<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission file number 1-12246
NATIONAL GOLF PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-4549193
(State of incorporation) (I.R.S. Employer
Identification No.)
2951 28th Street, Suite 3001, Santa Monica, CA 90405
(Address of principal executive offices) (Zip Code)
(310) 664-4100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
12,498,395 shares of common stock, $.01 par value, as of April 22, 1998
Page 1 of 9
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------------- ---------------------
<S> <C> <C>
ASSETS
Property:
Land $ 72,461 $ 72,339
Buildings 181,568 181,571
Ground improvements 301,814 301,814
Furniture, fixtures and equipment 35,597 35,589
Construction in progress 15,029 10,569
--------- --------
606,469 601,882
Less: accumulated depreciation (101,237) (94,872)
--------- --------
Net property 505,232 507,010
Cash and cash equivalents - 1,698
Investments 1,206 1,215
Mortgage note receivable 2,200 2,200
Investment in joint venture 7,895 8,004
Due from affiliate 4,728 4,524
Other assets, net 12,048 10,663
--------- --------
Total assets $ 533,309 $535,314
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes Payable $ 235,079 $299,032
Accounts payable and other liabilities 10,510 5,385
--------- --------
Total liabilities 245,589 304,417
--------- --------
Minority interest 153,690 96,007
--------- --------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized - none issued - -
Common stock, $.01 par value, 40,000,000
shares authorized, 12,478,395 and
12,408,195 shares issued and outstanding at
March 31, 1998 and December 31, 1997,
respectively 125 124
Additional paid in capital 139,367 139,222
Accumulated deficit (1,360) (1,360)
Unamortized restricted stock compensation (4,102) (3,096)
--------- --------
Total stockholders' equity 134,030 134,890
--------- --------
Total liabilities and
stockholders' equity $ 533,309 $535,314
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
------------------- -------------------
<S> <C> <C>
Revenues:
Rent from affiliates $18,986 $16,676
Rent 823 773
Equity in income from joint venture 89 -
------- -------
Total revenues 19,898 17,449
------- -------
Expenses:
General and administrative 1,390 1,214
Depreciation and amortization 6,582 5,918
------- -------
Total expenses 7,972 7,132
------- -------
Operating income 11,926 10,317
Other income (expense):
Interest income 102 95
Other income 345 68
Interest expense (5,393) (4,572)
------- -------
Income before provision for taxes and
minority interest 6,980 5,908
Provision for taxes (58) (54)
------- -------
Income before minority interest 6,922 5,854
Income applicable to minority interest (3,211) (2,576)
------- -------
Net income $ 3,711 $ 3,278
======= =======
Basic earnings per share $ 0.30 $ 0.27
Weighted average number of shares 12,458 12,345
Diluted earnings per share $ 0.29 $ 0.26
Weighted average number of shares 12,586 12,514
Distribution declared per common share
outstanding $ 0.43 $ 0.42
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,711 $ 3,278
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,582 5,918
Amortization of restricted stock 509 398
Minority interest in earnings 3,211 2,576
Distributions from joint venture, net
of equity in income 106 -
Other adjustments - 36
Changes in assets and liabilities:
Other assets (1,607) 3,654
Accounts payable and other
liabilities 4,666 2,949
Due from/to affiliate (209) (237)
-------- --------
Net cash provided by
operating activities 16,969 18,572
-------- --------
Cash flows from investing activities:
Purchase of available-for-sale
securities (1,814) (5)
Proceeds from sale of available-for-
sale securities 1,827 3
Investment in joint venture 2 -
Proceeds from short-term investment 215 -
Proceeds from mortgage loans - 77
Purchase of property and related assets (4,581) (16,303)
-------- --------
Net cash used by investing
activities (4,351) (16,228)
-------- --------
Cash flows from financing activities:
Principal payments on notes payable (71,074) (15,069)
Proceeds from notes payable 7,000 12,800
Proceeds from Preferred Units, net of
offering expenses 58,492 -
Proceeds from stock options exercised 412 216
Cash distributions (5,365) (5,192)
Limited partners' cash distributions (3,781) (3,692)
-------- --------
Net cash used by financing
activities (14,316) (10,937)
-------- --------
Net decrease in cash (1,698) (8,593)
Cash and cash equivalents at beginning of
period 1,698 11,224
-------- --------
Cash and cash equivalents at end of period $ - $ 2,631
======== ========
Supplemental cash flow information:
Interest paid $ 2,499 $ 958
Taxes paid 42 139
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NATIONAL GOLF PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
National Golf Properties, Inc. (the "Company") owns substantially all of
the golf courses through its general partner interest in National Golf
Operating Partnership, L.P. (the "Operating Partnership"), pursuant to its
58.5% ownership of the common units of partnership interest in the
Operating Partnership ("Common Units"). The Operating Partnership has an
89% general partner interest in Royal Golf, L.P. II ("Royal Golf"). Unless
the context otherwise requires, all references to the Company's business
and properties include the business and properties of the Operating
Partnership and Royal Golf.
The consolidated financial statements include the accounts of the Company,
the Operating Partnership and Royal Golf. All significant intercompany
transactions and balances have been eliminated.
The accompanying consolidated financial statements for the three months
ended March 31, 1998 and 1997 have been prepared in accordance with
generally accepted accounting principles ("GAAP") and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. These financial statements
have not been audited by independent public accountants, but include all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
condition, results of operations and cash flows for such periods. However,
these results are not necessarily indicative of results for any other
interim period or for the full year. The accompanying consolidated balance
sheet as of December 31, 1997 has been derived from the audited financial
statements, but does not include all disclosures required by GAAP.
Certain information and footnote disclosures normally included in financial
statements in accordance with GAAP have been omitted pursuant to
requirements of the Securities and Exchange Commission. Management
believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997.
The computation of diluted earnings per share is based on the weighted
average number of outstanding common shares during the period and the
incremental shares, using the treasury stock method, from stock options.
The incremental shares for the three months ended March 31, 1998 and 1997
were 128,017 and 168,514, respectively.
In March 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board issued Issue No. 97-11, "Accounting for Internal Costs
Relating to Real Estate Property Acquisitions." This statement provides
that internal acquisition costs of identifying and acquiring operating
properties should be expensed as incurred. Prior to
5
<PAGE>
this statement, the only internal acquisition costs capitalized by the
Company were acquisition bonuses. This statement applies to all internal
acquisition costs effective March 19, 1998. There is no material impact
anticipated by the adoption of this statement to the Company's earnings
per share, financial condition, or results of operations.
The accompanying consolidated balance sheets have been restated to reflect
an accounting allocation for reporting purposes from additional paid in
capital to minority interest for the limited partners' interest in the net
assets of the Company after giving effect to their exchange rights of
Common Units into the Company's common stock. While the limited partners
have not indicated such a desire to convert their Common Units, GAAP
requires the reporting of such exchange rights "as if converted." This
reallocation had no effect on earnings per share or results of operations
or allocations of net income to the general and limited partners of the
Operating Partnership. The reallocation at March 31, 1998 and December 31,
1997 was approximately $78.3 million and $78.1 million, respectively.
(2) Preferred Units
---------------
On March 4, 1998, the Operating Partnership completed the private placement
of 1,200,000 8% Series A Cumulative Redeemable Preferred Units ("Preferred
Units"), representing a limited partnership interest in the Operating
Partnership, to an institutional investor for a contribution to the
Operating Partnership of $60 million. The Preferred Units, which may be
called by the Operating Partnership at par on or after March 4, 2003, have
no stated maturity or mandatory redemption and pay a cumulative, quarterly
dividend at an annualized rate of 8%. The Preferred Units are not
convertible into common stock of the Company. The Operating Partnership
used $58 million of the approximately $58.5 million of net proceeds from
such private placement to reduce outstanding indebtedness under the
Operating Partnership's revolving credit facility.
(3) Lease Rental Agreements
-----------------------
The minimum rent for the first year for each golf course under the leases
is initially set at a fixed amount. Thereafter, with respect to the leases
for the initial portfolio of golf courses at the time of the completion of
the Company's initial public stock offering on August 18, 1993 (the
"Offering"), minimum rent will be increased each year by 4% or, if lower,
150% of the annual percentage increase in the Consumer Price Index ("CPI")
(the "Base Rent Escalation"). For these leases, percentage rent will be
paid to the Company each year in the amount, if any, by which the sum of
35% of course revenue in excess of a baseline amount plus 5% of other
revenue in excess of a baseline amount exceeds the cumulative Base Rent
Escalation since the commencement date of such leases. Generally, for the
leases entered into subsequent to the Offering, the rent is based upon the
greater of (a) the minimum base rent or (b) a specified percentage of
course revenue and other revenue. The minimum base rent under these leases
will be increased for specified years during the lease term based upon
increases in the CPI, provided that each such annual CPI increase shall not
exceed five percent. On an interim basis, percentage rent is recognized
taking into consideration the seasonality of the golf courses. Such
percentage rent income for the three months ended March 31, 1998 and 1997
was approximately $1,224,000 and $1,164,000, respectively.
(4) Statement of Cash Flows - Supplemental Disclosures
--------------------------------------------------
Non-cash transactions for the three months ended March 31, 1997 include
approximately $1.1 million in capital improvements accrued but not paid.
6
<PAGE>
(5) Other Data
----------
AGC is the lessee of all but five of the golf course properties in the
Company's portfolio at March 31, 1998. David G. Price, the Chairman of the
Board of Directors of the Company, owns approximately 5.4% of the Company's
outstanding common stock and approximately 38.4% of the Common Units of the
Operating Partnership and a controlling interest in AGC. AGC is a golf
course management company that operates a diverse portfolio of golf courses
for a variety of golf course owners including municipalities, counties and
others. AGC does not own any golf courses, but rather manages and operates
golf courses either as a lessee under leases, generally triple net, or
pursuant to management agreements. AGC derives revenues from the operation
of golf courses principally through receipt of green fees, membership
initiation fees, membership dues, golf cart rentals, driving range charges
and sales of food, beverages and merchandise.
The following table sets forth certain condensed unaudited financial
information concerning AGC:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------- -------------------
(In thousands)
<S> <C> <C>
Current assets $ 72,673 $ 79,692
Non-current assets 147,670 147,423
-------- --------
Total assets $220,343 $227,115
======== ========
Current liabilities $ 58,881 $ 59,670
Long-term liabilities 107,929 97,766
Minority interest 286 501
Shareholders' equity 53,247 69,178
-------- --------
Total liabilities and shareholders' equity $220,343 $227,115
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the three months ended
March 31,
------------------------------------------------
1998 1997
--------------------- ------------------
(In thousands)
<S> <C> <C>
Total revenues $107,970 $103,407
======== ========
Net income (loss) $ (4,030) $ 1,560
======== ========
</TABLE>
Total revenues from golf course operations and management agreements for
AGC increased by $4.6 million, or 4.4%, to $108 million for the three
months ended March 31, 1998 compared to $103.4 million for the three months
ended March 31, 1997. The increase in revenues was primarily attributable
to the addition of seven leased courses and three management courses.
7
<PAGE>
Net income decreased by $5.6 million to a net loss of $4 million for the
three months ended March 31, 1998 compared to net income of $1.6 million
for the corresponding three months of 1997. The decrease in net income was
primarily due to the reduction in same course revenue from the adverse
weather caused by El Nino in the sun belt states, where AGC has more mature
properties with higher operating margins. In addition, while the new
acquisitions contributed favorably to revenue, such properties historically
operate at lower margins in the first year of operation.
(6) Subsequent Events
-----------------
On April 6, 1998, the Board of Directors declared a distribution of $0.43
per share for the quarter ended March 31, 1998 to stockholders of record on
April 30, 1998, which distribution will be paid on May 15, 1998.
On April 13, 1998, the Company purchased Ivy Hills Country Club located in
Cincinnati, Ohio for approximately $1.7 million.
On April 20, 1998, the Operating Partnership completed the private
placement of an additional 300,000 Preferred Units to an institutional
investor (who on March 4, 1998 contributed $60 million to the Operating
Partnership for 1,200,000 Preferred Units) for a contribution to the
Operating Partnership of $15 million. The Operating Partnership used $14.5
million of the approximately $14.6 million of net proceeds from such
private placement to reduce outstanding indebtedness under the Operating
Partnership's revolving credit facility.
8
<PAGE>
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.
National Golf Properties, Inc.
Date: September 1, 1998 By: /s/ William C. Regan
--------------------
William C. Regan
Vice President - Controller
and Treasurer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
GOLF PROPERTIES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1998 SEP-30-1997 SEP-30-1996
<CASH> 0 3,004 9,775
<SECURITIES> 1,206 305 481
<RECEIVABLES> 6,928 4,072 3,593
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 5,934 5,181 10,866
<PP&E> 606,469 563,484 499,064
<DEPRECIATION> 101,237 88,716 71,243
<TOTAL-ASSETS> 533,309 498,980 450,999
<CURRENT-LIABILITIES> 10,510 7,266 5,343
<BONDS> 235,079 260,238 207,329
0 0 0
0 0 0
<COMMON> 125 124 123
<OTHER-SE> 133,905 135,012 138,774
<TOTAL-LIABILITY-AND-EQUITY> 533,309 498,980 450,999
<SALES> 0 0 0
<TOTAL-REVENUES> 19,898 55,515 42,992
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 7,972 22,225 17,128
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,393 14,241 9,973
<INCOME-PRETAX> 6,980 19,836 18,053
<INCOME-TAX> 58 165 203
<INCOME-CONTINUING> 6,922 19,671 17,850
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 3,711 11,117 9,774
<EPS-PRIMARY> .30 .90 .89
<EPS-DILUTED> .29 .89 .88
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
GOLF PROPERTIES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 JUN-30-1997 JUN-30-1996
<CASH> 2,631 7,518 6,430
<SECURITIES> 288 290 159
<RECEIVABLES> 2,861 2,696 30,397
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 2,919 8,304 8,625
<PP&E> 531,944 545,527 387,936
<DEPRECIATION> 78,685 84,315 66,345
<TOTAL-ASSETS> 467,687 480,414 370,952
<CURRENT-LIABILITIES> 6,161 7,639 3,529
<BONDS> 227,728 239,832 170,099
0 0 0
0 0 0
<COMMON> 123 124 107
<OTHER-SE> 136,181 135,751 108,441
<TOTAL-LIABILITY-AND-EQUITY> 467,687 480,414 370,952
<SALES> 0 0 0
<TOTAL-REVENUES> 17,449 36,180 26,958
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 7,132 14,384 10,912
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 4,572 9,263 6,073
<INCOME-PRETAX> 5,908 13,188 11,935
<INCOME-TAX> 54 113 111
<INCOME-CONTINUING> 5,854 13,075 11,824
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 3,278 7,365 6,373
<EPS-PRIMARY> .27 .60 .60
<EPS-DILUTED> .26 .59 .59
</TABLE>
