SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
- ------
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
____ EXCHANGE ACT OF 1934
For the transition period from __________to__________
Commission File Number: 0-25098
Family Golf Centers, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware 11-3223246
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 Broadhollow Road
Melville, New York 11747
(Address of principal executive offices)
(516) 694-1666
(Registrant's telephone number)
(Former Name, Former Address and Former Fiscal Year,
if changed since last Report)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such report(s),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of November 12, 1996
- -------------------------------------- -----------------------------------
Common Stock, par value $.01 per share 11,769,732
Transitional Small Business Disclosure Format (Check one): Yes No X .
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTORY COMMENT
The condensed consolidated financial statements included herein have
been prepared by Family Golf Centers, Inc. ("the Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management of the Company believes that the disclosures
are adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the notes
thereto. In the opinion of the management of the Company, the condensed
consolidated financial statements include all adjustments, consisting of only
normal recurring adjustments, necessary to fairly present the results for the
interim periods to which these financial statements relate.
The results of operations of the Company for the nine months ended September
30, 1996 are not necessarily indicative of the results to be expected for the
full year.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(Unaudited) 1995
------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $60,872,000 $23,121,000
Inventories 4,618,000 1,941,000
Prepaid expenses and other current assets (Note C) 1,540,000 999,000
------------ -----------
Total current assets 67,030,000 26,061,000
Property and equipment 91,630,000 33,330,000
Loan acquisition costs 188,000 234,000
Deferred tax benefit 106,000 116,000
Other assets 3,406,000 1,205,000
Excess of cost over fair value of assets acquired 1,861,000 636,000
------------ -----------
TOTAL $164,221,000 $61,582,000
============ ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 11,388,000 $3,044,000
Income taxes payable 1,245,000 569,000
Current portion of long-term obligations 5,772,000 1,850,000
------------ -----------
Total current liabilities 18,405,000 5,463,000
Long-term obligations (less current portion) 10,449,000 6,343,000
Deferred rent 146,000 116,000
Other liabilities 173,000 272,000
------------ -----------
Total liabilities 29,173,000 12,194,000
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Commitments, contingencies and others matters
STOCKHOLDERS' EQUITY
Preferred stock-authorized 2,000,000 shares,
none outstanding
Common stock, authorized 50,000,000 shares,
$.01 par value, 11,726,843 and 8,318,045 shares
outstanding at September 30, 1996 and
December 31, 1995,respectively 117,000 83,000
Additional paid-in capital 129,262,000 48,347,000
Retained earnings 5,716,000 958,000
Treasury stock (47,000)
------------ -----------
Total stockholders' equity 135,048,000 49,388,000
------------ -----------
TOTAL $164,221,000 $61,582,000
============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- --------------------------------
1996 1995 1996 1995
----------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C>
Operating revenues $16,234,000 $7,829,000 $ 8,531,000 $3,669,000
Merchandise sales 4,634,000 2,042,000 2,123,000 765,000
----------- ---------- ---------- ----------
Total revenue 20,868,000 9,871,000 10,654,000 4,434,000
Operating expenses 9,109,000 4,777,000 4,450,000 2,138,000
Cost of merchandise sold 3,043,000 1,359,000 1,390,000 518,000
Selling, general and
administrative expenses 2,149,000 852,000 661,000 274,000
----------- ---------- ---------- ----------
Income from operations 6,567,000 2,883,000 4,153,000 1,504,000
Interest expense (288,000) (634,000) (151,000) (393,000)
Other income 1,155,000 32,000 865,000 9,000
----------- ---------- ---------- ----------
Income before income taxes 7,434,000 2,281,000 4,867,000 1,120,000
Income tax expense 2,676,000 844,000 1,752,000 414,000
----------- ---------- ---------- ----------
Net income $4,758,000 $1,437,000 $3,115,000 $706,000
=========== ========== ========== ==========
Net income per share $0.48 $0.28 $0.27 $0.14
Weighted average shares outstanding 9,830,000 5,060,000 11,727,000 5,159,000
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------
1996 1995
----------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $4,758,000 $1,437,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,079,000 563,000
(Increase) in inventories (2,677,000) (1,035,000)
(Increase) in prepaid expenses and other current assets (658,000) (899,000)
Decrease in deferred tax asset 10,000 16,000
(Increase) in other assets (2,307,000) (937,000)
Increase in accounts payable and accrued expenses 7,379,000 746,000
Increase in income taxes payable 676,000 797,000
Increase (Decrease) in deferred rent 30,000 (53,000)
Increase (Decrease) in other liabilities (99,000) 150,000
----------- -----------
Net cash provided by operating activities 8,191,000 785,000
----------- -----------
Cash flows from investing activities:
Acquisitions of fixed assets (46,600,000) (13,197,000)
(Increase) in security deposits (57,000) --
Acquisitions of goodwill (1,261,000) --
----------- -----------
Net cash (used in)investing activities (47,918,000) (13,197,000)
----------- -----------
Cash flows from financing activities:
(Increase) Decrease in loan acquisition costs 46,000 (120,000)
Increase in short term borrowings 4,315,000
Decrease in due to officers (216,000)
Proceeds from bank loans 11,600,000 7,650,000
Repayment of bank loans (9,466,000) (1,275,000)
Proceeds from the exercise of options and warrants 1,034,000 --
Proceeds from the Issuance of Common Stock 74,264,000
----------- -----------
Net cash provided by financing activities 77,478,000 10,354,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 37,751,000 (2,058,000)
Cash and cash equivalents - beginning of period 23,121,000 2,296,000
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $60,872,000 $ 238,000
=========== ===========
Supplemental and noncash disclosures:
Acquisition of property in exchange for common stock $ 5,885,000 $1,666,000
Acquisition of property subject to mortgage and notes 5,893,000 3,047,000
Issuance of Compensatory Warrants 359,000 --
Property additions accrued but not paid 966,000 295,000
Interest paid 631,000 750,000
Taxes paid 1,999,000 34,000
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(NOTE A) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] THE COMPANY:
The Company (as defined below), designs, constructs and
operates family golf centers. The golf centers offer golf lessons and
a wide variety of practice opportunities, including facilities for
practicing, driving, pitching, putting, chipping and sand play. In
addition, most centers have a pro shop, a miniature golf course, a
snack bar and electronic video games.
Through an agreement with Golden Bear Golf Centers, Inc.
("GBI"), the Company is licensed to use the name "Golden Bear" for
certain of the Company's golf centers. The license agreement is
terminable by GBI under certain conditions.
[2] PRINCIPLES OF COMBINATION:
The consolidated financial statements include the accounts
of Family Golf Centers, Inc. ("FGCI") and its wholly owned
subsidiaries (the "Company"). All significant intercompany
transactions and accounts have been eliminated.
(NOTE B) INVENTORIES:
Inventory consists of merchandise for sale in the pro shop
at each facility and is valued at the lower of cost on a first-in,
first-out basis or market.
(NOTE C) PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets consists
principally of short term expenses paid in advance, credit card
receivables, receivables from others and pre-opening costs.
(NOTE D) ACQUISITIONS:
During the first quarter of 1996, the Company acquired two combination
golf center and 9-hole golf courses in Mesa, Arizona ("Mesa") and Virginia
Beach, Virginia ("Virginia Beach"). The Company also acquired a 17-acre property
on which there is a driving range, a miniature golf course, batting cage, a pro
shop and a club house located in Flemington, New Jersey ("Flemington").
<PAGE>
During the second quarter of 1996, the Company acquired six golf
recreational facilities; an existing golf recreational facility in Mohegan Lake,
New York ("Yorktown Heights"), a leasehold interest in a 14-acre property and
the related existing golf recreational facility in Indian River, Virginia
("Indian River"), a 24-acre parcel of property in Fairfield, Ohio ("Cincinnati")
on which there is a golf recreational facility, an 18-acre parcel of property in
Tucson, Arizona ("Tucson") on which there is an existing golf recreational
facility, a leased 42-acre parcel of property in St. Louis, Missouri ("St.
Louis") on which there is an existing golf recreational facility; including a
par-3 golf course, and a 32-acre parcel of property in West Palm Beach, Florida
("West Palm Beach") on which there is an existing golf recreational facility;
including a par-3 golf course.
During the third quarter of 1996, the Company acquired the following; a
long-term leasehold interest in a 25-acre parcel of property in San Jose,
California ("San Jose") on which there is an existing golf recreational
facility, a 20 year leasehold interest with the option to extend for two
additional ten year periods in Denver, Colorado ("Denver") on which there is an
existing golf recreational facility, a leasehold interest in a 17-acre property
and the related existing golf recreational facility in Westminster, California
("Westminster"), a 70-acre property in South Easton, Massachusetts ("Easton") on
which there is an existing golf recreational facility, a leasehold interest in a
38-acre property in Glen Burnie, Maryland ("Glen Burnie") and the related
existing golf recreational facility, a 283-acre parcel of property in Fountain
Inn, South Carolina ("Carolina Springs") on which there is a 27-hole golf course
and a golf recreational facility, a 24-acre parcel of property in Flanders, New
Jersey ("Flanders") on which there is an existing golf recreational facility, a
concession licence with the City of Denver ("Seven Iron") to manage an existing
golf recreational facility and restaurant and The Colbert-Ballard Golf Learning
Centers ("Colbert-Ballard"), which offers golf instruction nationwide.
The Company acquired Mesa, Virginia Beach, Indian River, Yorktown
Heights, Flemington, Tucson, Cincinnati, St. Louis, West Palm Beach, San Jose,
Denver, Westminster, Easton, Glen Burnie, Carolina Springs, Flanders, Seven Iron
and Colbert-Ballard for the aggregate purchase price of approximately $42.1
million, consisting of cash, Common Stock (based on the value of the Common
Stock as reported by the Nasdaq National Market on the date of the respective
acquisition), notes or assumption of liabilities, or a combination thereof.
Had the acquisitions of Virginia Beach, Indian River, Yorktown Heights,
Flemington, Tucson, Cincinnati, St. Louis, West Palm Beach, San Jose, Denver,
Westminster, Easton, Glen Burnie, Carolina Springs, Flanders, Seven Iron and
Colbert-Ballard been made January 1, 1996 (unaudited) pro forma total revenue,
net income and net income per share would have been $15.5 million, $1.9 million
and $0.15, respectively, for the nine months ended September 30, 1996. The
operations of Mesa were not material to the operations of the Company.
<PAGE>
Had the above noted acquisitions as well as the properties acquired
during 1995 (Pelham Enterprises, Inc., Hiland Golf Club, RFC Enterprises, Inc.,
land in Duluth, Georgia, Upper Hembree Partners, L.P., Golf Masters Limited
Partnership and Air Dome Limited Partnership, The Practice Tee) been made
January 1, 1995 (unaudited) pro forma total revenue, net income (loss) and net
income (loss) per share would have been $24.8 million, ($1.4) million and
($.25), respectively, for the year ended December 31, 1995. The operations of
Duluth and Mesa were not material to the operations of the Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
Company's Financial Statements and the notes thereto appearing elsewhere in
this Report. This Report contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from the results discussed in the forward-looking statements.
GENERAL
Family Golf Centers, Inc. operates golf-related recreational centers, two golf
clubs and a subsidiary company which provides golf instruction. The golf
centers, designed to appeal to the entire family, offer golf lessons and a wide
variety of practice opportunities, including facilities for practicing, driving,
pitching, putting, chipping and sand play. Most golf centers are designed around
an enclosed two-tier, heated driving range which permits year-round use and
include a coaching studio and a 4,000 - 6,000 square foot clubhouse, including a
full-line pro shop. In addition, most golf centers have a miniature golf
course, a cafe or snack bar and electronic video games. Some of the centers
include par-3 golf courses which are designed to facilitate the practice of
golf. The golf clubs include 18-hole and 27-hole championship courses, pro
shops, driving ranges, restaurants and one has complete banquet facilities.
As of September 30, 1996, the Company owns, leases or manages 32 golf
facilities (comprised of 24 golf centers and eight combination golf center and
golf course facilities located in 13 states). Of the golf centers, seven are
currently operated under the name "Golden Bear Golf Centers", licensed from
Jack Nicklaus' licensing company, Golden Bear Golf Centers, Inc.
RESULTS OF OPERATIONS
The following table sets forth selected operations data of the Company
expressed as a percentage of total revenue (except for operating expenses
which is expressed as a percentage of operating revenue and cost of
merchandise sold which is expressed as a percentage of merchandise sales) for
the periods indicated below:
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
Operating revenues 77.8% 79.3% 80.1% 82.7%
Merchandise sales 22.2 20.7 19.9 17.3
Total revenue 100.0 100.0 100.0 100.0
Operating expenses 56.1 61.0 52.2 58.3
Cost of merchandise sold 65.7 66.6 65.5 67.7
Selling, general and
admin. expenses 10.3 8.6 6.2 6.2
Income from operations 31.5 29.2 39.0 33.9
Interest expense 1.4 6.4 1.4 8.9
Other income 5.5 0.3 8.1 0.2
Income before income taxes 35.6 23.1 45.7 25.2
Income tax expense 12.8 8.6 16.5 9.3
Net income 22.8 14.5 29.2 15.9
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1995
Results for the nine months ended September 30, 1996 reflect the operations of
nine golf centers for the full period, operations of three golf centers for
approximately eight months, operations of one golf center for approximately
seven months, operations of two golf centers for about six months, operations of
three golf centers for approximately five months, operations of six golf centers
for four months, operations of two golf centers for three months, and operations
of six golf centers for two months. Results for the period ended September 30,
1995 reflect the operations of three golf centers for the full period,
operations of the one golf center (which was undergoing renovation) for
approximately seven months, operations of two golf centers for approximately six
months operations of two golf centers for five months and operations of three
golf centers for approximately two months. As a result of the change in the
number of golf centers open from period to period, the comparison between the
1996 and 1995 periods may not necessarily be meaningful.
Total revenue for the nine months ended September 30, 1996 was $20.9 million
as compared to $9.9 million for the same period in 1995, an increase of $11.0
million (111%). The overall increase in revenue was attributable to having
additional golf centers in operation during the 1996 period, as described
above partially offset by a decrease in revenue caused by severe winter
conditions in the Northeast region in 1996, relative to milder winter
conditions in 1995. Total revenue for the six golf centers operating for
predominantly all of the nine months ended September 30, 1996 and 1995
(Farmingdale, Wayne, Douglaston, Elmsford, Utica and Syracuse) increased 11%
to $8.5 million in the 1996 period from $7.7 million in the 1995 period. The
increase in revenues for these six golf centers was primarily due to stronger
merchandise and golf instruction sales.
Operating revenues, consisting of all sales except merchandise sales, amounted
to $16.2 million for the nine months ended September 30, 1996, as compared to
$7.8 million for the comparable 1995 period, an increase of $8.4 million
(107%). The increase in operating revenues was primarily attributable to
having additional golf centers in operation during the 1996 period.
Merchandise sales, consisting of golf clubs, balls, bags, gloves, videos,
apparel and related accessories, amounted to $4.6 million for the nine months
ended September 30, 1996 as compared to $2.0 million for the comparable 1995
period, an increase of $2.6 million (127%). The increase in merchandise sales
was primarily due to the contribution of new locations.
Operating expenses, consisting of operating wages and employee costs, land
rent, depreciation of golf driving range facilities and equipment, utilities
and all other facility operating costs, increased to $9.1 million (56.1% of
operating revenue) in the 1996 period from $4.8 million (61.0% of operating
revenue) in the 1995 period, an increase of $4.3 million (90.7%). The increase
in operating expenses was primarily due to the operating costs of locations
that were not operated by the Company during the 1995 period. Operating
expenses as a percentage of operating revenues decreased to 56.1% in 1996 from
61.0% in 1995 primarily due to the increase in revenues and lower
corresponding incremental increases in certain fixed costs, such as rent.
<PAGE>
The cost of merchandise sold increased to $3.0 million (65.7% of merchandise
sales) in the 1996 period from $1.4 million (66.6% of merchandise sales) in
the comparable 1995 period. The overall increase in this cost of $1.7 million
(124%) was primarily due to the higher level of merchandise sales.
Selling, general and administrative expenses for the nine months ended
September 30, 1996 amounted to 2.1 million (10.3% of total revenue) compared
to $0.9 million (8.6% of total revenue) in the comparable 1995 period, an
increase of $1.3 million (152%), primarily due to the expenses associated with
operating additional golf centers.
Interest expense decreased to $288,000 for the nine months ended September 30,
1996 from $634,000 in the comparable 1995 period. Other income, primarily
interest income, increased to $1,155,000 in the 1996 period from $32,000 in
the 1995 period. The decrease in interest expense and the increase in interest
income were attributable to the receipt and use of the proceeds from the
public offering completed in July 1996.
The Company had income before income taxes for the nine months ended September
30, 1996 of $7.4 million as compared to income of $2.3 million in the
comparable 1995 period. Net income for the nine months ended September 30,
1996 amounted to $4.8 million as compared to $1.4 million for the comparable
1995 period.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1995
Results for the three months ended September 30, 1996 reflect the operations
of 24 golf centers for the full period, operations of two golf centers for three
months and operations of six golf centers for two months. Five golf centers were
undergoing renovation for most of this period. Results for the three months
ended September 30, 1995 reflect the operations of six golf centers for the full
period, and operations of three golf centers for approximately two months. As a
result of the change in the number of golf centers open from period to period,
the comparison between the 1996 and 1995 periods may not necessarily be
meaningful.
Total revenue for the three months ended September 30, 1996 was $10.7 million
as compared to $4.4 million for the same period in 1995, an increase of $6.2
million (140%). The overall increase in revenue was primarily attributable to
having additional golf centers in operation during the 1996 period. Total
revenue for the eight golf centers operating for the full three months ended
September 30, 1996 and 1995 (Farmingdale, Wayne, Douglaston, Elmsford, Utica,
Syracuse, Pelham and Hiland) increased 14.8% to $4.7 million in the 1996 period
from $4.1 million in the 1995 period. The increase in revenues for these six
golf centers was primarily due to stronger merchandise and golf instruction
sales.
Operating revenues, consisting of all sales except merchandise sales, amounted
to $8.5 million for the three months ended September 30, 1996, as compared to
$3.7 million for the comparable
<PAGE>
1995 period, an increase of $4.9 million (133.0%). The increase in operating
revenues was primarily attributable to having additional golf centers in
operation during the 1996 period.
Merchandise sales, consisting of golf clubs, balls, bags, gloves, videos,
apparel and related accessories, amounted to $2.1 million for the three months
ended September 30, 1996 as compared to $0.8 million for the comparable
1995 period, an increase of $1.4 million (178%). The increase in merchandise
sales was primarily due to the contribution of new locations.
Operating expenses, consisting of operating wages and employee costs, land
rent, depreciation of golf driving range facilities and equipment, utilities
and all other facility operating costs, increased to $4.5 million (52.2% of
operating revenue) in the 1996 period from $2.1 million (58.3% of operating
revenue) in the 1995 period, an increase of $2.3 million (108.1%). The
increase in operating expenses was primarily due to the operating costs of
locations that were not operated by the Company during the 1995 period. The
decrease in operating expenses as a percentage of operating revenues was
primarily the result of increased revenue and a lower incremental increase in
certain fixed or partially fixed costs, such as rent.
The cost of merchandise sold increased to $1.4 million (65.5% of merchandise
sales) in the 1996 period from $0.5 million (67.7% of merchandise sales) in
the comparable 1995 period. The overall increase in this cost of $0.9 million
(168%) was primarily due to the higher level of merchandise sales.
Selling, general and administrative expenses for the three months ended
September 30, 1996 amounted to $661,000 (6.2% of total revenue) compared to
$274,000 (6.2% of total revenue) in the comparable 1995 period primarily due
to expenses associated with operating additional golf centers.
Interest expense decreased to $151,000 for the three months ended September
30, 1996 from $393,000 in the comparable 1995 period. Other income, primarily
interest income, increased to $865,000 in the 1996 period from $9000 in the
1995 period. The decrease in interest expense and the increase in interest
income, was attributable to the receipt and use of proceeds from the public
offering completed in July 1996.
The Company had income before income taxes for the three months ended
September 30, 1996 of $4.9 million as compared to income of $1.1 million in
the comparable 1995 period. Net income for the three months ended September
30, 1996 amounted to $3.1 million as compared to $0.7 million for the
comparable 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $48.6 million
compared to a working capital of $20.6 million at December 31, 1995, which
increase was principally due to the receipt of the proceeds from the public
offering in July 1996.
<PAGE>
The cash requirements of funding the Company's expansion have historically
exceeded cash flow from operations. Accordingly, the Company has satisfied its
capital needs primarily through debt and equity financing. On July 9, 1996,
the Company received net proceeds of $75.3 million from a public offering of
Common Stock.
The Company's outstanding indebtedness as of September 30, 1996 of $16.2
million bears interest at fixed and variable rates currently ranging from
5.25% to 10.5%.
As of September 30, 1996, the Company had $5 million outstanding under a line
of credit with Chemical Bank. Amounts outstanding under the credit line bear
interest at prime plus 1.5%.
The Company anticipates making substantial additional expenditures in
connection with the acquisition and operating of new golf facilities and
capital improvements to existing facilities. Golf center opening expenditures
primarily relate to projected golf center construction and opening costs,
associated marketing activities and the addition of personnel. From time to
time, the Company acquires, rather than leases, the land on which its golf
centers are located, which entails additional expenditures. Based on the
Company's experience with its existing golf centers, the Company believes that
the cost of opening or acquiring a golf center generally will not exceed $3.5
million (exclusive of land costs). However, there can be no assurance that
golf center opening or acquisition costs will not exceed $3.5 million. Golf
center acquisition costs vary substantially depending on the location and
status of the acquired property (i.e. whether significant improvements are
necessary) and whether the Company acquires or leases the related land. Land
acquisition costs vary substantially depending on a number of factors,
including principally location. To the extent that the Company acquires any
golf courses, the Company may be required to make capital improvements to
these courses, depending again upon the location and status of the acquired
property. The cost of golf course acquisition depends, to a large extent, upon
the price of the land and may substantially exceed the anticipated cost of
golf center acquisitions.
TRENDS
The Company plans to open additional golf centers. As such additional golf
centers commence operations, total revenue should continue to increase. In
addition, the Company believes that as its currently opened golf centers
mature, revenue and operating income from such centers should increase due to
customer awareness, programs marketing the golf centers to various special
interest groups, expanding ties to the local business and golfing community,
marketing programs, and the growing popularity of golf. Such increase may be
partially offset by initial losses from pre-opening costs and initial
operating losses associated with new golf centers.
SEASONALITY
Historically, the second and third quarters accounted for a greater portion of
the Company's operating income than have first and fourth quarters of the
year. This is primarily due to an
<PAGE>
outdoor playing season limited by inclement weather. Although most of the
Company's facilities are designed to be all-weather, portions of such
facilities, such as miniature golf courses which are outdoors, tend to be
vulnerable to weather conditions. One of the Company's golf centers and one
golf course are closed during a portion of the winter. Also, golfers are less
inclined to practice when weather conditions limit their ability to play golf
on outdoor courses. The Company believes that the Company's recent expansion
into areas (Arizona, California, Georgia, Virginia, Florida and South Carolina)
where inclement weather may have to some extent less of an impact on the outdoor
playing season than in the Northeast may mitigate this seasonal pattern
somewhat. Nonetheless, this seasonal pattern, as well as the timing of new
center openings, may cause the Company's results of operations to vary
significantly from quarter to quarter. Accordingly, period-to-period comparisons
are not necessarily meaningful and should not be relied on as indicative of
future results.
INFLATION
There was no significant impact on the Company's operations as a result of
inflation during the nine months ended September 30, 1996.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS NONE
ITEM 2. CHANGE IN SECURITIES NONE
ITEM 3. DEFAULT UPON SENIOR SECURITIES NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE
ITEM 5. OTHER INFORMATION NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT 27 FINANCIAL DATA SCHEDULE
(B) REPORTS ON FORM 8-K
(1) The current report on Form 8-K, dated July 5, 1996,
reporting an acquisition under Item 5. "Other Events."
(2) The current report on Form 8-K, dated September 25, 1996,
reporting five acquisitions under Item 2. "Acquisition or
Disposition of Assets" and an acquisition under Item 5.
"Other Events."
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 19, 1996
Melville, NY
FAMILY GOLF CENTERS, INC.
(Registrant)
By: /s/ KRISHNAN P. THAMPI
-----------------------------
KRISHNAN P. THAMPI
Executive Vice President,
Chief Financial Officer,
Chief Operating Officer,
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET (UNAUDITED) AND THE CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 60,272,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,618,000
<CURRENT-ASSETS> 67,030,000
<PP&E> 91,630,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 164,221,000
<CURRENT-LIABILITIES> 18,405,000
<BONDS> 0
0
0
<COMMON> 117,000
<OTHER-SE> 135,048,000
<TOTAL-LIABILITY-AND-EQUITY> 164,221,000
<SALES> 4,634,000
<TOTAL-REVENUES> 20,868,000
<CGS> 3,043,000
<TOTAL-COSTS> 14,301,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 288,000
<INCOME-PRETAX> 7,434,000
<INCOME-TAX> 2,676,000
<INCOME-CONTINUING> 4,758,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,758,000
<EPS-PRIMARY> $0.48
<EPS-DILUTED> $0.48
</TABLE>
