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 June 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.
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(Exact name of Registrant as specified in its Charter)
Delaware 11-3223246
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 Broadhollow Road
Melville, New York 11747
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(Address of principal executive offices)
(516) 694-1666
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(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 August 12, 1996
- -------------------------------------- ---------------------------------
Common Stock, par value $.01 per share 11,602,533
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 six months ended June 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>
June 30,
1996 December 31,
(Unaudited) 1995
--------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,214,000 $23,121,000
Inventories 4,075,000 1,941,000
Prepaid expenses and other current assets (Note C) 1,390,000 999,000
--------------- ----------------
Total current assets 12,679,000 26,061,000
Property and equipment 61,797,000 33,330,000
Loan acquisition costs 220,000 234,000
Deferred tax benefit 106,000 116,000
Other assets 3,015,000 1,205,000
Excess of cost over fair value of assets acquired 662,000 636,000
-------------- -----------------
TOTAL $78,479,000 $61,582,000
============== =================
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 6,000,000 $3,044,000
Income taxes payable 491,000 569,000
Current portion of long-term obligations 8,369,000 1,850,000
-------------- -----------------
Total current liabilities 14,860,000 6,463,000
Long-term obligations (less current portion) 8,667,000 6,343,000
Deferred rent 158,000 116,000
Other liabilities 193,000 272,000
-------------- ----------------
Total liabilities 23,878,000 12,194,000
-------------- ----------------
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, 8,598,025and 8,318,045 shares outstanding
at June 30, 1996 and December 31, 1995, respectively 86,000 83,000
Additional paid-in capital 51,949,000 48,347,000
Retained earnings 2,601,000 958,000
Treasury stock (35,000)
--------------- ----------------
Total stockholders' equity 54,601,000 49,388,000
--------------- -----------------
TOTAL $78,479,000 $61,582,000
============== =================
</TABLE>
The accompanying notes to financial statements are an intregal part hereof.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ -------------------------------
1996 1995 1996 1995
----------------- ---------------- ----------------- -------------
<S> <C> <C> <C> <C>
Operating revenues $7,702,000 $4,160,000 $5,011,000 $2,800,000
Merchandise sales 2,512,000 1,277,000 1,841,000 855,000
------------- -------------- --------------- -------------
Total revenue 10,214,000 5,437,000 6,852,000 3,655,000
Operating expenses 4,659,000 2,639,000 2,407,000 1,578,000
Cost of merchandise sold 1,653,000 841,000 1,196,000 545,000
Selling, general and
administrative expenses 1,488,000 578,000 845,000 226,000
------------ ------------- ------------- -------------
Income from operations 2,414,000 1,379,000 2,404,000 1,306,000
Interest expense (137,000) (241,000) (37,000) (148,000)
Other income 290,000 23,000 93,000 --
------------- ------------- ------------- -------------
Income before income taxes 2,567,000 1,161,000 2,460,000 1,158,000
Income tax expense 924,000 430,000 886,000 429,000
------------- -------------- ------------- -------------
Net income $1,643,000 $ 731,000 $1,574,000 $ 729,000
============= ============== ============= =============
Net income per share $0.19 $0.15 $0.18 $0.15
Weighted average shares outstanding 8,825,000 4,972,000 8,931,000 5,006,000
</TABLE>
The accompany 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>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1996 1995
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,643,000 $ 731,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 589,000 281,000
(Increase) in inventories (2,134,000) (1,082,000)
(Increase) in prepaid expenses and other current assets (507,000) (783,000)
Decrease in deferred tax asset 10,000 16,000
(Increase) in other assets (1,973,000) (242,000)
Increase in accounts payable and accrued expenses 1,131,000 645,000
Increase (Decrease) in income taxes payable (78,000) 414,000
Increase (Decrease) in deferred rent 42,000 (35,000)
Increase (Decrease) in other liabilities (79,000) 23,000
------------ ------------
Net cash provided by (used in) operating activities (1,356,000) (32,000)
------------ ------------
Cash flows from investing activities:
Acquisitions of fixed assets (14,363,000) (5,330,000)
(Increase) in security deposits -- (40,000)
Acquisitions of goodwill (50,000) --
------------ ------------
Net cash (used in)investing activities (14,413,000) (5,370,000)
------------ ------------
Cash flows from financing activities:
Decrease in loan acquisition costs 14,000 (132,000)
Increase in short term borrowings -- 2,057,000
Increase (Decrease) in due to officers -- (168,000)
Proceeds from bank loans -- 2,199,000
Repayment of bank loans (1,160,000) (479,000)
Proceeds from the exercise of options and warrants 1,008,000 --
------------ ------------
Net cash provided by financing activities (138,000) 3,447,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,907,000) (1,925,000)
Cash and cash equivalents - beginning of period 23,121,000 2,296,000
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 7,214,000 $ 371,000
============ ============
Supplemental and noncash disclosures:
Acquisition of property in exchange for common stock $ 2,841,000 $ 430,000
Acquisition of property subject to mortgage and notes 10,003,000 3,000,000
Issuance of Compensatory Warrants 359,000 --
Property additions accrued but not paid 1,826,000 271,000
Interest paid 355,000 309,000
Taxes paid 1,056,000 --
</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
JUNE 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:
In February and March 1996, the Company acquired a combination golf
center and 9-hole golf course in Mesa, Arizona ("Mesa"), a combination golf
center and 9-hole golf course located in Virginia Beach, Virginia ("Virginia
Beach") and a 17-acre property on which there is a driving range, a miniature
golf course, batting cages, a pro shop and a club house located in Flemington,
New Jersey ("Flemington"). The Company filed a Form 8-K, dated
February 28, 1996, under Item 5. Other Events, with respect to the
acquisition of Mesa. The Company filed a Form 8-K,
<PAGE>
dated March 6, 1996, under Item 5. Other Events, with respect to the acquisition
of Virginia Beach and Flemington.
In April 1996, the Company acquired a 14-acre property on which there
is an existing golf recreational facility ("Yorktown Heights"). The Company
filed a Form 8-K, dated April 8, 1996, under Item 5. Other Events, with respect
to the acquisition of Yorktown Heights. The Company filed a Form 8-K/A, dated
March 6, 1996 under Item 2. Acquisition or Disposition of Assets, with respect
to the acquisitions of Virginia Beach, Flemington and Yorktown Heights.
In May, 1996, the Company acquired long-term leasehold interests in a
14-acre parcel of property in Indian River, Virginia ("Indian River") and the
related existing golf recreational facility. The Company filed a Form 8-K, dated
May 20, 1996 under Item 5. Other Events, with respect to the acquisition of
Indian River.
In June 1996, the Company consummated the purchase of four golf
recreational facilities: a 24-acre parcel of property in Fairfield, Ohio
("Cincinnati") on which there is an existing golf recreational facility; the
second is on an 18-acre parcel of property in Tucson, Arizona ("Tucson") on
which there is an existing golf recreational facility; the third is on 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
the fourth is 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. The Company filed a Form 8-K, dated June 7, 1996 under Item
2. Acquisition or Disposition of Assets, with respect to the four aforementioned
acquisitions.
In July 1996, the Company acquired 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. The Company filed a Form 8-K, dated
July 5, 1996, under Item 5. Other Events, with respect to such acquisition.
The Company acquired the Mesa, Arizona, the Virginia Beach, Virginia,
the Indian River, Virginia, the Yorktown Heights, New York, the Flemington,
New Jersey, the Tucson, Arizona, the Fairfield, Ohio, the St. Louis, Missouri,
the West Palm Beach, Florida, and the San Jose, California golf facilities for
the aggregate purchase price of approximately $21.2 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 acquistion), notes or
assumption of liabilities, or a combination thereof.
<PAGE>
Had the acquisitions of Virginia Beach, Flemington, Yorktown Heights,
Indian River, Cincinnati, Tucson, St. Louis, West Palm Beach and San Jose been
made on January 1, 1996 (unaudited) pro forma sales, earnings and earnings per
share would have been $11.4 million, $1.3 million and $0.14 million respectively
for the six months ended June 30, 1996. The operations of Mesa were not material
to the operations of the Company.
Had the acquisitions of Greenville, Queensbury, Richmond, Alpharetta,
Valley View, TPT, Virginia Beach, Flemington, Yorktown, Indian River,
Cincinnati, Tucson, St. Louis, West Palm Beach, and San Jose been made on
January 1, 1995 (unaudited) pro forma sales, earnings (loss) and earnings (loss)
per share would have been $19.7 million, ($579,000) and ($0.10) respectively for
the year ended December 31, 1995. The operations of Duluth and Mesa were not
material to the operations of the Company.
(NOTE E) SUBSEQUENT EVENTS
Subsequent to June 30, 1996, the Company completed a public offering
of 3,000,000 shares of common stock. The net proceeds to the company were
approximately $75,000,000.
<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. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors" in the Company's Registration Statement on Form SB-2, as
amended, dated July 2, 1996, filed with the Securities and Exchange Commission.
GENERAL
Family Golf Centers, Inc. operates golf-related recreational centers and one
golf club. 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 club includes an 18-hole
championship course, a pro shop, a driving range, two restaurants and complete
banquet facilities.
As of June 30, 1996, the Company owns, leases or manages 24 golf facilities
(comprised of 17 golf centers and seven combination golf center and golf
course facilities located in ten 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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 THREE MONTHS ENDED JUNE 30
------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues 75.4% 76.5% 73.1% 76.6%
Merchandise sales 24.6 23.5 26.9 23.4
Total revenue 100.0 100.0 100.0 100.0
Operating expenses 60.5 63.4 48.0 56.4
Cost of merchandise sold 65.8 65.9 65.0 63.7
Selling, general and
admin. expenses 14.6 10.6 12.3 6.2
Income from operations 23.6 25.4 35.1 35.7
Interest expense 1.3 4.4 0.5 4.0
Other income 2.8 0.4 1.4 --
Income before income taxes 25.1 21.4 35.9 31.7
Income tax expense 9.0 7.9 12.9 11.8
Net income 16.1 13.5 23.0 19.9
</TABLE>
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Results for the six months ended June 30, 1996 reflect the operations of nine
golf centers for the full period, operations of three golf centers for
approximately five months, operations of one golf center for approximately
four months, operations of two golf centers for about three months, operations
of three golf centers for two months and of six golf centers for one month
or less. Results for the period ended June 30, 1995 reflect the operations of
the three golf centers for the full period, operations of the one golf center
(which was undergoing renovation) for approximately four months, operations of
two golf centers for approximately half of the period and operations of two
golf centers for 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 six months ended June 30, 1996 was $10.2 million as
compared to $5.4 million for the same period in 1995, an increase of $4.8
million (87.9%). The overall increase in revenue is 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 six months ended June 30, 1996 and 1995 (Farmingdale,
Wayne, Douglaston, Elmsford, Utica and Syracuse) increased 7.9% to $5.1 million
in the 1996 period from $4.7 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 $7.7 million for the six months ended June 30, 1996, as compared to $4.2
million for the comparable 1995 period, an increase of $3.5 million (85.1%).
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 $2.5 million for the six months
ended June 30, 1996 as compared to $1.3 million for the comparable 1995
period, an increase of $1.2 million (96.7%). 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 $4.7 million (60.5% of
operating revenue) in the 1996 period from $2.6 million (63.4% of operating
revenue) in the 1995 period, an increase of $2.1 million (76.5%). 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 60.5% in 1996 from
63.4% in 1995 primarily due to the increase in revenues and lower
corresponding incremental increases in certain fixed costs, such as rent.
The cost of merchandise sold increased to $1.6 million (65.8% of merchandise
sales) in the 1996 period from $0.8 million (65.9% of merchandise sales) in
the comparable 1995 period. The overall increase in this cost of $0.8 million
(96.6%) was primarily due to the higher level of merchandise sales.
<PAGE>
Selling , general and administrative expenses for the six months ended June
30, 1996 amounted to $1.5 million (14.6% of total revenue) compared to $0.6
million (10.6% of total revenue) in the comparable 1995 period, an increase of
$0.9 million (157.4%), primarily due to the expenses associated with operating
additional golf centers.
Interest expense decreased to $137,000 for the six months ended June 30, 1996
from $241,000 in the comparable 1995 period. Other income, primarily interest
income, increased to $290,000 in the 1996 period from $23,000 in the 1995
period. The decrease in interest expense and the increase in interest income
are attributable to the receipt and use of the proceeds from the Secondary
Offering in December, 1995.
The Company had income before income taxes for the six months ended June 30,
1996 of $2.6 million as compared to income of $1.2 million in the comparable
1995 period. Net income for the six months ended June 30, 1996 amounted to
$1.6 million as compared to $0.7 million for the comparable 1995 period.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Results for the three months ended June 30, 1996 reflect the operations of
thirteen golf centers for the full period, operations of one golf center for two
months and of six golf centers for one month or less. Four golf centers were
undergoing renovation for most of this period. Results for the period ended
June 30, 1995 reflect the operations of the five golf centers for the full
period, operations of the one golf center (which was undergoing renovation) for
approximately one month, operations of two 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 June 30, 1996 was $6.9 million as
compared to $3.7 million for the same period in 1995, an increase of $3.2
million (87.5%). The overall increase in revenue is primarily attributable to
having additional golf centers in operation during the 1996 period. Total
revenue for the six golf centers operating for the three months ended June 30,
1996 and 1995 (Farmingdale, Wayne, Douglaston, Elmsford, Utica and Syracuse)
increased 14.9% to $3.4 million in the 1996 period from $3.0 million in the
1995 period. The increase in revenues for these six golf centers is primarily
due to stronger merchandise and golf instruction sales.
Operating revenues, consisting of all sales except merchandise sales, amounted
to $5.0 million for the three months ended June 30, 1996, as compared to $2.8
million for the comparable 1995 period, an increase of $2.2 million (79.0%).
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 $1.8 million for the three months
ended June 30, 1996 as compared to $0.8 million for the comparable 1995
period, an increase of $1.0 million (115.3%). 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 $2.4 million (48.0 % of
operating revenue) in the 1996 period from $1.6 million (56.4% of operating
revenue) in the 1995 period, an increase of $0.8 million (52.5%). 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
<PAGE>
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 $1.2 million (65.0% of merchandise
sales) in the 1996 period from $0.5 million (63.7% of merchandise sales) in
the comparable 1995 period. The overall increase in this cost of $0.7 million
(119.4%) was primarily due to the higher level of merchandise sales. The
increase in this cost as a percentage of merchandise sales was due to a change
in the product mix.
Selling, general and administrative expenses for the three months ended June
30, 1996 amounted to $845,000 (12.3% of total revenue) compared to $226,000
(6.2% of total revenue) in the comparable 1995 period primarily due to
expenses associated with operating additional golf centers.
Interest expense decreased to $37,000 for the three months ended June 30, 1996
from $148,000 in the comparable 1995 period. Other income, primarily interest
income, increased to $93,000 in the 1996 period. The decrease in interest
expense and the increase in interest income, is attributable to the receipt
and use of proceeds from the public offering in December 1995.
The Company had income before income taxes for the three months ended June 30,
1996 of $2.5 million as compared to income of $1.2 million in the comparable
1995 period. Net income for the three months ended June 30, 1996 amounted to
$1.6 million as compared to $0.7 million for the comparable 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had a working capital deficiency of $2.3 million
compared to a working capital of $20.6 million at December 31, 1995, which
decrease was principally due to the acquisition of golf facilities and capital
expenditures during the six month ended June 30, 1996.
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 June 30, 1996 of $ 17.0 million
bears interest at fixed and variable rates currently ranging from 5.25% to
10.5%. On November 15, 1995, the Company entered into an agreement with Taipei
Bank, New York Agency for a construction loan of up to $1.7 million for the
development of the golf facility at Henrietta, New York. This loan bears
interest at the prime rate plus 2% per annum, and is due May 14, 1997. As of
June 30, 1996, the Company had drawn down an aggregate amount of $1.7 million
under this loan. The indebtedness was fully satisfied on August 1, 1996.
<PAGE>
As of June 30, 1996, the Company had $6.6 million outstanding under a line
of credit with Chemical Bank. Amounts outstanding under the credit line bear
interest at prime plus 1.5%. The outstanding line was fully satisfied on
July 9, 1996.
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.
<PAGE>
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 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 and Florida) 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 three months ended June 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
On June 7, 1996, the Company held its Annual Meeting
of Stockholders. At such meeting Dominic Chang, Krishan P. Thampi,
James Ganley, Jimmy C.M. Hsu and Yupin Wang were elected to
continue to serve as directors of the Company by a plurality of
the votes cast in person or by proxy at the Meeting. In addition,
the following matters were voted upon by the Stockholders:
(i) there were 4,871,024 votes cast for, 683,031 votes cast
against and 600 abstentions with respect to the amending and
restating of the Company's Certificate of Incorporation to increase
the authorized capital stock of the Company from 11,000,000 to
52,000,000, of which 2,000,000 shares shall be designated
"Preferred Stock" and 50,000,000 shall be designated "Common Stock";
(ii) there were 5,401,443 votes cast for, 152,150 votes cast against
and 1,062 abstentions with respect to the adoption of the Company's
1996 Stock Incentive Plan; and (iii) there were 5,663,405 votes
cast for, 400 votes cast against and 450 abstentions with respect
to the ratification of the appointment of Richard A. Eisner &
Company, LLP, certified public accountants, as auditors of the
Company for the fiscal year ending December 31, 1996.
ITEM 5. OTHER INFORMATION NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K NONE
(A) EXHIBITS
EXHIBIT 27 FINANCIAL DATA SCHEDULE
(B) REPORTS ON FORM 8-K
SEE NOTE D - ACQUISITION IN THE NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS IN PART I - FINANCIAL
INFORMATION OF THE FORM 10-QSB
<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: August 14, 1996
Melville, NY
FAMILY GOLF CENTERS, INC.
(Registrant)
By:________________________
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 SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,214,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,074,000
<CURRENT-ASSETS> 12,795,000
<PP&E> 61,797,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,479,000
<CURRENT-LIABILITIES> 6,491,000
<BONDS> 0
0
0
<COMMON> 86,000
<OTHER-SE> 54,515,000
<TOTAL-LIABILITY-AND-EQUITY> 78,479,000
<SALES> 2,512,000
<TOTAL-REVENUES> 10,214,000
<CGS> 1,653,000
<TOTAL-COSTS> 6,147,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137,000
<INCOME-PRETAX> 2,567,000
<INCOME-TAX> 924,000
<INCOME-CONTINUING> 1,643,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,643,000
<EPS-PRIMARY> $0.19
<EPS-DILUTED> $0.19
</TABLE>
