<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(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, 1999
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)
538 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 August 11, 1999
- -------------------------------------- ---------------------------------
Common Stock, par value $.01 per share 26,038,236
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X].
<PAGE>
ITEM 1.
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, 1999
are not necessarily indicative of the results to be expected for the full year.
-2-
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,590 $ 3,878
Restricted cash deposits 314 314
Short-term investments 331 17,374
Inventories 28,401 26,220
Prepaid expenses and other current assets 16,086 10,277
--------- ---------
Total current assets 48,722 58,063
Property, plant and equipment net 486,177 444,280
Loan acquisition costs (net) 6,603 6,269
Other assets 9,065 11,201
Excess of cost over fair value of assets acquired 51,424 52,227
--------- ---------
TOTAL $ 601,991 $ 572,040
========= =========
LIABILITIES
Current liabilities:
Accounts payable, accrued expenses and other current $ 27,106 $ 21,408
liabilities
Income taxes payable 354 2,590
Current portion of long-term obligations 273,994 3,950
--------- ---------
Total current liabilities 301,454 27,948
--------- ---------
Long-term obligations (less current portion) 130,621
Convertible subordinated notes 115,000
Deferred rent 1,472 1,193
Deferred tax liability 3,217 3,217
Other liabilities 6,465 4,738
--------- ---------
Total liabilities 312,608 282,717
--------- ---------
Minority interest 40 40
--------- ---------
Commitments, contingencies and other matters
STOCKHOLDERS' EQUITY
Preferred stock - authorized 2,000,000 shares,
none outstanding
Common stock - authorized 50,000,000 shares,
$.01 par value; 26,037,000 and
26,117,000 shares outstanding at
June 30, 1999 and December 31, 1998 260 261
Additional paid-in capital 289,361 292,040
Retained earnings 789 1,561
Accumulated other comprehensive income:
Foreign currency translation adjustment (548) (667)
Unearned compensation (472) (3,865)
Treasury shares (47) (47)
--------- ---------
Total stockholders' equity 289,343 289,283
--------- ---------
TOTAL $ 601,991 $ 572,040
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
-3-
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except par value)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues $ 62,847 $ 43,051 $ 35,518 $ 26,314
Merchandise sales 19,800 13,070 11,980 8,310
-------- -------- -------- --------
Total revenue 82,647 56,121 47,498 34,624
Operating expenses 55,780 29,285 33,578 15,534
Cost of merchandise sold 13,719 8,909 8,373 5,669
Selling, general and
administrative expenses 7,581 6,673 3,989 3,011
Merger, acquisition, integration and other related
charges -- 7,752 -- 7,752
-------- -------- -------- --------
Income from operations 5,567 3,502 1,558 2,658
Interest expense (7,326) (5,375) (4,171) (2,746)
Other income 494 1,190 116 234
-------- -------- -------- --------
Income (loss) before income taxes and cumulative
effect of a change in accounting principle (1,265) (683) (2,497) 146
Income tax expense (493) 4,887 (973) 4,027
-------- -------- -------- --------
Net income (loss) before cumulative effect of a
change in accounting principle $ (772) $ (5,570) (1,524) $ (3,881)
Cumulative effect of a change in accounting
principle
Pre-opening expenses, net of tax effect -- (2035) -- --
-------- -------- -------- --------
Net income (loss) (772) (7,605) (1,524) (3,881)
======== ======== ======== ========
Basic and diluted earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle (0.03) (0.26) (0.06) (0.19)
Cumulative effect of change in accounting principle (0.10)
-------- -------- -------- --------
Net income (loss) per share (0.03) (0.36) (0.06) (0.19)
======== ======== ======== ========
Weighted average shares outstanding - Basic 26,056 20, 844 26,088 20,856
Effect of dilutive securities -- -- -- --
-------- -------- -------- --------
Weighted average shares outstanding - Dilutive 26,056 20,844 26,088 20,856
======== ======== ======== ========
</TABLE>
The accompany notes to financial statements are an integral part hereof.
-4-
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (772) $ (7,605)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,396 5,156
Non-cash merger, acquisition, integration and other related charges 2,969
Non-cash operating expenses 193 2,234
(Increase) in inventories (2,181) (7,874)
(Increase) in prepaid expenses and other current assets (5,809) (4,405)
(Increase) in prepaid income taxes (82)
(Increase) decrease in other assets 2,136 (2,519)
Increase in accounts payable and accrued expenses 2,214 7,982
Increase (decrease) in other liabilities 2,006 (2)
(Decrease) in income taxes payable (2,236) (2,626)
-------- --------
Net cash (used in) provided by operating activities 4,947 (6,772)
-------- --------
Cash flows from investing activities:
Acquisitions of property and equipment (46,365) (63,720)
Acquisitions of goodwill (12,498)
Restricted cash deposits 65
Net proceeds from sale of short-term investments 17,043 55,839
-------- --------
Net cash (used in) investing activities (29,322) (20,314)
-------- --------
Cash flows from financing activities:
(Increase) in loan acquisition costs (334) (299)
Proceeds from loans, banks and others 37,551 39,375
Repayment of bank loans (13,130) (16,718)
Net proceeds from issuance of common stock 38
Proceeds from the exercise of options and warrants 2,741
-------- --------
Net cash provided by financing activities 24,087 25,137
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (288) (1,949)
Cash and cash equivalents - beginning of period 3,878 6,042
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,590 $ 4,093
======== ========
Supplemental and noncash disclosures:
Acquisition of property in exchange for common stock $ 522 $ 6,403
Acquisition of goodwill in exchange for mortgages, notes,
and common stock 3,953
Acquisition of property subject to loans payable 1,012 6,642
Issuance of stock for services rendered 53
Property additions accrued but not paid 4,496 15
Interest paid 4,564 3,228
Taxes paid 3,048 7,641
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
-5-
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(NOTE A) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] THE COMPANY:
The Company (as defined below), designs, constructs, operates, and manages 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, miniature
golf course, snack bar and electronic video games. The Company also operates ice
rinks and Family Sports Supercenters consisting of ice rinks and other indoor
recreational activities.
Through an agreement with Golden Bear Golf, Inc. ("GBGI"), the Company is
licensed to use the name "Golden Bear" for certain of the Company's golf
centers. In July 1998, the Company acquired 14 golf centers from Golden Bear
Golf, Inc. and the original license agreement was terminated and replaced
with a new license agreement pursuant to which the Company has agreed to operate
its seven existing "Golden Bear" Golf Centers and the 14 acquired golf centers
under the name "Golden Bear".
[2] PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Family Golf
Centers, Inc. and its wholly owned and majority owned subsidiaries herein
referred to as "FGCI" and "Company". All significant intercompany transactions
and accounts have been eliminated. Minority interests in the Company's
operations were insignificant.
On June 30, 1998, FGCI issued 1,384,735 shares of its common stock in exchange
for all outstanding common stock, options and warrants of Eagle Quest Golf
Centers, Inc. ("Eagle Quest"). Eagle Quest, which was incorporated in British
Columbia, Canada on February 5, 1996, acquires, develops and operates golf
practice centers incorporating a driving range, a retail golf shop, and a
learning academy and, in some locations, a short/executive course. This
exchange, which qualified as a tax-free reorganization for federal income tax
purposes, has been accounted for as a pooling-of-interests combination and,
accordingly, the consolidated financial statements for periods prior to the
combination have been restated to include the combined results of operations,
financial position and cash flows of Eagle Quest as though it had been a part of
the Company since inception. Under the pooling of interests method, the assets
and liabilities of Eagle Quest are carried at their historical amounts and the
historical operating results of Eagle Quest are combined with those of Family
Golf Centers, Inc. for all periods presented.
-6-
<PAGE>
[3] CHANGE IN ACCOUNTING PRINCIPLE
On April 3, 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, Reporting on the Costs of Start-Up Activities (SOP
98-5). In the third quarter of 1998, the Company adopted SOP 98-5 effective as
of January 1, 1998. The impact of this change in accounting principle on the
Company relates to the treatment of pre-opening costs associated with newly
developed facilities. SOP 98-5 requires that these costs be expensed as incurred
as compared to the Company's previous policy of capitalizing these costs and
amortizing them over a twelve month period.
(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) ACQUISITIONS:
During the first quarter of 1999, the Company acquired three golf facilities
located in Lodi, California ("Lodi"), El Cajon, California ("El Cajon"), and
Portland, Oregon ("Portland").
These acquisitions, and all other acquisitions made by the Company in 1998,
other than Eagle Quest, have been accounted for under the purchase method of
accounting and, accordingly, the results of operations have been included from
the date of acquisition.
The following unaudited pro forma information assumes that certain acquisitions
in 1998 had taken place at the beginning of 1998. The operations of Lodi, El
Cajon and Portland were not material to the operations of the Company for the
period ended March 31, 1999.
DECEMBER 31,
---------------
1998
---------------
Total revenue 144,598
Net (loss) (2,999)
Net (loss) per share - basic (.14)
- diluted (.14)
-7-
<PAGE>
(NOTE D) BUSINESS SEGMENT INFORMATION:
Information concerning operations by industry segment is as follows
(dollars in thousands):
GOLF NON-GOLF
OPERATIONS OPERATIONS CONSOLIDATED
Six months ended June 30, 1999
Total revenue $ 64,700 $ 17,947 $ 82,647
Operating income 4,000 1,567 5,567
Depreciation and amortization 7,227 2,169 9,396
Identifiable assets 476,459 125,532 601,991
Capital expenditures 43,729 8,785 52,514
Six months ended June 30, 1998:
Total revenue 46,729 9,392 56,121
Operating income 1,521 1,981 3,502
Depreciation & amortization 3,807 1,349 5,156
Identifiable Assets 344,548 61,492 406,040
Capital expenditures 109,695 7,602 117,297
Three months ended June 30, 1999:
Total revenue $ 40,239 $ 7,259 $ 47,498
Operating income 2,096 (538) 1,558
Depreciation and amortization 4,552 1,092 5,644
Three months ended June 30, 1998:
Total revenue 30,176 4,448 34,624
Operating income 1,519 1,139 2,658
Depreciation and amortization 2,309 721 3,030
Non-golf operations relate to complementary sports and family entertainment
facilities which includes ice rink facilities and other indoor family sports and
amusements.
(NOTE E) INDEBTEDNESS:
On December 2, 1998, and as amended, the Company replaced the existing $44.3
million Credit Facility with a syndicated $100,000,000 secured two (2) year
revolving Credit Facility converting to a four (4) year term loan. Chase serves
as the administrative agent for this new credit facility. The new Credit
Facility is secured by the pledge of the stock of most of the Company's
subsidiaries and such subsidiaries also guarantee such obligations. Interest
under the new Credit Facility was to be either (i) the greater of the bank's
prime rate or the federal funds rate plus .5% per annum plus a margin of .25%
per annum or (ii) the LIBOR rate, plus between 1% and 3.0% per annum (depending
on the Company's ratio of Consolidated Funded Debt to Consolidated EBITDA (as
such terms are defined in the credit agreement).
During the first half of 1999, the Company borrowed an additional $30.5 million
under the Credit Facility, $10.5 million of which was used to repay all amounts
outstanding under the mortgage loan with ORIX USA Corporation. As of June 30,
1999, $98.2 million was outstanding under the Credit Facility.
On August 12, 1999 the Company was granted, for a $250,000 fee, a temporary
waiver of certain of the financial covenants under the Credit Facility. This
waiver expires on October 5, 1999 and is subject to earlier expiration under
certain circumstances. Under the waiver, the interest rate for amounts
outstanding under the Credit Facility was adjusted to prime plus 2%. The Company
is currently engaged in discussions with Chase and the bank syndicate to
restructure the Credit Facility and to obtain additional liquidity. There can,
however, be no assurance that such a restructuring will be achieved or that any
request for additional liquidity will be obtained. If such a restructuring is
unsuccessful the Company will be in default under the Credit Facility which
default would trigger a cross-default under substantially all of the Company's
other debt instruments. In this event, the Company would likely file a voluntary
petition seeking protection under the bankruptcy laws.
In June 1999, the Company entered into a loan agreement with ChinaTrust Bank
(U.S.A.) providing for up to an $8 million term loan, secured by a mortgage on
two of the Company's existing properties. The loan matures in
-8-
<PAGE>
July, 2005 and bears interest at the prime rate less 1.0% during the draw down
period and at the prime rate during the pay down period. As of June 30, 1999,
the Company had drawn down $6.0 million available under the loan.
In June 1999, the Company entered into two sale leaseback transactions with
Realty Income Corp. ("RIC"). The Company sold the real property located at its
Flanders, New Jersey site and Alpharetta, Georgia site for $2.2 million and $3.3
million, respectively. Simultaneously with such sales, the Company entered into
a 25 year lease for each site with five 5-year renewal options with an annual
rent equal to 10.8% of the sale proceeds, which rent escalates every two years
based on an increase in the consumer price index.
On June 30, 1999 the Company entered into a Modification Agreement with
NationsBank N.A. whereby in exchange for a $2 million payment of principal and a
$40,000 extension fee, NationsBank agreed to extend the maturity of its four
secured term loans aggregating $6.1 million until August 31, 1999. On August 12,
1999, the Company again entered into a Modification Agreement with NationsBank
whereby in exchange for an increase in the interest rate, to the prime rate plus
2% and a $15,000 extension fee, NationsBank agreed to extend the maturity of its
four secured term loans to October 5, 1999. The Company currently does not have
the capital necessary to repay this indebtedness on October 5, 1999 when such
principal amount is due and intends to restructure the loans with NationsBank
or, failing such restructuring, to obtain funding from the lenders under the
Credit facility to satisfy the NationsBank obligation. There can, however, be no
assurance that such a restructuring will be achieved or that any request for
additional liquidity to satisfy NationsBank will be obtained. In such event,
NationsBank would have the right to declare a default under the loan agreement,
which default would trigger a cross-default under the Company's other debt
instruments. In this event, the Company would likely file a voluntary petition
seeking protection under the bankruptcy laws.
On July 29, 1999, the Company obtained a waiver from Fleet Bank whereby in
exchange for the Company transferring $225,000 into a cash reserve account and
paying a $6,000 waiver fee, Fleet Bank agreed to waive a financial covenant
applicable to the performance of the Company's ice facility in Simsbury,
Connecticut. The Company also agreed that within 60 days of the waiver, it would
work toward a mutually satisfactory loan restructuring agreement, which, among
other things, would include a reduction in the $2.8 million principal amount
outstanding to Fleet. Depending on the principal reduction amount required by
Fleet in such loan restructuring agreement, it is possible that the Company will
not have the capital necessary to make such payment. In such event, Fleet would
have the right to declare a default under the loan agreement which default would
trigger a cross-default under the Company's other debt instruments. In this
event, the Company would likely file a voluntary petition seeking protection
under the bankruptcy laws.
(NOTE F) RESTRICTED STOCK:
In February 1999, a restricted stock award of common stock granted to certain
officers of the Company was terminated.
-9-
<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 the
Report. This Report contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements appear in a number of places in the Report and include
statements regarding the intent, belief or current expectations of the Company
with respect to (i) the Company's acquisition and financing plans, (ii) trends
affecting the Company's financial condition or results of operations, (iii) the
impact of competition and (iv) the expansion and integration of certain
operations. The Company cautions that forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward-looking
statements as a result of various factors. The information contained in this
Report, including, without limitation, the information under "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the information contained in the Company's Annual Report on
Form 10-K for the year ended 1998 under "Risk Factors" and "Business" identifies
important factors that could cause or contribute to such differences.
GENERAL
The Company operates golf centers, ice rink facilities and family entertainment
centers in North America. Our golf centers are designed to provide a wide
variety of practice opportunities, including facilities for driving, chipping,
putting, pitching and sand play. In addition, our golf centers typically
offer full-line pro shops, golf lessons instructed by PGA-certified golf
professionals and other amenities such as miniature golf and snack-bars to
encourage family participation. From 1992 through 1998, we expanded rapidly,
growing from one facility in 1992 to 121 facilities as of June 30, 1999. As a
result of our performance over the last two quarters (and our liquidity
constraints, as described below), we are not likely continue to expand over the
near term but instead will focus on assimilating and strengthening our existing
operations.
Our golf facilities have opened at varying times over the past several years. As
a result of changes in the number of golf facilities open from period to period,
the seasonality of operations, the timing of acquisitions, the completion of
various debt and equity financings and the expansion of our business to include
ice rinks and Family Sports Supercenters, results of operations for any
particular period may not be indicative of the results of operations in the
future.
Most of our revenues from the golf centers are derived from selling tokens and
debit cards for use in automated range-ball dispensing machines, pro shop
merchandise sales, charging for rounds of miniature golf, golf lessons and
management fees. We also derive revenues at our golf courses from golf club
membership fees, fees for rounds of golf and golf lessons. We derive revenues
from our ice rink facilities by renting rinks to hockey leagues, charging
admissions to our skating facilities for public skating, providing lessons
through USFSA-certified instructors, skate equipment rental, and from pro-shop
merchandise and food beverage sales and video games. We derive revenues from our
Family Sports Supercenters from substantially the same sources as described
above. As of June 30 1999, we operated or managed 26 family entertainment and
ice rink facilities.
EAGLE QUEST MERGER
On June 30, 1998, we completed the acquisition of Eagle Quest for 1,384,735
shares of our common stock for all of the outstanding common stock, options and
warrants of Eagle Quest. This transaction was accounted for as a
pooling-of-interests business combination. Eagle Quest was the second largest
operator of golf driving ranges in North America, with 18 golf centers in Texas,
Washington and Canada. Accordingly, financial statements for prior periods have
been restated to include the accounts of Eagle Quest. All amounts discussed
herein include the consolidated results of Family Golf Centers, Inc. and its
subsidiaries, including Eagle Quest.
-10-
<PAGE>
The differences between our previously reported historical results and the
restated results discussed below are due to the combination of Eagle Quest's
revenues, expenses and losses with our historical revenues, expenses and income
of the Company. Our restated results of operations are not necessarily
indicative of the results of operations of the consolidated entity in the
future.
-11-
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected operations data 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:
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
Operating revenues 76.0% 76.7% 74.8% 76.0%
Merchandise sales 24.0 23.3 25.2 24.0
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
Operating expenses 88.8 68.0 94.5 59.0
Cost of merchandise sold 69.3 68.2 69.9 68.2
Selling, general and
admin. expenses 9.2 11.9 8.4 8.7
Merger, acquisition,
integration and other
related charges -- 13.8 -- 22.4
Income from operations 6.7 6.2 3.3 7.7
Interest expense 8.9 9.6 8.8 4.6
Other income 0.6 2.1 0.2 0.7
Income (loss) before income
taxes (1.5) (1.2) (5.0) 0.4
Income tax expense (benefit) (0.6) 8.7 (2.1) 11.6
Net income (loss) (1.0) (10.0) (3.2) (11.2)
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Total revenue for the six months ended June 30, 1999 was $82.6 million as
compared to $56.1 million for the same period in 1998, an increase of $26.5
million (47%). The overall increase in revenue was attributable to having
additional golf centers in operation during the 1999 period, as well as the
revenue generated by our ice rink and Family Sports Supercenters. Total revenue
for the 69 golf centers operating for the full six months ended June 30, 1999
and 1998 increased 1% to $39.0 million in the 1999 period from $38.4 million in
the 1998 period. Operating revenues increased by 1% to $26.6 million while
merchandise sales increased by 4% to $12.3 million. Total revenues for the 52
golf centers operated by Family Golf Centers in the 1998 and 1999 periods
increased 4%, while operating revenues for these centers increased by 3% and
merchandise sales increased by 4%. Total revenue for the 17 golf centers
operated by Eagle Quest in the 1998 period declined 11%, while operating
revenues declined 14% and merchandise sales declined by 1%.
Operating revenue, consisting of all sales except merchandise sales, amounted to
$62.8 million for the six months ended June 30, 1999, as compared to $43.1
million for the comparable 1998 period, an increase of $19.7 million (46%). The
increase in operating revenue was primarily attributable to having additional
golf centers in operation during the 1999 period, as well as the revenue
generated by our ice rinks and Family Sports Supercenters. Non-golf revenue from
our Sports Supercenters and ice rinks totaled $17.9 million for the six months
ended June 30, 1999.
-12-
<PAGE>
Merchandise sales, consisting of golf clubs, balls, bags, gloves, videos,
apparel and related accessories, amounted to $19.8 million for the six months
ended June 30, 1999 as compared to $13.1 million for the comparable 1998 period,
an increase of $6.7 million (51%). 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
facility operating costs, increased to $55.8 million (89% of operating revenue)
in the 1999 period from $29.3 million (68% of operating revenue) in the 1998
period, an increase of $26.5 million (90%). The increase in operating expenses
was primarily due to the operating costs of locations that were operated by the
Company during the 1999 period which were not owned in the 1998 period. The
increase in operating expenses as a percentage of revenues resulted from several
factors, including increased staff expense at our golf centers which was
incurred to focus on improving pro shop and lesson revenues, without achieving,
however, the expected revenue improvement; training and related expenses
incurred in connection with the implementation of our new MIS system; and the
delayed opening of several new facilities which resulted in significant expenses
without realizing the anticipated offsetting revenues.
The cost of merchandise sold increased to $13.7 million (69% of merchandise
sales) in the 1999 period from $8.9 million (68% of merchandise sales) in the
comparable 1998 period. The overall increase in the cost of merchandise sold of
$4.8 million (54%) was primarily due to the higher level of merchandise sales.
The increase in cost of merchandise sold as a percentage of merchandise sales is
primarily due to a change in product mix and an overall reduction in industry
profit margins.
Selling, general and administrative expenses for the six months ended June 30,
1999 amounted to $7.6 million (9% of total revenue) compared to $6.7 million
(12% of total revenue) in the comparable 1998 period, an increase of $900,000
(14%), primarily due to the expenses associated with opening and operating
additional golf centers. Selling, general and administrative expenses declined
to 9% of total revenue in 1999 from 12% in 1998 primarily due to the increase in
revenues and a relatively low corresponding incremental increase in certain
selling, general and administrative costs as a result of the combination of
overhead costs between Family Golf Centers Inc. and Eagle Quest.
Interest expense increased to $7.3 million for the six months ended June 30,
1999 from $5.4 in the comparable 1998 period. Other income, primarily interest
income, decreased to $494,000 in the 1999 period from $1.2 million in the 1998
period a decrease of $696,000.
Excluding the one-time merger, acquisition, integration and other related
expenses, we had a loss before income taxes of $1.3 million for the six months
ended June 30, 1999, as compared to income of $7.1 million in the comparable
1998 period. Inclusive of the one-time charges, loss before income taxes for the
six months ended June 30, 1998 was $683,000. After tax losses, excluding
one-time merger, acquisition, integration and other related expenses, for the
six months ended June 30, 1999 amounted to $772,000, as compared to $2.2 million
in the comparable 1998 period. Inclusive of the one-time charges, net loss after
taxes for the six months ended June 30, 1998 was $5.6 million.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
We acquired golf centers, ice rinks and family entertainment centers at
varying times during the year. As a result of the change in the number of golf
centers open from period to period, the comparison between the 1999 and 1998
periods may not necessarily be meaningful.
Total revenue for the three months ended June 30, 1999 was $47.5 million as
compared to $34.6 million for the same period in 1998, an increase of $12.9
million (37%). The overall increase in revenue was primarily attributable to
having additional golf facilities in operation during the 1999 period as well as
the revenue generated by our ice rinks and Family Sports Supercenters. Total
revenues for the 81 golf centers operating for the full three month period in
1998 and 1999 increased by 4% from $27.3 million in 1998 to $28.4 million in
1999. Operating revenues increased by 3% and merchandise sales increased by 8%.
The 81 golf centers consisted of 52 golf centers operated by Family Golf during
the 1998 period, 17 golf centers operated by Eagle Quest, 9 golf centers
acquired from Metro Golf in 1998 and 3 golf centers acquired from Blue Eagle
during 1998. Total revenues for the 52 Family Golf facilities increased by 5%,
operating revenues increased by 6% and merchandise sales increased by 4%. Total
revenues for the 17 Eagle Quest centers declined by 6%, operating revenues
declined by 10% and merchandise sales increased by 12% from 1998. Total revenues
for the 12 Metro Golf and Blue Eagle locations increased by 11%, operating
revenues increased by 2% and merchandise sales increased by 40%.
-13-
<PAGE>
Non-golf revenues from our Sports Supercenters and ice rinks amounted to $7.3
million in the 1999 period versus $4.4 million in 1998 due mainly to the new
Denver Supercenter and SkateNation acquisition.
Operating revenue, consisting of all sales except merchandise sales, amounted to
$35.50 million for the three months ended June 30, 1999, as compared to $26.3
million for the comparable 1998 period, an increase of $9.2 million (35%). The
increase in operating revenue was primarily attributable to having additional
golf facilities in operation during the 1999 period.
Merchandise sales, consisting of golf clubs, balls, bags, gloves, videos,
apparel and related accessories, amounted to $12.0 million for the three months
ended June 30, 1999 as compared to $8.3 million for the comparable 1998 period,
an increase of $3.7 million (45%). The increase in merchandise sales was
primarily due to the contribution of new locations and the continuing emphasis
placed by us on improving pro shop sales, improved purchasing procedures and
increased promotion.
Operating expenses, consisting of operating wages and employee costs, land rent,
depreciation of golf driving range skating and family entertainment facilities
and equipment, utilities and all other facility operating costs, increased to
$33.6 million (95% of operating revenue) in the 1999 period from $15.5 million
(59% of operating revenue) in the 1998 period, an increase of $18.1 million.
The increase in operating expenses was primarily due to having additional golf
and family entertainment centers in operation during the 1999 period. The
increase in operating expenses as a percentage of revenues resulted from several
factors, including increased staff expense at our golf centers which was
incurred to focus on improving pro shop and lesson revenues, without achieving,
however, the expected revenue improvement; training and related expenses
incurred in connection with the implementation of our new MIS system; and the
delayed opening of several new facilities which resulted in significant expenses
without realizing the anticipated offsetting revenues.
The cost of merchandise sold increased to $8.4 million (70% of merchandise
sales) in the 1999 period from $5.7 million (68% of merchandise sales) in the
comparable 1998 period. The overall increase in this cost of $2.7 million (47%)
was primarily due to the higher level of merchandise sales. The increase in cost
of merchandise sold as a percentage of merchandise sales was primarily due to
a change in product mix and a reduction in overall industry profit margins.
Selling, general and administrative expenses for the three months ended June 30,
1999 amounted to $4.0 million (8% of total revenue) compared to $3.0 million (9%
of total revenue) in the comparable 1998 period. The increase in selling,
general and administrative expenses is attributed to an increase in staff and
to expenses associated with implementing the new MIS system and advertising
expenses associated with operating additional golf centers.
Interest expense increased to $4.2 million for the three months ended June 30,
1999 from $2.7 million in the comparable 1998 period. The increase in interest
expense was due primarily to additional debt outstanding. Other income,
including interest income, decreased to $116,000 in the 1999 period as compared
to $234,000 in the 1998 period.
We had a loss before income taxes and cumulative effect in a change in
accounting principle of $2.5 million for the three months ended June 30, 1999,
as compared to income of $146,000 in the comparable 1998 period.
-14-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, we had cash, cash equivalents and short-term investments of $
4.2 million compared to $21.6 million at December 31, 1998. The decrease was due
principally to construction costs of approximately $46.3 million and the funding
of operating losses at certain underperforming sites, partially offset by the
proceeds of certain financing transactions described below.
The cash requirements of funding our construction expenditures and
acquisition costs have historically exceeded cash flow from operations. In the
past, we have satisfied our capital needs primarily through debt and
equity financing. Although we continually explore raising additional
capital through such means, equity financing would be extremely dilutive at our
current stock price ($1.19 per share as of August 13, 1999) and debt financing
may be difficult to obtain unless and until we restructure the debt under the
Credit Facility as well as our obligations to NationsBank and Fleet Bank.
Our outstanding indebtedness as of June 30, 1999 including the Notes (defined
below) and other indebtedness of $274 million, bears interest at fixed and
variable rates currently ranging from 5.3% to 15.0% per annum.
As a result of our performance in the second quarter of 1999, we were not in
compliance with several covenants under our $100 million Credit Facility,
including all the financial covenants which are based on earnings before
interest, taxes, depreciation and amortization. In exchange for a fee of
$250,000 and an increase in the interest rate applicable to all amounts
outstanding under the Credit Facility to the prime rate plus 2%, we have
received a waiver, expiring October 5,1999, with respect to such non-compliance
and we are currently engaged in discussions to (i) renegotiate the covenants in
the Credit Facility, and (ii) obtain additional liquidity from the banks which
are a party to such Credit Facility or third parties. There can, however, be no
assurances that we will be successful in such negotiation or that we will be
able to meet any amended financial covenants prospectively. Until the Credit
Facility is renegotiated, $98.2 million of principal outstanding under the
Credit Facility as well as substantially all other debt for borrowed money which
would otherwise be classified as long-term debt has been classified as a current
liability. If the covenants are successfully renegotiated, such indebtedness
will be reclassified. If such covenants are not successfully renegotiated, the
payment of all $98.2 million could be declared immediately due and payable. We
do not currently have sufficient cash reserves to repay all amounts outstanding
under the Credit Facility. In addition, if such covenants are not successfully
renegotiated, payment of substantially all of our other indebtedness could be
accelerated as well, in which case we would be unable to make such payments. In
this event, we would likely file a voluntary petition seeking protection under
the bankruptcy laws.
We also do not currently have adequate working capital to meet all of our
commitments. In addition to interest payments and other debt service over the
next 12 months of approximately $23 million, we are required to make a $6.1
million payment to NationsBank on October 5, 1999 and a payment of up to $2.8
million to Fleet Bank by September 29, 1999. We do not currently have sufficient
liquidity to make such $6.1 million payment due October 5, 1999 nor the payment
of up to $2.8 million to Fleet Bank by September 29, 1999. We also plan
approximately $25 million of expenditures over the next six months for
construction of facilities and capital improvements to and maintenance for our
other facilities. We are planning to meet our capital deficiency by seeking to
defer all or a portion of the payments due to Fleet Bank and NationsBank and
seeking additional liquidity from the lenders under the Credit Facility and
seeking construction financing or other debt financing to meet our needs. There
can be no assurance that we will be successful in obtaining such deferment or
such financing or as to the cost or terms if we do obtain them. We are also
exploring certain strategic alternatives, as described below, including
generating some capital through the sale of certain assets. Under the Credit
Facility, however, the proceeds of asset sales are required to be applied to the
repayment of indebtedness and, unless such provisions were waived or modified,
any such proceeds would not be available as working capital. If we are unable to
obtain additional working capital or a deferment of the $6.1 million payment due
to Nationsbank on October 5, 1999 and the payment of up to $2.8 million which
may be due to Fleet Bank on September 29, 1999, we will explore a variety of
other options including, but not limited to (i) other sources of financing, (ii)
halting construction projects currently underway, (iii) deferring capital
improvements and maintenance, (iv) closing certain operations (v) undertaking
other measures to conserve our working capital and (vi) filing a petition
seeking protection under the bankruptcy laws. Such measures could, and any
default would, have a material adverse impact on us.
-15-
<PAGE>
During the first half of 1999, the Company borrowed an additional $30.5 million
under the Credit Facility, $10.5 million of which was used to repay all amounts
outstanding under the mortgage loan with ORIX USA Corporation. As of June 30,
1999, $98.2 million was outstanding under the Credit Facility.
On August 12, 1999, we were granted, for a $250,000 fee, a temporary waiver of
certain of the financial covenants under the Credit Facility. This waiver
expires on October 5, 1999 and is subject to earlier expiration under certain
circumstances. Under the waiver, the interest rate for amounts outstanding under
the Credit Facility was adjusted to the prime rate plus 2%. We are currently
engaged in discussions with Chase and the bank syndicate to restructure the
Credit Facility and to obtain additional liquidity. There can, however, be no
assurance that such a restructuring will be achieved or that any request for
additional liquidity will be obtained. If such a restructuring is unsuccessful,
we will be in default under the Credit Facility which default would trigger a
cross default under substantially all of the Company's other debt instruments.
In this event, the Company would likely file a voluntary petition seeking
protection under the bankruptcy laws.
In June 1999, we entered into a loan agreement with ChinaTrust Bank (U.S.A.)
providing for up to an $8 million term loan, secured by a mortgage on two of our
existing properties. The loan matures in July, 2005 and bears interest at the
prime rate less 1.0% during the draw down period and at the prime rate during
the pay down period. As of June 30, 1999, we had drawn down $6.0 million
available under the loan.
In June 1999, we entered into two sale leaseback transactions with Realty Income
Corp. ("RIC"). We sold the real property located at our Flanders, New Jersey
site and Alpharetta, Georgia site for $2.2 million and $3.3 million,
respectively. Simultaneously with such sales, we entered into a 25 year lease
with five 5-year renewal options with an annual rent equal to 10.8% of the sales
proceeds, which rent escalates every two years based on an increase in the
consumer price index.
On June 30, 1999, we entered into a Modification Agreement with NationsBank N.A.
whereby in exchange for a $2 million payment of principal and a $40,000
extension fee, NationsBank agreed to extend the maturity of its four secured
term loans aggregating $6.1 million until August 31, 1999. On August 12, 1999,
the Company again entered into a Modification Agreement with NationsBank whereby
in exchange for an increase in the interest rate, to the prime rate plus 2% and
a $15,000 extension fee, NationsBank agreed to extend the maturity of its four
secured term loans to October 5, 1999. We currently do not have the capital
necessary to repay this indebtedness on October 5, 1999 when such principal
amount is due and we intend to restructure the loans with NationsBank or,
failing such restructuring, to obtain funding from the lenders under the Credit
facility to satisfy the NationsBank obligation. There can, however, be no
assurance that such a restructuring will be achieved or that any request for
additional liquidity to satisfy NationsBank will be obtained. In such event,
NationsBank would have the right to declare a default under the loan agreement,
which default would trigger a cross-default under the Company's other debt
instruments. In this event, the Company would likely file a voluntary petition
seeking protection under the bankruptcy laws.
In July 1999, we entered into a loan agreement with China Trust Commercial Bank
(New York Branch) providing for a $10 million term loan secured by a leasehold
mortgage on our Englewood, Colorado site. The loan matures in July 2004 and
bears interest at the prime rate less .5%.
On July 29, 1999, we obtained a waiver from Fleet Bank whereby in exchange for
our transferring $225,000 into a cash reserve account and paying a $6,000 waiver
fee, Fleet Bank agreed to waive a financial covenant applicable to the
performance of our ice facility in Simsbury, Connecticut. We also agreed that
within 60 days of the waiver, we would work toward a mutually satisfactory loan
restructuring agreement, which, among other things, would include a reduction in
the $2.8 million principal amount outstanding to Fleet. Depending on the
principal reduction amount required by Fleet in such loan restructuring
agreement, it is possible that we will not have the capital necessary to make
such payment. In such event, Fleet would have the right to declare a default
under the loan agreement which default would trigger a cross-default under our
other debt instruments. In this event, we would likely file a voluntary petition
seeking protection under the bankruptcy laws.
TRENDS
From 1994 through 1998, we rapidly expanded, growing from one golf facility in
1992 to 118 golf facilities as of December 31, 1998, a number of which were
acquired through acquisition. Our strategy was to quickly reach critical mass to
achieve economics of scale. Although we achieved certain of such economies, our
performance over the last two quarters has been extremely disappointing and
below our expectations. The principal reason for such performance is continued
disappointing operations primarily at certain of the golf facilities acquired in
1998. Another important factor in our not meeting our expectations was delay in
the construction of seven golf facilities due to permit issues and weather
conditions and a delay in the opening of certain portions of the Denver Family
Sport Super Center, which opened in December 1998, but which was not fully
operational until May 1999. As a result of these delays, we have incurred
significant expenses relating to the facilities without realizing the
anticipated offsetting revenues. Also contributing to our disappointing
performance was overstaffing in many facilities. In an effort to enhance
revenues, we changed our staffing model to separate our pro shop staff and golf
pro staff. Previously, we required the golf pros to man the pro shop when not
engaged in giving lessons. The change resulted in an overall increase in staff
and expenses and was made to coincide with the second quarter in anticipation of
strong demand during our traditionally strong golf season. However,
-16-
<PAGE>
revenues did not justify the increased staffing expenses. In addition, we
incurred larger than expected expenses in connection with the implementation of
our new MIS system and the training of our staff with respect to the new system.
We are currently engaged in an analysis of our business and are reviewing and
discussing a number of strategic alternatives, including the potential
disposition of the non-golf operations and the disposition or closing of
non-performing or underperforming golf facilities. If we dispose of any such
assets, we may not recover our investment and may experience substantial losses
from such sales. As part of the process, we have engaged Zolfo, Cooper L.L.C, a
business advisory firm, to assist in our analysis and discussions with our banks
and to advise us in connection with certain strategic alternatives.
Given our liquidity constraints, we will not acquire additional facilities over
the near-term, but instead will focus on assimilating and strengthening the
operations of our recently acquired facilities and improving their cash flow. In
this connection, we intend to take certain steps, including reorganization of
our management infrastructure and reduction of staff expenses. We also intend to
reduce our inventory by selling excess inventory. In addition, we intend to
close pro shops at sites that have historically generated less than a minimum
threshold of revenues per year. The remaining inventory at closed pro shops
would then be distributed as needed to our other pro shops.
SEASONALITY
Historically, the second and third quarters have accounted for a greater portion
of our revenues than have the first and fourth quarters of the year. This is
primarily due to an outdoor playing season limited by inclement weather.
Although most of our facilities are designed to be all-weather, portions of the
facilities, such as driving ranges, miniature golf courses which are outdoors,
tend to be vulnerable to weather conditions. Also, golfers are less inclined to
practice when weather conditions limit their ability to play golf on outdoor
courses. We have acquired golf centers in various locations (Arizona,
California, Florida, Georgia, North Carolina, South Carolina, Texas and
Virginia) where inclement weather may not limit the outdoor season as much as
weather limits the outdoor playing season at our golf facilities in Northern
states. In addition, the ice rink facilities and the Family Sports Supercenters
are expected to generate a greater portion of their revenues in the first and
fourth quarters of the years and accordingly, may partially offset such
seasonality. The timing of new facility acquisitions and openings may cause our
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 our operations as a result of inflation
during the six months ended June 30, 1999.
YEAR 2000 ISSUES
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, we note that certain statements contained in the
following discussion concerning the changeover to the year 2000 are
forward-looking in nature and are subject to many risks and uncertainties. These
forward-looking statements include such matters as our projected state of
readiness, our projected cost of remediation, the expected date of completion of
each program or phase and the expected contingency plans associated with any
worst case scenarios. Such statements also constitute "year 2000 readiness
disclosure" within the meaning of the year 2000 Information and Readiness
Disclosure Act.
-17-
<PAGE>
The year 2000 issue is the result of computer programs using two digits rather
than four to define the applicable year. Such software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in our activities and
operations.
The Company has formed a project team, comprised of our management information
services staff, to identify and correct Year 2000 compliance issues for the
Company's information technology ("IT") systems as well as the non-IT systems
such as fire and burglar alarms, irrigation systems and time clocks. The project
team has been charged with the responsibility of investigating and remediating
any and all problems associated with the millennium bug. All systems that are
not compliant will be either modified or replaced as is necessary, although
since a majority of our systems are industry standard software systems which are
year 2000 compliant, we do not expect that significant modification or
replacement will be necessary.
Although there can be no assurance, the total projected cost associated with the
Company's year 2000 program is not expected to be material to our financial
position, results of operations or cash flows. The total cost for the project
(excluding internal payroll costs) is currently expected to approximate $110,000
to $175,000, which is being funded from working capital. As of June 30, 1999, we
had incurred approximately $100,000 relating to our year 2000 compliance
project.
The project team has defined a four-phase approach to determining the year 2000
readiness of our systems, software and equipment. Phase I, Inventory Assessment,
involves the inventory of all systems, software and equipment and the
identification of any year 2000 issues. This phase is complete. Phase II,
Remediation, involves repairing, upgrading and/or replacing any non-compliant
equipment and systems. We replaced older IBM systems to a year 2000 compliant
Windows(R) based system as part of our plans to upgrade our point-of-sales
merchandise control systems. We also adjusted rather than replaced our non-IT
systems to perform properly in the year 2000 and thereafter. This phase is
complete. Phase III, Testing, involves testing the Company's systems, software,
and equipment for year 2000 readiness, or in certain cases, relying on test
results provided to the Company from suppliers. The project team has concluded
testing of the Company's most critical software programs to ensure year 2000
compliance and has contacted all major suppliers to review year 2000 compliance
issues of their products. This phase is complete. Phase IV, Implementation and
Completion, involves placing compliant systems, software and equipment into
production or service and implementing all necessary contingency plans. In the
event that any program or system fails system readiness testing, the Company
will rely on its contingency plans to alleviate the year 2000 issues. These
contingency plans, will include, but will not be limited to, development of
backup and recovery procedures, remediation of existing systems in parallel with
the installation of new systems, replacement with temporary manual processes and
identification of alternative suppliers.
As of June 30, 1999, our overall progress by phase for all IT and non-IT systems
was as follows:
- ------------------------------------------------------------------------------
PHASE PERCENT COMPLETE TARGET COMPLETION DATE
- ------------------------------------------------------------------------------
Phase I - Inventory Assessment 100% Complete
- ------------------------------------------------------------------------------
Phase II - Remediation 100% Complete
- ------------------------------------------------------------------------------
Phase III - Testing 100% Complete
- ------------------------------------------------------------------------------
Phase IV- Implementation and
Completion 95% September 30, 1999
- ------------------------------------------------------------------------------
The completion dates set forth above are based on the Company's current
expectations. However, due to the uncertainties inherent in year 2000
remediation, no assurances can be given as to whether such projects will be
completed on such dates.
The failure to correct a material year 2000 problem could result in an
interruption or failure of certain important business operations. The failure of
our point-of sales systems and billing systems could result in our inability to
timely post and record sales revenue and expenses. In addition, the aging of the
-18-
<PAGE>
Company's accounts payable would be inaccurate. In this unlikely event,
we would manually record sales and expenses until a year 2000 compliant
system is applied.
The financial impact of any or all of the above worst-case scenarios has not
been and cannot be estimated by the Company due to the numerous uncertainties
and variables associated with such scenarios. Management believes, however, that
its year 2000 program will significantly reduce the Company's risks associated
with the change over to the year 2000.
At the present time, we have not deferred any IT projects nor does it anticipate
that such a deferral will be necessary as a result of its year 2000 efforts.
-19-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS NONE
ITEM 2. CHANGE IN SECURITIES
As previously disclosed, on April 6, 1999, the Board of Directors of the Company
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, par value .0001 per share, of the Company
(the "Common Stock"). The dividend was payable on April 30, 1999 to stockholders
of record on April 20, 1999. Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $.10 per share, of the Company (the
"Preferred Stock") at a price of $75.00, subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement dated as of April 6,
1999, as the same may be amended from time to time, between the Company and
Continental Stock Transfer & Trust Co., as Rights Agent.
ITEM 3. DEFAULT UPON SENIOR SECURITIES NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE
ITEM 5. OTHER INFORMATION NONE
Effective as of August 11, 1999, Jeffrey C. Key, the Company's Chief Financial
Officer resigned to pursue other opportunities. The Company has not to date
appointed a new Chief Financial Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT 10.1 Amendment No. 3 to the Credit Agreement, dated
as of April 30, 1999.
EXHIBIT 10.2 Amendment No. 4 to the Credit Agreement, dated
as of July 19, 1999.
EXHIBIT 10.3 Waiver to the Credit Agreement, dated as of
August 12, 1999.
EXHIBIT 27 FINANCIAL DATA SCHEDULE
(b) REPORTS ON FORM 8-K
The Company's current report on Form 8-K, dated April 6, 1999 and filed
April 13, 1999, reporting the adoption of a Shareholders Right Plan.
-20-
<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 16, 1999
Melville, NY
FAMILY GOLF CENTERS, INC.
(Registrant)
By: /s/ Krishnan P. Thampi
--------------------------------
KRISHNAN P. THAMPI
President,
Chief Operating Officer,
Assistant Secretary, Treasurer
and Chief Accounting Officer.
-21-
<PAGE>
AMENDMENT NO. 3 dated as of April 30, 1999 (this "Amendment") to the
Credit Agreement dated as of December 2, 1998, as amended (the "Credit
Agreement") by and among FAMILY GOLF CENTERS, INC., a New York
corporation (the "Company"), THE CHASE MANHATTAN BANK, a New York
banking corporation ("Chase"), as Agent and as a Lender, and the
Lenders Party Thereto.
WHEREAS, the Company has requested and the Agent and the Lenders have
agreed, subject to the terms and conditions of this Amendment, to amend certain
provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
1. AMENDMENTS.
(a) Notwithstanding anything to the contrary in the Credit Agreement,
the Company agrees it shall not, during the period from the date hereof through
December 31, 1999, purchase or acquire all or a substantial part of the assets
of, or purchase or hold beneficially, any stock or securities of any other
Person, including, without limitation, in the context of a Permitted Acquisition
other than those pending acquisitions described on Exhibit A attached hereto,
provided that such pending acquisitions constitute Permitted Acquisitions.
(b) Notwithstanding anything to the contrary in the Credit Agreement,
from the date hereof through December 31, 1999, the "LIBO Margin" shall be 3.00%
in all circumstances. In addition, from the date hereof through December 31,
1999, the margin payable with respect to Alternate Base Rate Loans pursuant to
Section 3.01 of the Credit Agreement shall be increased by 25 basis points.
(c) Notwithstanding anything to the contrary in the Credit Agreement,
from the date hereof until December 31, 1999, the Company and its Subsidiaries
shall not incur any Indebtedness described in Section 7.02(h) of the Credit
Agreement.
(d) Notwithstanding anything to the contrary in the Credit Agreement,
from the date hereof until December 31, 1999, the Company and its Subsidiaries
shall not incur any additional Indebtedness described in Section 7.02(i) of the
Credit Agreement except that, during such period, the Company agrees that it
shall, no later than December 31, 1999, and the Lenders hereby permits the
Company to, enter into a financing arrangement with Chinatrust U.S.A. or other
financial institution acceptable to
1
<PAGE>
the Required Lenders (the "Mortgagee") pursuant to which the Company will incur
up to $20,000,000 in Indebtedness to the Mortgagee secured by a Mortgage Lien on
real property of the Company, provided, that (i) (A) any existing Indebtedness
of the Company in favor of ORIX USA Corporation ("ORIX"), with respect to the
facilities described on Exhibit B hereto, shall have been satisfied prior to
such time or shall be satisfied with the proceeds of such Indebtedness and (B)
all Liens (including without limitation, any Mortgage Liens) with respect to the
facilities described on Exhibit B hereto are released simultaneously with
payment to ORIX, (ii) such Mortgage Liens of the Mortgagee extend only to the
real property, improvements and fixtures, but not to any personal property,
located at the Company's facilities at Englewood, Colorado, Kent, Washington,
Yorktown Heights, New York and Duluth, Georgia, or any other property mutually
agreed upon by the Company and the Required Lenders, (iii) the Company shall
deliver to the Agent copies of any such mortgages, deeds of trust and all
agreements and instruments executed in connection therewith, promptly after
execution thereof, (iv) (a) the final date of maturity of such Indebtedness
shall not be less than five (5) years from the date of funding thereof and (b)
the principal repayment of such Indebtedness shall be based upon an amortization
schedule of not less than fifteen (15) years, and (v) such Indebtedness
otherwise complies with the terms and conditions set forth in Section 7.02(i)
and all other applicable provisions of the Credit Agreement.
(e) Section 7.13(a) of the Credit Agreement is hereby amended by
deleting the reference to "$230,000,000" in the second line thereof, and
replacing it with the reference "$225,000,000" in its place and stead.
(f) Section 7.13(c) of the Credit Agreement is hereby amended by
deleting the table therefrom and by substituting the following in its place:
PERIOD RATIO
------ -----
Closing Date through December 31, 1998 5.90:1:00
January 1, 1999 through June 29, 1999 6.25:1.00
June 30, 1999 through September 29, 1999 5.50:1.00
September 30, 1999 through December 30, 2000 5.00:1.00
December 31, 2000 and thereafter 4.50:1.00
(g) Section 7.13(e) of the Credit Agreement is hereby amended by
deleting the table therefrom and by substituting the following in its place:
2
<PAGE>
PERIOD RATIO
------ -----
Closing Date through December 31, 1998 3.00:1.00
January 1, 1999 through June 29, 1999 3.75:1.00
June 30, 1999 through December 30, 1999 3.25:1.00
December 31, 1999 through December 30, 2000 3.00:1.00
December 31, 2000 and thereafter 2.50:1.00
(h) Section 7.13(f) of the Credit Agreement is hereby amended and
restated to provide in its entirety as follows: "Permit the Company or any of
its Subsidiaries to make any Capital Expenditures during the period commencing
April 1, 1999 and ending December 31, 1999 other than those Capital Expenditures
in the total amount set forth in the capital expenditure budget attached hereto
as Exhibit C, with respect to the projects described therein. From and after
January 1, 2000, the aggregate amount of Consolidated Capital Expenditures of
the Company and its Subsidiaries financed with indebtedness for borrowed money
(excluding indebtedness for borrowed money evidenced by a Loan) shall not exceed
$50,000,000 during any fiscal year of the Company.
(i) Section 7.13 of the Credit Agreement is hereby further amended by
inserting the following new subsections (g) and (h) at the end thereof.
"(g) Minimum Consolidated EBITDA. Permit
Consolidated EBITDA to be less than the
amounts set forth below for the periods set
forth below:
PERIOD AMOUNT
------ ------
Fiscal quarter ended 3/31/99 $ 7,250,000
Fiscal quarter ended 6/30/99 $21,000,000
Fiscal quarter ended 9/30/99 $20,700,000
For purposes of this subclause (g) only, (1) Consolidated
EBITDA shall be calculated without giving effect to the last
sentence of the definition of the term "Consolidated EBITDA"
and (2) "Consolidated Interest Expense" shall mean the
consolidated gross interest expense of the Company and its
Subsidiaries determined in accordance with Generally Accepted
Accounting Principles applied on a consistent basis for the
relevant quarterly period."
(h) Minimum Liquidity. Maintain at all times
during the period ending December 31, 1999
minimum Liquidity of $5,000,000. For purposes
hereof "Liquidity" shall mean the sum of (i)
3
<PAGE>
the aggregate amount of cash and Eligible
Investments of the Company and its
Subsidiaries and (ii) the unused portion of
the Commitments."
(j) Section 10.04 of the Credit Agreement is hereby amended by (a)
deleting the reference to "(j)" on the sixth to last line thereof and replacing
it with the letter "(k)" in its place and stead and (b) adding a new subsection
"(k)" immediately following subsection "(j)" and immediately before the
provision "in each case" as follows:
"(k) increase the Total Commitment,"
2. MISCELLANEOUS.
-------------
Capitalized terms used herein and not otherwise defined herein shall
have the same meanings as defined in the Credit Agreement.
Except as expressly amended hereby, the Credit Agreement shall remain
in full force and effect in accordance with the original terms thereof.
The amendments herein contained are limited specifically to the matters
set forth above and do not constitute directly or by implication an amendment or
waiver of any other provision of Credit Agreement or any default which may occur
or may have occurred under the Credit Agreement.
The Company hereby represents and warrants that (a) after giving effect
to this Amendment, the representations and warranties by the Company and each of
its Subsidiaries pursuant to the Credit Agreement and the Loan Documents to
which each is a party are true and correct in all material respects as of the
date hereof with the same effect as those such representations and warranties
have been made on and as of such date, unless such representation is as of a
specific date, in which case, as of such date, (b) after giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing.
Please be advised that should there be a need for further amendments or
waivers with respect to these covenants or any other covenants, those requests
shall be evaluated by the Lenders when formally requested, in writing, by the
Company, and the Lenders may deny any such requests for any reason in their sole
discretion.
This Amendment may be executed in one or more counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute but one Amendment. This Amendment shall become effective when duly
executed counterparts hereof
4
<PAGE>
which, when taken together, bear the signatures of each of the parties hereto
shall have been delivered to the Agent.
This Amendment shall constitute a Loan Document.
This Amendment shall not become effective until the Company shall have
paid to the Agent for the ratable benefit of the Lenders an amendment fee of
$125,000.
IN WITNESS WHEREOF, the Company and the Agent, as authorized on behalf
of the Required Lenders, have caused this Amendment to be duly executed by their
duly authorized officers, all as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By: S/ Garrett J. Kelleher
----------------------------------------
Name: Garrett J. Kelleher
Title: Vice President
THE CHASE MANHATTAN BANK,
as Agent
By: S/ Robert F. Eisen, Jr.
---------------------------------------
Name: Robert F. Eisen, Jr.
Title: Vice President
5
<PAGE>
CONSENT
Each of the undersigned, not parties to the Credit Agreement but each a
Guarantor under a Guaranty dated as of December 2, 1998, hereby acknowledges the
terms of the Amendment contained herein and confirms that its Guaranty is in
full force and effect.
ORIENT ASSOCIATES TPT SEGUNDO, INC.
INTERNATIONAL, INC.
SKYDRIVE ALLEY POND COMPANY, GLOBAL GOLF/GAVILAN
INC
SKYDRIVE GREENBURGH CO., INC. INDIAN RIVER FAMILY GOLF
CENTERS, INC.
SKYCON CONSTRUCTION CO., INC. TUSCON FAMILY GOLF CENTERS,
INC.
SKYDRIVE WILLOWBROOK, NJ, INC. CINCINNATI FAMILY GOLF
CENTERS, INC.
SKYDRIVE CO., INC. ST. LOUIS FAMILY GOLF CENTERS,
INC.
PELHAM FAMILY GOLF CENTERS, WEST PALM BEACH FAMILY GOLF
INC. CENTERS, INC.
RICHMOND FAMILY GOLF CENTERS, SAN JOSE FAMILY GOLF CENTERS,
INC. INC.
PEACHTREE FAMILY GOLF CENTERS, EASTON FAMILY GOLF CENTERS,
INC. INC.
ALPHARETTA FAMILY GOLF RANDALL'S ISLAND FAMILY GOLF
CENTERS, INC. CENTERS, INC.
VALLEY VIEW FAMILY GOLF PRIVATIZATION PLUS, INC.
CENTERS, INC.
MESA FAMILY GOLF CENTERS, INC. WESTMINSTER FAMILY GOLF
CENTERS, INC.
VIRGINIA BEACH FAMILY GOLF CAROLINA SPRINGS FAMILY GOLF
CENTERS, INC. CENTERS, INC.
FLEMINGTON FAMILY GOLF DENVER FAMILY GOLF CENTERS,
CENTERS, INC. INC.
YORKTOWN FAMILY GOLF CENTERS, FLANDERS FAMILY GOLF CENTERS,
INC. INC.
By: S/ Garrett J. Kelleher By: S/ Garrett J. Kelleher
------------------------------ ----------------------------
Title: Vice President of each Title: Vice President of each
of the foregoing corporations of the foregoing corporations
6
<PAGE>
THE PRACTICE TEE, INC. MARGATE FAMILY GOLF CENTERS,
INC.
THE SEVEN IRON, INC. BROOKLYN FAMILY GOLF CENTERS,
INC.
C.B. FAMILY GOLF CENTERS, INC. LAKE GROVE FAMILY GOLF
CENTERS, INC.
DARLINGTON FAMILY GOLF GOLDEN SPIKES, INC.
CENTERS, INC.
MAINEVILLE FAMILY GOLF WHITEHALL FAMILY GOLF CENTERS,
CENTERS, INC. INC.
MILWAUKEE FAMILY GOLF CENTERS, SPORTS PLUS PROPERTIES, INC.
INC.
OLNEY FAMILY GOLF CENTERS, SPORTS PLUS PROPERTIES, LLC
INC.
PALM DESERT FAMILY GOLF GENPROP, LLC
CENTERS, INC.
BROWARD FAMILY GOLF CENTERS, ICEWORKS OF AMERICA, INC.
INC.
ENGLEWOOD FAMILY GOLF CENTERS, COMMACK FAMILY GOLF CENTERS,
INC. INC.
RALEIGH FAMILY GOLF CENTERS, GREENVILLE FAMILY GOLF
INC. CENTERS, INC.
TEMPE FAMILY GOLF CENTERS, THE GOLF ACADEMY OF HILTON
INC. HEAD ISLAND, INC.
GREEN OAK GOLF PRACTICE CHICAGO FAMILY GOLF CENTERS,
CENTER, INC. INC.
BRONX FAMILY GOLF CENTERS, FEDERAL WAY FAMILY GOLF
INC. CENTERS,INC.
MILPITAS FAMILY GOLF CENTERS, COUNTY LINE FAMILY GOLF
INC. CENTERS, INC.
SAN BRUNO FAMILY GOLF CENTERS, FAIRFIELD FAMILY GOLF CENTERS,
INC. INC.
INTERBAY FAMILY GOLF CENTERS, CONFIDENCE GOLF, INC.
INC.
By: S/ Garrett J. Kelleher By: S/ Garrett J. Kelleher
---------------------------- ---------------------------
Title: Vice President of each Title: Vice President of each
of the foregoing corporations of the foregoing corporations
7
<PAGE>
CARVER FAMILY GOLF CENTERS, KANSAS FAMILY GOLF CENTERS,
INC. INC.
PALM FAMILY GOLF CENTERS, INC. ELK GROVE FAMILY GOLF CENTERS,
INC.
CERRITOS FAMILY GOLF CENTERS, SPORTS PLUS CINCINNATI, INC.
INC.
WICHITA FAMILY GOLF CENTERS,
PHILADELPHIA FAMILY GOLF INC.
CENTERS, INC.
ENCINO/BALBOA FAMILY GOLF STUART FAMILY GOLF CENTERS,
CENTERS, INC. INC.
HOLBROOK FAMILY GOLF CENTERS, SPORTS PLUS RALEIGH, INC.
INC.
SHELTON FAMILY GOLF CENTERS, SPORTS PLUS WOODBRIDGE, INC.
INC.
SPORTS PLUS NEW ROCHELLE, INC. METROGOLF INCORPORATED
METROGOLF SAN DIEGO METROGOLF VIRGINIA, INC.
INCORPORATED
METROGOLF ILLINOIS CENTER, METROGOLF NEW YORK, INC.
INC.
METROGOLF MANAGEMENT, INC. FAMILY GOLF ACQUISITION, INC.
CARLSBAD FAMILY GOLF CENTERS, FAMILY GOLF VENDING,INC.
INC.
EVERGREEN FAMILY GOLF CENTERS, OVERLAND FAMILY GOLF CENTERS,
INC. INC.
OVERLAND PARK, LLC GREEN VALLEY FAMILY GOLF
CENTERS, INC.
GREEN VALLEY RANCH GOLF PARDOC VENDING CORP.
COURSE, LLC
EAGLE QUEST GOLF CENTERS EAGLE QUEST GOLF CENTERS
(TEXAS) INC. (TEXAS II) INC.
PRECISION COURSES, INC. EAGLE QUEST GOLF CENTERS
(CALIFORNIA) INC.
By: S/ Garrett J. Kelleher By: S/ Garrett J. Kelleher
---------------------------- ---------------------------
Title: Vice President of each Title: Vice President of each
of the foregoing corporations of the foregoing corporations
8
<PAGE>
IMG PROPERTIES, INC. EAGLE QUEST GOLF CENTERS
(H.P.) INC.
EAGLE QUEST GOLF CENTERS EAGLE QUEST GOLF CENTERS
ENTERTAINMENT INC. (WASHINGTON) INC.
EAGLE QUEST GOLF CENTERS GOLF PARK, INC.
(U.S.) INC.
SOLANO GOLF CENTER, LP GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
ILLINOIS CENTER GOLF PARTNERS, VINTAGE NEW YORK GOLF, LLC
L.P.
GBGC FAMILY GOLF CENTERS, INC. SACRAMENTO FAMILY GOLF
CENTERS, INC.
VOORHEES FAMILY GOLF CENTERS, PORTLAND FAMILY GOLF CENTERS,
INC. INC.
KANSAS CITY FAMILY GOLF BLUE EAGLE OF KANSAS, INC.
CENTERS, INC.
BLUE EAGLE OF FLORIDA, INC. BLUE EAGLE (OP) INC.
PINNACLE ENTERTAINMENT, INC. SKATENATION, INC.
RECREATIONAL MANAGEMENT RECREATIONAL MANAGEMENT
SERVICES CORPORATION CORPORATION
RECREATIONAL MANAGEMENT SKATENATION OF RICHMOND WEST,
SERVICES CORPORATION OF NEW LLC
JERSEY, INC.
SKATENATION OF RICHMOND SOUTH, SKATENATION OF PRINCE WILLIAM,
LLC LLC
SKATENATION OF RESTON, LLC SKATENATION OF PINEY ORCHARD,
LLC
INTERNATIONAL SKATING CENTER 82ND AVENUE GOLF RANGE, INC.
OF CONNECTICUT, LLC
RMSC OF CALIFORNIA, INC.
By: S/ Garrett J. Kelleher By: S/ Garrett J. Kelleher
---------------------------- ------------------------------
Title: Vice President of each Title: Vice President of each
of the foregoing corporations of the foregoing corporations
9
<PAGE>
EXHIBIT A
---------
PERMITTED PENDING ACQUISITIONS
10
<PAGE>
EXHIBIT B
---------
ORIX MORTGAGE LIENS TO BE RELEASED
Location of Facility:
Greenville, South Carolina
Fountain Inn, South Carolina
Alpharetta, Georgia
Yorktown Heights, New York
Flanders, New Jersey
11
<PAGE>
EXHIBIT C
---------
CAPITAL EXPENDITURE BUDGET
12
<PAGE>
AMENDMENT NO. 4 dated as of July 19, 1999 (this "Amendment")
to the Credit Agreement dated as of December 2, 1998, as
amended (the "Credit Agreement") by and among FAMILY GOLF
CENTERS, INC., a New York corporation (the "Company"), THE
CHASE MANHATTAN BANK, a New York banking corporation
("Chase"), as Agent and as a Lender, and the Lenders Party
Thereto.
WHEREAS, the Company has requested and the Agent and the Lenders have
agreed, subject to the terms and conditions of this Amendment, to amend certain
provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
1. AMENDMENT. Paragraph 1(d) of Amendment No. 3 to Credit
Agreement, dated as of April 30, 1999, by and between the Company and Chase, as
Agent, is hereby amended by amending subsection "(iv)" thereof in its entirety
to provide as follows:
"(iv) (a) the final date of maturity of such Indebtedness shall not be
less than five (5) years from the date of funding thereof and (b) the
principal repayment of such Indebtedness shall be as follows: (I)
$10,000,000 of such Indebtedness shall be based upon an amortization
schedule of not less than ten (10) years and (II) $10,000,000 of such
Indebtedness shall be based upon an amortization schedule of not less
than fifteen (15) years,"
2. MISCELLANEOUS.
Capitalized terms used herein and not otherwise defined herein shall
have the same meanings as defined in the Credit Agreement.
Except as expressly amended hereby, the Credit Agreement shall remain
in full force and effect in accordance with the original terms thereof.
The amendment herein contained is limited specifically to the matter
set forth above and does not constitute directly or by implication an amendment
or waiver of any other provision of Credit Agreement or any default which may
occur or may have occurred under the Credit Agreement.
The Company hereby represents and warrants that (a) after giving effect
to this Amendment, the representations and warranties by the Company and each of
its Subsidiaries pursuant to the Credit Agreement and the Loan Documents to
which each is a party are true and correct in all material respects as of the
date hereof with the same effect as those such representations and warranties
have been made on and as of such date, unless such representation is as of a
specific date, in which case, as of such date, (b) subject to the succeeding
sentence, after giving effect to this Amendment, no Default or Event of Default
has occurred and is continuing. The Company has not yet received the financial
information necessary to calculate its compliance with the financial covenants
set forth in
1
<PAGE>
Section 7.13 of the Credit Agreement. Accordingly, no representation is
made as of the date hereof as to the Company's compliance with those financial
covenants as of June 30, 1999. The execution by the Agent on the date hereof of
this Amendment shall not constitute a waiver of any Default or Event of Default
that may have occurred with respect to such financial covenants and all rights
and remedies of the Agent and the Lenders with respect to any such Default or
Event of Default are expressly reserved.
Please be advised that should there be a need for further amendments or
waivers with respect to these covenants or any other covenants, those requests
shall be evaluated by the Lenders when formally requested, in writing, by the
Company, and the Lenders may deny any such requests for any reason in their sole
discretion.
This Amendment may be executed in one or more counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute but one Amendment. This Amendment shall become effective when duly
executed counterparts hereof which, when taken together, bear the signatures of
each of the parties hereto shall have been delivered to the Agent.
This Amendment shall constitute a Loan Document.
IN WITNESS WHEREOF, the Company and the Agent, as authorized on behalf
of the Required Lenders, have caused this Amendment to be duly executed by their
duly authorized officers, all as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By: S/ Dominic Chang
------------------------
Name: Dominic Chang
Title: President
THE CHASE MANHATTAN BANK,
as Agent
By: S/ Robert F. Eisen, Jr.
-------------------------
Name: Robert F. Eisen, Jr.
Title: Vice President
FF2/156576_1
2
<PAGE>
CONSENT
Each of the undersigned, not parties to the Credit Agreement but each a
Guarantor under a Guaranty dated as of December 2, 1998, hereby acknowledges the
terms of the Amendment contained herein and confirms that its Guaranty is in
full force and effect.
ORIENT ASSOCIATES TPT SEGUNDO, INC.
INTERNATIONAL, INC.
SKYDRIVE ALLEY POND COMPANY, GLOBAL GOLF/GAVILAN
INC
SKYDRIVE GREENBURGH CO., INC. INDIAN RIVER FAMILY GOLF
CENTERS, INC.
SKYCON CONSTRUCTION CO., INC. TUSCON FAMILY GOLF CENTERS,
INC.
SKYDRIVE WILLOWBROOK, NJ, CINCINNATI FAMILY GOLF
INC. CENTERS, INC.
SKYDRIVE CO., INC. ST. LOUIS FAMILY GOLF CENTERS,
INC.
PELHAM FAMILY GOLF CENTERS, WEST PALM BEACH FAMILY GOLF
INC. CENTERS, INC.
RICHMOND FAMILY GOLF SAN JOSE FAMILY GOLF CENTERS,
CENTERS, INC. INC.
PEACHTREE FAMILY GOLF EASTON FAMILY GOLF CENTERS,
CENTERS, INC. INC.
ALPHARETTA FAMILY GOLF RANDALL'S ISLAND FAMILY GOLF
CENTERS, INC. CENTERS, INC.
VALLEY VIEW FAMILY GOLF PRIVATIZATION PLUS, INC.
CENTERS, INC.
MESA FAMILY GOLF CENTERS, INC. WESTMINSTER FAMILY GOLF
CENTERS, INC.
VIRGINIA BEACH FAMILY GOLF CAROLINA SPRINGS FAMILY GOLF
CENTERS, INC. CENTERS, INC.
BY: S/ PAMELA S. CHARLES BY: S/ PAMELA S. CHARLES
-------------------------- --------------------------
TITLE: VICE PRESIDENT OF EACH OF THE TITLE: VICE PRESIDENT OF EACH OF THE
FOREGOING CORPORATIONS FOREGOING CORPORATIONS
3
<PAGE>
FLEMINGTON FAMILY GOLF DENVER FAMILY GOLF CENTERS,
CENTERS, INC. INC.
YORKTOWN FAMILY GOLF FLANDERS FAMILY GOLF CENTERS,
CENTERS, INC. INC.
THE PRACTICE TEE, INC. MARGATE FAMILY GOLF CENTERS,
INC.
THE SEVEN IRON, INC. BROOKLYN FAMILY GOLF
CENTERS, INC.
C.B. FAMILY GOLF CENTERS, INC. LAKE GROVE FAMILY GOLF
CENTERS, INC.
DARLINGTON FAMILY GOLF GOLDEN SPIKES, INC.
CENTERS, INC.
MAINEVILLE FAMILY GOLF WHITEHALL FAMILY GOLF
CENTERS, INC. CENTERS, INC.
MILWAUKEE FAMILY GOLF SPORTS PLUS PROPERTIES, INC.
CENTERS, INC.
OLNEY FAMILY GOLF CENTERS, SPORTS PLUS PROPERTIES, LLC
INC.
PALM DESERT FAMILY GOLF GENPROP, LLC
CENTERS, INC.
BROWARD FAMILY GOLF CENTERS, ICEWORKS OF AMERICA, INC.
INC.
ENGLEWOOD FAMILY GOLF COMMACK FAMILY GOLF
CENTERS, INC. CENTERS, INC.
RALEIGH FAMILY GOLF CENTERS, GREENVILLE FAMILY GOLF
INC. CENTERS, INC.
TEMPE FAMILY GOLF CENTERS, THE GOLF ACADEMY OF HILTON
INC. HEAD ISLAND, INC.
GREEN OAK GOLF PRACTICE CHICAGO FAMILY GOLF CENTERS,
CENTER, INC. INC.
BY: S/ PAMELA S. CHARLES BY: S/ PAMELA S. CHARLES
---------------------------- ----------------------------
TITLE: VICE PRESIDENT OF EACH TITLE: VICE PRESIDENT OF EACH OF THE
OF THE FOREGOING CORPORATIONS FOREGOING CORPORATIONS
4
<PAGE>
BRONX FAMILY GOLF CENTERS, FEDERAL WAY FAMILY GOLF
INC. CENTERS,INC.
MILPITAS FAMILY GOLF CENTERS, COUNTY LINE FAMILY GOLF
INC. CENTERS, INC.
SAN BRUNO FAMILY GOLF FAIRFIELD FAMILY GOLF CENTERS,
CENTERS, INC. INC.
INTERBAY FAMILY GOLF CENTERS, CONFIDENCE GOLF, INC.
INC.
KANSAS FAMILY GOLF CENTERS,
CARVER FAMILY GOLF CENTERS, INC.
INC.
ELK GROVE FAMILY GOLF
PALM FAMILY GOLF CENTERS, INC. CENTERS, INC.
SPORTS PLUS CINCINNATI, INC.
CERRITOS FAMILY GOLF CENTERS,
INC. WICHITA FAMILY GOLF CENTERS,
INC.
PHILADELPHIA FAMILY GOLF
CENTERS, INC.
STUART FAMILY GOLF CENTERS,
ENCINO/BALBOA FAMILY GOLF INC.
CENTERS, INC.
HOLBROOK FAMILY GOLF SPORTS PLUS RALEIGH, INC.
CENTERS, INC.
SHELTON FAMILY GOLF CENTERS, SPORTS PLUS WOODBRIDGE, INC.
INC.
SPORTS PLUS NEW ROCHELLE, INC. METROGOLF INCORPORATED
METROGOLF SAN DIEGO METROGOLF VIRGINIA, INC.
INCORPORATED
METROGOLF ILLINOIS CENTER, METROGOLF NEW YORK, INC.
INC.
BY: S/ PAMELA S. CHARLES BY: S/ PAMELA S. CHARLES
---------------------------- -------------------------
TITLE: VICE PRESIDENT OF EACH OF THE TITLE: VICE PRESIDENT OF EACH OF THE
FOREGOING CORPORATIONS FOREGOING CORPORATIONS
METROGOLF MANAGEMENT, INC. FAMILY GOLF ACQUISITION, INC.
5
<PAGE>
CARLSBAD FAMILY GOLF CENTERS, FAMILY GOLF VENDING,INC.
INC.
EVERGREEN FAMILY GOLF OVERLAND FAMILY GOLF
CENTERS, INC. CENTERS, INC.
OVERLAND PARK, LLC GREEN VALLEY FAMILY GOLF
CENTERS, INC.
GREEN VALLEY RANCH GOLF PARDOC VENDING CORP.
COURSE, LLC
EAGLE QUEST GOLF CENTERS EAGLE QUEST GOLF CENTERS
(TEXAS) INC. (TEXAS II) INC.
PRECISION COURSES, INC. EAGLE QUEST GOLF CENTERS
(CALIFORNIA) INC.
IMG PROPERTIES, INC. EAGLE QUEST GOLF CENTERS (H.P.)
INC.
EAGLE QUEST GOLF CENTERS EAGLE QUEST GOLF CENTERS
ENTERTAINMENT INC. (WASHINGTON) INC.
EAGLE QUEST GOLF CENTERS (U.S.) GOLF PARK, INC.
INC.
SOLANO GOLF CENTER, LP GOOSE CREEK GOLF PARTNERS
LIMITED PARTNERSHIP
ILLINOIS CENTER GOLF PARTNERS, VINTAGE NEW YORK GOLF, LLC
L.P.
GBGC FAMILY GOLF CENTERS, INC. SACRAMENTO FAMILY GOLF
CENTERS, INC.
VOORHEES FAMILY GOLF PORTLAND FAMILY GOLF
CENTERS, INC. CENTERS, INC.
BY: S/ PAMELA S. CHARLES BY: S/ PAMELA S. CHARLES
--------------------------- -------------------------
TITLE: VICE PRESIDENT OF EACH OF THE TITLE: VICE PRESIDENT OF EACH OF THE
FOREGOING CORPORATIONS FOREGOING CORPORATIONS
KANSAS CITY FAMILY GOLF BLUE EAGLE OF KANSAS, INC.
CENTERS, INC.
6
<PAGE>
BLUE EAGLE OF FLORIDA, INC. BLUE EAGLE (OP) INC.
PINNACLE ENTERTAINMENT, INC. SKATENATION, INC.
RECREATIONAL MANAGEMENT RECREATIONAL MANAGEMENT
SERVICES CORPORATION CORPORATION
RECREATIONAL MANAGEMENT SKATENATION OF RICHMOND
SERVICES CORPORATION OF NEW WEST, LLC
JERSEY, INC.
SKATENATION OF RICHMOND SKATENATION OF PRINCE
SOUTH, LLC WILLIAM, LLC
SKATENATION OF RESTON, LLC SKATENATION OF PINEY ORCHARD,
LLC
INTERNATIONAL SKATING CENTER 82ND AVENUE GOLF RANGE, INC.
OF CONNECTICUT, LLC
RMSC OF CALIFORNIA, INC.
BY: S/ PAMELA S. CHARLES BY: S/ PAMELA S. CHARLES
------------------------ -----------------------
TITLE: VICE PRESIDENT OF EACH OF THE TITLE: VICE PRESIDENT OF EACH OF THE
FOREGOING CORPORATIONS FOREGOING CORPORATIONS
FF2/156576_2
7
<PAGE>
WAIVER dated as of August 12, 1999
(this "Waiver") to the Credit Agreement
dated as of December 2, 1998, as amended by
and among FAMILY GOLF CENTERS, INC., a New
York corporation (the "Company"), THE CHASE
MANHATTAN BANK, a New York banking
corporation ("Chase"), as Agent and as a
Lender, and the Lenders party thereto (the
"Credit Agreement").
WHEREAS, the Company has requested a waiver of certain provisions of
the Credit Agreement for the period from May 1, 1999 through October 5, 1999,
and the Agent and the Lenders have agreed, subject to the terms and conditions
of this Waiver, to grant such waiver set forth herein;
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the same meanings as defined in the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
1. Waivers. Compliance with each of Sections 7.13(a), 7.13(b), 7.13(c),
7.13(d), 7.13(e), 7.13(g) and 7.13(h) is hereby waived for the period commencing
May 1, 1999 through October 5, 1999 (the "Waiver Period"); provided that (i) any
breach during the Waiver Period in the timely performance, observance or
fulfillment of any of the terms or conditions contained herein shall constitute
an Event of Default under the Credit Agreement and, unless the Agent and the
requisite number of Lenders otherwise agree in writing, shall result in an
immediate termination of the effectiveness of the waivers contained herein; and
(ii) an Event of Default shall be deemed to have occurred as of the close of
business on the Waiver Termination Date (as hereinafter defined) if the Company
is not in compliance with any of the financial covenants contained in Section
7.13 of the Credit Agreement as of such date. As used herein, the term "Waiver
Termination Date" shall mean the close of business on October 5, 1999 or such
later date as may be agreed to in writing by the Agent and the requisite number
of Lenders. Upon the occurrence of any Event of Default, the Agent and the
Lenders shall have all rights and remedies available to them under the Loan
Documents, at law or otherwise with respect to each Event of Default, which
rights and remedies are hereby expressly reserved.
<PAGE>
2. Requirements During Waiver Period.
To induce the Agent and the Lenders to enter into this Waiver, the
Company agrees as follows:
(a) Notwithstanding anything to the contrary contained in the Credit
Agreement or any other Loan Document, during the Waiver Period, the
Company shall not be entitled to receive, nor shall the Company give a
notice pursuant to Section 2.01 or Section 2.05 of the Credit Agreement
requesting or otherwise seeking to obtain, (i) any Revolving Credit
Loans or (ii) the issuance of any Letter of Credit.
(b) Notwithstanding anything to the contrary contained in the Credit
Agreement or any other Loan Document, during the Waiver Period, all
fees payable under the Credit Agreement (other than interest which
shall be paid in accordance with paragraph (c) below) shall be payable
monthly in arrears on the first Business Day of each month.
(c) Notwithstanding anything to the contrary contained in the Credit
Agreement or any other Loan Document, during the Waiver Period, neither
the Company nor any of its Subsidiaries shall (i) pay any dividends or
make any distributions, (ii) prepay any Indebtedness or other
obligations in advance of the dates on which such amounts are due and
payable, (iii) make any further loans to or investments in any Foreign
Subsidiaries other than to fund $600,000 in the aggregate during the
Waiver Period in respect of the Coquitlam Project in Vancouver, B.C.
and to fund in the ordinary course of business, operations in Canada,
(iv) engage in any Affiliate Transactions or (v) make any loans or
advances of the type specified in Sections 7.06(a)(ii), 7.06(d),
7.06(f) or 7.06(g) of the Credit Agreement.
(d) Notwithstanding anything to the contrary contained in the Credit
Agreement or any other Loan Document, interest in respect of the
Revolving Credit Loans shall be payable as follows: (i) interest for
the period to but excluding August 1, 1999 in the amount of $88,959.90
shall be payable in cash on the Waiver Termination Date; (ii) interest
from (A) August 1, 1999 to but excluding the Effective Date (as
hereinafter defined) shall accrue at the then applicable contract rate
and (B) the Effective Date through August 31, 1999 shall accrue at the
Alternate Base Rate plus 2% per annum, provided, however, that 50% of
the sum of the amounts referenced in subparagraphs (A) and (B) above
shall be payable in cash on September 1, 1999 and the remaining 50%
<PAGE>
shall be payable in cash on the Waiver Termination Date; (iii) interest
from September 1, 1999 through September 30, 1999 shall accrue at the
Alternate Base Rate plus 2% per annum; provided, however, that 50% of
such amount shall be payable in cash on October 1, 1999 and the
remaining 50% shall be payable in cash on the Waiver Termination Date
and (iv) interest from October 1, 1999 through the Waiver Termination
Date shall be payable in cash on the Waiver Termination Date.
(e) Notwithstanding anything to the contrary contained in the Credit
Agreement or any other Loan Document, during the Waiver Period, the
Company shall not request any Interest Periods with respect to Adjusted
Libor Loans.
(f) Notwithstanding Section 8.01(e) of the Credit Agreement, during the
Waiver Period, it shall constitute an Event of Default if there is any
default in the payment, performance or compliance under any agreement
in respect of any Indebtedness of the Company or any of its
Subsidiaries (other than under the Credit Agreement and the other Loan
Documents) (which Indebtedness exceeds $250,000 in the aggregate) or in
respect of any material contract of the Company or any of its
Subsidiaries (except for (i) payments under construction contracts with
respect to which the Borrower or any of its Subsidiaries contests, in
good faith, the timing, validity, or amounts, if any claimed and (ii)
payments due to Golden Bear Golf, Inc. under the license agreement).
(g) The Company shall deliver to the Lenders as promptly as possible,
but no later than September 7, 1999, its proposed business and
strategic plans for approximately the 3 year period following the
Waiver Period and any related restructuring proposal, all in form
reasonably acceptable to the Agent.
3. Ratification of Agreement.
(a) To induce the Agent and the Lenders to enter into this Waiver, the
Company hereby represents and warrants that (i) after giving effect to
this Waiver, no violation of the terms of the Credit Agreement exist
and all representations and warranties by the Company and each of its
Subsidiaries pursuant to the Credit Agreement and the Loan Documents to
which each is a party are true, correct and complete in all material
respects as of the date hereof with the same effect as those such
representations and warranties have been made on and as of such date,
unless such representation is as of
-3-
<PAGE>
a specific date, in which case, as of such date, and (ii) after giving
effect to this Waiver, no Default or Event of Default has occurred and
is continuing.
(b) The waivers herein contained are limited specifically to the
matters set forth above and do not constitute directly or by
implication an amendment or waiver of any other provision of Credit
Agreement or any default which may occur or may have occurred under the
Credit Agreement or any other Loan Document. Except as expressly set
forth in this Waiver, the terms, provisions and conditions of the
Credit Agreement and the Loan Documents are unchanged, and said
agreements, as amended, shall remain in full force and effect and are
hereby confirmed and ratified. In the event of inconsistencies between
this Waiver and the Credit Agreement, the terms of this Waiver shall
govern.
(c) Should there be a need for further waivers with respect to these
covenants or any other provisions of the Loan Documents, those requests
shall be evaluated by the Lenders when formally requested, in writing,
by the Company, and the Lenders may deny any such requests for any
reason in their sole discretion.
(d) The Company and the Subsidiaries acknowledge that they have no
existing defense, counterclaim, offset, cross-complaint, claim or
demand of any kind or nature whatsoever that can be asserted to reduce
or eliminate all or any part of their respective liability to pay the
Obligations under or in respect of the Credit Agreement and all other
Loan Documents. The Company and the Subsidiaries hereby release and
forever discharge the Agent, the Lenders and all of their officers,
directors, employees, agents, advisors and attorneys from any and all
actions, causes of action, debts, dues, claims, demands, liabilities
and obligations of every kind and nature, both in law and in equity,
known or unknown, whether matured or unmatured, absolute or contingent.
4. Effectiveness. This Waiver shall become effective upon the occurrence
of all of the following (the "Effective Date"):
(i) the execution and delivery (by facsimile or otherwise) of
counterparts of this Waiver by the Company, the Agent and the Required
Lenders;
-4-
<PAGE>
(ii) the execution and delivery to the Agent of the Consent attached
hereto by each party listed therein;
(iii) the Company=s payment to the Agent of a Waiver Fee in the amount
of $250,000 for the ratable benefit of those Lenders which shall have
consented to this Waiver;
(iv) the Company shall have received and provided to the Agent written
evidence satisfactory to the Agent of the extension through October 5,
1999 of the maturity of the mortgage loan made to the Company by the
NationsBank N.A. (now known as Bank of America).
5. Consultant. The Company acknowledges and agrees that the Agent will
cause its counsel to retain PricewaterhouseCoopers LLP (or a similar financial
consultant) as an independent business consultant (the "Consultant") to assess
on behalf of the Agent, its counsel and the Lenders the operations, finances,
and business affairs of the Company and its Subsidiaries and to furnish a report
of its findings and recommendations solely to the Agent, its counsel and the
Lenders. The Company agrees to pay all reasonable fees, costs and out-of-pocket
expenses of the Consultant incurred in connection with the performance by the
Consultant of its duties described in this paragraph. The Company shall, and
shall cause all Subsidiaries, to cooperate fully and in a timely manner with the
Consultant, including its agents and employees.
6. Miscellaneous.
(a) This Waiver shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York without
regard to the principles of conflicts of law.
(b) This Waiver may be executed in one or more counterparts, each of
which shall constitute an original, but all of which when taken
together shall constitute but one Waiver.
(c) This Waiver shall constitute a Loan Document.
[Signature pages follow.]
-5-
<PAGE>
IN WITNESS WHEREOF, the Company, the Agent and the Required Lenders
have caused this Waiver to be duly executed by their duly authorized officers,
all as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By: s/ Krishnan P. Thampi
--------------------------------
Name: Krishnan P. Thampi
Title: President
THE CHASE MANHATTAN BANK,
as Agent and as a Lender
By: s/ Billie J. Prue
- -------------------------- --------------------------------
Name: Billie J. Prue
Title: Vice President
CIBC, Inc., as a Lender
By: s/ Dean J. Decker
- -------------------------- --------------------------------
Name: Dean J. Decker
Title: Executive Director
CIBC World Markets Corp.,
AS AGENT
BANK OF AMERICA, as a Lender
By: s/ Reinhard Freimuth
--------------------------------
Name: Reinhard Freimuth
Title: Vice President
<PAGE>
THE DIME SAVINGS BANK OF NEW YORK
FSB, as a Lender
By: s/ Gary R. Olson
- --------------------------- --------------------------------
Name: Gary R. Olson
Title: Vice President
THE MERCHANTS BANK OF NEW YORK,
as a Lender
By: s/ Andrew S. Baron
- --------------------------- --------------------------------
Name: Andrew S. Baron
Title: Vice President
-6-
<PAGE>
CONSENT
Each of the undersigned, not parties to the Credit Agreement but each a
Guarantor under a Guaranty dated as of December 2, 1998, hereby acknowledges the
terms of the Waiver contained herein and confirms that its Guaranty is in full
force and effect.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
ORIENT ASSOCIATES TPT SEGUNDO, INC.
INTERNATIONAL, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SKYDRIVE ALLEY POND COMPANY, INC. GLOBAL GOLF/GAVILAN
- ----------------------------------------------------------- --------------------------------------------------------
SKYDRIVE GREENBURGH CO., INC. INDIAN RIVER FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SKYCON CONSTRUCTION CO., INC. TUSCON FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SKYDRIVE WILLOWBROOK, NJ, INC. CINCINNATI FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SKYDRIVE CO., INC. ST. LOUIS FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
PELHAM FAMILY GOLF CENTERS, INC. WEST PALM BEACH FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
RICHMOND FAMILY GOLF CENTERS, INC. SAN JOSE FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
PEACHTREE FAMILY GOLF CENTERS, INC. EASTON FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
ALPHARETTA FAMILY GOLF CENTERS, INC. RANDALL'S ISLAND FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
VALLEY VIEW FAMILY GOLF CENTERS, INC. PRIVATIZATION PLUS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
MESA FAMILY GOLF CENTERS, INC. WESTMINSTER FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
VIRGINIA BEACH FAMILY GOLF CENTERS, INC. CAROLINA SPRINGS FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
By: s/ Pamela S. Charles By: s/ Pamela S. Charles
------------------------------------------------ ------------------------------------------------
Title: Vice President of the foregoing corporations Title: Vice President of the foregoing corporations
- ----------------------------------------------------------- --------------------------------------------------------
FLEMINGTON FAMILY GOLF CENTERS, INC. DENVER FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
YORKTOWN FAMILY GOLF CENTERS, INC. FLANDERS FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
<PAGE>
- ----------------------------------------------------------- --------------------------------------------------------
THE PRACTICE TEE, INC. MARGATE FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
THE SEVEN IRON, INC. BROOKLYN FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
C.B. FAMILY GOLF CENTERS, INC. LAKE GROVE FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
DARLINGTON FAMILY GOLF CENTERS, INC. GOLDEN SPIKES, INC.
- ----------------------------------------------------------- --------------------------------------------------------
MAINEVILLE FAMILY GOLF CENTERS, INC. WHITEHALL FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
- ----------------------------------------------------------- --------------------------------------------------------
MILWAUKEE FAMILY GOLF CENTERS, INC. SPORTS PLUS PROPERTIES, INC.
- ----------------------------------------------------------- --------------------------------------------------------
OLNEY FAMILY GOLF CENTERS, INC. SPORTS PLUS PROPERTIES, LLC
- ----------------------------------------------------------- --------------------------------------------------------
PALM DESERT FAMILY GOLF CENTERS, INC. GENPROP, LLC
- ----------------------------------------------------------- --------------------------------------------------------
BROWARD FAMILY GOLF CENTERS, INC. ICEWORKS OF AMERICA, INC.
- ----------------------------------------------------------- --------------------------------------------------------
ENGLEWOOD FAMILY GOLF CENTERS, INC. COMMACK FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
RALEIGH FAMILY GOLF CENTERS, INC. GREENVILLE FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
TEMPE FAMILY GOLF CENTERS, INC. THE GOLF ACADEMY OF HILTON HEAD ISLAND, INC.
- ----------------------------------------------------------- --------------------------------------------------------
GREEN OAK GOLF PRACTICE CENTER, INC. CHICAGO FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
By: s/ Pamela S. Charles By: s/ Pamela S. Charles
------------------------------------------------ ------------------------------------------------
Title: Vice President of the foregoing corporations Title: Vice President of the foregoing corporations
- ----------------------------------------------------------- --------------------------------------------------------
BRONX FAMILY GOLF CENTERS, INC. FEDERAL WAY FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
MILPITAS FAMILY GOLF CENTERS, INC. COUNTY LINE FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SAN BRUNO FAMILY GOLF CENTERS, INC. FAIRFIELD FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
INTERBAY FAMILY GOLF CENTERS, INC. CONFIDENCE GOLF, INC.
- ----------------------------------------------------------- --------------------------------------------------------
CARVER FAMILY GOLF CENTERS, INC. KANSAS FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
<PAGE>
- ----------------------------------------------------------- --------------------------------------------------------
PALM FAMILY GOLF CENTERS, INC. ELK GROVE FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
CERRITOS FAMILY GOLF CENTERS, INC. SPORTS PLUS CINCINNATI, INC.
- ----------------------------------------------------------- --------------------------------------------------------
PHILADELPHIA FAMILY GOLF CENTERS, INC. WICHITA FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
ENCINO/BALBOA FAMILY GOLF CENTERS, INC. STUART FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
HOLBROOK FAMILY GOLF CENTERS, INC. SPORTS PLUS RALEIGH, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SHELTON FAMILY GOLF CENTERS, INC. SPORTS PLUS WOODBRIDGE, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SPORTS PLUS NEW ROCHELLE, INC. METROGOLF INCORPORATED
- ----------------------------------------------------------- --------------------------------------------------------
METROGOLF SAN DIEGO INCORPORATED METROGOLF VIRGINIA, INC.
- ----------------------------------------------------------- --------------------------------------------------------
METROGOLF ILLINOIS CENTER, INC. METROGOLF NEW YORK, INC.
- ----------------------------------------------------------- --------------------------------------------------------
METROGOLF MANAGEMENT, INC. FAMILY GOLF ACQUISITION, INC.
- ----------------------------------------------------------- --------------------------------------------------------
By: s/ Pamela S. Charles By: s/ Pamela S. Charles
------------------------------------------------ ------------------------------------------------
Title: Vice President of the foregoing corporations Title: Vice President of the foregoing corporations
- ----------------------------------------------------------- --------------------------------------------------------
<PAGE>
- ----------------------------------------------------------- --------------------------------------------------------
CARLSBAD FAMILY GOLF CENTERS, INC. FAMILY GOLF VENDING, INC.
- ----------------------------------------------------------- --------------------------------------------------------
EVERGREEN FAMILY GOLF CENTERS, INC. OVERLAND FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
OVERLAND PARK, LLC GREEN VALLEY FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
GREEN VALLEY RANCH GOLF COURSE, LLC PARDOC VENDING CORP.
- ----------------------------------------------------------- --------------------------------------------------------
EAGLE QUEST GOLF CENTERS (TEXAS) INC. EAGLE QUEST GOLF CENTERS (TEXAS II) INC.
- ----------------------------------------------------------- --------------------------------------------------------
PRECISION COURSES, INC. EAGLE QUEST GOLF CENTERS (CALIFORNIA) INC.
- ----------------------------------------------------------- --------------------------------------------------------
IMG PROPERTIES, INC. EAGLE QUEST GOLF CENTERS (H.P.) INC.
- ----------------------------------------------------------- --------------------------------------------------------
EAGLE QUEST GOLF CENTERS ENTERTAINMENT INC. EAGLE QUEST GOLF CENTERS (WASHINGTON) INC.
- ----------------------------------------------------------- --------------------------------------------------------
EAGLE QUEST GOLF CENTERS (U.S.) INC. GOLF PARK, INC.
- ----------------------------------------------------------- --------------------------------------------------------
SOLANO GOLF CENTER, LP GOOSE CREEK GOLF PARTNERS LIMITED PARTNERSHIP
- ----------------------------------------------------------- --------------------------------------------------------
ILLINOIS CENTER GOLF PARTNERS, L.P. VINTAGE NEW YORK GOLF, LLC
- ----------------------------------------------------------- --------------------------------------------------------
GBGC FAMILY GOLF CENTERS, INC. SACRAMENTO FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
VOORHEES FAMILY GOLF CENTERS, INC. PORTLAND FAMILY GOLF CENTERS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
By: s/ Pamela S. Charles By: s/ Pamela S. Charles
------------------------------------------------ ------------------------------------------------
Title: Vice President of the foregoing corporations Title: Vice President of the foregoing corporations
- ----------------------------------------------------------- --------------------------------------------------------
KANSAS CITY FAMILY GOLF CENTERS, INC. BLUE EAGLE OF KANSAS, INC.
- ----------------------------------------------------------- --------------------------------------------------------
BLUE EAGLE OF FLORIDA, INC. BLUE EAGLE (OP) INC.
- ----------------------------------------------------------- --------------------------------------------------------
PINNACLE ENTERTAINMENT, INC. SKATENATION, INC.
- ----------------------------------------------------------- --------------------------------------------------------
RECREATIONAL MANAGEMENT SERVICES CORPORATION RECREATIONAL MANAGEMENT CORPORATION
- ----------------------------------------------------------- --------------------------------------------------------
RECREATIONAL MANAGEMENT SERVICES CORPORATION OF NEW SKATENATION OF RICHMOND WEST, LLC
JERSEY, INC.
- ----------------------------------------------------------- --------------------------------------------------------
<PAGE>
- ----------------------------------------------------------- --------------------------------------------------------
SKATENATION OF RICHMOND SOUTH, LLC SKATENATION OF PRINCE WILLIAM, LLC
- ----------------------------------------------------------- --------------------------------------------------------
SKATENATION OF RESTON, LLC SKATENATION OF PINEY ORCHARD, LLC
- ----------------------------------------------------------- --------------------------------------------------------
INTERNATIONAL SKATING CENTER OF CONNECTICUT, LLC 82ND AVENUE GOLF RANGE, INC.
- ----------------------------------------------------------- --------------------------------------------------------
RMSC OF CALIFORNIA, INC.
- ----------------------------------------------------------- --------------------------------------------------------
By: s/ Pamela S. Charles By: s/ Pamela S. Charles
------------------------------------------------ ------------------------------------------------
Title: Vice President of the foregoing corporations Title: Vice President of the foregoing corporations
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income for the
period ended June 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,904,000
<SECURITIES> 331,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 28,401,000
<CURRENT-ASSETS> 48,722,000
<PP&E> 486,177,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 601,991,000
<CURRENT-LIABILITIES> 301,454,000
<BONDS> 0
0
0
<COMMON> 260,000
<OTHER-SE> 289,083,000
<TOTAL-LIABILITY-AND-EQUITY> 601,991,000
<SALES> 82,647,000
<TOTAL-REVENUES> 82,647,000
<CGS> 13,719,000
<TOTAL-COSTS> 77,080,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,326,000
<INCOME-PRETAX> (1,265,000)
<INCOME-TAX> (494,000)
<INCOME-CONTINUING> (772,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (772,000)
<EPS-BASIC> (0.3)
<EPS-DILUTED> (0.3)
</TABLE>
