<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 31, 1999
Commission File Number 1-12246
----------------
NATIONAL GOLF PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Maryland 95-4549193
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
</TABLE>
2951 28th Street, Suite 3001 Santa Monica, California 90405
(Address of principal executive offices) (Zip Code)
(310) 664-4100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Form 8-K/A, Amendment No. 1, is being filed for the purpose of filing
the financial statements and pro forma financial information required by Item
7 with respect to the Current Report on Form 8-K filed by National Golf
Properties, Inc. (the "Company") on April 15, 1999 regarding its subsidiary,
National Golf Operating Partnership, L.P. ("NGOP"), which purchased fee
interests in 15 golf courses and long-term leasehold interests in five golf
courses and made a participating mortgage loan secured by an additional golf
course (collectively, the "Acquired Cobblestone Courses"). However, the
parties to such transactions are still finalizing adjustments to the purchase
price.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired--Cobblestone Golf
<TABLE>
<S> <C>
Report of Independent Accountants.................................... F-1
Combining Consolidated Balance Sheets as of March 29, 1999........... F-2
Combining Consolidated Statements of Operations for the period May
29, 1998 to March 29, 1999.......................................... F-3
Combining Consolidated Statements of Division Equity................. F-4
Combining Consolidated Statements of Cash Flows...................... F-5
Notes to Combining Consolidated Financial Statements................. F-6
(b) Pro Forma Financial Information
Combined Condensed Statement of Operations for the quarter ended
March 31, 1999 and the year ended December 31, 1998................. F-15
Combined Condensed Balance Sheet as of March 31, 1999................ F-16
</TABLE>
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
23.1 Consent of Independent Accountants
</TABLE>
2
<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 hereunto duly authorized.
NATIONAL GOLF PROPERTIES, INC.
/s/ William C. Regan
Date: June 14, 1999 By: _________________________________
William C. Regan
Vice President--Controller and
Treasurer
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Meditrust Corporation and
Meditrust Operating Company:
In our opinion, the accompanying combining consolidated balance sheets, and
the related combining consolidated statements of operations, division equity
and of cash flows present fairly, in all material respects, the combining
consolidated financial position of Cobblestone Golf and its operating
divisions, as defined in Note 1, as of March 29, 1999, and the results of
their operations and their cash flows for the period beginning May 29, 1998
and ending March 29, 1999 in conformity with generally accepted accounting
principles. These combining consolidated financial statements are the
responsibility of the Meditrust Companies' management; our responsibility is
to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Las Vegas, Nevada
May 7, 1999
F-1
<PAGE>
COBBLESTONE GOLF
COMBINING CONSOLIDATED BALANCE SHEETS
March 29, 1999
(in thousands)
<TABLE>
<CAPTION>
Courses Courses Courses Combined
Acquired Acquired Acquired Eliminating Consolidated
Corporate by ClubCorp by NGP by AGC Entries Total
--------- ----------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash
equivalents.......... $ 2,011 $ 281 $ 184 $ 7 $ -- $ 2,483
Accounts receivable
(net of allowance of
$359)................ 555 2,331 1,562 -- -- 4,448
Inventory............. -- 1,943 1,967 63 -- 3,973
Current portion of
notes receivable (net
of allowance of
$184)................ -- 2,388 1,132 -- -- 3,520
Prepaid expenses and
other current
assets............... 243 410 353 2 -- 1,008
------- -------- -------- ------ -------- --------
Total current
assets.............. 2,809 7,353 5,198 72 -- 15,432
Property, equipment and
leasehold interests,
net.................... 2,172 223,134 169,752 3,031 -- 398,089
Tradename (net of
accumulated
amortization of $357).. -- 4,606 3,550 57 -- 8,213
Notes receivable (net of
allowance of $166)..... -- 2,016 1,140 -- -- 3,156
Other assets............ 5 723 555 27 -- 1,310
Intercompany
receivables............ 42,913 -- -- -- (42,913) --
------- -------- -------- ------ -------- --------
Total assets......... $47,899 $237,832 $180,195 $3,187 $(42,913) $426,200
======= ======== ======== ====== ======== ========
LIABILITIES AND DIVISION EQUITY
-------------------------------
Current liabilities:
Accounts payable...... $ 557 $ 1,277 $ 1,102 $ 45 $ -- $ 2,981
Accrued payroll and
related expenses..... 2,131 329 290 8 -- 2,758
Accrued property
taxes................ 3 411 432 (5) -- 841
Other current
liabilities.......... 1 230 350 -- -- 581
Deferred revenue...... -- 1,733 1,491 7 -- 3,231
Current portion of
long-term debt....... -- -- 647 -- -- 647
Current portion of
capital lease
obligations.......... -- 1,007 1,101 17 -- 2,125
Current portion of
deferred purchase
price................ -- 222 -- -- -- 222
Minority interest..... -- 314 -- -- -- 314
------- -------- -------- ------ -------- --------
Total current
liabilities......... 2,692 5,523 5,413 72 -- 13,700
------- -------- -------- ------ -------- --------
Long-term debt, less
current portion........ -- -- 5,538 -- -- 5,538
Capital lease
obligations, less
current portion........ -- 2,223 2,301 20 -- 4,544
Long-term deferred
revenue................ -- 6,489 4,218 -- -- 10,707
Deferred purchase price,
less current portion... -- 86 -- -- -- 86
Other long-term
liabilities............ -- -- 148 -- -- 148
Intercompany payables... -- 25,868 16,414 631 (42,913) --
------- -------- -------- ------ -------- --------
Total liabilities.... 2,692 40,189 34,032 723 (42,913) 34,723
Commitments and
contingencies
Division equity......... 45,207 197,643 146,163 2,464 -- 391,477
------- -------- -------- ------ -------- --------
Total liabilities and
division equity..... $47,899 $237,832 $180,195 $3,187 $(42,913) $426,200
======= ======== ======== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these combining consolidated
financial statements.
F-2
<PAGE>
COBBLESTONE GOLF
COMBINING CONSOLIDATED STATEMENTS OF OPERATIONS
For the period May 29, 1998 to March 29, 1999
(In thousands)
<TABLE>
<CAPTION>
Courses Courses Courses Combined
Acquired Acquired Acquired Eliminating Consolidated
Corporate by ClubCorp by NGP by AGC Entries Total
--------- ----------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Golf.................. $ -- $ 32,890 $ 33,288 $1,056 $ -- $ 67,234
Food and beverage..... -- 8,139 8,947 82 -- 17,168
Other................. -- 6,378 4,069 184 -- 10,631
------- -------- -------- ------ ------- ---------
Total revenue....... -- 47,407 46,304 1,322 -- 95,033
------- -------- -------- ------ ------- ---------
Expenses:
Golf course
operations........... -- 33,206 32,390 765 -- 66,361
Food and beverage..... -- 2,804 3,017 29 -- 5,850
Depreciation and
amortization......... 108 9,030 7,003 175 (108) 16,208
Amortization of
goodwill............. -- 2,964 2,284 37 -- 5,285
General and
administrative....... 5,646 2,884 2,781 79 (5,646) 5,744
Costs associated with
unsuccessful
acquisitions......... 1,867 -- -- -- -- 1,867
Interest.............. 9 326 1,014 3 -- 1,352
Allocation of
corporate expenses... (5,754) -- -- -- 5,754 --
Goodwill impairment
charge............... -- 82,057 63,208 1,016 -- 146,281
------- -------- -------- ------ ------- ---------
Total expenses...... 1,876 133,271 111,697 2,104 -- 248,948
------- -------- -------- ------ ------- ---------
Loss before income
taxes.................. (1,876) (85,864) (65,393) (782) -- (153,915)
Provisions for income
taxes.................. -- -- -- -- -- --
------- -------- -------- ------ ------- ---------
Net loss................ $(1,876) $(85,864) $(65,393) $ (782) $ -- $(153,915)
======= ======== ======== ====== ======= =========
</TABLE>
The accompanying notes are an integral part of these combining consolidated
financial statements.
F-3
<PAGE>
COBBLESTONE GOLF
COMBINING CONSOLIDATED STATEMENTS OF DIVISION EQUITY
For the period May 29, 1998 to March 29, 1999
(In thousands)
<TABLE>
<CAPTION>
Courses Courses Courses Combined
Acquired Acquired Acquired Consolidated
Corporate by ClubCorp by NGP by AGC Total
--------- ----------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Meditrust Companies'
investment in division
equity, beginning of
period................. $ -- $ 16,758 $ 39,102 $ -- $ 55,860
Net loss................ (1,876) (85,864) (65,393) (782) (153,915)
Contribution of capital
from Meditrust
Companies.............. 47,083 266,749 172,454 3,246 489,532
------- -------- -------- ------ ---------
Meditrust Companies'
investment in division
equity, end of period.. $45,207 $197,643 $146,163 $2,464 $ 391,477
======= ======== ======== ====== =========
</TABLE>
The accompanying notes are an integral part of these combining consolidated
financial statements.
F-4
<PAGE>
COBBLESTONE GOLF
COMBINING CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period May 29, 1998 to March 29, 1999
(In thousands)
<TABLE>
<CAPTION>
Courses Courses Courses Combined
Acquired Acquired Acquired Consolidated
Corporate by ClubCorp by NGP by AGC Total
--------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss.............. $(1,876) $ (85,864) $ (65,393) $ (782) $(153,915)
Adjustments to
reconcile net loss to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization....... 108 11,940 9,235 210 21,493
Goodwill impairment
charge............. -- 82,057 63,208 1,016 146,281
Changes in assets
and liabilities:
Notes and accounts
receivable....... (214) (860) (88) 1 (1,161)
Inventory......... -- (105) (15) 13 (107)
Prepaid expenses
and other
assets........... (206) (917) (416) 3 (1,536)
Accounts payable,
accrued
liabilities and
deferred
revenue.......... (3,671) 5,447 2,159 (24) 3,911
------- --------- --------- ------ ---------
Net cash provided
by (used in)
operating
activities....... (5,859) 11,698 8,690 437 14,966
------- --------- --------- ------ ---------
Investing activities:
Payments to minority
interest holders..... -- (661) -- -- (661)
Acquisitions, net of
cash acquired........ -- (141,883) (100,750) -- (242,633)
Additions to property,
equipment and
leasehold interests.. (1,688) (10,858) (4,973) (247) (17,766)
------- --------- --------- ------ ---------
Net cash provided
by (used in)
investing
activities....... (1,688) (153,402) (105,723) (247) (261,060)
------- --------- --------- ------ ---------
Financing activities:
Cash contributions
from Meditrust
Companies............ 17,785 162,296 72,033 (2,509) 249,605
Principal payments on
long term debt and
capital leases....... -- (1,439) (1,426) (8) (2,873)
Payments on deferred
purchase price....... -- (154) -- -- (154)
Intercompany.......... (8,227) (18,753) 24,646 2,334 --
------- --------- --------- ------ ---------
Net cash provided
by (used in)
financing
activities....... 9,558 141,950 95,253 (183) 246,578
------- --------- --------- ------ ---------
Net increase (decrease)
in cash and cash
equivalents............ 2,011 246 (1,780) 7 484
Cash and cash
equivalents at
beginning of period.... -- 35 1,964 -- 1,999
------- --------- --------- ------ ---------
Cash and cash
equivalents at end of
period................. $ 2,011 $ 281 $ 184 $ 7 $ 2,483
======= ========= ========= ====== =========
</TABLE>
The accompanying notes are an integral part of these combining consolidated
financial statements.
F-5
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Basis of Presentation:
The accompanying combining consolidated financial statements are comprised
of The Cobblestone Golf Companies, Inc., Meditrust Golf Group, Inc., and
Meditrust Golf Group II, Inc. (together "Cobblestone Golf"). Cobblestone Golf
is engaged in the ownership, leasing, operation and management of golf course
properties and related facilities. As of March 29, 1999, Cobblestone Golf
owned 35 courses, one of which is under development, had leasehold interests
in nine courses, one of which is under development and operated one course
under a management agreement.
Meditrust Operating Company and Meditrust Corporation (together the
"Meditrust Companies") are two separate companies, the stocks of which trade
on the New York Stock Exchange as a single unit under a stock pairing
arrangement. The Cobblestone Golf Companies, Inc. is a wholly owned subsidiary
of Meditrust Operating Company. Meditrust Golf Group, Inc. is a wholly owned
subsidiary of Meditrust Corporation. Meditrust Golf Group II, Inc. is 99%
owned by Meditrust Corporation, with the remaining 1% balance owned by
Meditrust Operating Company.
The accompanying combining consolidated financial statements present the
"carved-out" financial position, results of operations and cash flows of
Cobblestone Golf and three operating divisions thereof as if Cobblestone Golf
operated as a separate unit of the Meditrust Companies, and the divisions
operated as separate units of Cobblestone Golf. The courses included in each
operating division are grouped based on the ultimate acquiring entity as a
result of the sale of Cobblestone Golf by the Meditrust Companies (see Note
13). The divisional abbreviations represent the following ultimate acquiring
companies; "ClubCorp": ClubCorp, Inc. and subsidiaries, "NGP": National Golf
Properties, and "AGC": American Golf Corporation. Amounts presented under
"Corporate" represent the net assets and operating results of the
administrative function of the combined operations.
The assets and liabilities contained herein are presented at historical
cost, based upon "push-down" accounting afforded to the Meditrust Companies as
a result of their acquisition of Cobblestone Holdings, Inc. on May 29, 1998
and eleven courses acquired subsequent to May 29, 1998, as more fully
described in Note 3. The accompanying carved out financial statements reflect
only debt obligations to third parties and do not include an allocation of the
Meditrust Companies' general corporate indebtedness (see Note 8). The
financial statements presented may not be indicative of the financial
position, results of operations and cash flows had Cobblestone Golf or the
divisions presented operated as non-affiliated entities.
2. Significant Accounting Policies:
Principles of Combination and Consolidation
The combining consolidated financial statements include the accounts of
Cobblestone Golf and its subsidiaries. All significant inter-company and
inter-entity balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and investments with original
maturities of less than 90 days.
F-6
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Meditrust Companies utilize a centralized cash management system to
provide financing for its operations, including those of Cobblestone Golf.
Cobblestone Golf's cash requirements are satisfied by the results of golf
operations, as well as transactions with the Meditrust Companies (see Note 8).
As of March 29, 1999, cash balances of $428 (NGP) are restricted under
lease agreements for use towards capital improvements.
Concentration of Credit Risk
Cobblestone Golf's cash equivalents are held by what management considers
to be high credit-quality financial institutions. Management believes no
significant concentration of credit risk exists with respect to these
investments.
Cobblestone Golf's concentration of credit risk with respect to its
accounts receivable is limited due to the geographic dispersion of golf
courses and the large number of golf course members and others from whom the
receivables are to be collected.
Inventories
Inventories are carried at the lower of cost (first-in, first-out) or
market.
Property, Equipment and Leasehold Interests
Property and equipment are recorded at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the related assets
which are generally as follows:
<TABLE>
<S> <C>
Depreciable land improvements................................ 20 years
Buildings and improvements................................... 30 years
Equipment, furniture and fixtures............................ 3 to 10 years
</TABLE>
Leasehold improvements, equipment recorded under capital leases and
property and equipment related to leased facilities are depreciated and
amortized using the straight-line method over the shorter of the lease term or
the estimated useful lives of the related assets. Costs associated with the
acquisition of leasehold interests in golf facilities have been capitalized
and are amortized over the remaining life of the related lease (2 to 27
years). Golf course facility construction in progress is carried at cost.
Interest associated with, or allocable to golf course facility construction in
progress is capitalized until construction is completed. The amount
capitalized is based upon a rate of interest which approximates the Meditrust
Companies' weighted average rate of borrowing.
Intangible Assets
Goodwill represents the excess of cost over the fair value of assets
acquired and is amortized using the straight-line method over 20 years (see
Note 13).
In connection with the acquisition of Cobblestone Holdings, Inc. and
subsidiaries by the Meditrust Companies, the Cobblestone trade name was
recorded at its fair value of $8,570. This intangible asset is being amortized
using the straight-line method over 20 years.
F-7
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Impairment of Long-Lived Assets and Intangibles
The Meditrust Companies assess the recoverability of long-lived assets and
certain identifiable intangibles whenever adverse events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the expected future cash flows (undiscounted and without
interest charges) are not sufficient to support the recorded asset, an
impairment would be recognized to reduce the carrying value to its net
realizable value (see Note 13).
Revenue and Deferred Revenue
Operating revenue is recognized when received except from dues and fees
paid in advance which are recognized over the period during which the dues and
fees allow the members access to the facilities. Cobblestone Golf recognizes
revenue on non-refundable initiation fees using the straight-line method over
the average life of an active membership. As of March 29, 1999, the estimated
average life of an active membership is 7 years. In addition, the incremental
direct selling costs incurred in connection with initiation fees are deferred
and amortized in a manner consistent with the related revenue.
Income Taxes
Meditrust Corporation has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended, and believes it has met all the requirements
for qualification as such. Accordingly, Meditrust Corporation will not be
subject to federal income taxes on amounts distributed to shareholders,
provided it distributes at least 95% of its REIT taxable income annually and
meets other requirements for qualifying as a REIT. Therefore, no provision for
federal income taxes is believed necessary for the activity of Meditrust Golf
Group, Inc.
Meditrust Operating Company provides for taxes in accordance with the
provisions of SFAS No. 109, Accounting for Income Taxes. Under this method,
the Meditrust Operating Company recognizes deferred tax assets and liabilities
for the expected future tax effects of temporary differences between the
carrying amounts and the tax bases of assets and liabilities, as well as
operating loss carry-forwards.
3. Acquisitions:
During March and May 1998, Meditrust Golf Group, Inc. purchased seven golf
courses for an aggregate purchase price of approximately $56,000. The
operations were then contributed to the Cobblestone Golf Companies, Inc. upon
completion of the transaction described below.
On May 29, 1998 the Meditrust Companies completed their merger with
Cobblestone Holdings, Inc. Under the terms of the merger agreement,
Cobblestone Holdings, Inc. merged into Meditrust Corporation, with Meditrust
Corporation being the surviving Corporation. Prior to the merger, Meditrust
Operating Company entered into an asset transfer agreement with Cobblestone
Golf Group, Inc., a wholly owned subsidiary of Cobblestone Holdings, Inc.
whereby Cobblestone Golf Group, Inc. transferred certain non-real estate
assets to Meditrust Operating Company.
In order to consummate the transaction, the Meditrust Companies issued
paired common stock with an aggregate market value of approximately $230,000
and issued options valued at $10,863. In addition, Meditrust Corporation
assumed and paid approximately $170,000 of Cobblestone's long-term debt and
associated costs. The total consideration paid in connection with the
Cobblestone Golf merger was approximately $420,000. The excess of the purchase
price over the fair value of the net assets acquired was approximately
$151,500.
F-8
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the period from May 29, 1998 to March 29, 1999, Cobblestone Golf
acquired the golf courses listed below. Each property was purchased from an
unaffiliated party. The cash portion of the acquisitions was funded by the
Meditrust Companies.
<TABLE>
<CAPTION>
Property Date Location
-------- ------------ --------------
<S> <C> <C>
Deercreek Country Club........................... June, 1998 Florida
Devil's Ridge.................................... July, 1998 North Carolina
Lochmere......................................... July, 1998 North Carolina
The Neuse........................................ July, 1998 North Carolina
Oak Valley....................................... July, 1998 North Carolina
Kiskiack......................................... July, 1998 Virginia
Nag's Head....................................... July, 1998 North Carolina
The Currituck Club............................... July, 1998 North Carolina
Champions Club of Atlanta........................ August, 1998 Georgia
Whitestone....................................... August, 1998 Texas
Blackstone....................................... June, 1998 Texas
</TABLE>
The effect on operations had these courses been acquired as of the
beginning of the period would not have been significant.
4. Property, Equipment and Leasehold Interests:
Property, equipment and leasehold interests consist of the following at
March 29, 1999:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
Land........................... $ -- $ 26,964 $ 19,599 $ -- $ 46,563
Land improvements.............. -- 139,598 89,992 147 229,737
Buildings and improvements..... 1,030 43,907 31,349 15 76,301
Equipment, furniture and
fixtures...................... 1,249 16,670 12,270 526 30,715
Leasehold interests............ -- -- 20,945 2,696 23,641
Construction in progress....... -- 4,743 2,439 -- 7,182
------ -------- -------- ------ --------
2,279 231,882 176,594 3,384 414,139
Less accumulated depreciation
and amortization.............. 107 8,748 6,842 353 16,050
------ -------- -------- ------ --------
Property, equipment and
leasehold interests, net...... $2,172 $223,134 $169,752 $3,031 $398,089
====== ======== ======== ====== ========
</TABLE>
Land improvements include $69,593 ($42,221,ClubCorp; $27,369, NGP, $3, AGC)
of non-depreciable golf course improvements consisting of tees, fairways,
roughs, trees, greens, bunkers and sand traps at March 29, 1999.
In connection with the purchase of The Hills of Lakeway, the ClubCorp
division of Cobblestone Golf is required to pay a deferred purchase price
equal to the greater of approximately $4 per membership or 25% of Initiation
Fees, as defined, collected for the first three hundred memberships sold.
The outstanding balance of the deferred purchase price of $308 is scheduled
to be paid in monthly installments through fiscal 2000.
F-9
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Notes Receivable:
Notes receivable consists of promissory notes made by golf club members for
the payment of initiation fees. The notes carry below market or no interest
rates, amortize monthly or annually and generally have a term of three to five
years. Management periodically assesses the collectibility of the notes
receivable and reserves for the portion that is doubtful of being collected.
The notes are collateralized by the underlying golf club membership and
Cobblestone Golf has full recourse against the member. Cobblestone Golf's
notes receivable balance as of March 29, 1999 was comprised of the following:
<TABLE>
<CAPTION>
ClubCorp NGP Total
-------- ------ ------
<S> <C> <C> <C>
Gross notes receivables............................ $ 5,246 $2,726 $7,972
Less allowance for uncollectible accounts.......... (232) (118) (350)
Less allowance for imputed interest................ (610) (336) (946)
------- ------ ------
Net notes receivable............................. 4,404 2,272 6,676
Less current portion............................... 2,388 1,132 3,520
------- ------ ------
$ 2,016 $1,140 $3,156
======= ====== ======
</TABLE>
6. Long-Term Debt:
Long-term debt consists of the following at March 29, 1999:
<TABLE>
<CAPTION>
NGP
------
<S> <C>
5% uncollateralized note payable, due October 1999................... $ 245
8% uncollateralized note payable, due monthly through 2007........... 238
Variable rate note payable, effective interest rate 10.47%, due
monthly through 2014, collateralized by the assets of The Vineyard
at Escondido........................................................ 5,472
10% imputed interest note payable, due January 2000,
uncollateralized.................................................... 230
------
6,185
Less current portion................................................. 647
------
Total long-term debt................................................. $5,538
======
</TABLE>
Scheduled payments of principal on long-term debt for each of the next five
years and thereafter, are as follows at March 29, 1999:
<TABLE>
<CAPTION>
NGP
------
<S> <C>
2000.............................................................. $ 647
2001.............................................................. 190
2002.............................................................. 210
2003.............................................................. 232
2004.............................................................. 258
Thereafter........................................................ 4,648
------
$6,185
======
</TABLE>
F-10
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Leases:
Cobblestone Golf leases nine golf facilities. The leases expire in various
years through 2025. Rent expense for the period May 29, 1998 to March 29, 1999
was as follows:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Rent expense........................... $359 $611 $2,299 $197 $3,466
</TABLE>
Cobblestone Golf leases certain golf carts and maintenance equipment under
capital leases with terms of two to five years. Included in equipment,
furniture and fixtures in the accompanying combining consolidated balance
sheet is equipment under capital leases totaling $8,066 at March 29, 1999.
Accumulated amortization of equipment under capital leases totaled $1,324 as
of the balance sheet date.
Scheduled payments of lease obligations for each of the next five years and
thereafter, are as follows at March 29, 1999:
Capital leases:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- ------- ---- -------
<S> <C> <C> <C> <C> <C>
2000........................... $ -- $ 1,392 $ 1,471 $ 19 $ 2,882
2001........................... -- 1,230 1,345 18 2,593
2002........................... -- 761 774 2 1,537
2003........................... -- 606 448 1 1,055
2004........................... -- 67 147 -- 214
Thereafter..................... -- -- -- -- --
----- ------- ------- ---- -------
Total minimum lease payments... -- 4,056 4,185 40 8,281
Amount representing interest... -- (826) (783) (3) (1,612)
----- ------- ------- ---- -------
Present value of net minimum
lease payments................ -- 3,230 3,402 37 6,669
Current portion................ -- (1,007) (1,101) (17) (2,125)
----- ------- ------- ---- -------
$ -- $ 2,223 $ 2,301 $ 20 $ 4,544
===== ======= ======= ==== =======
</TABLE>
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- ------- ---- -------
<S> <C> <C> <C> <C> <C>
2000................................ $ 444 $ 648 $ 2,261 $ 54 $ 3,407
2001................................ 444 639 2,261 54 3,398
2002................................ 444 639 2,261 54 3,398
2003................................ 444 639 2,261 54 3,398
2004................................ 444 639 2,261 54 3,398
Thereafter.......................... 623 1,447 22,077 630 24,777
------ ------ ------- ---- -------
Total minimum lease payments........ $2,843 $4,651 $33,382 $900 $41,776
====== ====== ======= ==== =======
</TABLE>
Operating Leases:
8. Related Party Transactions:
The Meditrust Companies provide certain services to Cobblestone Golf
primarily related to general tax preparation and consulting, legal,
accounting, and certain aspects of human resources. In the opinion of
management, the costs associated with these services were not material and
have been excluded from this financial statement. However, this is not
necessarily indicative of the level of expenses which may have been
experienced had Cobblestone Golf been presented on a stand-alone basis. The
amounts that would have or will
F-11
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
be incurred on a stand-alone basis could differ significantly from the
estimated amounts due to economies of scale, differences in management and/or
operational practices or other factors.
Interest expense associated with the Meditrust Companies' general corporate
debt has not been allocated to Cobblestone Golf in this financial statement.
An allocation of interest charges on general corporate debt to Cobblestone
Golf would have resulted in approximately $16,739 of interest expense for the
period ended March 29, 1999. An allocation of the debt would have resulted in
an increase of $181,163 in long-term debt at March 29, 1999. The allocation
methodology is based on applying the Meditrust Companies' total debt to total
capitalization and a weighted average interest rate of approximately 8.39% to
the Meditrust Companies' weighted average investment in Cobblestone Golf.
Management believes this allocation is reasonable.
In connection with the sale of Cobblestone Golf described in Note 13, the
Meditrust Companies have accrued a liability of $5,624 for bonuses paid to
Cobblestone employees as an incentive to stay with Cobblestone Golf through
the closing date of the sale. As such amount is an obligation of the Meditrust
Companies, no liability has been reflected in the combining consolidated
financial statements of Cobblestone Golf.
9. Employee Benefit Plan:
Cobblestone Golf maintains an employee savings plan (the "Plan") that
qualifies as a deferred salary arrangement under Section 401(k) of the
Internal Revenue Code. Under the Plan, which covers employees who have met
certain eligibility requirements, participating employees may defer up to 17%
of their pretax earnings, up to $9,500. Cobblestone Golf matches up to 20% of
the employee's contributions, up to a maximum of 4% of the employee's
earnings.
10. Stock Option Plan:
As an operating unit of the Meditrust Companies, Cobblestone Golf does not
have an employee stock option plan; however, certain employees of Cobblestone
Golf participate in the Meditrust Companies' stock option plans. These plans
provide for the grant of incentive and nonqualified options at an exercise
price that is 100% of the fair market value on the date of grant. The
Meditrust Companies apply APB 25 and related Interpretations in accounting for
stock options. Accordingly, no compensation expense is reflected in the
financial statements.
As of March 29, 1999, the employees of Cobblestone Golf hold a total of
7,495 options to purchase the Meditrust Companies' stock, all of which are
exercisable at the balance sheet date. The option prices range from $3.95 to
$4.42 per share at March 29, 1999. Compensation costs related to such options
would have been approximately $5 for the period from May 29, 1998 to March 29,
1999 had the Meditrust Companies followed the fair value method at the grant
date of option awards.
11. Commitments and Contingent Liabilities:
Cobblestone Golf has certain obligations to provide partial credit on
certain future memberships, at agreed upon terms, to residential developers of
properties adjacent to certain golf facilities.
Cobblestone Golf is party to various commitments, claims and routine
litigation arising in the ordinary course of business. Management does not
believe that the result of such commitments, claims and litigation,
individually or in the aggregate, will have a material effect on the business
or its income, cash flows or financial condition.
The Meditrust Corporation's equity interests in Cobblestone Golf have been
pledged to Meditrust Corporation's lenders under its senior credit facility
and to entitled bondholders.
F-12
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Certain subsidiaries of Cobblestone Golf have guaranteed Meditrust
Corporation's obligations, or Meditrust Operating Company's guaranty thereof,
under Meditrust Corporation's senior credit facility.
These guarantee obligations were terminated upon completion of the sale
described in Note 13.
Meditrust Corporation's senior credit facility contains a notice provision
applicable to transfer transactions.
12. Income Taxes:
The income tax provision consists of the following:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Federal
Current......................... $ 3,485 $ 1,530 $ 2,165 $ 85 $ 7,265
Deferred........................ (3,485) (1,530) (2,165) (85) (7,265)
------- ------- ------- ---- -------
$ -- $ -- $ -- $ -- $ --
======= ======= ======= ==== =======
</TABLE>
The difference between income taxes computed using the U.S. statutory
Federal income tax rate of 35% and actual tax provision as reflected in the
accompanying statements of operations is as follows:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C>
Expected income tax
benefit.................... $ 656 $ 30,052 $ 22,888 $ 274 $ 53,870
Net income (loss) from REIT
activities................. 631 (26,994) (20,466) (235) (47,064)
Operating losses not
available for tax benefit.. (1,287) (3,058) (2,422) (39) (6,806)
------- -------- -------- ----- --------
$ -- $ -- $ -- $ -- $ --
======= ======== ======== ===== ========
</TABLE>
The components of Cobblestone Golf's deferred tax assets and liabilities as
of March 29, 1999 are as follows:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Deferred tax assets
Net operating loss
carryforward................ $ 1,220 $ 535 $ 758 $ 30 $ 2,543
Long term deferred revenue... -- 2,271 1,476 -- 3,747
Other, net................... 67 252 188 9 516
------- ------- ------- ---- -------
Gross deferred tax assets...... 1,287 3,058 2,422 39 6,806
Valuation allowance.......... (1,287) (3,058) (2,422) (39) (6,806)
------- ------- ------- ---- -------
$ -- $ -- $ -- $ -- $ --
======= ======= ======= ==== =======
</TABLE>
A valuation allowance has been established due to the uncertainty of
realizing the loss carryforward and deferred tax assets.
13. Sale of Cobblestone Golf:
On February 10, 1999 the Meditrust Companies entered into an agreement (the
"Purchase Agreement") to sell Cobblestone Golf to Golf Acquisitions LLC, an
entity controlled by ClubCorp, NGP and AGC. The sale transaction closed based
on balances as of March 29, 1999. Proceeds to the Meditrust Companies were
$391,278, subject to a closing adjustment as defined in the Purchase
Agreement.
F-13
<PAGE>
COBBLESTONE GOLF
NOTES TO COMBINING CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As a result of the significant difference between the selling price in the
stock purchase agreement and the amount invested in Cobblestone Golf by the
Meditrust Companies, Cobblestone Golf determined that the goodwill recorded at
the time of the Meditrust Companies' acquisition would not be realized. As
such, the remaining unamortized balance of the goodwill was written off and
charged to earnings on February 10, 1999.
14. Supplementary Disclosures of Cash Flow Information:
<TABLE>
<CAPTION>
Corporate ClubCorp NGP AGC Total
--------- -------- ------ ---- ---------
<S> <C> <C> <C> <C> <C>
Cash paid during the period for
interest........................ $ 9 $ 326 $1,014 $ 3 $ 1,352
==== ====== ====== ==== =========
Non-cash investing and financing
activities:
Capital leases entered into for
new equipment................. $ -- $3,062 $2,487 $ -- $ 5,549
==== ====== ====== ==== =========
In connection with golf course
acquisitions:
Fair value of assets acquired,
exclusive of goodwill......... $ 368,457
=========
Goodwill....................... $ 151,404
=========
Fair value of liabilities
assumed....................... $ (36,053)
=========
Value of paired shares issued
to purchase Cobblestone
Holdings, Inc................. $(241,175)
=========
Cash, net...................... $(242,633)
=========
</TABLE>
F-14
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL DATA FOR THE COMPANY
The following unaudited pro forma combined condensed financial information
reflects the acquisition of the Acquired Cobblestone Courses by NGOP and that
NGOP paid in total approximately $191.8 million, including loan costs of
approximately $4.5 million for NGOP's new $300 million unsecured revolving
credit facility, which investment was financed by approximately $186.2 million
of cash and approximately $5.6 million of assumed notes. The pro forma
statement of operations for the three months ended March 31, 1999 and the year
ended December 31, 1998 assumes the Acquired Cobblestone Courses occurred on
January 1, 1998.
The historical financial information of the Company as of and for the three
months ended March 31, 1999 and the year ended December 31, 1998 have been
derived from the Company's consolidated financial statements. The pro forma
financial information should be read in conjunction with the accompanying
notes thereto and with the financial statements of the Company. The pro forma
combined condensed financial information does not purport to be indicative of
the financial position or operating results which would have been achieved had
the Acquired Cobblestone Courses been consummated as of the dates indicated
and should not be construed as representative of future financial position or
operating results. In the opinion of the Company's management, all adjustments
necessary to reflect the effects of the acquisition have been made.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Pro Forma Historical Adjustments Pro Forma
------------ ----------- ------------ ------------ ----------- ------------
Three Months Three Months
Year Ended Acquired Year Ended Ended Acquired Ended
December 31, Cobblestone December 31, March 31, Cobblestone March 31,
1998 Courses 1998 1999 Courses 1999
------------ ----------- ------------ ------------ ----------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues
Rent...................... $ 83,350 $ 16,779 (1) $100,129 $20,507 $4,434 (1) $24,941
Equity in income from
joint venture............ 385 -- 385 105 -- 105
-------- -------- -------- ------- ------ -------
Total revenues.............. 83,735 16,779 100,514 20,612 4,434 25,046
-------- -------- -------- ------- ------ -------
Expenses
General & administrative.. 5,156 -- 5,156 1,379 -- 1,379
Depreciation &
amortization............. 27,079 8,878 (2) 35,957 7,350 2,219 (2) 9,569
-------- -------- -------- ------- ------ -------
Total expenses.............. 32,235 8,878 41,113 8,729 2,219 10,948
-------- -------- -------- ------- ------ -------
Interest expense.......... (20,350) (15,652)(3) (36,002) (5,692) (3,913)(3) (9,605)
Interest income........... 1,170 -- 1,170 543 -- 543
Other income.............. 1,845 -- 1,845 12 -- 12
-------- -------- -------- ------- ------ -------
Income before provision for
taxes and minority
interest................... 34,165 (7,751) 26,414 6,746 (1,698) 5,048
Provision for taxes......... (231) -- (231) (57) -- (57)
Minority interest........... (17,292) 3,216 (4) (14,076) (3,775) 701 (4) (3,074)
-------- -------- -------- ------- ------ -------
Net income.................. $ 16,642 $ (4,535) $ 12,107 $ 2,914 $ (997) $ 1,917
======== ======== ======== ======= ====== =======
Basic earnings per share $ 1.33 $ 0.97 $ 0.23 $ 0.15
Weighted average number
of shares.................. 12,497 12,497 12,622 12,622
Diluted earnings per share.. $ 1.32 $ 0.96 $ 0.23 $ 0.15
Weighted average number
of shares.................. 12,599 12,599 12,687 12,687
</TABLE>
F-15
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL DATA
FOR THE COMPANY--(Continued)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
-------------- ----------- --------------
Acquired
Cobblestone
March 31, 1999 Courses March 31, 1999
-------------- ----------- --------------
<S> <C> <C> <C>
Balance Sheet Data(5):
Assets
Net property....................... $724,605 $ 12,655 (6) $737,260
Cash and cash equivalents.......... 1,627 -- 1,627
Investments........................ 200 -- 200
Mortgage notes receivable.......... 27,855 (12,655)(6) 15,200
Investment in joint venture........ 7,537 -- 7,537
Due from affiliate................. 1,663 -- 1,663
Other assets, net.................. 19,427 -- 19,427
-------- -------- --------
Total assets..................... $782,914 $ -- $782,914
======== ======== ========
Liabilities and Stockholders'
Equity
Notes payable...................... $462,874 $ -- $462,874
Accounts payable and other
liabilities....................... 24,645 -- 24,645
-------- -------- --------
Total liabilities................ 487,519 -- 487,519
-------- -------- --------
Minority interest.................. 164,766 -- 164,766
-------- -------- --------
Common stock....................... 126 -- 126
Additional paid in capital......... 135,823 -- 135,823
Unamortized restricted stock
compensation...................... (5,320) -- (5,320)
-------- -------- --------
Total stockholders' equity....... 130,629 -- 130,629
-------- -------- --------
Total liabilities and
stockholders' equity............ $782,914 $ -- $782,914
======== ======== ========
</TABLE>
- --------
(1) Reflects assumed rents at 8.75% of NGOP's initial investment of
approximately $191.8 million, including loan costs of approximately $4.5
million. Minimum rents will increase to 9.25% in the second year.
(2) Reflects an increase in depreciation expense due to the acquisition of the
Acquired Cobblestone Courses, excluding the loan costs of approximately
$4.5 million, for a total investment of approximately $187.3 million. The
Acquired Cobblestone Courses are recorded at cost and depreciation is
computed on a straight-line basis over the estimated useful lives of the
assets as follows: (i) buildings--30 years; (ii) ground improvements--20
years; and (iii) furniture, fixtures and equipment--5 years.
(3) On March 31, 1999, the Company entered into a new $300 million unsecured
revolving credit facility with a group of lenders led by The First
National Bank of Chicago, as Administrative Agent. Advances under the
credit facility bear interest at the Administrative Agent's alternate base
rate plus the then-applicable base rate margin or, at the option of the
Company, LIBOR plus the then-applicable LIBOR rate margin. The
Administrative Agent's alternate base rate for any day means the greater
of (i) a rate per annum equal to the corporate base rate of interest
announced by the Administrative Agent from time to time, and (ii) the
federal funds rate as published by the Federal Reserve Bank plus one-half
percent (0.50%) per annum. The amount of the base rate margin and LIBOR
rate margin vary depending upon the amount of the Company's outstanding
indebtedness compared to its capitalization. Reflects interest expense on
additional debt of approximately $186.2 million at an assumed weighted
average rate of 7.53% that will be incurred by NGOP to cover NGOP's cash
payment and approximately $5.6 million of assumed notes at a weighted
average rate of 10.35%.
F-16
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL DATA
FOR THE COMPANY--(Continued)
(4) Reflects NGOP's limited partners' interest of 41.49% and 41.26% in the
earnings of NGOP for the year ended December 31, 1998 and the three months
ended March 31, 1999, respectively.
(5) As the acquisition closed on March 31, 1999, the related balance sheet
reflects the purchase price of the acquisition and related loan costs.
(6) Reflects the participating mortgage loan secured by a golf course being
converted to a purchase of such golf course.
F-17
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statements on Form S-8 (File No.'s 33-67350 and 333-33775) and Form S-3 (File
No. 333-67403) of National Golf Properties, Inc. of our report dated May 7,
1999 relating to the financial statements of Cobblestone Golf, which appears
in the Current Report on Form 8-K/A Amendment No. 1 of National Golf
Properties, Inc. dated March 31, 1999.
PricewaterhouseCoopers LLP
Las Vegas, Nevada
June 11, 1999
