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ClubCorp Holdings Inc. (NYSE:MYCC)

Q2 2014 Earnings Conference Call

July 23, 2014 5:30 PM ET

Executives

Frank Molina – VP, IR and Treasury

Eric Affeldt – President and CEO

Curt McClellan - CFO

Analysts

Randy Konik – Jefferies

Carlo Santarelli – Deutsche Bank

Steve Kent – Goldman Sachs

Rick Nelson – Stephens

Shaun Kelley – Bank of America Merrill Lynch

Tim Conder – Wells Fargo Securities

Operator

Good afternoon, ladies and gentlemen. Welcome to the ClubCorp Holdings’ Second Quarter Fiscal 2014 Earnings Conference Call. This call is being broadcast live from ClubCorp’s website, and a replay will be available on the ClubCorp website after this call. During today’s presentation, all participants will be in a listen-only mode.

At this time, I will turn the conference call over to Frank Molina, Vice President of Investor Relations and Treasury. Sir, you may begin.

Frank Molina

Thank you, Jamie. Good afternoon, everyone, and welcome to our second quarter earnings call. Joining me on today’s call from ClubCorp are Eric Affeldt, our President and CEO; and Curt McClellan, our CFO. Eric will begin our discussion followed by Curt who will review our second quarter results. Following our prepared remarks, the conference call will be open for question and answer session, during which phase, please limit yourself to one question plus one follow-up.

We will review second quarter fiscal 2014 results highlighted in our earnings release published this afternoon and also contain within Form 10-Q for the second quarter ended June 17, 2014. If you do not have a copy of our earnings release, it can be accessed on our Investor Relations portion of our website at ir.clubcorp.com.

Please note that the second quarter of fiscal 2014 and the second quarter of fiscal 2013 both consisted of 12 weeks. All growth percentages unless otherwise stated refer to year-over-year progress.

I would also like to remind all listeners that ClubCorp Holdings desires to take advantage of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Certain statements in this conference call may be considered forward-looking statements within the meaning of that Act. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For a list of these factors, please refer to the Risk Factors section in our 2013 Form 10-K filed with the SEC.

Finally, our discussion may include certain non-GAAP financial measures. More information regarding our forward-looking statements and reconciliations of non-GAAP financial measures to the most comparable GAAP measures are included in our earnings release, in our SEC filings, and on our Investor Relations website at ir.clubcorp.com.

Now I will turn the call over to Eric.

Eric Affeldt

Thank you, Frank, and welcome everybody again to ClubCorp’s second quarter earnings call. We’re very pleased with our solid performance in the second quarter. Revenue increased 8.1% and adjusted EBITDA increased 8.7% compared to prior year.

Our results this quarter continue to validate our growth strategy and reinforce the value of our membership model. We’re in the midst of our peak season and activity in our golf and country clubs is in full swing. As evidenced, we’ve seen an increase in a la carte covers, private events, member and guest rounds and paid grounds. We’re also seeing an increase in tennis, athletic and spa spending.

Membership sales are strong and continue to pace ahead of last year. The substantial pickup in member activity is no accident. Our clubs are successful because they are multifaceted, multigenerational and appeal to a wide range of members and their guests. Our investment activity has been focused on bringing in a wider range of consumer.

We’ve spent more than $400 million on reinvention and capital improvements since 2007 and when you think about it, most of our capital spend has been non-golf. We’ve invested heavily in fitness, pools, tennis and dining facilities, all in an effort to promote greater utilization of our clubs by the entire family and attract new members.

Our reinventions have done very well and are contributing nicely to our same store growth. Reinvention drives usage and adds to the stickiness of our membership. The same can be said of newly acquired clubs. When evaluating an acquisition, we look for three things; a stable revenue base, population density and affluence around the club.

The other intangible is reinvention. We envision what the club would look like as a reinvented club. Many of our reinvention elements that we put into our same store clubs find their way into newly acquired clubs and become a significant driver of growth for us.

We see this impact on our results as well. Newly acquired clubs contributed nearly half of the year-over-year growth in revenue this quarter. It’s not just the fact that membership and revenue increases at the time of acquisition, but more importantly how much it increases post-acquisition.

For example, membership growth at Oak Tree, Cherry Valley, Chantilly and recently here in Dallas at Prestonwood has already increased more than 40% and over half of this growth has come from new golf members. Recall, we know that golf members tend to use the club on average more than 55 times a year and are most valuable member.

Like the acquisition of a new member at an existing club, a new club acquisition has many growth elements. We see incremental revenue from absorbing the install base, new membership growth, increase in member usage and increase in ancillary spend. Moreover as our portfolio is expanded, members continue to participate in one or more of our upgrade programs including our O.N.E. product.

Approximately 45% of members now enjoy some form of upgrade offer today and we see no reason why this number cannot increase in the future.

Lastly, after we reported our Q1 earnings last year, a retailer with some exposure with the golf space blamed its performance on secular changes in golf overall. While normal supply and demand will affect every industry, I’d like to point out that our business model is and will remain very different.

For starters, our retail business represents less than 5% of our total revenues. And even though it’s a very small component of what we do, it continues to grow slightly each quarter. Second, we are not in the daily fee golf business. Our members do not quit their clubs due to a few days or weekend of increment weather. More importantly, we have over 150,000 memberships that serve over 370,000 members. These memberships represent not just individual members but also families.

We offer so much more than golf. We offer a differentiated leisure product that provides members and their families a place to recreate, socialize, network and just spend time together. These clubs play an integral part in our members’ lives. Again the momentum in the business continues. We’ve had a very strong first half to the year, and we feel confident the second half too such that we are raising guidance for the full year.

We remain focused on the things that make our business model different and the things we can control. Our combined focus on organic growth, reinventions and acquisitions proves we are executing against our strategy and our Q2 results confirm the strategy is working.

I’ll now turn it over to Curt to give you more details on the numbers.

Curt McClellan

Thanks Eric. As Eric mentioned, we are delighted with our strong Q2 results. The second quarter represents a transition into our summer peak season. We are seeing an increase in member usage, and as a result, we experienced an increase in the second quarter in all of our key performance metrics, including membership dues, a la carte and private events, food and beverage revenue and golf operations revenue.

Underpinning these results is our three-pronged strategy focused on organic growth, reinvention and acquisitions. Reinventions and acquisitions increase the intrinsic value of our assets and adds to our network offerings. Reinventions are significant part of our growth strategy and contribute positively to revenue growth and profitability.

New amenities at reinvented clubs add to the quality, atmosphere and attractiveness of our clubs. These investments represent positive changes that resonate with both existing and perspective members. This year, we completed seven reinvention projects including reinvention elements at two newly acquired properties.

Since 2007, we have now reinvented 22 golf and country clubs and 17 business, sports and alumni clubs for a total of 39 reinvented clubs. Reinvention is still under way at three same store golf and country clubs and three business, sports and alumni clubs.

Now for the second quarter results. Consolidated revenue was $211.4 million, an increase of $15.8 million, up 8.1%. Same store club revenue was up $7.9 million or 4.1% due to increases from all three major revenue streams; dues, food and beverage and golf operations.

Additionally, revenue from newly acquired clubs was $8.3 million. As a remainder, newly acquired clubs include clubs acquired in fiscal years 2013 or 2014. Adjusted EBITDA was $49.9 million, up $4 million or 8.7% with $1 million of the increase attributable to newly acquired clubs.

Total membership as of June 17, 2014, were 151,758, an increase of 4,371, up 3% of our memberships at June 11, 2013. Same store golf and country club memberships increased 1.1%, while total golf and country club memberships including newly acquired clubs increased 5.2%. Same store business, sports and alumni club memberships decreased 0.1%.

Club reinventions and our O.N.E. product continue to drive member usage and grow revenue. In fact membership penetration of upgrade products has steadily increased and is now approximately 45% at the end of Q2, up from 41% a year ago.

Taking a quick look at our capital structure. At the end of the second quarter, we had $78.9 million in cash and cash equivalents, and total liquidity of $190.2 million. And the company was compliant with all of its debt covenants.

Cash flow from operations was $21.4 million and we paid $7.7 million in dividends. Additionally, free cash flow over the last four quarters was $87.6 million, up from $72.4 million a year ago.

Turning to segment results. First in our golf and country club segment, total revenue was $167.3 million, an increase of $15.2 million or 10%. Same store golf and country club revenue grew $6.8 million to $158.5 million, up 4.5%. Same store dues revenue increased $3 million to $67.8 million, up 4.6% due to higher base dues rates and increase in same store membership counts and nearly a 14% increase in upgrade revenues.

Same store food and beverage revenue grew $3.1 million to $39.8 million, up 8.3%, largely due to an increase in a la carte revenue that was up 12% and bolstered by a nearly 15% increase in a la carte check average. Private event revenue also increased 4%. Same store golf operations revenue increased $0.9 million to $39.4 million, up 2.4% compared to prior year, largely due to an increase in member and guest rounds. Both cart rentals and retail revenue increased more than 3%.

Adjusted EBITDA for same store golf and country clubs was $48.7 million, an increase of $2.1 million or 4.4%. The growth in second quarter same store adjusted EBITDA was primarily due to increased revenue from dues and food and beverage revenue. While same store adjusted EBITDA margins were flat compared to prior year, total golf and country club adjusted EBITDA margins saw a 90 basis points due to mix from newly acquired clubs.

Turning to our business, sports and alumni club segment. Second quarter same store revenue totaled $42.7 million, an increase of $1 million, up 2.4% due mainly to an increase in food and beverage revenue. Same store food and beverage revenue increased $0.8 million to $22.2 million, up 4%, largely due to an increase in private event spend.

Same store dues revenue increased by $0.2 million to $17.8 million, up 1.2% due to an increase in average dues per membership. Adjusted EBITDA for business, sports and alumni clubs was $8.2 million, a decrease of $0.2 million or decline of 2.4% due to an increase in food and beverage cost of sales and increased variable payroll expense.

Finally, corporate and other adjusted EBITDA increased $1.1 million versus the prior year, due to timing of a $1.8 million higher cash distribution from our purchasing co-op Avendra, offset by an increase in incentive compensation and other payroll expenses.

Turning to our outlook. The consistent quality and revenue and earnings through the second quarter give us confidence to raise the bottom end of our full year guidance. Accordingly, we expect to generate revenue in the range of $845 million to $860 million, and adjusted EBITDA in the range of $184 million to $190 million.

As a remainder, our guidance estimates are based on current management expectations and maybe subject to change. Please refer to our forward-looking statements cautionary language in the earnings release and Risk Factors section of our 10-K.

In closing, I would like to reaffirm how pleased we are with our second quarter results. We look forward to delivering our strategic and financial objectives through the balance of the year.

That concludes our prepared remarks. We’ll now open the line for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions) And our first question comes from Randy Konik from Jefferies. Please go ahead with your question.

Randy Konik – Jefferies

Hi. Can you hear me?

Eric Affeldt

Yes, we can Randy.

Randy Konik – Jefferies

All right, great guys. So I guess a couple of questions. With regards to the EBITDA contribution from new clubs, do you expect that to ramp-up over time? Are you gaining any efficiencies as you’re accelerating club acquisitions over time. Just curious if you think the ramp rate will improve as we go forward here. And then, secondly, from a free cash flow perspective, how – you had nice growth year-over-year in the last four quarters of free cash flow, how should we be thinking about the free cash flow picture ahead of a multiyear timeframe? And then I guess lastly, any real update on REIT status? I was curious about that – curious on your thoughts there. Thanks.

Eric Affeldt

Randy as always thanks for the questions. I am going to let Curt talk to the free cash flow question, but relative to ramp rates for acquisitions, as we’ve said many times, we tend to buy clubs that in many respects have been undercapitalized in some cases under managed and it takes a little while for them to turn around.

I believe the press release did have information that talked about our revenues from acquired clubs coming in at about $8.3 million and adjusted EBITDA of $1 million, which would be about 13% margin. Obviously that’s significantly below the 29% – almost 29% that the golf and country club division does.

So the direct answer is yes. These clubs are accelerating, but we don’t buy them in day one, do they do 29%. So in some cases, they are coming from negative EBITDA and in some cases they are flat. And yes, they are accelerating, and I would expect as the quarters progress that the newly acquired clubs margin will continue to increase as well.

I’ll give it back to Curt to talk about the free cash flow, and then I’ll come back and talk about the REIT.

Curt McClellan

Sure, thanks Eric. On the free cash flow as you can see, we had $92 million in free cash flow for the – on an LTM basis, and about $79 million last year. So that’s an improvement there. We are not providing guidance around free cash flow. We would look at the drivers there primarily being adjusted EBITDA. As you know that’s a key part of our free cash flow calculation. And then our recent recapitalization on an annualized basis is going to take us $13 million in interest expense. So that too will benefit free cash flow as we move forward.

Eric Affeldt

Randy, back to the REIT question. And short and sweet, and it’s going to be a broken record here. The board and management continue to look at our options surrounding REIT alternatives. As we’ve discussed previously, there is fairly complicated structural issues relative to a particular type of REIT we could look at. So at this point we really have nothing definitive to report and certainly we’ll keep you and the rest of the investment community apprised if that changes.

Randy Konik – Jefferies

Great. Thanks guys.

Eric Affeldt

Thanks Randy.

Operator

Our next question comes from Carlo Santarelli from Deutsche Bank. Please go ahead with your question.

Carlo Santarelli – Deutsche Bank

Hi guys, good afternoon. Just a quick question on margins and how maybe we should think about go forward potential cost pressures or spots within the, specifically the golf and country club business, where you think you might be able to do a little bit more on a same store basis excluding the acquisitions, but you think you might be able to do a little bit more or a little bit better flow through from kind of net revenue growth?

Curt McClellan

Sure. I’ll take that and let Eric add in if he’d like. As you look at the golf and country club division, margins on a same store basis for the quarter were flat. Keep in mind that we did have some pressure this quarter on utility and water costs, so that definitely impacted us, but we were very pleased to maintain that flat margin. As you know, we’ve projected and that business typically runs between 28% to 30% margins in the golf and country club division, and that’s where we believe it’s going to continue to run.

On a year-to-date basis, I would call out, we did have slight improvements still up year-to-date given the benefits we had in the first quarter, we’re 60 basis points up at 29.9% margin for the division for the year-to-date. If you look at – sorry go ahead.

Carlo Santarelli – Deutsche Bank

Well my question was just getting back to the comment you made about water. And I guess it’s obviously that your agronomy is a big cause. So a lot of people think about weather and rain is having a negative impact on your business, but is it also thought about as being favorable for cost as you need to water less, and obviously your rounds played won’t matter as much because you’re still getting your dues revenue?

Curt McClellan

I think simplistically that is accurate, Carlo. We actually had a very rare – very heavy rain out here in Dallas about a week ago with much cooler temperatures which clearly helps replenish reservoirs. So again I can’t say that we wanted to rain all the time because we love the ancillary revenues on a nice sunny day, but clearly it does help when we do get precipitation that will lower utility cost. Also we’ve been very proactive over the last several years in taking out irrigated areas in clubs, and in fact as you may be aware, many municipalities are actually rewarding companies, in particular golf courses, for taking irrigated areas and turning them into native vegetation which of course reduces the amount of water that it takes to irrigate the golf course.

Carlo Santarelli – Deutsche Bank

Great. Thanks guys. That’s all from me.

Eric Affeldt

Thanks Carlo.

Operator

Our next question comes from Steve Kent from Goldman Sachs. Please go ahead with your question.

Steve Kent – Goldman Sachs

Yes, hi. I have two questions. First, at one point you thought that you’d be able to hit 3% dues increases, and as you’re coming in a little bit lighter than that, and I was just wondering if that – it’s hard to hit but there is a mixed issue there, if you could address that? And then the second question is more on the O.N.E. program where you’ve shown a very significant increase in that program, and it’s a win-win for everybody on it. Where do you think – in fact if 47% can go to by year-end and then to the next 12 months, I’m not sure if you’ve actually played that out?

Eric Affeldt

Yes, Steve in answer to your second question, obviously we’re thrilled with the performance of the O.N.E. product. As you’ll recall going back to our initial public offering and when the program was actually launched prior to calling it O.N.E., I think we were in the low 30s in terms of penetration rate. So the fact that we’re up to 44%, 45% now is clearly indicative of both the appeal of the program and our ability to expand it.

I really don’t have forecast for you to say by year-end we expect to be at 48% or 49% or whatever the percentage would be, but as I’ve said many times, it’s very logical to assume that number will increase as you see normal attrition and people leaving the clubs generally are not using the upgraded program. And we’ve also said many times that since O.N.E in particular is now created, or excuse me presented as the standard membership package, we’re seeing acceptance rates of particularly golf members and well in excess of 75% of new people coming into the club taking the O.N.E. program. So logically that 45% number is going to increase. I just can’t tell you how rapidly.

Curt McClellan

On the dues front Steve, as you look at golf and country club, the golf and country club division in particular on a same store basis, we grew 4.6% in dues, so definitely outpacing inflation. There were three primary drivers to that. Obviously rate increase and membership and then the increased participation in the O.N.E. program also help to drive the dues increase. So we have taken dues increases already for 2014. Those were done really in Q1. And so are in effect now as we go across the balance of the year.

Steve Kent – Goldman Sachs

Okay. Thank you.

Operator

Our next question comes from Rick Nelson from Stephens. Please go ahead with your question.

Rick Nelson – Stephens

Thanks, a nice quarter. I’d like to ask you about the acquisition pipeline, and I noticed Troon Golf changed hands this quarter. If you could comment there and are you seeing any increased competition on the acquisition?

Eric Affeldt

Yes. So there has been an announcement regarding Troon in a – I don’t think it’s closed yet, but they did announce that they have at least a preliminary agreement with a couple of different investment groups. We were aware of that process, and we’ve said many times that frankly it’s logical that some of the other multi-course owners and operators could change hands since basically they are all owned by private equity firms.

We’ve seen continued increase in our acquisition pipeline in terms of the one-off deals. And so notwithstanding the fact that we haven’t done a deal here in a few months, I would expect to see us continue to grow for the balance of the year through acquisitions. But as we’ve said before, it’s kind of difficult, in fact it’s near impossible to predict exactly when that’s going to happen because as you guys know there is a lot of circumstances that go into completing a transaction.

Rick Nelson – Stephens

Are the valuations are changing here, Eric, as the environment improves?

Eric Affeldt

I would say on balance they probably are increasing a bit overall. And with that said, I’d also reiterate that the majority of the deals that we do in fact which is not all the deals that we do would be considered off-market. So they are not things that are being brokered, and therefore we deliberately try to approach owners before their sellers, and frankly that has allowed us to buy clubs what I think are quite attractive purchase prices as evidenced by the two TPC facilities that we bought recently, both of which again I’ve mentioned – I think were built, it’s safe to assume in excess of $20 million a copy and we acquired both of them for under $4 million if I am not mistaken.

Rick Nelson – Stephens

Very good. Thanks a lot and good luck.

Operator

Our next question comes from Shaun Kelley from Bank of America. Please go ahead with your question.

Shaun Kelley – Bank of America Merrill Lynch

Hi. Good afternoon guys. I just wanted to return to, I guess the question about margins. And I guess to look at it a little differently. It looks like on the SG&A line this quarter, your overall SG&A was up about almost 50%, and then if we look at last quarter, it was only up about 16%. So trying to get a sense, obviously a piece of that given the timing of some of the deals that were announced at the end of last quarter but trying to get a sense of how much of the dollar increase came from acquisitions when we look at it on kind of a run rate basis?

Curt McClellan

Yes. Now are you talking specifically about the SG&A line item on the P&L?

Shaun Kelley – Bank of America Merrill Lynch

Yes. Well, again just margins overall, Curt. I think basically I’m just trying to ask like how much of that – was the entire story here just increased expenses related to acquisitions or is there anything else going on in the core business, because it seems a big acceleration?

Curt McClellan

Yes, the big increase that you’re seeing there is primarily driven off of the refinance. We had about $3 million charge related to the refinancing of taking out the bonds that was done in the second quarter, as well as the secondary offering. So that was a primary driver there. In addition, you do have some things that I would consider more recurring in nature, and that would be items related to increased payroll related to be in a public company we brought on various heads if you will, investor relations and things of that nature.

So you’re seeing some increase there, but the bulk of that, the $2.9 million or $3 million that I mentioned related specifically to the taking out of the bonds was the primary driver of the $5 million increase that you see. We also had some acquisition costs in there as well, and those costs continue to be incurred as we pursue acquisitions.

Shaun Kelley – Bank of America Merrill Lynch

Great. And then just kind of going back to the overall kind of divisional margin question. Do you think you should be able to get a little bit of margin leverage given, let’s call it 4% to 5% revenue growth type rate right now, or do you think you need to be a little bit higher than that based on what you guys are seeing in kind of overall cost inflation, be it water, utilities, property taxes or labor?

Eric Affeldt

I’ll take a swing at that Shaun. I think we’ve commented during the IPO process and afterward that not all trees grow to the sky or trees don’t grow to the sky, let me say that. And our clubs at some point basically reach a point of stabilization. And as an example, we have clubs in our golf and country club division that do 50% operating margins. Those are a very, very few and far between and it’s due to the nature of the particular revenue mix at a club. We have clubs that do 15% to 20%. And as I mentioned a moment ago with our acquisition clubs, currently running about 13%.

So there is always going to be a case where a club basically reaches a maturity, and it’s not likely to increase dramatically because you’ve maximized the number of members at a club. You can’t put another 100 bodies into a club. So our margins are not likely to increase to go from, as an example the golf and country club division. I would not anticipate and we never have anticipated gross margins going from 28%, 29% to 34% or 35%. The only way that impact, I don’t know that it could happen sort of having too many numbers which of course then would probably lead to higher attrition and leaving right back where we are today.

So I think our margins tend to be pretty stable. And again the other contributing factor would be continued increases in our upgrade membership product. That could put some upward momentum on margins, but otherwise it’s a pretty stable model.

Shaun Kelley – Bank of America Merrill Lynch

Got it. Thanks Eric. I think that’s really clear. I guess just one last thing would simply be, as we’re thinking about the acquisition ramp-up from here, is there any difference in seasonality on the acquired clubs or as we’re looking at, I guess about $8 million revenue contribution, should that generally be in line with the seasonality that you guys are getting from, I guess the rest of your golf and country division?

Eric Affeldt

Yes. It will generally be in line. Again our two largest quarters from a revenue standpoint are two and four. And in four, that’s really driven my private event because that tends to be our largest private event period of the year.

Curt McClellan

And the incremental four weeks.

Eric Affeldt

And the incremental four weeks that we. I should have said that.

Shaun Kelley – Bank of America Merrill Lynch

Excellent. Great. Thank you guys.

Eric Affeldt

Thanks Shaun.

Operator

(Operator Instructions) Our next question is from Tim Conder from Wells Fargo Securities. Please go ahead with your question.

Tim Conder – Wells Fargo Securities

Thank you. Regarding the O.N.E. membership, did you have any changes or tweaking of that during the quarter? And then was it – can you kind of give the percentage, whether it was golf or the sports clubs side that you saw the greatest growth or conversion into that, or if you were tilting it a little bit more towards the sports clubs side?

Eric Affeldt

Tim, good question. I am looking at Curt, I don’t know if we have where we published those percentages on O.N.E. acceptance rates by division. I can’t tell you that in the quarter we began testing some new wrinkles in our O.N.E. product, particularly in the business club division where as you know, we really don’t – or haven’t had a O.N.E. program there. It’s been principally related to the golf and country club division.

So we’ve been running some tests, but it’s not material. So again I think – we don’t publish the information by division. We continue to see and I think we’re in O.N.E. now in Curt in 80 business or 80 golf clubs. Is that correct?

Curt McClellan

That’s right.

Eric Affeldt

We continue to see just excellent response again from new members coming in and taking the program, but there has been no material change to the overall product offering.

Curt McClellan

I would just add there that what we tend to see, Tim, is that we’re continuing the momentum that we’ve seen. We’ve grown almost a 1% in each of the last three quarters in that area or in our penetration rate overall. And as new members come on especially in the golf and country club division and join clubs with the O.N.E product, a larger percentage of those members continue to take the product. So I think the bulk of what you’re seeing here and the benefit is coming from that.

Tim Conder – Wells Fargo Securities

And gentlemen, if you take that wrinkle and look at that from a O.N.E. side into the business and sports side. Would that be – would you put that in a bucket of being some of those opportunistic things that could help, maybe do you see operating results a little bit more from the business and sports clubs segment?

Eric Affeldt

Yes, I think so. Obviously, Tim, the whole premise behind the O.N.E. product and for those now familiar with it, we added at least in the golf and country club division in addition to traveling benefits we added 50% off your home club food which is obviously proven quite popular. It’s difficult to do that in the business club division, because the primary product there is food, not tennis, swimming, golf etcetera.

But with that said, the whole premise behind O.N.E. is to add value to membership thus encouraging people to pay more dues. So that’s why we continue to test is how can we add more value at the business club division and whether that’s some break up of food or whether that’s some other wrinkle, I am not sure. Over time, I would imagine we would continue to tinker with O.N.E. and perhaps offer discounts off of golf car rentals as an example might be a possibility.

There is a whole host of things that we could potentially throw into the ON.E. bucket to keep it fresh.

Tim Conder – Wells Fargo Securities

Okay. And then lastly gentlemen, Eric, you gave a little bit of as much as you could update on the REIT structure. Maybe I’ll ask in a little bit different way. At this point, would there be somewhat of a timetable, timeframe where we could expect to hear something on the options that look more palatable? Are we talking here in the next three months, by the end of the year type of thing, or any type of additional color you can add there sir?

Eric Affeldt

I don’t want to speak for my board. I would say that I personally would anticipate that by year-end, we’ll have better definition about what structure if any we’re leaning toward, but again that my board drives that.

Tim Conder – Wells Fargo Securities

Okay. Thank you.

Operator

And ladies and gentlemen, I’m showing no additional questions. I would like to turn the conference call back over to Mr. Eric Affeldt for any closing remarks.

Eric Affeldt

Yes, I just want to say thanks everybody for again your support for the questions. We continue to be pleased as I said earlier and as Curt said with our progress through the first half of the year. We remain optimistic. As Curt has said, we’ve raised the bottom end of our revenue guidance for the balance of the year.

And lastly I’d encourage everyone to tune in a week from tomorrow to the World Golf Championships-Bridgestone Invitational, which would be held at one of flagship properties, Firestone Golf and Country Club in Akron, Ohio. So it’s a great opportunity to actually see one of our premier clubs in action and again that starts a week from tomorrow.

Operator

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines.

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Source: ClubCorp Holdings' (MYCC) CEO Eric Affeldt on Q2 2014 Results - Earnings Call Transcript
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