
December 31,
2013
 
December 25,
2012
 
Change
 
% Change
Golf and Country Clubs
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
81,170

 
80,536

 
634

 
0.8
 %
Managed same store clubs (1)
580

 
576

 
4

 
0.7
 %
New or acquired clubs, excluding managed clubs (2)
2,358

 
380

 
1,978

 
NM

Newly added managed clubs (3)
330

 
252

 
78

 
NM

Total Golf and Country Clubs
84,438

 
81,744

 
2,694

 
3.3
 %
Business, Sports and Alumni Clubs
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
54,733

 
55,190

 
(457
)
 
(0.8
)%
Managed same store clubs (1)
6,672

 
6,856

 
(184
)
 
(2.7
)%
New or acquired clubs, excluding managed clubs (2)
—

 
—

 
—

 
NM

Newly added managed clubs (3)
—

 
—

 
—

 
NM

Total Business, Sports and Alumni Clubs (4)
61,405

 
62,046

 
(641
)
 
(1.0
)%
Total
 

 
 

 
 

 
 

Same store clubs, excluding managed clubs (1)
135,903

 
135,726

 
177

 
0.1
 %
Managed same store clubs (1)
7,252

 
7,432

 
(180
)
 
(2.4
)%
New or acquired clubs, excluding managed clubs (2)
2,358

 
380

 
1,978

 
NM

Newly added managed clubs (3)
330

 
252

 
78

 
NM

Total memberships at end of period (4)
145,843

 
143,790

 
2,053

 
1.4
 %
_______________________

(1)
See “Basis of Presentation—Same Store Analysis” for a definition of 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 which were acquired or opened in fiscal years 2013 and 2012 consisting of: Hartefeld National Golf Club, Oak Tree Country Club, Cherry Valley Country Club and Chantilly National Golf and Country Club.

(3)
Newly added managed clubs includes one club added under a management agreement in fiscal years 2013 and 2012 consisting of: LPGA International.

(4)
Does not include certain international club memberships.

Seasonality of Demand and Fluctuations in Quarterly Results
 
The first, second and third fiscal quarters each consist of twelve weeks, whereas, the fourth quarter consists of sixteen or seventeen weeks of operations. As a result of these factors, we usually generate a disproportionate share of our revenues and cash flows in the second, third and fourth fiscal quarters of each year and have lower revenues and profits in the first quarter. The timing of purchases, sales, leasing of facilities or divestitures, has also caused and may cause our results of operations to vary significantly in otherwise comparable periods. To clarify variations caused by newly acquired or divested operations, we employ a same store analysis for year-over-year comparability purposes. See “Basis of Presentation—Same Store Analysis”.

Our quarterly results also fluctuate as a result of a number of other factors. Our business clubs typically generate a greater share of their yearly revenues in the fourth fiscal quarter, which includes the holiday and year-end party season. Usage of our golf and country club facilities declines significantly during the first and fourth fiscal quarters, when colder temperatures and shorter days reduce the demand for golf and golf-related activities.

Our results can also be affected by non-seasonal and severe weather patterns. Periods of extremely hot, dry, cold or rainy weather in a given region can be expected to impact our golf-related revenue for that region. Similarly, extended periods of low rainfall can affect the cost and availability of water needed to irrigate our golf courses and can adversely affect results for facilities in the impacted region. Keeping turf grass conditions at a satisfactory level to attract play on our golf courses requires significant amounts of water. Our ability to irrigate a course could be adversely impacted by a drought or other water shortage, which we have experienced from time to time. A severe drought affecting a large number of properties could have a material adverse effect on our business and results of operations.

53



Further, the timing of distributions from our equity method investments, including Avendra, LLC, a purchasing cooperative of hospitality companies, varies due to factors outside of our control. Adjusted EBITDA, as defined in “Basis of Presentation—EBITDA and Adjusted EBITDA” is impacted when cash distributions from equity method investments vary from the equity in earnings recognized for the related investments.

Reinvention Capital Investments

We continue to identify and prioritize capital projects and believe the reinvention of our clubs through strategic capital investments help drive membership sales, facility usage and member retention. A significant portion of our invested capital is used to add reinvention elements to “major reinvention” clubs, defined as clubs receiving $750,000 or more gross capital spend on a project basis excluding initial one-time capital investments at newly acquired clubs, as we believe these club enhancements represent opportunities to increase revenues and generate a positive return on our investment, although we cannot guarantee such returns. Elements of reinvention capital expenditures include “Touchdown Rooms”, which are small private meeting rooms allowing members to hold impromptu private meetings while leveraging the other services of their club. “Anytime Lounges” provide a contemporary and casual atmosphere to work and network, while “Media Rooms” provide state-of-the-art facilities to enjoy various forms of entertainment. Additional reinvention elements include refitted fitness centers, enhanced pool area amenities such as shade cabanas, pool slides and splash pads, redesigned golf practice areas for use by beginners to avid golfers, and newly created or updated indoor and outdoor dining and social gathering areas designed to take advantage of the expansive views and natural beauty of our clubs.

Club Acquisitions and Dispositions
    
We continually explore opportunities to expand our business through select acquisitions of attractive properties. We also evaluate joint ventures and management opportunities that allow us to expand our operations and increase our recurring revenue base without substantial capital outlay. We believe that the fragmented nature of the private club industry presents significant opportunities for us to expand our portfolio by leveraging our operational expertise and by taking advantage of market conditions.

The table below summarizes the number and type of club acquisitions and dispositions during the periods indicated:
 
Golf & Country Clubs
 
Business, Sports & Alumni Clubs
Acquisitions / (Dispositions)
Owned
Clubs
 
Leased
Clubs
 
Managed
 
Joint
Venture
 
Total
 
Owned
Clubs
 
Leased
Clubs
 
Managed
 
Joint
Venture
 
Total
December 25, 2012
80

 
13

 
3

 
6

 
102

 
1

 
43

 
4

 
1

 
49

First Quarter 2013
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Second Quarter 2013 (1)
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

Third Quarter 2013 (2)
—

 
1

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

Fourth Quarter 2013 (3)
—

 
1

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

December 31, 2013
81

 
15

 
3

 
6

 
105

 
1

 
43

 
4

 
1

 
49

First Quarter 2014 (4)
2

 
—

 
—

 
—

 
2

 
—

 
—

 
1

 
—

 
1

Second Quarter 2014 (5)
2

 
—

 
—

 
—

 
2

 
—

 
1

 
—

 
—

 
1

Third Quarter 2014 (6)
—

 
—

 
(1
)
 
—

 
(1
)
 
—

 
(1
)
 
—

 
—

 
(1
)
Fourth Quarter 2014 (7)
31

 
3

 
15

 
—

 
49

 
—

 
1

 
(1
)
 
—

 
—

December 30, 2014
116

 
18

 
17

 
6

 
157

 
1

 
44

 
4

 
1

 
50

 _______________________

(1)
In May 2013, we acquired Oak Tree Country Club, a private country club located in Edmond, Oklahoma.

(2)
In June 2013, we acquired Cherry Valley Country Club, a private country club located in Skillman, New Jersey.

(3)
In December 2013, we acquired Chantilly National Golf and Country Club, a private country club located in Centreville, Virginia.

(4)
In March 2014, we purchased Prestonwood Country Club, a private country club which features two properties: The Creek in Dallas, Texas and The Hills in nearby Plano, Texas and we began managing and operating Paragon Club of Hefei, a private business club in China.

54



(5)
In April 2014, we purchased TPC Michigan, a semi-private country club located in Dearborn, Michigan and TPC Piper Glen, a private country club located in Charlotte, North Carolina. In April, 2014, we also finalized the lease and management rights to the Baylor Club, an alumni club located within the new Baylor University football stadium in Waco, Texas.

(6)
In July 2014, the management agreement with Hollytree Country Club, a private country club located in Tyler, Texas, was terminated. In August 2014, we combined the membership of two leased business clubs within downtown Raleigh, North Carolina into one club which is named City Club Raleigh. City Club Raleigh occupies the space formerly occupied by the Cardinal Club. The space formerly occupied by the Capital City Club is no longer under lease.

(7)
On September 30, 2014, ClubCorp completed the acquisition of Sequoia Golf which included 30 owned golf and country clubs, three leased golf and country clubs, 16 managed golf and country clubs and one leased sports club. Subsequent to September 30, 2014, three management deals acquired with the Sequoia Golf acquisition were terminated.

In October 2014, we entered into management agreements with River Run Golf & Country Club, a private golf club in Davidson, North Carolina and Sequoyah National, a semi-private golf club in Whittier, North Carolina. In December 2014, we purchased Oro Valley Country Club, a private country club located in Oro Valley, Arizona. Additionally, in December 2014, the management agreement with Paragon Club of Hefei, a business club located in Hefei, China was terminated.

Basis of Presentation
 
Total revenues recorded in our two principal business segments (1) golf and country clubs and (2) business, sports and alumni clubs, are comprised mainly of revenues from membership dues (including upgrade dues), food and beverage operations and golf operations. Operating expenses recorded in our two principal business segments primarily consist of labor expenses, food and beverage costs, golf course maintenance costs and general and administrative costs.
 
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.

EBITDA and Adjusted EBITDA

Adjusted EBITDA (“Adjusted EBITDA”) is a key financial measure used by our management to (1) internally measure our operating performance, (2) evaluate segment performance and allocate resources and (3) assess our ability to service our debt, incur additional debt and meet our capital expenditure requirements. We believe that the presentation of Adjusted EBITDA, on a consolidated basis, is appropriate as it provides additional information to investors about our performance and investors and lenders have historically used EBITDA-related measures. Additionally, certain financial covenants under the credit agreement governing the Secured Credit Facilities utilize Adjusted EBITDA, after a pro forma adjustment to give effect to current period acquisitions as though they had been consummated on the first day of the period presented.
At the beginning of fiscal year 2014, we began managing the business using Adjusted EBITDA, which is the earnings measure historically disclosed on a consolidated basis, as our measure of segment profit and loss. Prior to this change, we utilized Segment EBITDA (“Segment EBITDA”) as our measure of segment profit and loss, but we also presented Adjusted EBITDA on a consolidated basis, as certain financial covenants in the credit agreement governing the Secured Credit Facilities utilized this measure of Adjusted EBITDA. These two measurements have not produced materially different results. This change results in alignment of our internal measure of segment profit and loss with the measure used to evaluate our performance on a consolidated basis and the measure used to evaluate our performance under financial covenants under the credit agreement governing the Secured Credit Facilities. Further, it reduces the number of non-GAAP measurements we report, thus simplifying our financial reporting. The manner in which we calculate Adjusted EBITDA has not changed. For comparability purposes, amounts for fiscal years 2013 and 2012 have been recast.

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

55


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 and non-financial covenants which require us to maintain specified financial ratios in reference to Adjusted EBITDA.
The following table provides a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods indicated:
 
Fiscal Years Ended
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
(dollars in thousands)
Net income (loss)
$
13,329

 
$
(40,680
)
 
$
(26,992
)
Interest expense
65,209

 
83,669

 
89,369

Income tax (benefit) expense
(41,469
)
 
1,681

 
(7,528
)
Interest and investment income
(2,585
)
 
(345
)
 
(1,212
)
Depreciation and amortization
80,792

 
72,073

 
78,286

EBITDA
$
115,276

 
$
116,398

 
$
131,923

Impairments, disposition of assets and income (loss) from discontinued operations and divested clubs (1)
12,729

 
14,364

 
26,501

Loss on extinguishment of debt (2)
31,498

 
16,856

 
—

Non-cash adjustments (3)
2,007

 
3,929

 
1,865

Other adjustments (4)
25,315

 
10,134

 
3,237

Equity-based compensation expense (5)
4,303

 
14,217

 
—

Acquisition adjustment (6)
5,644

 
1,306

 
2,560

Adjusted EBITDA
$
196,772

 
$
177,204

 
$
166,086

______________________

(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 quality as discontinued operations.

(2)
Includes loss on extinguishment of debt calculated in accordance with GAAP.

(3)
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.

(4)
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.

(5)
Includes equity-based compensation expense, calculated in accordance with GAAP, related to awards held by certain employees, executives and directors.

(6)
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.


56


Adjusted EBITDA is not determined in accordance with GAAP and 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.
Same Store Analysis

We employ “same store” analysis techniques for a variety of management purposes. By our definition, clubs are evaluated at the beginning of each year and considered same store once they have been fully operational for one fiscal year. Newly acquired or opened clubs, clubs added under management agreements and divested clubs are not classified as same store; however, clubs held for sale are considered same store until they are divested. Once a club has been divested, it is removed from the same store classification for all periods presented. For same store year-over-year comparisons, clubs must be open the entire year for both years in the comparison to be considered same store, therefore, same store facility counts and operating results may vary depending on the years of comparison. We believe this approach provides for a more effective analysis tool because it allows us to assess the results of our core operating strategies by tracking the performance of our established same store clubs without the inclusion of newly acquired or opened clubs.

Our fiscal year consists of a 52/53 week period ending on the last Tuesday of December. Our first, second and third fiscal quarters each consist of twelve weeks while our fourth fiscal quarter consists of sixteen or seventeen weeks.
 

57


Results of Operations

The following table presents our consolidated statements of operations as a percent of total revenues for the periods indicated:
 
Fiscal Year Ended
 
December 30, 2014
 
% of Revenue
 
December 31, 2013
 
% of Revenue
 
December 25, 2012
 
% of Revenue
 
(dollars in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Club operations
$
629,180

 
71.2
 %
 
$
579,751


71.1
 %
 
$
535,274

 
70.9
 %
Food and beverage
251,838

 
28.5
 %
 
231,673


28.4
 %
 
216,269

 
28.6
 %
Other revenues
3,137

 
0.4
 %
 
3,656


0.4
 %
 
3,401

 
0.5
 %
Total revenues
884,155

 
 

 
815,080

 
 

 
754,944

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Direct and selling, general and administrative expenses:
 
 
 
 
 

 
 
 
 

 
 
Club operating costs exclusive of depreciation
568,171

 
64.3
 %
 
527,787


64.8
 %
 
483,653

 
64.1
 %
Cost of food and beverage sales exclusive of depreciation
81,165

 
9.2
 %
 
74,607


9.2
 %
 
68,735

 
9.1
 %
Depreciation and amortization
80,792

 
9.1
 %
 
72,073


8.8
 %
 
78,286

 
10.4
 %
Provision for doubtful accounts
2,733

 
0.3
 %
 
3,483


0.4
 %
 
2,765

 
0.4
 %
Loss on disposals of assets
10,518

 
1.2
 %
 
8,122


1.0
 %
 
10,904

 
1.4
 %
Impairment of assets
2,325

 
0.3
 %
 
6,380

 
0.8
 %
 
4,783

 
0.6
 %
Equity in earnings from unconsolidated ventures
(1,404
)
 
(0.2
)%
 
(2,638
)

(0.3
)%
 
(1,947
)
 
(0.3
)%
Selling, general and administrative
73,870

 
8.4
 %
 
64,073


7.9
 %
 
45,343

 
6.0
 %
Operating income
65,985

 
7.5
 %

61,193


7.5
 %
 
62,422

 
8.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Interest and investment income
2,585

 
0.3
 %
 
345


—
 %
 
1,212

 
0.2
 %
Interest expense
(65,209
)
 
(7.4
)%
 
(83,669
)

(10.3
)%
 
(89,369
)
 
(11.8
)%
Loss on extinguishment of debt
(31,498
)
 
(3.6
)%
 
(16,856
)
 
(2.1
)%
 
—

 
—
 %
Other income
—

 
—
 %
 
—

 
—
 %
 
2,132

 
0.3
 %
Loss from continuing operations before income taxes
(28,137
)
 
(3.2
)%

(38,987
)

(4.8
)%
 
(23,603
)
 
(3.1
)%
Income tax benefit (expense)
41,469

 
4.7
 %
 
(1,681
)

(0.2
)%
 
7,528

 
1.0
 %
Income (loss) from continuing operations
13,332

 
1.5
 %

(40,668
)

(5.0
)%
 
(16,075
)
 
(2.1
)%
Loss from discontinued clubs, net of income tax benefit (expense)
(3
)
 
—
 %
 
(12
)

—
 %
 
(10,917
)
 
(1.4
)%
NET INCOME (LOSS)
13,329

 
1.5
 %

(40,680
)

(5.0
)%
 
(26,992
)
 
(3.6
)%
Net income attributable to noncontrolling interests
(103
)
 
—
 %
 
(212
)

—
 %
 
(283
)
 
—
 %
Net income (loss) attributable to ClubCorp
$
13,226

 
1.5
 %

$
(40,892
)

(5.0
)%
 
$
(27,275
)
 
(3.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC
63,941

 
 
 
54,172

 
 
 
50,570

 
 
WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED
64,318

 
 
 
54,603

 
 
 
50,570

 
 
 
 
 
 
 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE, BASIC:
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to ClubCorp
$
0.21

 
 
 
$
(0.75
)
 
 
 
$
(0.32
)
 
 
Loss from discontinued clubs attributable to ClubCorp
$
—

 
 
 
$
—

 
 
 
$
(0.22
)
 
 
Net income (loss) attributable to ClubCorp
$
0.21

 
 
 
$
(0.75
)
 
 
 
$
(0.54
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE, DILUTED:
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to ClubCorp
$
0.21

 
 
 
$
(0.75
)
 
 
 
$
(0.32
)
 
 
Loss from discontinued clubs attributable to ClubCorp
$
—

 
 
 
$
—

 
 
 
$
(0.22
)
 
 
Net income (loss) attributable to ClubCorp
$
0.21

 
 
 
$
(0.75
)
 
 
 
$
(0.54
)
 
 



58


Comparison of the Fiscal Years Ended December 30, 2014 and December 31, 2013
 
The following table presents key financial information derived from our consolidated statements of operations for fiscal years 2014 (consisting of 52 weeks) and 2013 (consisting of 53 weeks). Fiscal year 2014 was comprised of one less week than fiscal year 2013, which impacts the changes in results between the periods presented.
 
 
Fiscal Year Ended
 
 
 
 
 
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
Change (2)
 
%
Change (2)
 
 
(dollars in thousands)
Total revenues
 
$
884,155

 
$
815,080

 
$
69,075

 
8.5
 %
Club operating costs and expenses exclusive of depreciation (1)
 
652,069

 
605,877

 
46,192

 
7.6
 %
Depreciation and amortization
 
80,792

 
72,073

 
8,719

 
12.1
 %
Loss on disposals of assets
 
10,518

 
8,122

 
2,396

 
29.5
 %
Impairment of assets
 
2,325

 
6,380

 
(4,055
)
 
(63.6
)%
Equity in earnings from unconsolidated ventures
 
(1,404
)
 
(2,638
)
 
1,234

 
46.8
 %
Selling, general and administrative
 
73,870

 
64,073

 
9,797

 
15.3
 %
Operating income
 
65,985

 
61,193

 
4,792

 
7.8
 %
Interest and investment income
 
2,585

 
345

 
2,240

 
649.3
 %
Interest expense
 
(65,209
)
 
(83,669
)
 
18,460

 
22.1
 %
Loss on extinguishment of debt
 
(31,498
)
 
(16,856
)
 
(14,642
)
 
(86.9
)%
Loss from continuing operations before income taxes
 
(28,137
)
 
(38,987
)
 
10,850

 
27.8
 %
Income tax benefit (expense)
 
41,469

 
(1,681
)
 
43,150

 
2,566.9
 %
Loss from continuing operations
 
$
13,332

 
$
(40,668
)
 
$
54,000

 
132.8
 %
__________________________
 
(1) 
Comprised of club operating costs, cost of food and beverage sales and provision for doubtful accounts.

(2) 
All figures refer to year-over-year growth. Fiscal year 2013 benefited from one additional week in such fiscal year.

Total revenues of $884.2 million for fiscal year 2014 increased $69.1 million, or 8.5%, over fiscal year 2013, largely due to $60.2 million of revenue attributable to club properties added in 2013 and 2014, including the clubs acquired through the Sequoia Golf acquisition on September 30, 2014. Both the golf and country and business, sports and alumni segments experienced an increase in same store revenue despite the impact of one less week in fiscal year 2014. Same store golf and country club revenue increased by $9.0 million driven by increases in same store dues and food and beverage revenue which were offset by decreases in other revenue and golf operations. These factors are discussed below under “Segment Operations—Golf and Country Clubs”. In addition, our same store business, sports and alumni club segment revenue increased $1.5 million primarily due to increases in same store food and beverage revenue and dues offset by a decrease in other revenue. These factors are discussed below under “Segment Operations—Business, Sports and Alumni Clubs”.
 
Club operating costs and expenses totaling $652.1 million for fiscal year 2014 increased $46.2 million, or 7.6%, compared to fiscal year 2013. The increase is largely due to $51.0 million of club operating costs and expenses from club properties added in 2013 and 2014, including the clubs acquired through the Sequoia Golf acquisition on September 30, 2014. Excluding the properties added, club operating costs decreased $4.8 million, or 1.0%, largely due to a decrease in payroll expense of $4.4 million due to the impact of one less week in fiscal year 2014, a decrease in equity-based compensation expense of $3.2 million offset by $1.9 million increased food and beverage cost of goods sold related to higher revenues.
 
Depreciation and amortization expense increased $8.7 million, or 12.1%, during fiscal year 2014 compared to fiscal year 2013. Depreciation expense increased $10.2 million due to our increased fixed asset balances primarily related to club acquisitions, including Sequoia Golf, along with reinvention and expansion capital spend. Amortization expense decreased $1.5 million due to intangible assets that fully amortized during fiscal year 2013, partially offset by increased amortization from intangible assets recognized with the Sequoia Golf acquisition.

Loss on disposal of assets for fiscal years 2014 and 2013 of $10.5 million and $8.1 million, respectively, were largely comprised of losses on asset retirements during the normal course of business. During fiscal year 2013, the losses were partially offset by a property settlement of $0.8 million

59



Impairment of assets of $2.3 million for fiscal year 2014 was comprised of impairment losses to property and equipment, management contract intangible assets, and trade name intangible assets at certain of our clubs to adjust the carrying amount of those assets to fair value. Impairment of assets of $6.4 million for fiscal year 2013 was primarily comprised of impairment losses to property and equipment and liquor licenses at certain of our clubs to adjust the carrying amount of those assets to fair value.

Selling, general and administrative expenses of $73.9 million for fiscal year 2014 increased $9.8 million, or 15.3%, compared to fiscal year 2013. The major components of selling, general and administrative expenses are shown in the table below.

 
 
Fiscal Year Ended
 
 
 
 
Components of selling, general and administrative expense (1)
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
Change
 
%
Change
 
 
(dollars in thousands)
Selling, general and administrative expense, excluding equity-based compensation and capital structure costs
 
$
62,177

 
$
53,625

 
$
8,552

 
15.9
 %
Capital structure costs
 
8,785

 
823

 
7,962

 
967.4
 %
Equity-based compensation
 
2,908

 
9,625

 
(6,717
)
 
(69.8
)%
Selling, general and administrative
 
$
73,870

 
$
64,073

 
$
9,797

 
15.3
 %
______________________

(1)
Selling, general and administrative expense, excluding equity-based compensation and capital structure is a non-GAAP financial measure. We believe this measure is informative to investors because excluding capital structure costs and equity-based compensation will allow investors to more meaningfully compare our results between periods.

Selling, general and administrative expenses, excluding equity-based compensation and capital structure costs, were $62.2 million for fiscal year 2014, an increase of $8.6 million, or 15.9%, compared to fiscal year 2013. We recognized a $3.5 million increase in payroll expense, including $2.5 million additional payroll expense related to the Sequoia Golf acquisition and $0.8 million incremental payroll expense largely related to being a public-equity filer. In addition to the increase in payroll expense, professional fees and other expenses related to acquisitions increased $2.5 million, which increase included $6.9 million higher acquisition costs and other expenses largely related to the Sequoia Golf acquisition and $1.3 million increased costs related to being a public-equity filer, offset by $5.8 million savings in connection with the termination of a management agreement with an affiliate of KSL during fiscal year 2013.

Capital structure costs included within selling, general and administrative expenses increased $8.0 million to $8.8 million during fiscal year 2014, primarily due to costs associated with the fifth and sixth amendments to the credit agreement governing the Secured Credit Facilities, the early redemption of the 10% Senior Notes due December 1, 2018 (the “Senior Notes”) and costs associated with a secondary equity offering by our majority shareholder. Capital structure costs of $0.8 million during fiscal year 2013 were largely comprised of costs associated with the second and third amendments to the credit agreement governing the Secured Credit Facilities and Holdings' initial public offering.

Equity-based compensation expense included within selling, general and administrative expenses decreased $6.7 million due to the recognition of equity-based compensation expense of $2.9 million in fiscal year 2014, while $9.6 million was recognized in fiscal year 2013. The consummation of Holdings' IPO on September 25, 2013 satisfied the liquidity condition associated with certain outstanding awards and equity-based compensation expense for those awards was recognized for the portion of the requisite service period which had passed. No equity-based compensation expense was recognized prior to the consummation of Holdings' IPO on September 25, 2013.

Interest expense totaled $65.2 million and $83.7 million for fiscal years 2014 and 2013, respectively. During our second fiscal quarter, on May 11, 2014, the outstanding balance of 10% Senior Notes was redeemed using proceeds from additional borrowings on the term loan facility, which bore interest at 4.0% through September 30, 2014 and 4.5% through December 30, 2014. The $18.5 million decrease of interest expense is primarily comprised of a $29.9 million reduction due to the lower principal balance on the Senior Notes, including a partial redemption during fiscal year 2013, offset by a $12.0 million increase in interest on the term loan facility due to the increases to the principal balance during fiscal year 2014.


60


Loss on extinguishment of debt for fiscal year 2014 consisted of a $27.5 million redemption premium payment and a write-off of $4.0 million in debt issuance costs both resulting from the redemption of $269.8 million of the Senior Notes. Loss on extinguishment of debt for fiscal year 2013 consisted of a $14.5 million redemption premium payment and a write-off of $2.3 million in debt issuance costs both resulting from the redemption of $145.3 million of the Senior Notes.

Income tax benefit for fiscal year 2014 increased $43.2 million compared to fiscal year 2013, and the effective tax rates were 147.4% and (4.3)% for fiscal years 2014 and 2013, respectively. For fiscal year 2014, the effective tax rate differed from the statutory federal tax rate of 35.0% primarily due to $36.4 million of changes in uncertain tax benefits, the majority of which includes $43.7 million benefit related to the completion of the 2010 IRS audit offset by a $7.0 million expense related to an audit of one of our Mexican subsidiaries. The remaining differences are related to state and foreign taxes and other permanent differences. For fiscal year 2013, the effective tax rate differed from the statutory federal tax rate of 35.0% primarily due to changes in uncertain tax positions, state and foreign taxes and other permanent differences.

Segment Operations

The following table presents key financial information for our Segments and Adjusted EBITDA for fiscal years 2014 (consisting of 52 weeks) and 2013 (consisting of 53 weeks). Fiscal year 2014 was comprised of one less week than fiscal year 2013, which impacts the changes in results between the periods presented.
 
 
Fiscal Year Ended
 
 
 
 
Consolidated Summary
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
Change
 
%
Change
 
 
(dollars in thousands)
Total Revenue
 
$
884,155

 
$
815,080

 
$
69,075

 
8.5
 %
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
Golf and Country Clubs
 
$
203,542

 
$
180,208

 
$
23,334

 
12.9
 %
Business, Sports and Alumni Clubs
 
35,310

 
34,500

 
810

 
2.3
 %
Other
 
(42,080
)
 
(37,504
)
 
(4,576
)
 
(12.2
)%
Total Adjusted EBITDA (1)
 
$
196,772

 
$
177,204

 
$
19,568

 
11.0
 %
_______________________________

(1)
See ‘‘Basis of Presentation—EBITDA and Adjusted EBITDA’’ for the definition of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.
 

61


Golf and Country Clubs
 
The following table presents key financial information for our golf and country clubs for fiscal years 2014 (consisting of 52 weeks) and 2013 (consisting of 53 weeks). Fiscal year 2014 was comprised of one less week than fiscal year 2013, which impacts the changes in results between the periods presented. References to percentage changes that are not meaningful are denoted by ‘‘NM’’.
 
 
Fiscal Year Ended
 
 
 
 
Golf and Country Club Segment
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
Change (3)
 
%
Change (3)
 
 
(dollars in thousands)
Same Store Clubs
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
Dues
 
$
294,291

 
$
286,767

 
$
7,524

 
2.6
 %
Food and Beverage
 
143,904

 
139,899

 
4,005

 
2.9
 %
Golf Operations
 
141,075

 
141,831

 
(756
)
 
(0.5
)%
Other
 
48,214

 
49,978

 
(1,764
)
 
(3.5
)%
Revenue
 
$
627,484

 
$
618,475

 
$
9,009

 
1.5
 %
Adjusted EBITDA
 
$
187,502

 
$
178,571

 
$
8,931

 
5.0
 %
Adjusted EBITDA Margin
 
29.9
%
 
28.9
%
 
100 bps
 
3.5
 %
 
 
 
 
 
 
 
 
 
New or Acquired Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
67,543

 
$
9,998

 
$
57,545

 
NM

Adjusted EBITDA
 
$
16,040

 
$
1,637

 
$
14,403

 
NM

 
 
 
 
 
 
 
 
 
Total Golf and Country Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
695,027

 
$
628,473

 
$
66,554

 
10.6
 %
Adjusted EBITDA
 
$
203,542

 
$
180,208

 
$
23,334

 
12.9
 %
Adjusted EBITDA Margin
 
29.3
%
 
28.7
%
 
60 bps
 
2.1
 %
 
 
 
 
 
 
 
 
 
Same store memberships, excluding managed club memberships
 
82,312

 
81,569

 
743

 
0.9
 %
Same store average membership, excluding managed club memberships (1)
 
81,941

 
81,243

 
698

 
0.9
 %
Dues per average same store membership, excluding managed club memberships (2)
 
$
3,591

 
$
3,530

 
$
61

 
1.7
 %
Revenue per average same store membership, excluding managed club memberships (2)
 
$
7,658

 
$
7,613

 
$
45

 
0.6
 %
_______________________________

(1)
Same store average membership, excluding managed club memberships, is calculated using the same store membership count, excluding managed clubs, at the beginning and end of the period indicated.

(2)
Same store dues or revenue divided by same store average membership, excluding managed club memberships.

(3) 
All figures refer to year-over-year growth. Fiscal year 2013 benefited from one additional week in such fiscal year.
 
Total revenue for same store golf and country clubs increased $9.0 million, or 1.5%, for fiscal year 2014 compared to fiscal year 2013, although all major revenue streams were negatively impacted by one less week in fiscal year 2014. Dues revenue increased $7.5 million, or 2.6% due to a rate increase in dues per same store average membership, an increase in the number of memberships and greater participation in the O.N.E. offering, despite the impact of one less week in fiscal year 2014. Food and beverage revenue increased $4.0 million, or 2.9%, primarily due to a 4.1% increase in a la carte revenue and an increase in corporate private events. Golf operations revenue decreased $0.8 million, or 0.5%, due primarily to the impact of one less week in fiscal year 2014 which was partially offset by increased retail sales. Other revenue decreased $1.8 million, or 3.5%, largely due to lower revenue recognized for membership initiation payments which are being recognized into revenue over the expected lives of active memberships.

62



Adjusted EBITDA for same store golf and country clubs increased $8.9 million, or 5.0%, for fiscal year 2014 compared to fiscal year 2013, despite the impact of one less week in fiscal year 2014, largely due to the increase in higher margin dues revenue combined with improved margins in food and beverage, partially offset by increased water and electricity rates. As a result, same store Adjusted EBITDA margin for fiscal year 2014 increased 100 basis points over fiscal year 2013.

New or acquired clubs includes the results, from the date of acquisition, for all clubs acquired or opened in fiscal years 2013 and 2014, including our acquisition of Sequoia Golf on September 30, 2014. New and acquired clubs contributed revenues of $67.5 million and Adjusted EBITDA of $16.0 million during fiscal year 2014, which was largely related to Sequoia Golf.

Business, Sports and Alumni Clubs
 
The following table presents key financial information for our business, sports and alumni clubs for fiscal years 2014 (consisting of 52 weeks) and 2013 (consisting of 53 weeks). Fiscal year 2014 was comprised of one less week than fiscal year 2013, which impacts the changes in results between the periods presented. References to percentage changes that are not meaningful are denoted by ‘‘NM’’.
 
 
Fiscal Year Ended
 
 
 
 
Business, Sports and Alumni Club Segment
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
Change (3)
 
%
Change (3)
 
 
(dollars in thousands)
Same Store Clubs
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
Dues
 
$
77,779

 
$
77,600

 
$
179

 
0.2
 %
Food and Beverage
 
92,905

 
90,171

 
2,734

 
3.0
 %
Other
 
11,214

 
12,659

 
(1,445
)
 
(11.4
)%
Revenue
 
$
181,898

 
$
180,430

 
$
1,468

 
0.8
 %
Adjusted EBITDA
 
$
35,550

 
$
34,508

 
$
1,042

 
3.0
 %
Adjusted EBITDA Margin
 
19.5
%
 
19.1
%
 
40 bps
 
2.1
 %
 
 
 
 
 
 
 
 
 
New or Acquired Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
2,105

 
$
—

 
$
2,105

 
NM

Adjusted EBITDA
 
$
(240
)
 
$
(8
)
 
$
(232
)
 
NM

 
 
 
 
 
 
 
 
 
Total Business, Sports and Alumni Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
184,003

 
$
180,430

 
$
3,573

 
2.0
 %
Adjusted EBITDA
 
35,310

 
34,500

 
$
810

 
2.3
 %
Adjusted EBITDA Margin
 
19.2
%
 
19.1
%
 
10 bps
 
0.5
 %
 
 
 
 
 
 
 
 
 
Same store memberships, excluding managed club memberships
 
55,064
 
54,733
 
331

 
0.6
 %
Same store average membership, excluding managed club memberships (1)
 
54,899

 
54,962

 
(63
)
 
(0.1
)%
Dues per average same store membership, excluding managed club memberships (2)
 
$
1,417

 
$
1,412

 
$
5

 
0.4
 %
Revenue per average same store membership, excluding managed club memberships (2)
 
$
3,313

 
$
3,283

 
$
30

 
0.9
 %
_______________________________

(1)
Same store average membership, excluding managed club memberships, is calculated using the same store membership count, excluding managed clubs, at the beginning and end of the period indicated.

(2)
Same store dues or revenue divided by same store average membership, excluding managed club memberships.


63


(3) 
All figures refer to year-over-year growth. Fiscal year 2013 benefited from one additional week in such fiscal year.
 
Total revenues for same store business, sports and alumni clubs increased $1.5 million, or 0.8%, for fiscal year 2014 compared to fiscal year 2013, although all major revenue streams were negatively impacted by one less week in fiscal year 2014. Food and beverage revenue increased $2.7 million, or 3.0%, primarily due to a 4.3% increase in private party revenue driven by increased spend in corporate private events. Dues revenue increased $0.2 million, or 0.2% due primarily to a rate increase in dues per same store average membership, despite the impact of one less week in fiscal year 2014. Other revenue decreased $1.4 million, or 11.4%, due primarily to lower revenue recognized for membership initiation payments which are being recognized into revenue over the expected lives of active memberships and the impact of one less week in fiscal year 2014.
 
Adjusted EBITDA for same store business, sports and alumni clubs increased $1.0 million, or 3.0%, for fiscal year 2014 compared to fiscal year 2013, despite the impact of one less week in fiscal year 2014, primarily due to increases in food and beverage revenue and higher margin dues revenue at our recently reinvented clubs, offset by increased payroll expense including variable wages associated with higher revenues. Additionally, rent expense decreased as there were higher leasing costs in fiscal year 2013 associated with the relocation and reinvention of one of our business clubs. Same store Adjusted EBITDA margin for fiscal year 2014 increased 40 basis points compared to fiscal year 2013.

Other
 
The following table presents financial information for Other, which is comprised primarily of activities not related to our two business segments, for fiscal years 2014 (consisting of 52 weeks) and 2013 (consisting of 53 weeks). Fiscal year 2014 was comprised of one less week than fiscal year 2013, which impacts the changes in results between the periods presented.
 
 
Fiscal Year Ended
 
 
 
 
Other
 
December 30, 2014
(52 weeks)
 
December 31, 2013
(53 weeks)
 
Change
 
%
Change
 
 
(dollars in thousands)
Adjusted EBITDA
 
$
(42,080
)
 
$
(37,504
)
 
$
(4,576
)
 
(12.2
)%

Other Adjusted EBITDA decreased $4.6 million, or 12.2%, for fiscal year 2014 compared to fiscal year 2013 largely due to $2.0 million increase in expense related to the infrastructure to support Sequoia Golf subsequent to acquisition on September 30, 2014, a $0.9 million increase in our insurance expense resulting from higher claims, and a $0.6 million increase in incentive compensation. The remaining increase is largely related to increases in other expenses offset by the impact of one less week in fiscal year 2014.


64


Comparison of the Fiscal Years Ended December 31, 2013 and December 25, 2012
 
The following table presents key financial information derived from our consolidated statements of operations for fiscal years 2013 (consisting of 53 weeks) and 2012 (consisting of 52 weeks). Fiscal year 2013 was comprised of one more week than fiscal year 2012, which impacts the changes in results between the periods presented.
 
 
Fiscal Year Ended
 
 
 
 
 
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
Change (2)
 
%
Change (2)
 
 
(dollars in thousands)
Total revenues
 
$
815,080

 
$
754,944

 
$
60,136

 
8.0
 %
Club operating costs and expenses exclusive of depreciation (1)
 
605,877

 
555,153

 
50,724

 
9.1
 %
Depreciation and amortization
 
72,073

 
78,286

 
(6,213
)
 
(7.9
)%
Loss on disposals of assets
 
8,122

 
10,904

 
(2,782
)
 
(25.5
)%
Impairment of assets
 
6,380

 
4,783

 
1,597

 
33.4
 %
Equity in earnings from unconsolidated ventures
 
(2,638
)
 
(1,947
)
 
(691
)
 
(35.5
)%
Selling, general and administrative
 
64,073

 
45,343

 
18,730

 
41.3
 %
Operating income
 
61,193

 
62,422

 
(1,229
)
 
(2.0
)%
Interest and investment income
 
345

 
1,212

 
(867
)
 
(71.5
)%
Interest expense
 
(83,669
)
 
(89,369
)
 
5,700

 
6.4
 %
Loss on extinguishment of debt
 
(16,856
)
 
—

 
(16,856
)
 
(100.0
)%
Other income
 
—

 
2,132

 
(2,132
)
 
(100.0
)%
Loss from continuing operations before income taxes
 
(38,987
)
 
(23,603
)
 
(15,384
)
 
(65.2
)%
Income tax benefit (expense)
 
(1,681
)
 
7,528

 
(9,209
)
 
(122.3
)%
Loss from continuing operations
 
$
(40,668
)
 
$
(16,075
)
 
$
(24,593
)
 
(153.0
)%
__________________________
 
(1) 
Comprised of club operating costs, cost of food and beverage sales and provision for doubtful accounts.

(2) 
All figures refer to year-over-year growth. Fiscal year 2013 benefited from one additional week in such fiscal year.

Total revenues of $815.1 million for fiscal year 2013 increased $60.1 million, or 8.0%, over fiscal year 2012, largely due to increased golf and country club revenue. Golf and country club revenue increased $42.5 million, or 7.3%, of which $11.5 million is attributable to golf and country club properties added in fiscal years 2012 and 2013. The remaining $31.0 million golf and country club revenue increase is driven by increases from all revenue streams due to fiscal year 2013 comprising 53 weeks, while fiscal year 2012 was comprised of 52 weeks, and increases in same store dues, food and beverage, golf operations and other revenue. In addition, our business, sports and alumni club segment revenue increased $6.1 million, or 3.5%, primarily due to increases in all types of revenue due to fiscal year 2013 comprising 53 weeks, while fiscal year 2012 was comprised of 52 weeks and an increase in dues revenue and food and beverage revenue. Revenue also increased $9.5 million, due to reimbursements for certain operating costs at managed clubs. These reimbursements do not include a markup and have no net impact on operating income, as such costs are included within club operating costs and expenses.
 
Club operating costs and expenses totaling $605.9 million for fiscal year 2013 increased $50.7 million, or 9.1%, compared to fiscal year 2012. The increase is partially due to $10.2 million of club operating costs and expenses related to club properties added in fiscal years 2012 and 2013 and $20.7 million of increased variable labor costs and food and beverage cost of goods sold associated with higher revenues. The remaining increase is largely related to $9.5 million in certain operating costs at managed clubs, which are offset by reimbursements recorded within revenue, resulting in no net impact on operating income. Additionally, club operating costs and expenses include $4.6 million equity-based compensation expense in fiscal year 2013 while none was recorded in fiscal year 2012.
 
Depreciation and amortization decreased $6.2 million, or 7.9% during fiscal year 2013 compared to fiscal year 2012, due primarily to lower amortization expense from intangible assets that fully amortized at the end of fiscal 2012.

Loss on disposal of assets for fiscal years 2013 and 2012 of $8.1 million and $10.9 million, respectively, were largely comprised of losses on asset retirements during the normal course of business. During fiscal year 2013, the losses were partially

65


offset by a property settlement of $0.8 million, while the losses in fiscal year 2012 were partially offset by insurance proceeds related to Hurricane Irene of $2.0 million and a property settlement of $1.2 million.

Impairment of assets of $6.4 million for fiscal year 2013 was primarily comprised of impairment losses to liquor licenses and property and equipment at certain of our clubs to adjust the carrying amount of certain liquor licenses and property and equipment, respectively, to its fair value. Impairment of assets of $4.8 million for fiscal year 2012 included impairments of mineral rights assets of $3.0 million, intangible assets of $0.5 million, an equity method investment of $0.7 million and property and equipment of $0.7 million.
Selling, general and administrative expenses of $64.1 million for fiscal year 2013 increased $18.7 million, or 41.3%, compared to fiscal year 2012. The major components of selling, general and administrative expenses are shown in the table below.

 
 
Fiscal Year Ended
 
 
 
 
Components of selling, general and administrative expense (1)
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
Change
 
%
Change
 
 
(dollars in thousands)
Selling, general and administrative expense, excluding equity-based compensation and capital structure costs
 
53,625

 
45,236

 
8,389

 
18.5
%
Capital structure costs
 
823

 
107

 
716

 
669.2
%
Equity-based compensation
 
9,625

 
—

 
9,625

 
100.0
%
Selling, general and administrative
 
$
64,073

 
$
45,343

 
$
18,730

 
41.3
%
______________________

(1)
Selling, general and administrative expense, excluding equity-based compensation and capital structure is a non-GAAP financial measure. We believe this measure is informative to investors because excluding capital structure costs and equity-based compensation will allow investors to more meaningfully compare our results between periods.

Selling, general and administrative expenses, excluding equity-based compensation and capital structure costs, were $53.6 million for fiscal year 2013, an increase of $8.4 million, or 18.5%, compared to fiscal year 2012. We made a one-time payment of $5.0 million to an affiliate of KSL in connection with the termination of a management agreement in connection with our IPO during fiscal year 2013. Additionally, selling, general and administrative expenses increased due to a $1.7 million increase in incentive compensation expense largely due to improved performance in fiscal year 2013.

Capital structure costs included within selling, general and administrative expenses increased $0.7 million to $0.8 million during fiscal year 2013 primarily due to costs associated with the second and third amendments to the credit agreement governing the Secured Credit Facilities and Holdings' initial public offering. Equity-based compensation expense included within selling, general and administrative expenses increased due to the recognition of equity-based compensation expense of $9.6 million in fiscal year 2013, while none was recognized in fiscal year 2012.

Interest expense totaled $83.7 million and $89.4 million for fiscal years 2013 and 2012, respectively. The $5.7 million decrease is comprised of a $4.0 million reduction due to lower interest rates on the Secured Credit Facilities and $1.4 million lower accretion expense related to membership initiation deposits.

Loss on extinguishment of debt for fiscal year 2013 consisted of a $14.5 million redemption premium payment and a write-off of $2.3 million in debt issuance costs both resulting from the redemption of $145.3 million of the Senior Notes. We did not incur any losses on extinguishment of debt during fiscal year 2012.

Income tax expense for fiscal year 2013 increased $9.2 million compared to fiscal year 2012, and the effective tax rates were (4.3)% and 31.9% for fiscal years 2013 and 2012, respectively. For fiscal year 2013, 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 permanent differences. For fiscal year 2012, the effective tax rate differed from the statutory federal tax rate of 35.0% primarily due to changes in uncertain tax positions, state and foreign taxes.


66


Segment Operations

The following table presents key financial information for our Segments and Adjusted EBITDA for fiscal years 2013 (consisting of 53 weeks) and 2012 (consisting of 52 weeks). Fiscal year 2013 was comprised of one more week than fiscal year 2012, which impacts the changes in results between the periods presented.
 
 
Fiscal Year Ended
 
 
 
 
Consolidated Summary
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
Change
 
%
Change
 
 
(dollars in thousands)
Total Revenue
 
$
815,080

 
$
754,944

 
$
60,136

 
8.0
 %
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
Golf and Country Clubs
 
$
180,208

 
$
168,491

 
$
11,717

 
7.0
 %
Business, Sports and Alumni Clubs
 
34,500

 
34,255

 
245

 
0.7
 %
Other
 
(37,504
)
 
(36,660
)
 
(844
)
 
(2.3
)%
Total Adjusted EBITDA (1)
 
$
177,204

 
$
166,086

 
$
11,118

 
6.7
 %
_______________________________

(1)
See ‘‘Basis of Presentation—EBITDA and Adjusted EBITDA’’ for the definition of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.
 

67


Golf and Country Clubs
 
The following table presents key financial information for our golf and country clubs for fiscal years 2013 (consisting of 53 weeks) and 2012 (consisting of 52 weeks). Fiscal year 2013 was comprised of one more week than fiscal year 2012, which impacts the changes in results between the periods presented. References to percentage changes that are not meaningful are denoted by ‘‘NM’’.
 
 
Fiscal Year Ended
 
 
 
 
Golf and Country Club Segment
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
Change (3)
 
%
Change (3)
 
 
(dollars in thousands)
Same Store Clubs
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
Dues
 
$
284,898

 
$
266,906

 
$
17,992

 
6.7
 %
Food and Beverage
 
137,450

 
128,687

 
8,763

 
6.8
 %
Golf Operations
 
141,110

 
137,663

 
3,447

 
2.5
 %
Other
 
49,788

 
48,977

 
811

 
1.7
 %
Revenue
 
$
613,246

 
$
582,233

 
$
31,013

 
5.3
 %
Adjusted EBITDA
 
$
177,647

 
$
167,876

 
$
9,771

 
5.8
 %
Adjusted EBITDA Margin
 
29.0
%
 
28.8
%
 
20 bps
 
0.7
 %
 
 
 
 
 
 
 
 
 
New or Acquired Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
15,227

 
$
3,731

 
$
11,496

 
NM

Adjusted EBITDA
 
$
2,561

 
$
615

 
$
1,946

 
NM

 
 
 
 
 
 
 
 
 
Total Golf and Country Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
628,473

 
$
585,964

 
$
42,509

 
7.3
 %
Adjusted EBITDA
 
$
180,208

 
$
168,491

 
$
11,717

 
7.0
 %
Adjusted EBITDA Margin
 
28.7
%
 
28.8
%
 
(10) bps
 
(0.3
)%
 
 
 
 
 
 
 
 
 
Same store memberships, excluding managed club memberships
 
81,170

 
80,536

 
634

 
0.8
 %
Same store average membership, excluding managed club memberships (1)
 
80,853

 
80,286

 
567

 
0.7
 %
Dues per average same store membership, excluding managed club memberships (2)
 
$
3,524

 
$
3,324

 
$
200

 
6.0
 %
Revenue per average same store membership, excluding managed club memberships (2)
 
$
7,585

 
$
7,252

 
$
333

 
4.6
 %
_______________________________

(1)
Same store average membership, excluding managed club memberships, is calculated using the same store membership count, excluding managed clubs, at the beginning and end of the period indicated.

(2)
Same store dues or revenue divided by same store average membership, excluding managed club memberships.

(3) 
All figures refer to year-over-year growth. Fiscal year 2013 benefited from one additional week in such fiscal year.

Total revenue for same store golf and country clubs increased $31.0 million, or 5.3%, for fiscal year 2013 compared to fiscal year 2012, largely due to increases in dues, increases from all major revenue streams due to fiscal year 2013 comprising of 53 weeks, while fiscal year 2012 was comprised of 52 weeks and increases in food and beverage, golf operations and other revenue. Dues revenue increased $18.0 million, or 6.7%, inclusive of one additional week in fiscal year 2013, due to an increase in average dues per membership, which is partially due to revenues from the O.N.E. product, and an increase in memberships. Food and beverage revenue increased $8.8 million, or 6.8%, primarily due to a 7.8% increase in a la carte revenue driven by an increase in a la carte covers per average membership, which is partially driven by the O.N.E. product, combined with a 2.0% increase in a la carte check average and an increase in private party revenue driven by increased spend in

68


social and corporate private parties. Golf operations revenue increased $3.4 million, or 2.5%, due to increases in average green fees, cart fees and increased retail revenue.

Adjusted EBITDA for same store golf and country clubs increased $9.8 million, or 5.8%, for fiscal year 2013 compared to fiscal year 2012, inclusive of one additional week in fiscal year 2013, largely due to the increase in higher margin dues revenue. As a result, same store Adjusted EBITDA margin for fiscal year 2013 increased 20 basis points over fiscal year 2012.

Business, Sports and Alumni Clubs
 
The following table presents key financial information for our business, sports and alumni clubs for fiscal years 2013 (consisting of 53 weeks) and 2012 (consisting of 52 weeks). Fiscal year 2013 was comprised of one more week than fiscal year 2012, which impacts the changes in results between the periods presented. References to percentage changes that are not meaningful are denoted by ‘‘NM’’.
 
 
Fiscal Year Ended
 
 
 
 
Business, Sports and Alumni Club Segment
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
Change (3)
 
%
Change (3)
 
 
(dollars in thousands)
Same Store Clubs
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
Dues
 
$
77,600

 
$
74,914

 
$
2,686

 
3.6
 %
Food and Beverage
 
90,171

 
86,958

 
3,213

 
3.7
 %
Other
 
12,659

 
12,472

 
187

 
1.5
 %
Revenue
 
$
180,430

 
$
174,344

 
$
6,086

 
3.5
 %
Adjusted EBITDA
 
$
34,508

 
$
34,255

 
$
253

 
0.7
 %
Adjusted EBITDA Margin
 
19.1
%
 
19.6
%
 
(50) bps
 
(2.6
)%
 
 
 
 
 
 
 
 
 
New or Acquired Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
—

 
$
—

 
$
—

 
NM

Adjusted EBITDA
 
$
(8
)
 
$
—

 
$
(8
)
 
NM

 
 
 
 
 
 
 
 
 
Total Business, Sports and Alumni Clubs
 
 
 
 
 
 
 
 
Revenue
 
$
180,430

 
$
174,344

 
$
6,086

 
3.5
 %
Adjusted EBITDA
 
34,500

 
34,255

 
$
245

 
0.7
 %
Adjusted EBITDA Margin
 
19.1
%
 
19.6
%
 
(50) bps
 
(2.6
)%
 
 
 
 
 
 
 
 
 
Same store memberships, excluding managed club memberships
 
54,733
 
55,190
 
(457
)
 
(0.8
)%
Same store average membership, excluding managed club memberships (1)
 
54,962

 
55,624

 
(662
)
 
(1.2
)%
Dues per average same store membership, excluding managed club memberships (2)
 
$
1,412

 
$
1,347

 
$
65

 
4.8
 %
Revenue per average same store membership, excluding managed club memberships (2)
 
$
3,283

 
$
3,134

 
$
149

 
4.8
 %
_______________________________

(1)
Same store average membership, excluding managed club memberships, is calculated using the same store membership count, excluding managed clubs, at the beginning and end of the period indicated.

(2)
Same store dues or revenue divided by same store average membership, excluding managed club memberships.

(3) 
All figures refer to year-over-year growth. Fiscal year 2013 benefited from one additional week in such fiscal year.

Total revenues for same store business, sports and alumni clubs increased $6.1 million, or 3.5%, for fiscal year 2013 compared to fiscal year 2012, due to increases from all major revenue streams due to fiscal year 2013 comprising 53 weeks,

69


while fiscal year 2012 was comprised of 52 weeks, as well as increases in food and beverage revenue. Food and beverage revenue increased $3.2 million, or 3.7%, due to an 8.9% increase in a la carte revenue, driven by a 5.9% increase in a la carte check average and a 4.1% increase in a la carte covers per average membership, combined with an increase in private party revenue driven by increased spend in corporate private parties. Dues revenue increased $2.7 million, or 3.6%, inclusive of one additional week in fiscal year 2013.
 
Adjusted EBITDA for same store business, sports and alumni clubs increased $0.3 million, or 0.7%, for fiscal year 2013 compared to fiscal year 2012, inclusive of one additional week in fiscal year 2013, as improved revenues were offset by increases in variable labor costs and an increase in cost of goods sold associated with increased food and beverage revenue. The remaining increase in expenses was primarily related to increased leasing costs associated with the relocation and reinvention of one of our business clubs. Primarily as a result of the relocation and reinvention of the business club described above, Adjusted EBITDA margin for fiscal year 2013 declined 50 basis points compared to fiscal year 2012.

Other
 
The following table presents financial information for Other, which is comprised primarily of activities not related to our two business segments, for fiscal years 2013 (consisting of 53 weeks) and 2012 (consisting of 52 weeks). Fiscal year 2013 was comprised of one more week than fiscal year 2012, which impacts the changes in results between the periods presented.
 
 
Fiscal Year Ended
 
 
 
 
Other
 
December 31, 2013
(53 weeks)
 
December 25, 2012
(52 weeks)
 
Change
 
%
Change
 
 
(dollars in thousands)
Adjusted EBITDA
 
$
(37,504
)
 
$
(36,660
)
 
$
(844
)
 
(2.3
)%

Other Adjusted EBITDA decreased $0.8 million, or 2.3%, for fiscal year 2013 compared to fiscal year 2012 largely due to an increase in incentive compensation expense due to improved performance in fiscal year 2013.

Liquidity and Capital Resources
 
We operate through our subsidiaries and have no material assets other than the stock of our subsidiaries. Our ability to pay dividends is dependent on our receipt of dividends or other distributions from our subsidiaries, proceeds from the issuance of our securities and borrowings under the Secured Credit Facilities and other debt instruments.

Our primary goal as it relates to liquidity and capital resources is to attain and retain the right level of debt and cash to maintain and fund expansions, replacement projects and other capital investments at our clubs, be poised for external growth and pay dividends to our stockholders. Historically, we have financed our business through cash flows from operations and debt.

We anticipate cash flows from operations to be our primary source of cash over the next twelve months. We believe current assets and cash generated from operations will be sufficient to meet anticipated working capital needs, planned capital expenditures, debt service obligations and payment of a quarterly cash dividend on our common stock of $0.13 per share, or an indicated annual dividend of $0.52 per share. The payment of such quarterly dividends will be at the discretion of our Board of Directors. We plan to use excess cash reserves, the revolving credit facility, debt proceeds, equity proceeds, or a combination thereof to expand the business through capital improvement and expansion projects and strategically selected club acquisitions.

As of December 30, 2014, cash and cash equivalents totaled $75.0 million and we had $111.3 million available for borrowing under the revolving credit facility of the Secured Credit Facilities for total liquidity of $186.3 million. As of March 5, 2015, we had $105.3 million available for borrowing under the revolving credit facility.


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Cash Flows from Operating Activities
 
Cash flows from operations totaled $129.2 million and $93.7 million for fiscal years 2014 and 2013, respectively. The $35.5 million increase in operating cash flows is due largely to an increase in earnings of $25.8 million, excluding income taxes, the $14.6 million increase of loss on extinguishment of debt, the $10.2 million increase of depreciation expense and the $9.9 million decrease of equity based compensation expense which do not impact operating cash flows, combined with the impact of changes in working capital during the normal course of business.

Cash flows from operations totaled $93.7 million and $96.9 million for fiscal years 2013 and 2012, respectively. The $3.2 million decrease in operating cash flows is due to $13.7 million lower earnings, which includes a one-time payment of $5.0 million to an affiliate of KSL in connection with the termination of a management agreement in connection with our IPO, and changes in working capital during the normal course of business.

Cash Flows used in Investing Activities
 
Cash flows used in investing activities totaled $352.7 million and $72.7 million for fiscal years 2014 and 2013, respectively. The increase in cash used for investing activities is largely due the $260.0 million in cash consideration spent during fiscal year 2014 for the acquisition of Sequoia Golf, a $13.1 million increase in capital spent to maintain, renovate and reinvent our existing properties and a $4.6 million increase in cash used for the acquisition of other clubs.

Cash flows used in investing activities totaled $72.7 million and $47.3 million for fiscal years 2013 and 2012, respectively. The increase in cash used for investing activities is largely due to a $12.1 million increase in cash used for acquisitions of clubs, a $5.3 million increase in capital spent to maintain, renovate and reinvent our existing properties and a $6.6 million decrease in cash proceeds from dispositions. In addition, during fiscal year 2012, we received $2.2 million of insurance proceeds for damages caused by Hurricane Irene.

Cash Flows used in Financing Activities
 
Cash flows provided by financing activities totaled $245.0 million for fiscal year 2014 while cash flows used in financing activities totaled $49.1 million for fiscal year 2013.

During fiscal year 2014, Operations entered into fifth and sixth amendments to the credit agreement governing the Secured Credit Facilities which increased the term loan facility principal balance to $901.1 million. The proceeds of the additional term loan borrowings under the fifth amendment of $348.3 million, net of discount, together with cash on hand, were used to redeem the remaining $269.8 million principal amount of the Senior Notes, pay the related redemption premium of $27.5 million and repay the $11.2 million borrowed under our revolving credit facility earlier in the year. The proceeds of the additional term loan borrowings under the sixth amendment of $248.1 million, net of discount, together with cash on hand, were used to fund the acquisition of Sequoia Golf, including certain expenses related thereto. During fiscal year 2013, we received $173.3 million in proceeds, net of underwriting discounts and commissions, from the issuance of common stock in our IPO and paid $4.3 million in equity offering costs. We used a portion of the net proceeds from our IPO to redeem $145.3 million in aggregate principal amount of the Senior Notes and to pay approximately $14.5 million of redemption premium.

Additionally, during fiscal year 2014 we made scheduled debt repayments of $13.6 million, which was a $12.1 million decrease from the $25.7 million scheduled and other debt repayments made during fiscal year 2013. During fiscal year 2013, Operations entered into the second amendment to the credit agreement governing the Secured Credit Facilities which increased the term loan facility principal balance by $10.0 million. We paid $8.3 million and $7.9 million for debt issuance and modification costs in fiscal years 2014 and 2013, respectively, related primarily to debt amendments to the credit agreement governing the Secured Credit Facilities.

During fiscal year 2014, we paid $30.8 million of dividends to our common stockholders and during fiscal year 2013, we made a distribution of $35.0 million to the owners of our common stock.

Cash flows used in financing activities totaled $49.1 million and $18.9 million for fiscal years 2013 and 2012, respectively. During fiscal year 2013, we received $173.3 million in proceeds, net of underwriting discounts and commissions, from the issuance of common stock in our IPO and paid $4.3 million in equity offering costs. We used a portion of the net proceeds from our IPO to redeem $145.3 million in aggregate principal amount of the Senior Notes and to pay approximately $14.5 million of redemption premium. On December 27, 2012, during fiscal year 2013, we made a distribution of $35.0 million to the owners of our common stock. Additionally, we made scheduled debt repayments of $25.7 million, which is a $10.9 million increase from fiscal year 2012.

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Total cash and cash equivalents increased by $21.3 million during fiscal year 2014 and decreased by $28.2 million during fiscal year 2013.

Capital Spending
 
The nature of our business requires us to invest capital to maintain our existing properties. For fiscal years 2014, 2013 and 2012 we spent approximately $29.1 million, $23.8 million and $16.7 million, respectively, in capitalized costs to maintain our existing properties. During fiscal year 2015, we anticipate spending approximately $45.7 million in capital to maintain our existing facilities.

In addition to maintaining our properties, we also spend discretionary capital to expand and improve existing properties, including major reinventions, and expand our business through acquisitions. Capital expansion funding, including acquisitions, totaled approximately $323.8 million, $51.3 million and $41.1 million for fiscal years 2014, 2013 and 2012, respectively. We anticipate spending approximately $42.1 million on reinvention and expansion projects during fiscal year 2015, excluding potential future acquisitions.

Future discretionary capital spending amounts are subject to change if additional acquisitions or expansion opportunities are identified that fit our strategy to expand the business or as a result of other factors, including but not limited to those described in Item 1A. Risk Factors.

Subsequent to December 30, 2014, we purchased two golf and country clubs in the Chicago, Illinois area. On January 13, 2015, we purchased Ravinia Green Country Club, a private golf club in Riverwoods, Illinois, for a purchase price of $5.9 million. 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. We anticipate spending more than $1.5 million in reinvention project capital at each property.

Debt

Secured Credit Facilities—In 2010, Operations entered into the Secured Credit Facilities. The credit agreement governing the Secured Credit Facilities was subsequently amended in 2012, 2013 and 2014. As of March 5, 2015, the Secured Credit Facilities, are comprised of (i) a $901.1 million term loan facility, and (ii) a revolving credit facility with capacity of $135.0 million and $105.3 million available for borrowing after deducting $23.7 million of standby letters of credit and $6.0 million of borrowings outstanding. In addition, the credit agreement governing the Secured Credit Facilities includes capacity which provides, subject to lender participation, for additional borrowings in revolving or term loan commitments, so long as the Senior Secured Leverage Ratio does not exceed 3.75:1.00.

As of March 5, 2015, the interest rate on the term loan facility was 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.
    
As of March 5, 2015, all revolving credit commitments 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. We are 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.

As long as commitments are outstanding under the revolving credit facility, we are subject to the Senior Secured Leverage Ratio. The Senior Secured Leverage Ratio is defined as the ratio of Operations' Consolidated Senior Secured Debt to Consolidated EBITDA (disclosed as Adjusted EBITDA and defined in “Basis of Presentation”) 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. The credit agreement governing the Secured Credit Facilities requires us to maintain a leverage ratio no greater than 5.00:1.00 for each fiscal quarter.

We may be required to prepay the outstanding term loan facility by a percentage of excess cash flows, as defined by the credit agreement governing the Secured Credit Facilities, each fiscal year end after its annual consolidated financial statements are delivered, which percentage may decrease or be eliminated depending on the results of the Senior Secured Leverage Ratio test at the end of each fiscal year. No such prepayment was required with respect to fiscal year 2014. We may voluntarily repay outstanding loans under the Secured Credit Facilities in whole or in part upon prior notice without premium or penalty, other than certain fees incurred in connection with a repricing transaction.


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As of December 30, 2014, Operations was in compliance with all covenant restrictions under the credit agreement governing the Secured Credit Facilities. The following tables present the Senior Secured Leverage Ratio, as defined in the credit agreement governing the Secured Credit Facilities, on a rolling four quarter basis through December 30, 2014:
 
Fiscal Year Ended
 
December 30, 2014
 
(dollars in thousands)
Pro Forma Adjusted EBITDA (1)
$
219,097

Pro Forma Consolidated Senior Secured Debt (2)
$
938,524

 
 

Senior Secured Leverage Ratio
4.28
x
_______________________

(1)
The following table presents a reconciliation of Adjusted EBITDA to Pro Forma Adjusted EBITDA for fiscal year 2014:
 
Fiscal Year Ended
 
December 30, 2014
 
(dollars in thousands)
Adjusted EBITDA (a)
$
196,772

Pro forma adjustment - acquisitions (b)
22,325

Pro Forma Adjusted EBITDA
$
219,097


(a)
See ‘‘Basis of Presentation’’ for the definition of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.

(b)
The pro forma adjustment gives effect to all fiscal year 2014 acquisitions as though they had been consummated on January 1, 2014 and includes certain expected cost savings.

(2)
The reconciliation of total debt to Pro Forma Consolidated Senior Secured Debt is as follows:
 
As of December 30, 2014
 
(dollars in thousands)
Long-term debt (net of current portion and excluding loan discount)
$
968,564

Current maturities of long-term debt
18,025

Outstanding letters of credit
23,667

Uncollateralized surety bonds
4,287

Less:
 
Notes payable related to Non-Core Development Entities
(11,837
)
Adjustment per credit agreement (a)
(64,182
)
Pro Forma Consolidated Senior Secured Debt
$
938,524

_______________________

(a)
Represents an adjustment reducing total debt by the lesser of Operations' unrestricted cash or $85.0 million. Adjustment includes a $10.8 million pro forma reduction to Operations’ unrestricted cash which reflects the cash interest which would have been paid during fiscal year 2014 if the Sequoia Golf acquisition and the associated increase in the term loan balance had occurred on January 1, 2014.
 
Senior Notes—On November 30, 2010, Operations issued $415.0 million in Senior Notes with registration rights, 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. The redemption premium of $14.5 million and proportional write-off of unamortized debt issuance costs of $2.3 million was accounted for as a loss on extinguishment of debt during fiscal year 2013.


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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 was 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 fiscal year 2014.

General Electric Capital Corporation—In July 2008, we entered into a secured mortgage loan with General Electric Capital Corporation (“GECC”) for $32.0 million with an original maturity of July 2011. During fiscal year 2011, we extended the term of the loan to July 2012. Effective August 1, 2012, under the First Amendment to the loan agreement with GECC, the maturity extended to November 2015 with two additional twelve month options to extend through November 2017 upon satisfaction of certain conditions. As of December 30, 2014, we expect to meet the required conditions and currently intend to extend the loan with GECC to November 2017. The loan is collateralized by the assets of two golf and country clubs. As part of the August 1, 2012 amendment, the interest rate was changed from 3.25% plus 30 day LIBOR to 5% plus the greater of three month LIBOR or 1%.
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 25 year amortization. The loan is collateralized by the assets of one golf and country club and the loan provides for variable interest rates based on 30 day LIBOR.
BancFirst—In connection with the acquisition of Oak Tree Country Club in May 2013, we assumed a mortgage loan with BancFirst for $5.0 million. The loan had 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 extended the term of the loan to October 1, 2015. As of December 30, 2014, we expect to meet the required conditions and currently intend to extend the loan with BancFirst to October 2016. The loan is collateralized by the assets of Oak Tree Country Club and bears interest at a rate equal to the greater of 4.5% or the prime rate.
As of December 30, 2014, other debt and capital leases totaled $48.1 million.
The following table summarizes the components of our interest expense for fiscal year 2014:
 
 
Fiscal Year Ended
 
 
December 30, 2014
 
 
(dollars in thousands)
Interest expense related to:
 
 
Interest related to funded debt (1)
 
$
39,318

Capital leases and other indebtedness (2)
 
1,678

Amortization of debt issuance costs and term loan discount
 
2,429

Notes payable related to certain Non-Core Development Entities
 
1,061

Accretion of discount on member deposits
 
20,723

Total Interest expense
 
$
65,209

_______________________

(1)
Interest expense related to funded debt includes interest on the Senior Notes, the securities and borrowing under the Secured Credit Facilities, and mortgage loans with General Electric Capital Corporation, Atlantic Capital Bank and BancFirst.

(2)
Includes interest expense on capital leases and other indebtedness (which includes other mortgage loans not included in funded debt above), offset by capitalized interest.


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Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments
 
We are not aware of any off-balance sheet arrangements as of December 30, 2014. The following tables summarize our total contractual obligations and other commercial commitments and their respective payment or commitment expiration dates by year as of December 30, 2014:

Contractual Obligations
 
 
Payments due by Period
 
 
Total
 
Less than
one year
 
1 - 3 years
 
3 - 5 years
 
More than
five years
 
 
(dollars in thousands)
Long-term debt (1)
 
$
952,640

 
$
4,711

 
$
33,564

 
$
612

 
$
913,753

Interest on long-term debt (2)
 
245,493

 
43,294

 
86,252

 
92,742

 
23,205

Capital lease obligations, including imputed interest
 
37,260

 
14,947

 
17,688

 
4,625

 
—

Membership initiation deposits (3)
 
338,645

 
135,583

 
31,082

 
28,031

 
143,949

Other long-term obligations (4)
 
19,015

 
7,143

 
6,217

 
1,971

 
3,684

Operating leases
 
197,272

 
23,058

 
40,731

 
31,629

 
101,854

Total contractual cash obligations (5)
 
$
1,790,325

 
$
228,736

 
$
215,534

 
$
159,610

 
$
1,186,445

_______________________

(1)
Long-term debt consisted of $901.1 million under the Secured Credit Facilities and $51.5 million of other debt. No amounts were outstanding under the revolving credit facility.

(2)
Interest on long-term debt includes interest on our $901.1 million term loan facility which bears interest at a rate equal to the higher of (i) 4.50% or (ii) an elected LIBOR plus a margin of 3.50%. For purposes of this table, we have assumed an interest rate of 4.5% on the term loan facility for all future periods, which is based on the LIBOR rate as of December 30, 2014. Interest on long-term debt does not include interest on notes payable related to Non-Core Development Entities. See Note 10 of our consolidated financial statements included elsewhere herein.

(3)
Represents the net present value of initiation deposits based on the discounted value of future maturities using our incremental borrowing rate adjusted to reflect a 30-year time frame. The initiation deposits are refundable on or after the maturity date, subject to satisfaction of contractual conditions. We have redeemed approximately 1.7% of total initiation deposits received as of December 30, 2014. The present value of the initiation deposits received is recorded as a liability on our consolidated balance sheets and accretes over the nonrefundable term using the effective interest method. At December 30, 2014, the gross amount of the initiation deposits recorded as a liability was $716.1 million.

(4)
Consists of insurance reserves for general liability and workers’ compensation of $19.0 million, of which $7.1 million is classified as current.

(5)
Table excludes obligations for uncertain income tax positions. As of December 30, 2014 and December 31, 2013, we had $7.7 million and $56.1 million, respectively, of unrecognized tax benefits related to uncertain tax positions. Unrecognized tax benefits are not expected to change significantly over the next twelve months; however, we are unable to predict when, and if, cash payments related to uncertain tax positions will be required.


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Commercial Commitments
 
 
Total
 
Less than
one year
 
1 - 3 years
 
3 - 5 years
 
More than
five years
 
 
(dollars in thousands)
Standby letters of credit (1)
 
$
23,667

 
$
23,667

 
$
—

 
$
—

 
$
—

Capital commitments (2)
 
12,438

 
12,438

 
—

 
—

 
—

Total commercial commitments
 
$
36,105

 
$
36,105

 
$
—

 
$
—

 
$
—

_______________________

(1)
Standby letters of credit are primarily related to security for future estimated claims for workers’ compensation and general liability insurance and collateral for our surety bond program. Our commitment amount for insurance-related standby letters of credit is gradually reduced as obligations under the policies are paid. See “Contractual Obligations” regarding reserves for workers’ compensation and general liability insurance.

(2)
Includes capital commitments at certain clubs to procure assets related to future construction for capital projects.

Inflation

To date, inflation has not had a significant impact on our operations. As operating costs and expenses increase, we generally attempt to offset the adverse effect through price adjustments that we believe to be in line with industry standards. However, we are subject to the risk operating costs will increase to a point in which we would be unable to offset such increases with raised dues, fees and/or prices without negatively affecting demand. In addition to inflation, factors that could cause operating costs to rise include, among other things, increased labor costs, lease payments at our leased facilities, energy costs and property taxes.

Critical Accounting Policies and Estimates

The process of preparing financial statements in conformity with GAAP requires us to use estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes included elsewhere in this report. We base these estimates and assumptions upon the best information available to us at the time the estimates or assumptions are made. Accordingly, our actual results could differ materially from our estimates. The following is a description of the most significant estimates made by management. A full description of all our significant accounting policies is included in Note 2 of the audited consolidated financial statements included elsewhere herein.

Revenue Recognition
Revenues from club operations, food and beverage and merchandise sales are recognized 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. The monthly dues are expected to cover the cost of providing membership services and are generally adjusted annually depending on national, regional or local economic conditions, which could limit our ability to increase revenues from membership dues.
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. These initiation payments vary in amount based on a variety of factors such as the supply and demand for our services in each particular market, number of golf courses or breadth of amenities available to the members and the prestige of the club. In general, initiation fees are not refundable, whereas initiation deposits are not refundable until after a fixed number of years (generally 30) and the satisfaction of contract-specific conditions. We recognize revenue related to membership initiation fees 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 as revenue over the expected life of an active membership.
The present value of the refund obligation is recorded as a membership initiation deposit liability in our consolidated balance sheet and accretes over the nonrefundable term using the effective interest method with an interest rate defined as our incremental borrowing rate at the time the initiation deposit was paid adjusted to reflect the life of the maturity, which is generally a 30-year time frame.

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Expected Life of an Active Membership
The determination of the expected lives of active memberships is a critical estimate in the recognition of revenues associated with initiation fees and deposits. 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 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 fiscal year 2012, the average expected life of a golf and country club membership was approximately six years and the expected life of a business, sports and alumni club membership was approximately four years. We re-evaluate the expected lives of our active memberships annually as of the first day of our fourth quarter for the subsequent four quarter period. During fiscal year 2013, our estimated expected lives ranged from one to 20 years. Beginning in the fourth quarter of 2013, 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. During fiscal year 2014, 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. A one year increase or decrease in the average expected lives of our memberships in either our golf and country club segment or our business, sports and alumni segment would change total revenues by less than 1%.

Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment to identify properties where events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For each property identified, we perform a recoverability test to determine if the future undiscounted cash flows to be received over our expected holding period of the property exceed the carrying amount of the assets of the property. If the recoverability test is not met, the impairment is determined by comparing the carrying value of the property to its fair value which may be approximated by using future discounted cash flows using a risk-adjusted discount rate. Future cash flows of each property are determined using management’s projections of the performance of a given property based on its past performance and expected future performance, local operations and other factors both within our control and out of our control. Additionally, throughout the impairment evaluation process, we consider the impact of recent property appraisals when they are available. Estimates utilized in the future evaluations of long-lived assets for impairment could differ from estimates used in the current period calculations. Unfavorable future estimates could result in material impairments to long-lived assets.
Goodwill and Intangible Assets
We classify intangible assets into three categories: (1) intangible assets with finite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. We review goodwill and indefinite lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable. We test definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable. We utilize a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations.
Our intangible assets with finite lives are primarily comprised of management contracts, member relationships and trade names and are tested whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable. Our intangible assets with indefinite lives are primarily comprised of trade names and are tested for impairment at least annually. We utilize the relief from royalty method to determine the estimated fair value for each trade name which is classified as a Level 3 measurement. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Estimates utilized in the future evaluations of intangible assets for impairment could differ from estimates used in the current period calculations. Unfavorable future estimates could result in material impairments to intangible assets.
We evaluate goodwill for impairment at the reporting unit level (golf and country clubs and business, sports and alumni clubs), which are the same as our two operating segments. When testing for impairment, we first compare the fair value of our reporting units to the recorded values. Valuation methods used to determine fair value include analysis of the discounted future free cash flows that a reporting unit is expected to generate (Income Approach) and an analysis, which is based upon a comparison of our reporting units to similar companies utilizing a purchase multiple of earnings before interest, taxes, depreciation and amortization (Market Approach). These valuations are considered Level 3 measurements. Key assumptions

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used in this model include future cash flows, growth rates, discount rates, capital needs and projected margins, among other factors.
We test goodwill for impairment as of the first day of our last fiscal quarter. Based on this analysis, no impairment of goodwill was recorded for all years presented and we are not currently aware of any material events that would cause us to reassess the fair value of our goodwill. The estimated fair values of our golf and country clubs and business, sports and alumni clubs reporting units both exceeded their carrying values by a significant amount as of the analysis performed during fiscal year 2014.
Estimates utilized in the future evaluations of goodwill for impairment could differ from estimates used in the current period calculations. Unfavorable future estimates could result in an impairment of goodwill. The most significant assumptions used in the Income Approach to determine the fair value of our reporting units in connection with impairment testing include: (i) the discount rate, (ii) the expected long-term growth rate and (iii) future cash flows projections. If we used a discount rate that was 50 basis points higher or used an expected long-term growth rate that was 50 basis points lower or used future cash flow projections that were 50 basis points lower in our impairment analysis of goodwill for fiscal year 2014, it would not have resulted in either reporting unit’s carrying value exceeding its fair value. In addition, future changes in market conditions will impact estimates used in the Market Approach and could result in an impairment of goodwill.
Additionally, as a result of the Sequoia Golf acquisition on September 30, 2014, we recorded additional goodwill and intangible assets. GAAP requires that we allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the fair value of the net assets acquired or the excess of the aggregate fair values of assets acquired and liabilities assumed is recorded as goodwill. In determining the fair values of assets acquired assumed in a business combination, we use various recognized valuation methods including, depending on the nature of the asset or liability, the cost approach, sales comparison approach and the excess earnings method. Key assumptions used include future cash flows, growth rates, discount rates and projected margins, among other factors. Estimates utilized in the future evaluations of these assets for impairment could differ from estimates used when recording the fair value on the date of acquisition. Unfavorable future estimates could result in impairments of the assets.

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

In addition, 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. 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. Additionally, during fiscal year 2014, we received an audit assessment for the 2009 tax year for another Mexican subsidiary, which we have protested with the Mexican taxing authorities through the appropriate administrative channel. Subsequently, we recorded a liability 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 result of our protest of this assessment. Management believes it is unlikely that our unrecognized tax benefits will significantly change within the next 12 months given the current status in particular of the matters currently under examination by the Mexican tax authorities. A difference in the ultimate resolution of tax uncertainties from what is currently estimated could have a material adverse effect on our operating results and financial condition.

In addition, in October 2014, an IRS audit was completed resulting in $48.6 million reduction to unrecognized tax benefits, of which $11.7 million represented settlements and $36.9 million represented further reductions of prior period unrecognized tax benefits. An additional $11.8 million of accrued interest and penalties were reversed, thereby resulting in $43.7 million of the above benefits being recorded in the income statement.

Refer to Note 12 of the Notes to Consolidated Financial Statements under Part II, Item 8: “Financial Statements” of this Form 10-K for further discussion of our accounting policies around income taxes and uncertain tax positions.

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Recently Issued Accounting Pronouncements

See “Recently Issued Accounting Pronouncements” included in Note 2 of the Notes to Consolidated Financial Statements under Part II, Item 8: “Financial Statements” of this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Interest Rate Risk

Our indebtedness consists of both fixed and variable rate debt facilities. As of December 30, 2014, the interest rate on the term loan facility under the Secured Credit Facilities was the higher of (i) 4.5% “Floor” or (ii) an elected LIBOR plus a margin of 3.5%. Therefore, the term loan facility is effectively subject to a 4.5% Floor until LIBOR exceeds 1.0%. As of March 5, 2015, the three month LIBOR was 0.26%, which is below 1.0%, such that a hypothetical 0.5% increase in LIBOR would not result in an increase in interest expense.
As of December 30, 2014, Operations is party to an interest rate cap agreement which limits our interest rate exposure on the term loan facility. The agreement is on a notional amount of $200.0 million, limits our exposure on the elected LIBOR rate to 1.0% and expires in May 2015.
Foreign Currency Exchange Risk
Our interests in foreign economies include three golf properties in Mexico and one business club in China. We translate foreign currency denominated amounts into U.S. dollars and we report our consolidated financial results of operations in U.S. dollars. Because the value of the U.S. dollar fluctuates relative to other currencies, revenues that we generate or expenses that we incur in other currencies could increase or decrease our revenues or expenses as reported in U.S. dollars. Total foreign currency denominated revenues and expenses comprised less than 1.0% of our consolidated revenues and expenses, respectively, for fiscal year 2014.
Fluctuations in the value of the U.S. dollar relative to other currencies could also increase or decrease foreign currency transaction gains and losses which are reflected as a component of club operating costs. Total foreign currency transaction losses for fiscal year 2014 totaled less than $0.2 million.


79


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
Page
Audited Consolidated Financial Statements
 
 
 



80


Management’s Report on Internal Control over Financial Reporting

Management of ClubCorp Holdings, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 30, 2014. In making this assessment, management used the criteria established in Internal Control-Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 30, 2014, the Company’s internal control over financial reporting was effective.

The Company acquired Sequoia Golf in the fourth quarter of the fiscal year ended December 30, 2014. As such, the scope of management's assessment of the effectiveness of the Company's internal control over financial reporting did not include the internal controls over financial reporting at Sequoia Golf. These exclusions are consistent with the Securities and Exchange Commission Staff's guidance that an assessment of a recently acquired business may be omitted from the scope of management's assessment of the internal control over financial reporting in the year of acquisition. Sequoia Golf represented 14% of the Company's total assets and 4% of the Company's revenues as of and for the fiscal year ended December 30, 2014.


81


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
ClubCorp Holdings, Inc.
Dallas, Texas
We have audited the accompanying consolidated balance sheets of ClubCorp Holdings, Inc. and subsidiaries (the “Company”) as of December 30, 2014 and December 31, 2013, and the related consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 30, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ClubCorp Holdings, Inc. and subsidiaries as of December 30, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
March 12, 2015


82


CLUBCORP HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Fiscal Years Ended December 30, 2014, December 31, 2013 and December 25, 2012

(In thousands, except per share amounts)
 
2014

2013
 
2012
REVENUES:
 


 

 
 
Club operations
$
629,180


$
579,751

 
$
535,274

Food and beverage
251,838


231,673

 
216,269

Other revenues
3,137


3,656

 
3,401

Total revenues
884,155

 
815,080

 
754,944







 
 
DIRECT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
 


 

 
 
Club operating costs exclusive of depreciation
568,171


527,787

 
483,653

Cost of food and beverage sales exclusive of depreciation
81,165


74,607

 
68,735

Depreciation and amortization
80,792


72,073

 
78,286

Provision for doubtful accounts
2,733


3,483

 
2,765

Loss on disposals of assets
10,518

 
8,122

 
10,904

Impairment of assets
2,325

 
6,380

 
4,783

Equity in earnings from unconsolidated ventures
(1,404
)

(2,638
)
 
(1,947
)
Selling, general and administrative
73,870


64,073

 
45,343

OPERATING INCOME
65,985


61,193

 
62,422







 
 
Interest and investment income
2,585


345

 
1,212

Interest expense
(65,209
)

(83,669
)
 
(89,369
)
Loss on extinguishment of debt
(31,498
)
 
(16,856
)
 
—

Other income
—

 
—

 
2,132

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(28,137
)

(38,987
)
 
(23,603
)
INCOME TAX BENEFIT (EXPENSE)
41,469


(1,681
)
 
7,528

INCOME (LOSS) FROM CONTINUING OPERATIONS
13,332


(40,668
)
 
(16,075
)
Loss from discontinued clubs, net of income tax benefit (expense) of $1, $(3) and $2,669 in 2014, 2013 and 2012, respectively
(3
)

(12
)
 
(10,917
)
NET INCOME (LOSS)
13,329


(40,680
)
 
(26,992
)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(103
)

(212
)
 
(283
)
NET INCOME (LOSS) ATTRIBUTABLE TO CLUBCORP
$
13,226


$
(40,892
)
 
$
(27,275
)






 
 
NET INCOME (LOSS)
$
13,329


$
(40,680
)
 
$
(26,992
)
Foreign currency translation, net of tax
(3,220
)

(398
)
 
1,890

OTHER COMPREHENSIVE (LOSS) INCOME
(3,220
)

(398
)
 
1,890

COMPREHENSIVE INCOME (LOSS )
10,109


(41,078
)
 
(25,102
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(103
)

(212
)
 
(283
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLUBCORP
$
10,006


$
(41,290
)
 
$
(25,385
)






 
 
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC
63,941


54,172

 
50,570

WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED
64,318


54,603

 
50,570





 
 
EARNINGS PER COMMON SHARE, BASIC:



 
 
Income (loss) from continuing operations attributable to ClubCorp
$
0.21


$
(0.75
)
 
$
(0.32
)
Loss from discontinued clubs attributable to ClubCorp
$
—


$
—

 
$
(0.22
)
Net income (loss) attributable to ClubCorp
$
0.21


$
(0.75
)
 
$
(0.54
)




 
 
EARNINGS PER COMMON SHARE, DILUTED:



 
 
Income (loss) from continuing operations attributable to ClubCorp
$
0.21


$
(0.75
)
 
$
(0.32
)
Loss from discontinued clubs attributable to ClubCorp
$
—


$
—

 
$
(0.22
)
Net income (loss) attributable to ClubCorp
$
0.21


$
(0.75
)
 
$
(0.54
)
 
 
 
 
 
 
Cash distributions declared per common share
$
0.49

 
$
0.79

 
$
—

 
See accompanying notes to consolidated financial statements

83


CLUBCORP HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

As of December 30, 2014 and December 31, 2013

(In thousands of dollars, except share and per share amounts)
 
2014
 
2013
ASSETS
 

 
 

CURRENT ASSETS:
 

 
 

Cash and cash equivalents
$
75,047

 
$
53,781

Receivables, net of allowances of $5,424 and $3,666 at December 30, 2014 and December 31, 2013, respectively
65,337

 
83,161

Inventories
20,931

 
15,819

Prepaids and other assets
15,776

 
13,339

Deferred tax assets, net
26,574

 
10,403

Total current assets
203,665

 
176,503

Investments
5,774

 
8,032

Property and equipment, net (includes $9,422 and $9,347 related to VIEs at December 30, 2014 and December 31, 2013, respectively)
1,474,763

 
1,234,903

Notes receivable, net of allowances of $704 and $724 at December 30, 2014 and December 31, 2013, respectively
8,262

 
4,756

Goodwill
312,811

 
258,459

Intangibles, net
34,960

 
27,234

Other assets
24,836

 
26,330

TOTAL ASSETS
$
2,065,071

 
$
1,736,217

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

CURRENT LIABILITIES:
 

 
 

Current maturities of long-term debt
$
18,025

 
$
11,567

Membership initiation deposits - current portion
135,583

 
112,212

Accounts payable
31,948

 
26,764

Accrued expenses
44,424

 
36,772

Accrued taxes
21,903

 
20,455

Other liabilities
59,550

 
79,300

Total current liabilities
311,433

 
287,070

Long-term debt (includes $13,302 and $13,157 related to VIEs at December 30, 2014 and December 31, 2013, respectively)
965,187

 
638,112

Membership initiation deposits
203,062

 
204,152

Deferred tax liability, net
244,113

 
210,989

Other liabilities (includes $22,268 and $21,233 related to VIEs at December 30, 2014 and December 31, 2013, respectively)
120,417

 
157,944

Total liabilities
1,844,212

 
1,498,267

Commitments and contingencies (See Note 15)


 


 
 
 
 
EQUITY
 

 
 

Common stock of ClubCorp Holdings, Inc., $0.01 par value, 200,000,000 shares authorized; 64,443,332 and 63,789,730 issued and outstanding at December 30, 2014 and December 31, 2013, respectively
644

 
638

Additional paid-in capital
293,006

 
320,274

Accumulated other comprehensive loss
(4,290
)
 
(1,070
)
Retained deficit
(79,443
)
 
(92,669
)
Total stockholders’ equity
209,917

 
227,173

Noncontrolling interests in consolidated subsidiaries and variable interest entities
10,942

 
10,777

Total equity
220,859

 
237,950

TOTAL LIABILITIES AND EQUITY
$
2,065,071

 
$
1,736,217


See accompanying notes to consolidated financial statements

84


CLUBCORP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Fiscal Years Ended December 30, 2014, December 31, 2013 and December 25, 2012

(In thousands of dollars)
 
2014
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
 
Net income (loss)
$
13,329

 
$
(40,680
)
 
$
(26,992
)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
 

 
 

 
 

Depreciation
79,394

 
69,211

 
68,780

Amortization
1,398

 
2,863

 
9,829

Asset impairments
2,325

 
6,380

 
4,926

Bad debt expense
2,760

 
3,502

 
2,793

Equity in earnings from unconsolidated ventures
(1,404
)
 
(2,638
)
 
(1,947
)
Gain on investment in unconsolidated ventures
(2,203
)
 
—

 
—

Distribution from investment in unconsolidated ventures
5,740

 
4,699

 
3,882

Loss on disposals of assets
10,514

 
8,121

 
22,208

Debt issuance costs and amortization of term loan discount
13,687

 
5,084

 
2,033

Accretion of discount on member deposits
20,723

 
20,961

 
24,596

Amortization of surface rights bonus revenue
—

 
—

 
(1,823
)
Amortization of above and below market rent intangibles
(365
)
 
141

 
281

Equity-based compensation
4,303

 
14,217

 
—

Redemption premium payment included in loss on extinguishment of debt
27,452

 
14,525

 
—

Net change in deferred tax assets and liabilities
2,110

 
(4,548
)
 
(14,207
)
Net change in prepaid expenses and other assets
(3,652
)
 
(2,849
)
 
(532
)
Net change in receivables and membership notes
29,741

 
(26,925
)
 
1,859

Net change in accounts payable and accrued liabilities
1,027

 
(815
)
 
4,254

Net change in other current liabilities
(32,776
)
 
26,548

 
1,940

Net change in other long-term liabilities
(44,945
)
 
(4,104
)
 
(4,992
)
Net cash provided by operating activities
129,158

 
93,693

 
96,888

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
 
Purchase of property and equipment
(72,647
)
 
(59,541
)
 
(54,208
)
Acquisition of clubs
(20,255
)
 
(15,620
)
 
(3,570
)
Acquisition of Sequoia Golf, net of cash acquired
(260,007
)
 
—

 
—

Proceeds from dispositions
447

 
1,419

 
8,002

Proceeds from insurance
—

 
—

 
2,228

Net change in restricted cash and capital reserve funds
(355
)
 
(59
)
 
230

Return of capital in equity investments
126

 
1,073

 
—

Net cash used in investing activities
(352,691
)
 
(72,728
)
 
(47,318
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
 
Repayments of long-term debt
(283,387
)
 
(170,937
)
 
(14,830
)
Proceeds from new debt borrowings, net of loan discount
596,375

 
10,713

 
—

Repayments of revolving credit facility borrowings
(11,200
)
 
—

 
—

Proceeds from revolving credit facility borrowings
11,200

 
—

 
—

Redemption premium payment
(27,452
)
 
(14,525
)
 
—

Purchase of interest rate cap agreement
—

 
—

 
(57
)
Debt issuance and modification costs
(8,254
)
 
(7,872
)
 
(917
)
Distribution to owners
(30,765
)
 
(35,000
)
 
—

Proceeds from issuance of common stock in Holdings' initial public offering, net of underwriting discounts and commissions
—

 
173,250

 
—

Equity offering costs
(777
)
 
(4,349
)
 
—

Distribution to noncontrolling interests
(27
)
 
—

 
(942
)
Proceeds from new membership initiation deposits
853

 
1,042

 
851

Repayments of membership initiation deposits
(1,567
)
 
(1,421
)
 
(3,016
)
Net cash provided by (used in) financing activities
244,999

 
(49,099
)
 
(18,911
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(200
)
 
(50
)
 
826

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
21,266

 
(28,184
)
 
31,485

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
53,781

 
81,965

 
50,480

CASH AND CASH EQUIVALENTS - END OF PERIOD
$
75,047

 
$
53,781

 
$
81,965

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
 
Cash paid for interest
$
35,930

 
$
61,441

 
$
66,932

Cash paid for income taxes
$
2,723

 
$
3,187

 
$
4,089

Non-cash investing and financing activities are as follows:
 
 
 
 
 
Capital lease
$
20,428

 
$
11,342

 
$
10,799

Capital accruals
$
2,394

 
$
1,790

 
$
1,092

Leasehold improvements
$
3,386

 
$
—

 
$
442

Distribution declared payable to owners
$
8,454

 
$
7,654

 
$
—

Distribution related to utilization of certain deferred tax benefits recorded in connection with the ClubCorp Formation
$
—

 
$
4,518

 
$
—

Debt assumed with asset acquisition
$
87

 
$
4,954

 
$
—


See accompanying notes to consolidated financial statements

85


CLUBCORP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Fiscal Years Ended December 30, 2014, December 31, 2013 and December 25, 2012

(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 27, 2011
50,569,730

 
$
506

 
$
184,460

 
$
(2,562
)
 
$
(24,502
)
 
$
11,224

 
$
169,126

Net (loss) income
—

 
—

 
—

 
—

 
(27,275
)
 
283

 
(26,992
)
Other comprehensive income
—

 
—

 
—

 
1,890

 
—

 
—

 
1,890

Distributions to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
(942
)
 
(942
)
BALANCE - December 25, 2012
50,569,730

 
$
506

 
$
184,460

 
$
(672
)
 
$
(51,777
)
 
$
10,565

 
$
143,082

Distributions to owners ($0.65 per common share)
—

 
—

 
(35,000
)
 
—

 
—

 
—

 
(35,000
)
Proceeds from issuance of common stock in Holdings' initial public offering, net of underwriting discounts, commissions and other offering costs
13,200,000

 
132

 
168,769

 
—

 
—

 
—

 
168,901

Issuance of restricted stock
20,000

 
—

 
—

 
—

 
—

 
—

 
—

Distributions to owners declared ($0.14 per common share)
—

 
—

 
(7,654
)
 
—

 
—

 
—

 
(7,654
)
Equity-based compensation expense
—

 
—

 
14,217

 
—

 
—

 
—

 
14,217

Distribution related to utilization of certain deferred tax benefits recorded in connection with the ClubCorp Formation
—

 
—

 
(4,518
)
 
—

 
—

 
—

 
(4,518
)
Net (loss) income
—

 
—

 
—

 
—

 
(40,892
)
 
212

 
(40,680
)
Other comprehensive loss
—

 
—

 
—

 
(398
)
 
—

 
—

 
(398
)
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
653,602

 
6

 
(6
)
 
—

 
—

 
—

 
—

Distributions to owners declared ($0.49 per common share)
—

 
—

 
(31,565
)
 
—

 
—

 
—

 
(31,565
)
Equity-based compensation expense
—

 
—

 
4,303

 
—

 
—

 
—

 
4,303

Recognition of noncontrolling interests related to Sequoia Golf Acquisition
—

 
—

 
—

 
—

 
—

 
89

 
89

Net (loss) income
—

 
—

 
—

 
—

 
13,226

 
103

 
13,329

Other comprehensive loss
—

 
—

 
—

 
(3,220
)
 
—

 
—

 
(3,220
)
Distributions to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
(27
)
 
(27
)
BALANCE - December 30, 2014
64,443,332

 
$
644

 
$
293,006

 
$
(4,290
)
 
$
(79,443
)
 
$
10,942

 
$
220,859



See accompanying notes to consolidated financial statements



86


NOTES TO CONSOLIDATED 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”, 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. ClubCorp has two reportable segments (1) golf and country clubs and (2) business, sports and alumni clubs. As of December 30, 2014, 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”). The acquisition was executed through an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Sequoia Golf Holdings, LLC, Parthenon-Sequoia Ltd., Parthenon Investors II, L.P., J&R Founders’ Fund II, L.P., PCIP Investors, and certain individuals named therein. See Notes 10 and 13 for further description of the acquisition and related financing.

We own or lease and consolidate 134 golf and country clubs in the United States and Mexico and 45 business, sports and alumni clubs throughout the United States. We consolidate five golf and country club joint ventures, located in the United States, for which we are deemed to be the primary beneficiary. We have joint venture ownership in one golf and country club and one business, sports, and alumni club, both in the United States, which we do not consolidate. We manage 17 golf and country clubs in the United States, and manage four business, sports and alumni clubs in the United States and China.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation—The consolidated 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 financial statements presented herein reflect our financial position, results of operations, cash flows and changes in equity in conformity with accounting principles generally accepted in the United States, or “GAAP”. All intercompany accounts have been eliminated.

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 14.

Fiscal Year—Our fiscal year consists of a 52/53 week period ending on the last Tuesday of December. For 2014 and 2012, the fiscal years are comprised of the 52 weeks ended December 30, 2014 and December 25, 2012, respectively. For 2013, the fiscal year is comprised of the 53 weeks ended December 31, 2013.

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 statements of operations over the expected life of an active membership. The present value of the

87


refund obligation is recorded as a membership initiation deposit liability in the consolidated balance sheets and accretes over the nonrefundable term using the effective interest method with an interest rate defined as our incremental borrowing rate adjusted to reflect a 30-year time frame. The accretion is included in interest expense.

The majority of membership initiation fees sold are not refundable and are deferred and recognized within club operations revenue on the consolidated 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 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 fiscal year ended December 31, 2013, 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. During the fiscal year ended December 30, 2014, 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 statements of operations were $13.1 million, $17.7 million and $16.3 million for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively.

Cash Equivalents—We consider investments with an original maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts—The allowance for doubtful accounts is established and maintained based on our best estimate of accounts receivable collectability. Management estimates collectability by specifically analyzing known troubled accounts, accounts receivable aging and other historical factors that affect collections. Such factors include the historical trends of write-offs and recovery of previously written-off accounts, the financial strength of the member and projected economic and market conditions.
The evaluation of these factors involves subjective judgments and changes in these factors may significantly impact the consolidated financial statements. The table below shows the changes in our allowance for doubtful accounts balance:
 
2014
 
2013
 
2012
Beginning allowance
$
3,666

 
$
2,626

 
$
3,586

Bad debt expense, excluding portion related to notes receivable
2,760

 
3,502

 
2,907

Write offs
(1,002
)
 
(2,462
)
 
(3,867
)
     Ending allowance
$
5,424

 
$
3,666

 
$
2,626

Inventories—Inventories, which consist primarily of food and beverages and merchandise held for resale, are stated at the lower of cost (weighted average cost method) or market. Losses on obsolete or excess inventory are not material.
Investments—Investments in certain unconsolidated affiliates are accounted for by the equity method, while investments in other unconsolidated affiliates are accounted for under the cost method in accordance with GAAP. See Note 4.
Property and Equipment, Net—Property and equipment is recorded at cost, including interest incurred during construction periods. We capitalize costs that both materially add value and appreciably extend the useful life of an asset. With respect to golf course improvements (included in land improvements), only costs associated with original construction, complete replacements, or the addition of new trees, sand traps, fairways or greens are capitalized. All other related costs are expensed as incurred. For building improvements, only costs that extend the useful life of the building are capitalized; repairs and maintenance are expensed as incurred. Internal use software development costs are capitalized and amortized on a straight-line basis over the expected benefit period. The unamortized balance of internal use software totaled $6.7 million and $4.3 million at December 30, 2014 and December 31, 2013, respectively. See Note 6.

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Depreciation is calculated using the straight-line method based on the following estimated useful lives:
Depreciable land improvements
5
-
20 years
Building and recreational facilities
20
-
40 years
Machinery and equipment
3
-
10 years
Leasehold improvements
1
-
40 years
Furniture and fixtures
3
-
10 years

Leasehold improvements are amortized over the shorter of the term of the respective leases or their useful life using the straight-line method.

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

Goodwill and Other Intangibles, Net—GAAP requires that we allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the fair value of the net assets acquired or the excess of the aggregate fair values of assets acquired and liabilities assumed is recorded as goodwill.

We classify intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. Intangibles specifically related to an individual property are recorded at the property level. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives as reflected in Note 7.

We assess the recoverability of the carrying value of goodwill and other indefinite lived intangibles annually on the first day of the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill impairment is tested for impairment by first comparing the fair value of a reporting unit to its carrying amount. When the fair value is less than carrying value further analysis is performed to measure the amount of impairment loss, if any. See Note 7.

Impairment of Long-Lived Assets—We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. For assets to be held and used, we perform a recoverability test to determine if the future undiscounted cash flows over the expected holding period for the property exceed the carrying amount of the assets of the property in question. If the recoverability test is not met, the impairment is determined by comparing the carrying value of the property to its fair value which may be approximated by using future discounted cash flows using a risk-adjusted discount rate. Future cash flows of each property are determined using management’s projections of the performance of a given property based on its past performance and expected future performance, local operations and other factors both within our control and out of our control. Additionally, throughout the impairment evaluation process, we consider the impact of recent property appraisals when they are available. If actual results differ from these estimates, additional impairment charges may be required. As discussed in Note 5, GAAP establishes a three‑tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The fair value calculations associated with these valuations are classified as Level 3 measurements under GAAP.
Insurance Reserves—We have established insurance programs to cover exposures above predetermined deductibles for certain insurable risks consisting primarily of physical loss to property, workers’ compensation, employee healthcare, and comprehensive general and auto liability. Insurance reserves are developed by us, using the assistance of a third-party actuary and consideration of our past claims experience, including both the frequency and settlement of claims.
Advertising Expense—We market our clubs through advertising and other promotional activities. Advertising expense is charged to income during the period incurred. Advertising expense totaled $5.5 million, $5.8 million and $5.5 million for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, 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

89


comprehensive loss, until realized. No translation gains or losses have been reclassified into earnings for the fiscal years ended December 30, 2014, December 31, 2013 or December 25, 2012. Realized foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive loss in club operating costs.

Income Taxes—Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recognized.

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 can no longer be 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.

Interest and Investment Income—Interest and investment income is comprised principally of interest on notes receivable, cash deposits held by financial institutions and the return on our equity investment in Avendra, LLC. See Note 4.
Leases—We lease operating facilities under agreements with terms up to 99 years. These agreements normally provide for minimum rentals plus executory costs. Some of the agreements provide for scheduled rent increases during the lease term, as well as provisions for renewal options. Rent expense is recognized on a straight-line basis over the term of the lease from the time at which we take control of the property. Renewal options determined to be reasonably assured are also included in the lease term. In some cases, we must pay contingent rent generally based on a percentage of gross receipts or positive cash flow as defined in the lease agreements.
Some of our lease agreements contain tenant allowances. Upon receipt of such allowances, we record a deferred rent liability in other liabilities on the consolidated balance sheets. The allowances are then amortized on a straight-line basis over the remaining terms of the corresponding leases as a reduction of rent 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 statements of operations:
 
Fiscal Year Ended
 
December 30, 2014
 
December 31, 2013
 
December 25, 2012
Club operating costs exclusive of depreciation
$
1,395

 
$
4,592

 
$
—

Selling, general and administrative
2,908

 
9,625

 
—

Pre-tax equity-based compensation expense
4,303

 
14,217

 
—

Less: benefit for income taxes
(1,311
)
 
(817
)
 
—

Equity-based compensation expense, net of tax
$
2,992

 
$
13,400

 
$
—


As of December 30, 2014, there was approximately $2.9 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 1.5 years.

The ClubCorp Holdings, Inc. 2012 Stock Award Plan, which was amended and restated as of August 14, 2013 (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 December 30, 2014, approximately 3.0 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. 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. The fair

90


market value of each RSU was calculated using: (i) an analysis of the discounted future free cash flows we expected to generate (Income Approach) and (ii) an analysis comparing ClubCorp to similar companies utilizing a purchase multiple of earnings before interest, taxes, depreciation and amortization (Market Approach). No equity-based compensation expense was recognized prior to the consummation of Holdings' IPO as the awards were contingent on the satisfaction of the liquidity condition. Subsequent to Holdings' IPO, this fair market value is recognized into expense using an accelerated attribution method over the requisite service period. On March 15, 2014, the required time period following our 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 RSUs will convert into shares of our common stock upon satisfaction of the remaining time vesting requirement. As of December 30, 2014, 190,788 RSUs remain outstanding.

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 requirements. The number of PSUs under these grants represents the target number of such units that may be earned, based on Holdings' total shareholder return over the applicable performance periods compared with a peer group. If more than the target number of PSUs vest at the end of a performance period because Holdings' total shareholder return exceeds certain percentile thresholds of the peer group, additional shares will be issued under the Stock Plan at that time. The fair market value of each PSU was estimated on the date of grant using a Monte Carlo simulation analysis which generates a distribution of possible future stock prices for Holdings and the peer group from the grant date to the end of the applicable performance period. The risk-free rate ranged from 0.3% to 0.65%, and is based on U.S. Treasury yields with a term commensurate to the applicable PSU performance period. Expected dividend yields were 0% as all dividends are assumed to be reinvested. The expected volatility for each PSU is 21.62% and is based on based on the historical volatility of our common stock.

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.

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, 196,267 of which remained subject to time vesting requirements as of December 30, 2014 and vested on December 31, 2014.

Recently Issued Accounting Pronouncements
 
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-11 (“ASU 2013-11”), Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU No. 2013-11 clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Our adoption of ASU 2013-11 at the beginning of fiscal year 2014 did not materially impact our consolidated financial statements.

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

91


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 financial position or results of operations. During the fiscal year ended December 30, 2014, five management agreements were terminated. These divestitures would have qualified as discontinued operations prior to our adoption of the amended guidance, but are reported within continuing operations under the amended guidance.

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 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.

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 December 30, 2014. The other managed golf course property VIEs are financed through advances from us. Outstanding advances as of December 30, 2014 total $3.8 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.

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The following summarizes the carrying amount and classification of the VIEs' assets and liabilities in the consolidated balance sheets as of December 30, 2014 and December 31, 2013, net of intercompany amounts:
 
 
December 30, 2014
 
December 31, 2013
Current assets
$
962

 
$
1,407

Fixed assets, net
9,422

 
9,347

Other assets
839

 
850

Total assets
$
11,223

 
$
11,604

 
 
 
 
Current liabilities
$
1,007

 
$
1,644

Long-term debt
13,302

 
13,157

Other long-term liabilities
20,718

 
20,060

Noncontrolling interest
5,886

 
5,955

Company capital
(29,690
)
 
(29,212
)
Total liabilities and equity
$
11,223

 
$
11,604

 
Recourse of creditors to these VIEs is limited to the assets of the VIE entities, which total $11.2 million and $11.6 million at December 30, 2014 and December 31, 2013, respectively.
 
4. INVESTMENTS
 
Equity method investments in golf and business club ventures total $1.3 million and $1.4 million at December 30, 2014 and December 31, 2013, 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 from unconsolidated ventures in the consolidated 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 $4.0 million and $6.2 million at December 30, 2014 and December 31, 2013, respectively. Our share of earnings in the equity investment is included in equity in earnings from unconsolidated ventures in the consolidated 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 $3.5 million, $3.5 million and $2.9 million during the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively. The difference between the carrying value of the investment and our share of the equity reflected in the joint venture's financial statements at the time of the acquisition of 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 $4.0 million and $6.0 million at December 30, 2014 and December 31, 2013, respectively.
 
Our equity in net income from Avendra, LLC is shown below:
 
Fiscal Year Ended
 
December 30, 2014
 
December 31, 2013
 
December 25, 2012
ClubCorp's equity in net income, excluding amortization
$
3,107

 
$
4,400

 
$
3,819

Amortization
(2,008
)
 
(2,008
)
 
(2,008
)
ClubCorp's equity in net income
$
1,099

 
$
2,392

 
$
1,811


Additionally, we recognized $2.2 million of return on our equity investment within interest and investment income during the fiscal year ended December 30, 2014. All cash distributions from our equity investment are reported as distribution from investment in unconsolidated ventures within the operating section of consolidated statements of cash flows.
 

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5. FAIR VALUE
 
GAAP establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:
 
Level 1—unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company;
 
Level 2—inputs that are observable in the marketplace other than those inputs classified as Level 1; and
 
Level 3—inputs that are unobservable in the marketplace and significant to the valuation.
 
We maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant to the fair value calculation. We recognize transfers between levels of the fair value hierarchy on the date of the change in circumstances that caused the transfer.

Fair Value of Financial Instruments
Debt—We estimate the fair value of our debt obligations, excluding capital lease obligations, as follows, as of December 30, 2014 and December 31, 2013:
 
 
2014
 
2013
 
Recorded Value
 
Fair Value
 
Recorded Value
 
Fair Value
Level 2 (1)
$
897,729

 
$
887,589

 
$
570,856

 
$
601,775

Level 3
51,534

 
41,648

 
53,132

 
43,971

Total
$
949,263

 
$
929,237

 
$
623,988

 
$
645,746

______________________

(1)
The recorded value for Level 2 Debt is presented net of the $3.4 million and $0.0 million discount as of December 30, 2014 and December 31, 2013, respectively, on the Secured Credit Facilities, as defined in Note 9.

     All debt obligations are considered Level 3 except for the Secured Credit Facilities, 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 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 December 30, 2014 and December 31, 2013.

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. As of December 30, 2014 and December 31, 2013, there were certain assets that were determined to be impaired and therefore the carrying amount of those assets were recorded at their fair value.


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The estimated fair values of our assets and liabilities measured at fair value on a non-recurring basis as a result of impairment losses during the years ended December 30, 2014, December 31, 2013, and December 25, 2012 were as follows:
 
 
2014
 
2013
 
2012
 
 
Fair Value
 
Impairment Losses
 
Fair Value
 
Impairment Losses
 
Fair Value
 
Impairment Losses
Equity method investments
 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,077

 
$
716

Property and equipment
 
1,076

 
1,443

 
2,028

 
3,937

 
368

 
717

Other assets - mineral rights
 
—

 
—

 
—

 
—

 
2,178

 
2,993

Intangible assets - trade names
 
760

 
60

 
—

 
—

 
490

 
360

Intangible assets - liquor licenses
 
20

 
2

 
642

 
2,443

 
563

 
140

Intangible assets - management contracts
 
—

 
820

 
—

 
—

 
—

 
—


Equity Method Investments—During the fiscal year ended December 25, 2012, we determined that one of our equity method investments had a decrease in value that was other than temporary. We recognized an impairment loss of $0.7 million during the fiscal year ended December 25, 2012 to adjust its carrying amount to its fair value of $1.1 million. The valuation method used to determine fair value was based on a third party valuation using inputs that were unobservable in the marketplace. This valuation is considered a Level 3 measurement.

Property and Equipment—We recognized impairment losses to property and equipment of $1.4 million, $3.9 million and $0.7 million during the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively, to adjust the carrying amount of certain property and equipment to its fair value of $1.1 million, $2.0 million and $0.4 million, respectively, due to continued and projected negative operating results as well as changes in the expected holding period of certain fixed assets. The valuation method used to determine fair value was based on an analysis of discounted future free cash flows using a risk-adjusted discount rate (Income Approach), and based on cost adjusted for economic obsolescence (Cost Approach). The fair value calculations associated with these valuations are classified as Level 3 measurements. See Note 6.

Mineral Rights—We evaluate these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. During the fiscal year ended December 25, 2012, we recognized an impairment of $3.0 million to adjust the carrying value of certain of these mineral rights to their fair value of $2.2 million. The valuation is considered a Level 3 measurement and is based upon inactive market prices for similar assets which are not observable in the marketplace. See Note 8.

Trade Names—We test our trade name intangible assets annually for impairment, utilizing the relief from royalty method to determine the estimated fair value for each trade name which is classified as a Level 3 measurement. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates.

We recorded impairment of trade names of $0.1 million and $0.4 million during fiscal years ended December 30, 2014 and December 25, 2012, respectively, to adjust the carrying amount of certain trade names to their fair value of $0.8 million and $0.5 million, respectively. See Note 7.

Liquor Licenses—We test our liquor licenses annually for impairment. We use quoted prices for similar assets in active markets when they are available; quoted prices are considered Level 2 measurements. We recorded immaterial impairments of liquor licenses in the fiscal year ended December 30, 2014. We recorded impairment of liquor licenses of $2.4 million and $0.1 million in the fiscal years ended December 31, 2013 and December 25, 2012, respectively, to adjust the carrying amount of certain liquor licenses to their fair value of $0.6 million and $0.6 million, respectively. See Note 7.

Management Contracts—We evaluate these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. During the fiscal year ended December 30, 2014, we recognized an impairment of $0.8 million to adjust the carrying value of certain management contracts to their fair value of $0.0 million due to the termination of the contract. The valuation is considered a Level 3 measurement and is based on expected future cash flows. See Note 7.

There were no impairments to goodwill in the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012. The key assumptions used in the goodwill impairment analysis are considered Level 3 measurements. See Note 7. Assets and liabilities from business combinations were recorded on our consolidated 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 13.

95



6. PROPERTY AND EQUIPMENT
 
Property and equipment, including capital lease assets, at cost consists of the following at December 30, 2014 and December 31, 2013:

 
2014
 
2013
Land and non-depreciable land improvements
$
589,975

 
$
530,212

Depreciable land improvements
445,979

 
339,806

Buildings and recreational facilities
482,493

 
416,259

Machinery and equipment
225,103

 
181,619

Leasehold improvements
104,904

 
95,901

Furniture and fixtures
85,800

 
72,687

Construction in progress
6,284

 
3,513

 
1,940,538

 
1,639,997

Accumulated depreciation
(465,775
)
 
(405,094
)
Total
$
1,474,763

 
$
1,234,903


Depreciation expense, from continuing operations, which included depreciation of assets recorded under capital leases, was $79.4 million, $69.2 million and $68.5 million for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively. Interest capitalized as a cost of property and equipment totaled $0.2 million, $0.3 million and $0.2 million for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively.

We evaluate property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. We recognized impairment losses to property and equipment of $1.4 million, $3.9 million and $0.7 million during the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively, to adjust the carrying amount of certain property and equipment to its fair value of $1.1 million, $2.0 million and $0.4 million, respectively, due to continued and projected negative operating results as well as changes in the expected holding period of certain fixed assets. See Note 5.

7. GOODWILL AND INTANGIBLE ASSETS
 
Intangible assets consist of the following at December 30, 2014 and December 31, 2013:
 
 
 
 
2014
 
2013
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

 
$
24,850

 


 
$
24,850

Liquor Licenses
 
 
2,042

 


 
2,042

 
2,023

 


 
2,023

Intangible assets with finite lives:
 
 
 

 
 

 
 

 
 

 
 

 
 

Member Relationships
2-7 years
 
2,866

 
(539
)
 
2,327

 
2,800

 
(2,547
)
 
253

Management Contracts
1-10 years
 
5,698

 
(866
)
 
4,832

 
598

 
(490
)
 
108

Trade names
2 years
 
$
1,100

 
$
(131
)
 
969

 
$
—

 
$
—

 
—

Total
 
 
$
36,496

 
$
(1,536
)
 
$
34,960

 
$
30,271

 
$
(3,037
)
 
$
27,234

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
 
 
$
312,811

 
 
 
$
312,811

 
$
258,459

 
 
 
$
258,459

 
Intangible Assets—Intangible assets include trade names, liquor licenses and member relationships. Intangible asset amortization expense was $1.4 million, $2.9 million and $9.8 million for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively.


96


During the fiscal year ended December 30, 2014, we acquired Sequoia Golf. See Note 13. As part of the purchase we recorded $9.8 million of intangible assets with finite lives that have a weighted average amortization period of approximately three years. The intangible assets recorded are comprised of member relationships of $2.9 million, management contracts of $5.8 million and a trade name of $1.1 million, which have a weighted average amortization period of approximately two years, three years and two years, respectively.

We retired fully amortized intangible assets and the related accumulated amortization of $2.9 million and $16.7 million, which were primarily comprised of member relationships, from the consolidated balance sheets as of December 30, 2014 and December 31, 2013, respectively.

For each of the five years subsequent to 2014 and thereafter the amortization expense is expected to be as follows:

Year
Amount
2015
$
3,008

2016
1,996

2017
921

2018
758

2019
479

Thereafter
966

Total
$
8,128


We test indefinite lived intangible assets for impairment annually. We test intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows.

We test our trade name intangible assets annually for impairment, utilizing the relief from royalty method to determine the estimated fair value for each trade name which is classified as a Level 3 measurement. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates.

We recorded impairment of indefinite lived trade names of $0.1 million and $0.4 million during fiscal years ended December 30, 2014 and December 25, 2012, respectively, to adjust the carrying amount of certain trade names to their fair value of $0.8 million and$0.5 million, respectively. See Note 5. We did not recognize any impairment losses to trade name intangible assets in the fiscal year ended December 31, 2013.

We test our liquor licenses annually for impairment. We use quoted prices for similar assets in active markets when they are available; quoted prices are considered Level 2 measurements. We recorded immaterial impairments of liquor licenses in the fiscal year ended December 30, 2014. We recorded impairment of liquor licenses of $2.4 million and $0.1 million in the fiscal years ended December 31, 2013 and December 25, 2012, respectively, to adjust the carrying amount of certain liquor licenses to their fair value of $0.6 million and $0.6 million, respectively. See Note 5.

We evaluate our management contracts for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. During the fiscal year ended December 30, 2014, we recognized an impairment of $0.8 million to adjust the carrying value of certain management contracts to their fair value of $0.0 million due to the termination of the contract. The valuation is considered a Level 3 measurement and is based on expected future cash flows. See Note 5. We did not recognize any impairment losses to management contracts in the fiscal years ended December 31, 2013 and December 25, 2012.

Goodwill—We evaluate goodwill for impairment at the reporting unit level (golf and country clubs and business, sports and alumni clubs), which are the same as our operating segments. When testing for impairment, we first compare the fair value of our reporting units to the recorded values. Valuation methods used to determine fair value include analysis of the discounted future free cash flows that a reporting unit is expected to generate (Income Approach) and an analysis which is based upon a comparison of our reporting units to similar companies utilizing a purchase multiple of earnings before interest, taxes, depreciation and amortization (Market Approach). These valuations are considered Level 3 measurements. Key assumptions used in this model include future cash flows, growth rates, discount rates, capital needs and projected margins, among other factors.


97


If the carrying amount of the reporting units exceeds its fair value, goodwill is considered potentially impaired and a second step is performed to measure the amount of impairment loss. In the second step of the goodwill impairment test, we compare the implied value of the reporting unit's goodwill with the carrying value of that unit's goodwill. If the carrying value of the reporting unit's goodwill exceeds the implied value, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. Accordingly, the fair value of a reporting unit is allocated to the assets and liabilities of that unit, including intangible assets, and any excess of the value of the reporting unit over the amounts assigned to its assets and liabilities is the implied value of its goodwill.

We evaluate goodwill for impairment annually as of the first day of our last fiscal quarter or whenever events or circumstances indicate that the carrying amount may not be fully recoverable. Based on this analysis, no impairment of goodwill was recorded for the fiscal years ended December 30, 2014, December 31, 2013 or December 25, 2012.

During the fiscal year ended December 30, 2014, we acquired Sequoia Golf. See Note 13. The excess of the purchase price over the aggregate fair values of assets acquired and liabilities assumed was recorded as goodwill of $54.4 million 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.

During the fiscal year ended December 25, 2012 we entered into an agreement to sell a business, sports and alumni club for proceeds of $5.9 million. See Note 13. We evaluated goodwill for impairment in conjunction with this agreement. Based on this analysis, no impairment of goodwill was required prior to entering into the sales agreement. As a result of the sale, we allocated $6.5 million of goodwill to this property and recognized a loss on disposal of goodwill for this amount in the fiscal year ended December 25, 2012. This loss is presented in loss from discontinued operations in the consolidated statements of operations and comprehensive loss. Estimates utilized in the future evaluations of goodwill for impairment could differ from estimates used in the current period calculations. Unfavorable future estimates could result in an impairment of goodwill.
    
The following table shows goodwill activity by reporting unit. No impairments have been recorded for either reporting unit.
 
Golf & Country Clubs
 
Business, Sports & Alumni Clubs
 
Total
December 25, 2012
$
113,108

 
$
145,351

 
$
258,459

December 31, 2013
$
113,108

 
$
145,351

 
$
258,459

Acquisition - Sequoia Golf
$
54,352

 
$
—

 
$
54,352

December 30, 2014
$
167,460

 
$
145,351

 
$
312,811

 
8. OTHER ASSETS

Other assets includes debt issuance costs, assets related to mineral rights and above and below market leases.

Debt Issuance Costs—Debt issuance costs totaled $11.5 million and $15.9 million at December 30, 2014 and December 31, 2013, respectively. See Note 10.

Mineral Rights—Mineral rights at various golf properties totaled $2.3 million and $2.3 million at December 30, 2014 and December 31, 2013, respectively. These assets will be depleted using the percentage depletion method based on actual production. We evaluate these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through future cash flows. During the fiscal year ended December 25, 2012, we recognized an impairment of $3.0 million to adjust the carrying value of certain of these mineral rights to their fair value of $2.2 million. See Note 5. We have not recognized any impairment losses to mineral rights in the fiscal years ended December 30, 2014 and December 31, 2013. The valuation is considered a Level 3 measurement and is based upon inactive market prices for similar assets which are not observable in the marketplace. During 2008, we entered into certain mineral lease and surface right agreements with third parties to allow for exploration and production on these properties. We received $19.9 million which was classified as other current and long term liabilities in the consolidated balance sheets and was recognized in other income in the consolidated statements of operations on a straight line basis over the term of the agreements, which ranged from six months to four years.


98


Above and Below Market Leases—As a result of our acquisition by affiliates of KSL in 2006, we have recorded above and below market lease intangibles. The above market lease intangibles totaled $0.8 million and $1.4 million at December 30, 2014 and December 31, 2013, respectively, and are recorded in other liabilities; below market lease intangibles were $0.2 million and $0.4 million at December 30, 2014 and December 31, 2013, respectively, and are recorded in other assets. Amortization of the net above/below market lease intangibles is recorded as a net (increase) reduction in rent expense.

Related net amortization (accretion) over the next 5 years and thereafter is as follows:
Year
 
Amount
 
 
 
2015
 
$
255

2016
 
101

2017
 
92

2018
 
83

2019
 
76

Thereafter
 
—

Total
 
$
607


9. CURRENT AND LONG-TERM LIABILITIES
 
Current liabilities consist of the following at December 30, 2014 and December 31, 2013:

 
December 30, 2014
 
December 31, 2013
Accrued compensation
$
29,273

 
$
27,933

Accrued interest
7,428

 
2,373

Other accrued expenses
7,723

 
6,466

Total accrued expenses
$
44,424

 
$
36,772

 
 
 
 
Taxes payable other than federal income taxes
$
21,903

 
$
20,000

Federal income taxes payable
—

 
455

Total accrued taxes
$
21,903

 
$
20,455

 
 
 
 
Advance event and other deposits
$
15,584

 
$
17,305

Unearned dues
12,819

 
32,438

Deferred membership revenues
10,937

 
10,883

Insurance reserves
8,464

 
8,175

Distributions to owners declared, but unpaid
8,384

 
7,654

Other current liabilities
3,362

 
2,845

Total other current liabilities
$
59,550

 
$
79,300

 

99


Other long-term liabilities consist of the following at December 30, 2014 and December 31, 2013:

 
December 30, 2014
 
December 31, 2013
Uncertain tax positions (1)
$
7,670

 
$
56,105

Deferred membership revenues
42,894

 
42,773

Casualty insurance loss reserves - long term portion
14,162

 
11,255

Above market lease intangibles
774

 
1,347

Deferred rent
27,838

 
22,716

Accrued interest on notes payable related to Non-Core Development Entities
22,174

 
21,111

Other
4,905

 
2,637

Total other long-term liabilities
$
120,417

 
$
157,944

______________________

(1)    The change in uncertain tax positions is described in Note 12.

10. 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 December 30, 2014, 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 $111.3 million available for borrowing, after deducting $23.7 million of standby letters of credit outstanding. In addition, the credit agreement governing the Secured Credit Facilities includes capacity which provides, subject to lender participation, for additional borrowings in revolving and term loan commitments so long as the Senior Secured Leverage Ratio (the “Senior Secured Leverage Ratio”) does not exceed 3.75:1.00.
    
As of December 30, 2014, the interest rate on the term loan facility was 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.

As of December 30, 2014, the revolving credit facility had capacity of $135.0 million, which was reduced by $23.7 million of standby letters of credit outstanding, leaving $111.3 million available for borrowing. All remaining revolving credit commitments 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.

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 (exclusive of the Senior Notes) 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 December 30, 2014, Operations' leverage ratio was 4.28:1.00.
    
The amendments to the Secured Credit Facilities made during 2012, 2013 and 2014 included, among other things, the following key modifications:

On November 16, 2012, Operations entered into the first amendment to the credit agreement governing the Secured Credit Facilities, which reduced the interest rate on the term loan facility to the higher of (i) 5.0% or (ii) an elected LIBOR plus a margin of 3.75%.

On July 24, 2013, Operations entered into a second amendment to the credit agreement governing the Secured Credit Facilities to reduce the interest rate on the term loan facility, increase the principal borrowed under the term loan facility, extend the maturity date of the term loan facility, eliminate the quarterly principal payment requirement under the term loan facility, increase the amount of permissible incremental facilities and modify certain financial covenants and non-financial terms and conditions associated with the credit agreement governing the Secured Credit Facilities. The interest rate on the term loan facility was reduced to the higher of (i) 4.25% or (ii) an elected LIBOR plus a margin of 3.25%, with an additional reduction to the higher of (i) 4.0% or (ii) an elected LIBOR plus a margin of 3.0%, upon successful completion of an initial public offering

100


with proceeds of at least $50.0 million, which condition was satisfied on September 25, 2013, by the receipt by Operations, by way of contribution, of the net proceeds from the completion of our IPO. The term loan facility principal balance was increased to $301.1 million and the maturity date of the term loan facility was extended to July 24, 2020.

On August 30, 2013, Operations entered into a third amendment to the credit agreement governing the Secured Credit Facilities, effective on September 30, 2013, to conditionally secure the $135.0 million incremental revolving credit commitments, which mature on September 30, 2018. Borrowings under such facility bear interest at a rate of LIBOR plus a margin of 3.0% per annum.

On February 21, 2014, Operations entered into a fourth amendment to the credit agreement governing the Secured Credit Facilities which made certain administrative changes to such credit agreement. 

On April 11, 2014, Operations entered into a fifth amendment to the credit agreement governing the Secured Credit Facilities to (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, (ii) ease 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, (iii) modify the accordion feature under the credit agreement to be calculated as (x) $50.0 million, plus (y) after the full utilization of the amount available under clause (x), an additional amount of incremental term or revolving commitments, so long as the Senior Secured Leverage Ratio does not exceed 3.75:1.00 and (iv) make other administrative changes to the credit agreement. The Senior Secured Leverage Ratio, as amended, requires Operations and its restricted subsidiaries to maintain a Senior Secured Leverage Ratio of no greater than 5.00:1.00. Under the fifth amendment, the additional borrowings under the term loan facility bore interest at the same rate as the existing term loans, which was the higher of (i) 4.0% or (ii) an elected LIBOR plus a margin of 3.0%. The incremental term loan continues to mature on July 24, 2020.

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 the higher of (a) 4.5% or (b) an elected LIBOR plus a margin of 3.5%, (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 and (iv) make other administrative changes to the credit agreement governing the Secured Credit Facilities. The term loan continues to mature on July 24, 2020.

All obligations under the Secured Credit Facilities are guaranteed by Operations' Parent and each existing and all subsequently acquired or organized direct and indirect restricted subsidiaries of Operations, other than certain excluded subsidiaries (collectively, the “guarantors”). The Secured Credit Facilities are secured, subject to permitted liens and other exceptions, by a first-priority perfected security interest in substantially all the assets of Operations, and the guarantors, including, but not limited to (1) a perfected pledge of all the domestic capital stock owned by Operations and the guarantors, and (2) perfected security interests in and mortgages on substantially all tangible and intangible personal property and material fee-owned property of Operations and the guarantors, subject to certain exclusions.

We are required to make interest payments on the last business day of each of March, June, September and December. We may be required to prepay the outstanding term loan facility by a percentage of excess cash flows, as defined by the credit agreement governing the Secured Credit Facilities, each fiscal year end after our annual consolidated financial statements are delivered, which percentage may decrease or be eliminated depending on the results of the Senior Secured Leverage Ratio test at the end of each fiscal year. Additionally, we are required to prepay the term loan facility with proceeds from certain asset sales, borrowings and certain insurance claims as defined by the credit agreement governing the Secured Credit Facilities.

We may voluntarily repay outstanding loans under the Secured Credit Facilities in whole or in part upon prior notice without premium or penalty, other than certain fees incurred in connection with repaying, refinancing, substituting or replacing the existing term loans with new indebtedness.

We are also 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 in arrears on the last business day of each March, June, September and December.

The credit agreement governing the Secured Credit Facilities limits Operations' Parent's and Operations' (and most or all of Operations' Parent's subsidiaries') ability to:

•
create, incur, assume or suffer to exist any liens on any of their assets;

•
make or hold any investments (including acquisitions, loans and advances);

101



•
incur or guarantee additional indebtedness;

•
enter into mergers or consolidations;

•
conduct sales and other dispositions of property or assets;

•
pay dividends or distributions on capital stock or redeem or repurchase capital stock;

•
change the nature of the business;

•
enter into transactions with affiliates; and

•
enter into burdensome agreements.

We incurred debt issuance costs of $6.8 million in conjunction with the issuance of the Secured Credit Facilities; these costs have been capitalized. We incurred additional debt issuance costs of $0.8 million in conjunction with the amendment entered into on November 16, 2012, $4.4 million in conjunction with the second amendment entered into on July 24, 2013 and $3.4 million in conjunction with the third amendment entered into on August 30, 2013; these have also been capitalized. In conjunction with the fifth amendment entered into on April 11, 2014, we incurred $4.8 million in debt issuance costs; $1.2 million of these costs have been capitalized, while $3.6 million was expensed in the fiscal year ended December 30, 2014. In conjunction with the sixth amendment entered into on September 30, 2014, we incurred $3.5 million in debt issuance costs; $0.7 million of these costs have been capitalized and are being amortized over the remaining term of the loan, while $2.8 million was expensed in the fiscal year ended December 30, 2014. All capitalized debt issuance costs are being amortized over the term of the loan.

Senior Notes

On November 30, 2010, Operations issued $415.0 million in senior unsecured notes (the “Senior Notes”) with registration rights, 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. The redemption premium of $14.5 million and proportional write-off of unamortized debt issuance costs of $2.3 million was accounted for as a loss on extinguishment of debt during the fiscal year ended December 31, 2013.

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 fiscal year ended December 30, 2014.
    
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 December 30, 2014, we expect to meet the required conditions and currently intend to extend the loan with GECC to November 2017.

The loan is collateralized by the assets of two golf and country clubs with a book value of $39.5 million as of December 30, 2014. The proceeds from the loan were used to pay existing debt of $11.2 million to GECC, $2.7 million to Ameritas Life and $8.0 million to Citigroup. Interest rates are variable based on 30 day LIBOR rates. Payments on the loan were interest only through August 2009 with principal payments commencing in September 2010 based upon a twenty-five year amortization schedule. However, as the cash on cash return (defined as the percentage of underwritten net operating income for the previous twelve months divided by the outstanding principal balance of the loan as of such date) for the period September 1, 2008 through August 31, 2009, and September 1, 2009 through August 31, 2010, was greater than 14% and 15%, respectively, amortization did not commence until September 1, 2011. As part of the August 1, 2012 amendment, the interest rate was changed from 3.25% plus 30 day LIBOR to 5% plus the greater of three month LIBOR or 1%.


102


We incurred debt issuance costs in conjunction with the original loan of $0.9 million which have been capitalized and were amortized over the original term of the loan. We incurred an immaterial amount of debt issuance costs in conjunction with the subsequent amendments of this loan. These costs have been capitalized and are being amortized over the term of the loan.

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. The loan is collateralized by the assets of one golf and country club with a book value of $6.8 million as of December 30, 2014. The interest rate is the greater of 3% plus 30 day LIBOR or 4.5%. We incurred an immaterial amount of debt issuance costs in conjunction with the issuance of this mortgage loan. These have been capitalized and are being amortized over the term of the loan.

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. The loan is collateralized by the assets of Oak Tree Country Club, which had a book value of $7.2 million as of December 30, 2014. The interest rate is the greater of 4.5% or the prime rate. We incurred an immaterial amount of debt issuance costs in conjunction with the assumption of this mortgage loan. These costs have been capitalized and are being amortized over the term of the loan.

Long-term borrowings and lease commitments as of December 30, 2014 and December 31, 2013, are summarized below: 
 
December 30, 2014
 
December 31, 2013
 
 
 
 
 
Carrying Value
Interest Rate
 
Carrying Value
Interest Rate
 
Interest Rate Calculation
 
Maturity
 
 
 
 
 
 
 
 
 
 
Senior Notes
$
—

—
%
 
$
269,750

10.00
%
 
Fixed
 
2018
Secured Credit Facilities
 

 
 
 

 
 
 
 
 
Term Loan
901,106

4.50
%
 
301,106

4.00
%
 
As of December 30, 2014, greater of (i) 4.5% or (ii) an elected LIBOR + 3.5%; as of December 31, 2013, greater of (i) 4.0% or (ii) an elected LIBOR + 3.0%
 
2020
Revolving Credit Borrowings - ($135,000 capacity) (1)
—

3.26
%
 
—

3.25
%
 
LIBOR plus a margin of 3.0%
 
2018
Mortgage Loans
 

 
 
 

 
 
 
 
 
General Electric Capital Corporation
29,738

6.00
%
 
30,313

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
3,333

4.50
%
 
3,493

4.50
%
 
Greater of (i) 3.0% + 30 day LIBOR or (ii) 4.5%
 
2015
BancFirst
4,266

4.50
%
 
4,652

4.50
%
 
Greater of (i) 4.5% or (ii) prime rate
 
2016
Other indebtedness
2,360

4.00% - 8.60%

 
2,837

4.75% - 8.00%

 
Fixed
 
Various
 
952,640

 
 
623,988

 
 
 
 
 
Capital leases
33,949

 
 
25,691

 
 
 
 
 
 
986,589

 
 
649,679

 
 
 
 
 
Less current portion
(18,025
)
 
 
(11,567
)
 
 
 
 
 
Less discount on the Secured Credit Facilities' Term Loan
(3,377
)
 
 
—

 
 
 
 
 
Long-term debt
$
965,187

 
 
$
638,112

 
 
 
 
 
______________________

103



(1)
As of December 30, 2014, the revolving credit facility had capacity of $135.0 million, which was reduced by $23.7 million of standby letters of credit outstanding, leaving $111.3 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 December 30, 2014.
Year
Debt
 
Capital Leases
 
Total
2015
$
4,711

 
$
13,314

 
$
18,025

2016
4,658

 
9,678

 
14,336

2017
28,906

 
6,739

 
35,645

2018
338

 
3,209

 
3,547

2019
274

 
1,009

 
1,283

Thereafter
913,753

 
—

 
913,753

Total
$
952,640

 
$
33,949

 
$
986,589


11. LEASES

We lease operating facilities under agreements with terms up to 99 years. These agreements normally provide for minimum rentals plus executory costs. In some cases, we must pay contingent rent generally based on a percentage of gross receipts or positive cash flows as defined in the lease agreements. As a result, future lease payments that are considered contingent on future results are not included in the table below.

Future minimum lease payments for each of the next five years and thereafter required at December 30, 2014 under operating leases for land, buildings and recreational facilities with initial non-cancelable lease terms in excess of one year are as follows:

Year
 
Capital Leases
 
Operating Leases
 
 
 
 
 
2015
 
$
14,947

 
$
23,058

2016
 
10,591

 
20,955

2017
 
7,097

 
19,776

2018
 
3,491

 
16,724

2019
 
1,134

 
14,905

Thereafter
 
—

 
101,854

Minimum lease payments
 
$
37,260

 
$
197,272

Less: imputed interest component
 
3,311

 
 
Present value of net minimum lease payments of which $13.3 million is included in current liabilities
 
$
33,949

 
 

Total facility rental expense was $29.1 million, $29.4 million and $29.1 million in the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively; contingent rent was $9.2 million, $8.8 million and $8.4 million in the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively.


104


12. INCOME TAXES

Holdings files a consolidated federal income tax return. 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.

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are calculated using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are provided against deferred income tax assets for amounts which are not considered “more likely than not” to be realized.

Loss from continuing operations before income taxes and noncontrolling interest consists of the following:
 
2014
 
2013
 
2012
Domestic
$
(27,471
)
 
$
(38,583
)
 
$
(23,563
)
Foreign
(666
)
 
(404
)
 
(40
)
 
$
(28,137
)
 
$
(38,987
)
 
$
(23,603
)

The income tax (expense) benefit from continuing operations consists of the following:

 
2014
 
2013
 
2012
Current
 
 
 
 
 
Federal
$
42,400

 
$
(3,040
)
 
$
(1,508
)
State
1,242

 
(2,972
)
 
(1,185
)
Foreign
(62
)
 
(220
)
 
1,027

Total Current
43,580

 
(6,232
)
 
(1,666
)
Deferred
 
 
 
 
 
Federal
(1,277
)
 
4,209

 
6,090

State
(834
)
 
342

 
3,104

Foreign
—

 
—

 
—

Total Deferred
(2,111
)
 
4,551

 
9,194

Total income tax benefit (expense)
$
41,469

 
$
(1,681
)
 
$
7,528


The differences between income taxes computed using the U.S. statutory Federal income tax rate of 35% and the actual income tax provision for continuing operations as reflected in the accompanying consolidated statements of operations are as follows:


105


 
2014
 
2013
 
2012
Expected federal income tax benefit
$
10,113

 
$
13,645

 
$
8,260

State taxes, net of federal benefit
(2,607
)
 
(468
)
 
409

Change in valuation allowance - state
(245
)
 
(1,266
)
 
828

Change in valuation allowance - foreign
(1,128
)
 
(44
)
 
(707
)
Foreign rate differential
(127
)
 
(97
)
 
2

IETU, withholding and other permanent - foreign
(62
)
 
(220
)
 
557

Adjustments related to uncertain tax positions
36,409

 
(3,171
)
 
(3,273
)
Equity-based compensation
(298
)
 
(4,192
)
 
—

Membership initiation deposits
—

 
(4,586
)
 
—

Nondeductible transaction costs
(1,777
)
 
—

 
—

Other, net
1,191

 
(1,282
)
 
1,452

Actual income tax benefit (expense)
$
41,469

 
$
(1,681
)
 
$
7,528


    
We had the following net operating loss carryforwards at December 30, 2014, which are available to offset future taxable income:
Type of Carryforward
Gross Amount
 
Expiration Dates (in years)
Federal tax operating loss
$
89,702

 
2024
-
2034
State tax operating loss
$
182,596

 
2015
-
2034
AMT net operating loss
$
66,434

 
2026
-
2034
Foreign net operating loss
$
17,874

 
Indefinite


106


The components of the deferred tax assets and deferred tax liabilities at December 30, 2014 and December 31, 2013 are as follows:
 
 
 
2014
 
2013
Deferred tax assets:
 
 
 
 
 
Federal tax net operating loss carryforwards
 
 
$
31,396

 
$
9,089

State and foreign tax net operating loss carryforwards
 
 
12,577

 
11,417

Membership deferred revenue
 
 
59,605

 
51,568

Reserves and accruals
 
 
19,829

 
19,902

Tax credits
 
 
3,908

 
3,162

Capital losses
 
 
—

 
6,723

Straight-line rent
 
 
10,918

 
8,650

Other
 
 
18,074

 
18,942

Total gross deferred tax assets
 
 
$
156,307

 
$
129,453

Valuation allowance - State
 
 
(5,594
)
 
(5,348
)
Valuation allowance - Foreign
 
 
(6,696
)
 
(5,568
)
Deferred tax liabilities:
 
 
 
 
 
Discounts on membership initiation deposits and acquired notes
 
 
(145,772
)
 
(150,905
)
Property and equipment
 
 
(204,304
)
 
(155,424
)
Deferred revenue
 
 
(1,525
)
 
(1,920
)
Intangibles
 
 
(9,617
)
 
(10,541
)
Other
 
 
(338
)
 
(333
)
Total gross deferred tax liabilities
 
 
(361,556
)
 
(319,123
)
Net deferred tax liability
 
 
$
(217,539
)
 
$
(200,586
)

The allocation of deferred taxes between current and long-term as of December 30, 2014 and December 31, 2013 is as follows:
 
 
 
2014
 
2013
Current portion-deferred tax asset, net
 
 
$
26,574

 
$
10,403

Long-term deferred tax liability, net
 
 
(244,113
)
 
(210,989
)
Net deferred tax liability
 
 
$
(217,539
)
 
$
(200,586
)

Valuation allowances included above of $12.3 million and $10.9 million at December 30, 2014 and December 31, 2013, respectively, relate primarily to net operating loss carryforwards in certain states and in Mexico.

GAAP prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions are recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information.

A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met. GAAP also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.

We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense. Income tax expense for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012 includes interest (benefit) expense and penalties of $(10.6) million, $4.1 million and $3.7 million respectively.


107


A reconciliation of the change in our unrealized tax benefit for all periods presented is as follows:

 
2014
 
2013
 
2012
Balance at beginning of year
$
50,378

 
$
51,384

 
$
52,513

Increases in tax positions for current year
—

 
—

 
—

Increases in tax positions for prior years
5,800

 
103

 
17

Decreases in tax positions for prior years
(48,636
)
 
(1,109
)
 
(1,146
)
Balance at end of year
$
7,542

 
$
50,378

 
$
51,384


Holdings files income tax returns in the U.S. federal jurisdiction, numerous state jurisdictions and in three foreign jurisdictions. 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. 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 December 30, 2014, tax years 2010 - 2014 remain open under statute for US 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 described below.

As of December 30, 2014 and December 31, 2013, we have recorded $7.7 million and $56.1 million, respectively, of unrecognized tax benefits related to uncertain tax positions, including interest and penalties of $1.4 million and $12.1 million, respectively, which are included in other liabilities in the consolidated balance sheets. If we were to prevail on all uncertain tax positions recorded as of December 30, 2014, the net effect would be an income tax benefit of approximately $6.2 million, exclusive of any benefits related to interest and penalties.

In October 2014, the IRS audit was completed resulting in $48.6 million reduction to unrecognized tax benefits, of which $11.7 million represented settlements and $36.9 million represented further reductions of prior period unrecognized tax benefits. An additional $11.8 million of accrued interest and penalties were reversed, thereby resulting in $43.7 million of the above benefits being recorded in the income statement. These benefits are offset by an increase of approximately $7.3 million of unrecognized tax benefits (including penalties and interest) primarily related to certain Mexican tax positions described in more detail below.

In addition, 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. 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. Additionally, during the fiscal year ended December 30, 2014, we received an audit assessment for the 2009 tax year for another Mexican subsidiary, which we have protested with the Mexican taxing authorities through the appropriate administrative channel. Subsequently, we recorded a liability 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 result of our protest of this assessment.

Management believes it is unlikely that our unrecognized tax benefits will significantly change within the next 12 months given the current status in particular 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 December 30, 2014.


108


13. NEW AND ACQUIRED CLUBS, CLUB DIVESTITURES AND DISCONTINUED OPERATIONS

New and Acquired Clubs

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

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 acquisition increased our network of private clubs, expanding the geographic cluster model and solidifying market penetration in Atlanta, Georgia and Houston, Texas. 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 10 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

109


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.

The operating results of Sequoia Golf, which are recorded in the golf and country club segment contributed $36.3 million in revenue and $4.7 million of loss from continuing operations before income taxes for the fiscal year ended December 30, 2014. We have recognized approximately $5.1 million in acquisition costs which are primarily recognized in selling, general and administrative expenses.

The following table presents the unaudited pro forma consolidated financial information of ClubCorp as if the acquisition of Sequoia Golf was completed on December 26, 2012, the first day of fiscal year 2013. The following unaudited pro forma financial information includes adjustments for: (i) depreciation on acquired property and equipment; (ii) alignment of revenue recognition policies; (iii) amortization of intangible assets recorded at the date of the transaction; and (iv) transaction and business integration related costs. No adjustments were made to reflect anticipated synergies. This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the transaction taken place on December 26, 2012.
 
Fiscal Year Ended
 
December 30, 2014
 
December 31, 2013
Pro forma revenues
$
1,001,599

 
$
948,472

Pro forma net income (loss) attributable to ClubCorp
$
(9,080
)
 
$
(55,178
)
Pro forma basic net income (loss) from continuing operations attributable to ClubCorp, per share
$
(0.14
)
 
$
(1.02
)
Pro forma diluted net income (loss) from continuing operations attributable to ClubCorp, per share
$
(0.14
)
 
$
(1.02
)
 
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:


110


 
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


Prestonwood Country Club—On March 3, 2014, we acquired Prestonwood Country Club, 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

Chantilly National Golf & Country Club—On December 17, 2013, we acquired Chantilly National Golf & Country Club, a private country club located in Centreville, Virginia, with a purchase price of $4.6 million for net cash consideration of $4.8 million. We recorded the following major categories of assets and liabilities:
 
December 17, 2013

Depreciable land improvements, property and equipment
$
5,171

Inventory
103

Other current liabilities
(25
)
Other long-term liabilities
(180
)
Long-term debt (obligation related to capital leases)
(234
)
Total
$
4,835

Cherry Valley Country Club—On June 18, 2013, we acquired Cherry Valley Country Club, a private country club located in Skillman, New Jersey, with a purchase price and net cash consideration of $5.6 million. We recorded the following major categories of assets and liabilities:
 
June 18, 2013

Depreciable land improvements, property and equipment
$
5,976

Prepaid assets
121

Inventory
179

Long-term debt (obligation related to capital leases)
(311
)
Other liabilities
(408
)
Total
$
5,557

Oak Tree Country Club—On May 22, 2013, we acquired Oak Tree Country Club, a private country club located in Edmond, Oklahoma, with a purchase price of $10.0 million for net cash consideration of $5.2 million. We assumed debt of $5.0 million in connection with the acquisition. We recorded the following major categories of assets and liabilities: 

111


 
May 22, 2013

Land, property and equipment
$
12,108

Receivables, prepaid assets and other assets
662

Inventory
233

Current maturities of long-term debt
(468
)
Long-term debt
(4,486
)
Deferred tax liability
(722
)
Membership initiation deposits and other liabilities
(2,099
)
Total
$
5,228

Hartefeld National Golf Club—On April 18, 2012, we acquired Hartefeld National Golf Club, a private country club located in Avondale, Pennsylvania, with a purchase price of $3.8 million for net cash consideration of $3.6 million. We recorded the following major categories of assets and liabilities:
 
April 18, 2012

Land, depreciable land improvements, property and equipment
$
3,999

Prepaid real estate taxes
31

Inventory
112

Deferred revenue and other liabilities
(572
)
Total
$
3,570


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 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, terminated in July, 2014, three management agreements acquired with the Sequoia Golf acquisition which were terminated after acquisition and a management agreement with Paragon Club of Hefei, a business club located in Hefei, China which was terminated in December 2014. No gain or loss on divestiture was recorded. These divestitures would have qualified as discontinued operations prior to our adoption of ASU 2014-8, but are reported within continuing operations under the amended guidance. See Note 2.

Discontinued Club Operations

We did not dispose of or divest any clubs which qualified as discontinued operations in the fiscal years ended December 30, 2014 and December 31, 2013.

Glendale Racquet Club, Inc.—On September 27, 2012, we sold certain assets and liabilities of Glendale Racquet Club, Inc., a sports club located in Milwaukee, Wisconsin, to an unrelated third party for $5.9 million. The sale resulted in a pre-tax loss of $11.1 million recorded in the fiscal year ended December 25, 2012 including a $6.5 million loss recognized for goodwill allocated to this entity. See Note 7. These losses are included in loss from discontinued operations in the consolidated statements of operations and comprehensive loss.
We discontinued one additional business, sports and alumni club and one golf management contract in the fiscal year ended December 25, 2012 for a pre-tax gain of $0.1 million. In conjunction with the discontinued golf management contract, we recorded impairment of liquor licenses of $0.1 million. See Note 7.

Operations of the clubs that have been disposed during the fiscal year ended December 25, 2012 were reclassified to discontinued operations on the consolidated statements of operations. Summarized financial information for these clubs is as follows:

112


 
 
Fiscal Year Ended
 
 
December 25, 2012
Revenues
 
$
3,759

Operating expenses, excluding loss on disposals and impairments of assets
 
(3,658
)
Loss on disposals and impairments of assets
 
(11,448
)
Interest expense
 
(2,239
)
Loss from discontinued club operations, before taxes
 
(13,586
)
Income tax benefit
 
2,669

Net loss from discontinued clubs
 
$
(10,917
)
     
14. 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, on a consolidated basis, is appropriate as it provides additional information to investors about our performance and investors and lenders have historically used EBITDA-related measures.

At the beginning of fiscal year 2014, we began managing the business using Adjusted EBITDA, which is the earnings measure historically disclosed on a consolidated basis, as our measure of segment profit and loss. Prior to this change, we utilized Segment EBITDA (“Segment EBITDA”) as our measure of segment profit and loss, but we also presented Adjusted EBITDA on a consolidated basis, as certain financial covenants in the credit agreement governing the Secured Credit Facilities utilized this measure of Adjusted EBITDA. These two measurements have not produced materially different results. This change results in alignment of our internal measure of segment profit and loss with the measure used to evaluate our performance on a consolidated basis and the measure used to evaluate our performance under financial covenants under the credit agreement governing the Secured Credit Facilities. Further it reduces the number of non-GAAP measurements we report, thus simplifying our financial reporting. The manner in which we calculate Adjusted EBITDA has not changed. For comparability purposes, amounts for the fiscal years ended December 31, 2013 and December 25, 2012 have been recast.

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.

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

Business, sports and alumni club operations consist of business clubs, business/sports clubs, sports clubs and alumni clubs. Business clubs provide a setting for dining, business or social entertainment. Sports clubs provide a variety of recreational facilities and business/sports clubs provide a combination of the amenities available at business clubs and sports clubs. Alumni clubs provide the same amenities as business clubs while targeting alumni and staff of universities.

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

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The table below shows summarized financial information by segment for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012:
 
 
2014
 
2013
 
2012
Golf and Country Clubs
 

 
 

 
 
Revenues
$
695,027

 
$
628,473

 
$
585,964

Adjusted EBITDA
203,542

 
180,208

 
168,491

Capital Expenditures
71,108

 
47,546

 
47,283

 
 
 
 
 
 
Business, Sports and Alumni Clubs
 

 
 

 
 
Revenues
$
184,003

 
$
180,430

 
$
174,344

Adjusted EBITDA
35,310

 
34,500

 
34,255

Capital Expenditures
20,605

 
18,641

 
14,198

 
 
 
 
 
 
Other
 

 
 

 
 
Revenues
$
15,132

 
$
11,874

 
$
1,817

Adjusted EBITDA
(42,080
)
 
(37,504
)
 
(36,660
)
Capital Expenditures
$
5,483

 
$
5,428

 
$
3,766

 
 
 
 
 
 
Elimination of intersegment revenues and segment reporting adjustments
$
(10,007
)
 
$
(5,697
)
 
$
(7,181
)
 
 
 
 
 
 
Total
 

 
 

 
 
Revenues
$
884,155

 
$
815,080

 
$
754,944

Adjusted EBITDA
196,772

 
177,204

 
166,086

Capital Expenditures
97,196

 
71,615

 
65,247


 
As of
Total Assets
2014
 
2013
Golf and Country Clubs
1,483,856

 
1,254,988

Business, Sports and Alumni Clubs
92,525

 
90,078

Other
488,690

 
391,151

Consolidated
$
2,065,071

 
$
1,736,217


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The following table presents revenue by product type and revenue and long-lived assets by geographical region, excluding financial instruments. Foreign operations are primarily located in Mexico.

 
2014
 
2013
 
2012
Revenues
 
 
 
 
 
Dues
$
408,351

 
$
373,422

 
$
347,086

Food and beverage
251,838

 
231,673

 
216,269

Golf
144,139

 
133,412

 
128,362

Other
79,827

 
76,573

 
63,227

Total
$
884,155

 
$
815,080

 
$
754,944

 
 
 
 
 
 
 
2014
 
2013
 
2012
Revenues
 
 
 
 
 
United States
$
877,780

 
$
808,208

 
$
748,124

All Foreign
6,375

 
6,872

 
6,820

Total
$
884,155

 
$
815,080

 
$
754,944

 
 
 
 
 
 
 
2014
 
2013
 
 
Long-Lived Assets
 
 
 
 
 
United States
$
1,817,545

 
$
1,517,823

 
 
All Foreign
24,567

 
26,717

 
 
Total
$
1,842,112

 
$
1,544,540

 
 


The table below provides a reconciliation of our net income (loss) to Adjusted EBITDA for the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012:
 
 
2014
 
2013
 
2012
Net income (loss)
$
13,329

 
$
(40,680
)
 
$
(26,992
)
Interest expense
65,209

 
83,669

 
89,369

Income tax (benefit) expense
(41,469
)
 
1,681

 
(7,528
)
Interest and investment income
(2,585
)
 
(345
)
 
(1,212
)
Depreciation and amortization
80,792

 
72,073

 
78,286

EBITDA
$
115,276

 
$
116,398

 
$
131,923

Impairments, disposition of assets and income (loss) from discontinued operations and divested clubs (1)
12,729

 
14,364

 
26,501

Loss on extinguishment of debt (2)
31,498

 
16,856

 
—

Non-cash adjustments (3)
2,007

 
3,929

 
1,865

Other adjustments (4)
25,315

 
10,134

 
3,237

Equity-based compensation expense (5)
4,303

 
14,217

 
—

Acquisition adjustment (6)
5,644

 
1,306

 
2,560

Adjusted EBITDA
$
196,772

 
$
177,204

 
$
166,086

______________________

(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 quality as discontinued operations.

(2)
Includes loss on extinguishment of debt calculated in accordance with GAAP.


115


(3)
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.

(4)
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.

(5)
Includes equity-based compensation expense, calculated in accordance with GAAP, related to awards held by certain employees, executives and directors.

(6)
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.

15. COMMITMENTS AND CONTINGENCIES
 
We routinely enter into contractual obligations to procure assets used in the day to day operations of our business. As of December 30, 2014, we had capital commitments of $12.4 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 financial statements.

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. 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. Additionally, during the fiscal year ended December 30, 2014, we received an audit assessment for the 2009 tax year for another Mexican subsidiary, which we have protested with the Mexican taxing authorities through the appropriate administrative channel. Subsequently, we recorded a liability 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 result of our protest of this assessment.

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 balance sheet as of December 30, 2014.

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 December 30, 2014, we have an immaterial amount recorded in accrued taxes on the consolidated 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 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

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with legal counsel, we believe that any potential liability from these matters would not materially affect our consolidated financial statements.

16. 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 fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012 (in thousands, except per share amounts):
 
Fiscal Years Ended
 
December 30, 2014
 
December 31, 2013
 
December 25, 2012
 
Basic
 
Diluted
 
Basic
 
Diluted
 
Basic
 
Diluted
Income (loss) from continuing operations attributable to ClubCorp
$
13,229

 
$
13,229

 
$
(40,880
)
 
$
(40,880
)
 
(16,358
)
 
(16,358
)
Weighted-average shares outstanding
63,941

 
63,941

 
54,172

 
54,172

 
50,570

 
50,570

Effect of dilutive equity-based awards
—

 
377

 
—

 
431

 
—

 
—

Total Shares
63,941

 
64,318

 
54,172

 
54,603

 
50,570

 
50,570

Income (loss) from continuing operations attributable to ClubCorp per share
$
0.21

 
$
0.21

 
$
(0.75
)
 
$
(0.75
)
 
$
(0.32
)
 
$
(0.32
)
For the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, there are no potential common shares excluded from the calculation of diluted EPS because they would have been 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.

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 2013
 
 
 
 
 
 
December 26, 2012
 
$
0.69

 
December 26, 2012
 
$
35,000

 
December 27, 2012
December 10, 2013
 
$
0.12

 
January 3, 2014
 
$
7,654

 
January 15, 2014
 
 
 
 
 
 
 
 
 
Fiscal Year 2014
 
 
 
 
 
 
March 18, 2014
 
$
0.12

 
April 3, 2014
 
$
7,725

 
April 15, 2014
June 25, 2014
 
$
0.12

 
July 7, 2014
 
$
7,731

 
July 15, 2014
September 9, 2014
 
$
0.12

 
October 3, 2014
 
$
7,731

 
October 15, 2014
December 3, 2014
 
$
0.13

 
January 2, 2015
 
$
8,377

 
January 15, 2015

17. RELATED PARTY TRANSACTIONS

During the fiscal year ended December 31, 2013, we were a party to a management agreement (the “Management Agreement”) with an affiliate of KSL, pursuant to which we were provided financial and management consulting services in exchange for an annual fee of $1.0 million. In addition, we agreed to reimburse the management company for all of its reasonable out-of-pocket costs and expenses incurred in providing management services to us and certain of our affiliates. During the fiscal years ended December 31, 2013 and December 25, 2012, we paid an affiliate of KSL approximately $0.8 million and $1.0 million, respectively, in management fees. The Management Agreement allowed that, in the event of a financing, refinancing or direct or indirect sale of all or substantially all of our equity or assets, the management company may also be entitled to receive a fee equal to 1% of the lenders' maximum commitments, in the case of a financing or refinancing, or 1% of the total consideration paid, in the case of a sale. Following our IPO and effective October 1, 2013, the Management

117


Agreement was terminated and in connection with the termination, we made a one-time payment of $5.0 million during the fiscal year ended December 31, 2013.

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 $0.1 million during the fiscal year ended December 30, 2014. This amount was not material for the fiscal year ended December 31, 2013.

During the fiscal years ended December 31, 2013 and December 25, 2012, we paid $0.4 million and $0.8 million, respectively, to affiliates of KSL for private party events. We made no payments to affiliates of KSL for private party events during the fiscal year ended December 30, 2014.

On December 27, 2012, during the fiscal year ended December 31, 2013, we made a $35.0 million distribution to our owners.

Effective May 1, 2013, we entered into a consulting services agreement with an affiliate of KSL whereby we provide certain golf-related consulting services in exchange for an annual fee of $0.1 million. During the fiscal year ended December 30, 2014, the revenue associated with this agreement was $0.1 million. The revenue associated with this contract was immaterial during the fiscal year ended December 31, 2013.
 
As of December 30, 2014, we had receivables of $0.2 million and payables of $0.7 million and as of December 31, 2013, we had receivables of $0.2 million and payables of $0.1 million, for outstanding advances from golf and business club ventures in which we have an equity method investment. We recorded $0.5 million, $0.5 million and $0.6 million in the fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, respectively, in management fees from these ventures. As of December 30, 2014 and December 31, 2013, we had a receivable of $2.3 million and $1.8 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. We recognized and collected $0.1 million and $0.2 million during the fiscal years ended December 31, 2013 and December 25, 2012, respectively, in revenue associated with these arrangements. During the fiscal year ended December 30, 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 fiscal years ended December 30, 2014, December 31, 2013 and December 25, 2012, we collected and remitted $0.1 million, $0.1 million and $0.1 million, respectively, in conjunction with these agreements.


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18. QUARTERLY RESULTS OF OPERATIONS (unaudited)

The following table sets forth the historical unaudited quarterly financial data for the periods indicated. The information for each of these periods has been prepared on the same basis as the audited consolidated financial statements and, in our opinion, reflects all adjustments necessary to present fairly our financial results. Operating results for previous periods do not necessarily indicate results that may be achieved in any future period.

The operating results of Sequoia Golf, which was acquired on September 30, 2014, contributed $36.3 million in revenue and $4.7 million of loss from continuing operations before income taxes for the sixteen weeks ended December 30, 2014.
 
 
For the sixteen weeks ended
 
For the twelve weeks ended
2014
 
December 30, 2014
 
September 9, 2014
 
June 17, 2014
 
March 25, 2014
Total revenues
 
$
302,539

 
$
204,475

 
$
211,418

 
$
165,723

Direct and selling, general and administrative expenses
 
289,741

 
183,821

 
189,877

 
154,731

Income (loss) from continuing operations
 
31,322

 
3,274

 
(17,476
)
 
(3,788
)
Net income
 
31,321

 
3,273

 
(17,477
)
 
(3,788
)
Net income (loss) attributable to ClubCorp
 
31,355

 
3,210

 
(17,613
)
 
(3,726
)
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to ClubCorp per share, basic
 
$
0.49

 
$
0.05

 
$
(0.28
)
 
$
(0.06
)
Net income (loss) attributable to ClubCorp per share, diluted
 
$
0.49

 
$
0.05

 
$
(0.28
)
 
$
(0.06
)

 
 
For the seventeen weeks ended
 
For the twelve weeks ended
2013
 
December 31, 2013
 
September 3, 2013
 
June 11, 2013
 
March 19, 2013
Total revenues
 
$
269,566

 
$
194,835

 
$
195,619

 
$
155,060

Direct and selling, general and administrative expenses
 
259,547

 
176,653

 
171,851

 
145,836

(Loss) income from continuing operations
 
(32,270
)
 
(5,030
)
 
7,118

 
(10,486
)
Net (loss) income
 
(32,277
)
 
(5,034
)
 
7,122

 
(10,491
)
Net (loss) income attributable to ClubCorp
 
(32,358
)
 
(5,163
)
 
7,079

 
(10,450
)
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to ClubCorp per share, basic
 
$
(0.52
)
 
$
(0.10
)
 
$
0.14

 
$
(0.21
)
Net (loss) income attributable to ClubCorp per share, diluted
 
$
(0.52
)
 
$
(0.10
)
 
$
0.14

 
$
(0.21
)

19. SUBSEQUENT EVENTS

On December 3, 2014, 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 January 2, 2015. This dividend was paid on January 15, 2015.

Subsequent to the fiscal year ended December 30, 2014, we purchased two golf and country clubs in the Chicago, Illinois area. On January 13, 2015, we purchased Ravinia Green Country Club, a private golf club in Riverwoods, Illinois, for a purchase price of $5.9 million. 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. We are in the process of finalizing our purchase price allocations, which are subject to change until our information is finalized, no later than twelve months from the acquisition date.

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 requirements. The number of performance restricted

119


stock units issued under these grants represents the target number of such units that may be earned, based on Holdings' total shareholder return over the applicable performance periods compared with a peer group. If more than the target number of performance restricted stock units vest at the end of a performance period because Holdings' total shareholder return exceeds certain percentile thresholds of the peer group, additional shares will be issued under the Stock Plan at that time.


120


Schedule I - Registrant’s Condensed Financial Statements
ClubCorp Holdings, Inc.
Registrant Only Financial Statements
Condensed Statements of Operations and Comprehensive Loss
For the Fiscal Years Ended December 30, 2014, December 31, 2013 and December 25, 2012
(In thousands)
 
2014
 
2013
 
2012
Equity in net income (loss) of subsidiaries
$
13,226

 
$
(40,892
)
 
$
(27,275
)
NET INCOME (LOSS)
13,226

 
(40,892
)
 
(27,275
)
NET INCOME (LOSS) ATTRIBUTABLE TO CLUBCORP HOLDINGS, INC.
$
13,226

 
$
(40,892
)
 
$
(27,275
)
 
 
 
 
 
 
NET INCOME (LOSS)
13,226

 
(40,892
)
 
(27,275
)
Equity in other comprehensive (loss) income of subsidiaries
(3,220
)
 
(398
)
 
1,890

COMPREHENSIVE INCOME (LOSS)
10,006

 
(41,290
)
 
(25,385
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLUBCORP HOLDINGS, INC.
$
10,006

 
$
(41,290
)
 
$
(25,385
)

121


ClubCorp Holdings, Inc.
Registrant Only Financial Statements
Condensed Balance Sheets
As of December 30, 2014 and December 31, 2013
(In thousands, except share and per share amounts)
 
2014
 
2013
ASSETS
 
 
 
Investment in subsidiaries
$
218,371

 
$
234,827

TOTAL ASSETS
$
218,371

 
$
234,827

LIABILITIES AND EQUITY
 
 
 
Distributions to owners declared, but unpaid - current
8,384

 
7,654

Distributions to owners declared, but unpaid - long-term
70

 
—

TOTAL LIABILITIES
$
8,454

 
$
7,654

EQUITY
 
 
 
Common stock of ClubCorp Holdings, Inc., $0.01 par value, 200,000,000 shares authorized; 64,443,332 and 63,789,730 issued and outstanding at December 30, 2014 and December 31, 2013, respectively
644

 
638

Additional paid-in capital
293,006

 
320,274

Retained deficit
(83,733
)
 
(93,739
)
Total stockholders’ equity
209,917

 
227,173

Total equity
209,917

 
227,173

TOTAL LIABILITIES AND EQUITY
$
218,371

 
$
234,827


122


ClubCorp Holdings, Inc.
Registrant Only Financial Statements
Condensed Statements of Cash Flows
For the Fiscal Years Ended December 30, 2014, December 31, 2013 and December 25, 2012
(In thousands)
 
2014
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net income (loss)
$
13,226

 
$
(40,892
)
 
$
(27,275
)
Adjustments to reconcile net loss to cash flows from operating activities:
 
 
 
 
 
Equity in net (income) loss of subsidiary
(13,226
)
 
40,892

 
27,275

Net cash provided by operating activities
—

 
—

 
—

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Contribution from subsidiary
30,765

 
35,000

 
—

Distribution to subsidiary
—

 
(173,250
)
 
—

Net cash provided by (used in) investing activities
30,765

 
(138,250
)
 
—

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Distribution to owners
(30,765
)
 
(35,000
)
 
—

Proceeds from issuance of common stock in Holdings' initial public offering, net of underwriting discounts and commissions
—

 
173,250

 
—

Net cash (used in) provided by financing activities
(30,765
)
 
138,250

 
—

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
—

 
—

 
—

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
—

 
—

 
—

CASH AND CASH EQUIVALENTS - END OF PERIOD
$
—

 
$
—

 
$
—

Non-cash investing and financing activities are as follows:
 
 
 
 
 
Distribution declared payable to owners
$
8,454

 
$
7,654

 
$
—

Distribution related to utilization of certain deferred tax benefits recorded in connection with the ClubCorp Formation
$
—

 
$
4,518

 
$
—


Notes to Condensed Registrant Only Financial Statements
1. ORGANIZATION
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 of ClubCorp, Inc. (“CCI”), which was effective as of November 30, 2010, for the purpose of operating and managing golf and country clubs and business, sports and alumni clubs. As of December 30, 2014, 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.
Holdings has no operations or significant assets or liabilities other than its investment in Operations' Parent and Operations. Accordingly, Holdings is dependent upon distributions from Operations' Parent and Operations to fund its obligations. However, Operations' Parent's and Operations’ ability to pay dividends or lend to Holdings is limited under the terms of our various debt agreements.
2. BASIS OF PRESENTATION
The accompanying condensed financial statements (registrant only) include the accounts of Holdings and its investment in Operations' Parent and Operations accounted for in accordance with the equity method, and do not present the financial statements of Holdings and its subsidiaries on a consolidated basis. These registrant only condensed financial statements should be read in conjunction with the ClubCorp Holdings, Inc. consolidated financial statements.

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3. RESTRICTED STOCK UNITS
On April 1, 2012, Holdings granted restricted stock units (“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. 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 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 RSUs will convert into shares of our common stock upon satisfaction of the remaining time vesting requirement. As of December 30, 2014, 190,788 RSUs remain outstanding.

On January 17, 2014, and on February 7, 2014, we granted 103,886 and 111,589 shares of restricted stock under the Stock Plan, respectively, 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 requirements. The number of performance restricted stock units issued under these grants represents the target number of such units that may be earned, based on the Company's total shareholder return over the applicable performance periods compared with a peer group. If more than the target number of performance restricted stock units vest at the end of a performance period because the Company's total shareholder return exceeds certain percentile thresholds of the peer group, additional shares will be issued under the Stock Plan at that time.

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. No other equity-based awards were granted during the fiscal year ended December 30, 2014.

4. SUBSEQUENT EVENTS

On December 3, 2014, 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 January 2, 2015. This dividend was paid on January 15, 2015.
    
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 requirements. The number of performance restricted stock units issued under these grants represents the target number of such units that may be earned, based on Holdings' total shareholder return over the applicable performance periods compared with a peer group. If more than the target number of performance restricted stock units vest at the end of a performance period because Holdings' total shareholder return exceeds certain percentile thresholds of the peer group, additional shares will be issued under the Stock Plan at that time.


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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.

ITEM 9A. CONTROLS AND PROCEDURES
 
Included in this Form 10-K are certifications of our Chief Executive Officer and our Chief Financial Officer, which are required in accordance with Rule 15d-14 of the Securities Exchange Act of 1934, as amended. This section includes information concerning the controls and controls evaluation referred to in the certifications.

Evaluation of Disclosure Controls and Procedures
 
Our Chief Executive Officer and Chief Financial Officer, with the assistance of senior management personnel, have conducted an evaluation of the effectiveness of our disclosure controls and procedures at the reasonable assurance level (as defined in Rule 15d-15(e) of Exchange Act) as of December 30, 2014. We perform this evaluation on a quarterly basis so that the conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our annual and quarterly reports filed under the Exchange Act. Based on this evaluation, and subject to the limitations described below, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 30, 2014.
 
Change in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting during the quarter ended December 30, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See “Item 8. Financial Statements and Supplementary Data” for Management's Report on Internal Control over Financial Reporting with respect to the effectiveness of internal control over financial reporting.
 
Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and the Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurances that the objectives of the control system are met. The design of a control system reflects resource constraints, and the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, have been or will be detected.

ITEM 9B. OTHER INFORMATION

2015 Short Term Incentive Plan

On March 10, 2015, our Compensation Committee of the Board of Directors of the Company, together with a subcommittee comprised of the independent directors of the Committee (the “Subcommittee”) approved a 2015 Short Term Incentive Plan (“2015 STI Plan”), in which our Named Executive Officers (or “NEOs”) and other employees are eligible to participate. Under the 2015 STI Plan, the Compensation Committee and Subcommittee made a grant to each NEO in an initial amount expressed as a percentage of his or her base salary (“Initial Grant Amount”). The Initial Grant Amount for Mr. Affeldt is 80% of his salary and for Mr. Burnett is 65% of his salary. The Initial Grant Amount for each other NEO is 50% of his or her respective salary. Each grant under the 2015 STI Plan is subject to the continued employment of the participant on the payment date and to a minimum Adjusted EBITDA threshold that must be attained before any awards will be paid.

With respect to the Initial Grant Amount, 60% of such amount (the “Performance-Based Percentage”) is subject to downward or upward adjustment based upon our actual Adjusted EBITDA results for fiscal year 2015 in comparison to budgeted Adjusted EBITDA for fiscal year 2015. The NEO will receive between 50% and 200% of the Performance-Based Percentage if actual Adjusted EBITDA for fiscal year 2015 is at least 95% and up to 130% or more of budgeted Adjusted EBITDA for fiscal year 2015. The remaining 40% of the Initial Grant Amount may be paid, adjusted downward or upward, or withheld at the discretion of the Compensation Committee based on the NEO's personal performance. Awards, if any, will be paid in cash after completion of the audit of the Company's financial statements in the first quarter of the following year.


125


The above description of the 2015 STI Plan is qualified in its entirety by reference to the 2015 STI Plan filed as Exhibit 10.26 to this Form 10-K and incorporated herein by reference.

Amended and Restated PSU Agreements

On March 10, 2015, the Committee and Subcommittee also approved an amended and restated form of Performance Restricted Stock Unit Agreement (the “Amended and Restated PSU Agreement”) for awards of Performance Restricted Stock Units (“PSUs”) granted on February 7, 2014 to the NEOs and other employees pursuant to the Stock Plan. The Amended and Restated PSU Agreement revises the original form of agreement to provide that each PSU that vests will give the holder the right to receive a cash payment equal in amount to the aggregate amount of all dividends declared and paid on one share of the Company’s common stock while the PSU was outstanding. No dividend equivalent rights will be paid on any PSUs that do not vest, and the vesting terms were not changed.

The above description of the Amended and Restated PSU Agreement is qualified in its entirety by reference to the form of Amended and Restated PSU Agreement filed as Exhibit 10.28 to this Form 10-K and incorporated herein by reference.


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PART III—OTHER INFORMATION

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated herein by reference from the Company’s definitive proxy statement for the 2015 annual meeting of stockholders.

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference from the Company’s definitive proxy statement for the 2015 annual meeting of stockholders.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The information required by this item is incorporated herein by reference from the Company’s definitive proxy statement for the 2015 annual meeting of stockholders.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference from the Company’s definitive proxy statement for the 2015 annual meeting of stockholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference from the Company’s definitive proxy statement for the 2015 annual meeting of stockholders.


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PART IV

ITEM 15.    EXHIBITS

A. 1. Financial Statements

The following consolidated financial statements of the Company, the notes thereto and the related Report of Independent Registered Public Accounting Firm are filed under Item 8 of this Form 10-K:


A. 2. Financial Statement Schedules

The information required by Schedule I - Financial Information of Registrant is provided under Item 8 of this Form 10-K:

The information required by Schedule II - Valuation and Qualifying Accounts is provided in Notes 2 and 12 to the consolidated financial statements included elsewhere herein.

Other schedules are omitted because they are not required.

A. 3. Exhibits

The exhibits listed below are incorporated herein by reference to prior SEC filings by Registrant or its affiliates or are included as exhibits in this Form 10-K.

Exhibit No.
 
Description of Exhibit
3.1 (a)

 
Form of Amended and Restated Articles of Incorporation of ClubCorp Holdings, Inc. (Incorporated by reference to Exhibit 3.1(a) to Amendment No. 1 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 6, 2013)
3.1 (b)

 
Form of Amended and Restated Bylaws of ClubCorp Holdings, Inc. (Incorporated by reference to Exhibit 3.1(b) to Amendment No. 1 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 6, 2013)
10.1

†
Long Term Incentive Plan (Incorporated by reference to Exhibit 10.7 on Form S-4 filed by ClubCorp Club Operations, Inc. on March 28, 2011)
10.2

 
Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.8 on Form S-4 filed by ClubCorp Club Operations, Inc. on March 28, 2011)
10.3

 
Guaranty and Security Agreement dated as of November 30, 2010 among ClubCorp Club Operations, Inc., each other Grantor from time to time party thereto and Citicorp North America, Inc., as Administrative Agent (Incorporated by reference to Exhibit 10.9 on Form S-4 filed by ClubCorp Club Operations, Inc. on March 28, 2011)

128


10.4

 
Form of Indemnification Agreement between ClubCorp Holdings, Inc. and its directors and officers (Incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 6, 2013)
10.5

†
ClubCorp Holdings, Inc. Amended and Restated 2012 Stock Award Plan (Incorporated by reference to Exhibit 10.10 to Amendment No. 2 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 26, 2013)
10.6

†
Form of Restricted Stock Unit Agreement under ClubCorp Holdings, Inc. 2012 Stock Award Plan (Incorporated by reference to Exhibit 10.12 on Form 10-K filed by ClubCorp Club Operations, Inc. on March 26, 2012)
10.7

†
Form of Performance Restricted Stock Unit Agreement under ClubCorp Holdings, Inc. 2012 Stock Award Plan (Incorporated by reference to Exhibit 10.1 on Form 8-K filed by ClubCorp Holdings, Inc. on February 13, 2014)
10.8

†
2012 Incentive Plan (Incorporated by reference to Exhibit 10.1 on Form 10-Q filed by ClubCorp Club Operations, Inc. on October 15, 2012)
10.9

 
Amendment No. 1, dated as of November 16, 2012, to the Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.1 on Form 8-K filed by ClubCorp Club Operations, Inc. on November 16, 2012)
10.10

 
Joinder Agreement, dated as of January 16, 2013, by and between ClubCorp NV I, LLC, a Nevada limited liability company; ClubCorp NV II, LLC, a Nevada limited liability company; ClubCorp NV III, LLC, a Nevada limited liability company; ClubCorp NV IV, LLC, a Nevada limited liability company; and ClubCorp NV V, LLC, a Nevada limited liability company and Citicorp North America, Inc., as administrative agent and collateral agent (Incorporated by reference to Exhibit 10.1 on Form 8-K filed by ClubCorp Club Operations, Inc. on January 22, 2013)
10.11

 
Pledge Amendment, dated as of January 16, 2013, by and between ClubCorp USA, Inc. and Citicorp North America, Inc., as administrative agent and collateral agent (Incorporated by reference to Exhibit 10.2 on Form 8-K filed by ClubCorp Club Operations, Inc. on January 22, 2013)
10.12

 
Amendment No. 2, dated as of July 24, 2013, to the Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.3 on Form 10‑Q filed by ClubCorp Club Operations, Inc. on July 26, 2013)
10.13

 
Amendment No. 3, dated as of August 30, 2013, to the Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner. (Incorporated by reference to Exhibit 10.18 on Form 10-K filed by ClubCorp Holdings, Inc. on March 21, 2014)
10.14

†
Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.17 to Amendment No. 1 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 6, 2013)
10.15

†
Form of Nonqualified Stock Option Agreement (Incorporated by reference to Exhibit 10.18 to Amendment No. 1 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 6, 2013)
10.16

 
Form of Registration Rights Agreement between ClubCorp Holdings, Inc. and certain of its stockholders (Incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the Form S-1 filed by ClubCorp Holdings, Inc. on August 6, 2013)
10.17

 
Amendment No. 4, dated as of February 21, 2014, to the Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner. (Incorporated by reference to Exhibit 10.22 on Form 10-K filed by ClubCorp Holdings, Inc. on March 21, 2014)
10.18

†
2014 Short Term Incentive Plan (Incorporated by reference to Exhibit 10.23 on Form 10-K filed by ClubCorp Holdings, Inc. on March 21, 2014)
10.19

 
Joinder Agreement, dated as of March 21, 2014, by and between ClubCorp NV VI, LLC, a Nevada limited liability company; ClubCorp NV VII, LLC, a Nevada limited liability company; ClubCorp NV VIII, LLC, a Nevada limited liability company; ClubCorp NV IX, LLC, a Nevada limited liability company; and ClubCorp NV X, LLC, a Nevada limited liability company and Citicorp North America, Inc., as administrative agent and collateral agent (Incorporated by reference to Exhibit 10.23 on Form 10-K filed by ClubCorp Holdings, Inc. on March 21, 2014)
10.20

 
Pledge Amendment, dated as of March 21, 2014, by and between ClubCorp USA, Inc. and Citicorp North America, Inc., as administrative agent and collateral agent (Incorporated by reference to Exhibit 10.25 on Form 10-K filed by ClubCorp Holdings, Inc. on March 21, 2014)

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10.21

 
Amendment No. 5, dated as of April 7, 2014, to the Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.1 on Form 8-K filed by ClubCorp Holdings, Inc. on April 11, 2014)
10.22

 
Amendment No. 6, dated as of September 30, 2014, to the Credit Agreement dated as of November 30, 2010 among CCA Club Operations Holdings, LLC, ClubCorp Club Operations, Inc. as Borrower, Citicorp North America, Inc. as Administrative Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto and Citigroup Global Markets Inc. as Sole Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.1 on Form 8-K filed by ClubCorp Holdings, Inc. on October 3, 2014)
10.23

 
Joinder Agreement, dated as of September 30, 2014, by ClubCorp, Inc., a Delaware corporation (the "Borrower") and the Affiliates of the Borrower from time to time party thereto as Grantors in favor of Citicorp North America, Inc., as administrative agent and collateral agent for the Secured Parties referred to therein (Incorporated by reference to Exhibit 10.2 on Form 8-K filed by ClubCorp Holdings, Inc. on October 3, 2014)
10.24

 
Pledge Agreement, dated as of September 30, 2014, by ClubCorp, Inc., a Delaware corporation (the "Borrower") the undersigned Grantor and the other Affiliates of the Borrower from time to time party thereto as Grantors in favor of Citicorp North America, Inc., as administrative agent and collateral agent for the Secured Parties referred to therein (Incorporated by reference to Exhibit 10.3 on Form 8-K filed by ClubCorp Holdings, Inc. on October 3, 2014)
10.25

 
Equity Purchase Agreement by and among ClubCorp USA, Inc., Sequoia Golf Holdings LLC, Parthenon-Sequoia LTD., Parthenon Investors II, L.P., J&R Founders' Fund II, L.P., PCIP Investors and The Other Members of Sequoia Golf Holdings LLC, dated as of August 13, 2014 (Incorporated by reference to Exhibit 10.5 on Form 10‑Q filed by ClubCorp Holdings, Inc. on October 16, 2014)
10.26

†
2015 Short Term Incentive Plan
10.27

†
Form of Amended Performance Restricted Stock Unit Agreement under ClubCorp Holdings, Inc. 2012 Stock Award Plan (Incorporated by reference to Exhibit 10.2 on Form 8-K filed by ClubCorp Holdings, Inc. on February 6, 2015)
10.28

†
Form of Amended and Restated Performance Restricted Stock Unit Agreement for awards granted on February 7, 2014 under ClubCorp Holdings, Inc. 2012 Stock Award Plan
11

 
Statement of Computation of Per Share Earnings (Included in Part II, Item 8: “Financial Statements” of this annual report on Form 10-K.)
21

 
Subsidiaries of the Registrant
23.1

 
Consent of Deloitte & Touche LLP
31.1

 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
31.2

 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
32.1

 
Certifications of Chief Executive Officer pursuant to 18 U.S.C. §1350*
32.2

 
Certifications of Chief Financial Officer pursuant to 18 U.S.C. §1350*
101

 
The following information from the Company's annual report on Form 10-K for the fiscal year ended December 30, 2014 formatted in eXtensible Business Reporting Language: (i) Consolidated statements of operations and comprehensive loss as of December 30, 2014, December 31, 2013 and December 25, 2012; (ii) Consolidated balance sheets as of December 30, 2014 and December 31, 2013; (iii) Consolidated statements of cash flows as of December 30, 2014, December 31, 2013 and December 25, 2012; (iv) Consolidated statements of changes in equity as of December 30, 2014, December 31, 2013 and December 25, 2012 and (v) Notes to the consolidated financial statements.**
 ______________________________

*
Exhibit is furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

**
In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and is deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

†
Indicates management contract or compensatory plan or arrangement.


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 
 
 
CLUBCORP HOLDINGS, INC.
 
 
 
 
Date:
March 12, 2015
 
/s/ Eric L. Affeldt
 
 
 
Eric L. Affeldt
 
 
 
President, Chief Executive Officer and Director
(Principal Executive Officer)

Date:
March 12, 2015
 
/s/ Curtis D. McClellan
 
 
 
Curtis D. McClellan
 
 
 
Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Date:
March 12, 2015
 
/s/ John A. Beckert
 
 
 
John A. Beckert, Director

Date:
March 12, 2015
 
/s/ Douglas H. Brooks
 
 
 
Douglas H. Brooks, Director

Date:
March 12, 2015
 
/s/ Janet E. Grove
 
 
 
Janet E. Grove, Director

Date:
March 12, 2015
 
/s/ Martin J. Newburger
 
 
 
Martin J. Newburger, Director

Date:
March 12, 2015
 
/s/ Eric C. Resnick
 
 
 
Eric C. Resnick, Director

Date:
March 12, 2015
 
/s/ Michael S. Shannon
 
 
 
Michael S. Shannon, Director

Date:
March 12, 2015
 
/s/ Steven S. Siegel
 
 
 
Steven S. Siegel, Director

Date:
March 12, 2015
 
/s/ William E. Sullivan
 
 
 
William E. Sullivan, Director

Date:
March 12, 2015
 
/s/ Bryan J. Traficanti
 
 
 
Bryan J. Traficanti, Director

131