<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1997
Commission File Number 0-19743
THOUSAND TRAILS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2138671
-------- ----------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
2711 LBJ FREEWAY, SUITE 200, DALLAS, TEXAS 75234
- --------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (972) 243-2228
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
The number of shares of Common Stock, par value $.01, issued and outstanding as
of April 29, 1997 was 7,383,276.
<PAGE>
THOUSAND TRAILS, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets at March 31, 1997
and June 30, 1996.............................................. 3
Consolidated Statements of Operations for the nine months
ended March 31, 1997 and March 31, 1996........................ 4
Consolidated Statements of Operations for the three months
ended March 31, 1997 and March 31, 1996........................ 5
Consolidated Statement of Stockholders' Deficit
for the nine months ended March 31, 1997....................... 6
Consolidated Statements of Cash Flows for the nine months ended
March 31, 1997 and March 31, 1996............................... 7
Notes to Consolidated Financial Statements....................... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................. 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 29
</TABLE>
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS March 31, June 30,
------ 1997 1996
--------- ---------
<S> <C> <C>
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents................. $ 1,547 $ 37,403
Current portion of receivables, net of
allowances and discount of
$2.2 million and $2.7 million........... 2,986 4,270
Accounts and dues receivable, net......... 509 522
Inventory and other current assets........ 2,474 4,672
-------- --------
Total Current Assets.................... 7,516 46,867
Restricted cash........................... 1,355 2,912
Receivables, net of allowances and
discount of $4.3 million and
$5.4 million............................ 4,683 8,949
Campground real estate.................... 13,451 13,468
Resort real estate........................ 572 1,159
Buildings and equipment, net of
accumulated depreciation of
$12.2 million and $10.4 million......... 24,765 27,130
Land held for sale........................ 6,126 6,821
Other assets.............................. 4,318 2,448
-------- --------
Total Assets............................ $ 62,786 $109,754
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES
Accounts payable.......................... $ 1,056 $ 3,030
Accrued interest.......................... 1,144 5,617
Other accrued liabilities................. 8,156 9,329
Current portion of long term debt......... 75 28,530
Accrued construction costs................ 2,942 3,154
Deferred membership dues revenue.......... 19,949 17,599
-------- --------
Total Current Liabilities............... 33,322 67,259
Long term debt............................ 48,720 66,922
Other liabilities......................... 3,729 3,564
-------- --------
Total Liabilities....................... 85,771 137,745
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, $.01 par value,
1,500,000 shares authorized, none
issued or outstanding
Common stock, $.01 par value,
15,000,000 shares authorized,
7,383,276 and 3,702,726 shares
issued and outstanding................... 74 37
Additional paid-in capital................ 20,502 17,549
Accumulated deficit subsequent to
December 31, 1991, date of
emergence from bankruptcy (total
deficit eliminated $51,752).............. (43,426) (45,451)
Cumulative currency translation
adjustment............................... (135) (126)
-------- --------
Total Stockholders' Deficit............. (22,985) (27,991)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT................................... $ 62,786 $109,754
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
<PAGE>
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended March 31,
-----------------------------------
1997 1996
---------- ---------
<S> <C> <C>
REVENUES
Membership dues....................... $29,700 $29,956
Other campground/resort revenue....... 12,852 16,641
Membership and resort interest sales.. 2,966 2,798
RPI membership fees................... 3,000 3,438
Interest income....................... 2,875 5,146
Gain on asset dispositions............ 1,581 4,004
Other income.......................... 2,720 3,280
Nonrecurring income................... 4,714
------- -------
Total Revenues..................... 55,694 69,977
------- -------
EXPENSES
Campground/resort operating expenses.. 31,225 37,235
Selling expenses...................... 2,430 2,547
Marketing expenses.................... 953 929
RPI membership expenses............... 1,443 1,709
Corporate member services............. 1,152 1,235
Interest expense and amortization..... 7,321 13,399
General and administrative expenses... 7,564 7,543
Nonrecurring expenses................. 530
Restructuring costs................... 1,101 79
------- -------
Total Expenses..................... 53,189 65,206
------- -------
INCOME BEFORE INCOME TAXES AND.......... 2,505 4,771
EXTRAORDINARY ITEM
Income tax provision.................. (480) (11)
------- -------
INCOME BEFORE EXTRAORDINARY ITEM........ 2,025 4,760
Extraordinary gain on debt repurchase. 1,390
------- -------
NET INCOME.............................. $ 2,025 $ 6,150
======= =======
</TABLE>
<TABLE>
<CAPTION>
PRIMARY AND FULLY DILUTED NET INCOME PER SHARE:
<S> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM......... $.27 $1.29
EXTRAORDINARY ITEM....................... .37
------- -------
NET INCOME............................... $.27 $1.66
------- -------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING............................. 7,469 3,703
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
<PAGE>
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1997 1996
---------- ----------
<S> <C> <C>
REVENUES
Membership dues............................... $ 9,783 $ 9,913
Other campground/resort revenue............... 2,566 3,687
Membership and resort interest sales.......... 555 877
RPI membership fees........................... 1,057 1,204
Interest income............................... 880 1,742
Gain on asset dispositions.................... 366 3,086
Other income.................................. 833 1,073
Nonrecurring income........................... 4,714
---------- ----------
Total Revenues............................. 16,040 26,296
---------- ----------
EXPENSES
Campground/resort operating expenses.......... 8,957 10,070
Selling expenses.............................. 606 731
Marketing expenses............................ 318 266
RPI membership expenses....................... 506 536
Corporate member services..................... 340 331
Interest expense and amortization............. 2,243 4,358
General and administrative expenses........... 2,853 2,582
Nonrecurring expenses......................... 530
Restructuring costs........................... 79
---------- ----------
Total Expenses............................. 15,823 19,483
---------- ----------
INCOME BEFORE INCOME TAXES AND.................. 217 6,813
EXTRAORDINARY ITEM
Income tax provision.......................... (168) (168)
---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM................ 49 6,645
Extraordinary gain on debt repurchase......... 1,390
---------- ----------
NET INCOME...................................... $ 49 $ 8,035
========== ==========
PRIMARY AND FULLY DILUTED NET INCOME PER SHARE
INCOME BEFORE EXTRAORDINARY ITEM................ $.01 $1.80
EXTRAORDINARY ITEM.............................. .37
---------- ----------
NET INCOME...................................... $.01 $2.17
---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING.................................... 7,982 3,703
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
<PAGE>
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED MARCH 31, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency
Common Paid-In Accumulated Translation
Stock Capital Deficit Adjustment Total
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996.................. $37 $17,549 ($45,451) ($126) ($27,991)
Issuance of common stock in
Restructuring......................... 37 2,953 2,990
Foreign currency translation
adjustment............................ (9) (9)
Net income for the nine months ended
March 31, 1997......................... 2,025 2,025
------- ------- ------- ------- -------
BALANCE, March 31, 1997................. $ 74 $20,502 ($43,426) ($135) ($22,985)
======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 6
<PAGE>
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended March 31,
-----------------------------------
1997 1996
-------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Collections of principal on
receivables ............................. $ 6,211 $ 9,092
Interest received......................... 2,556 4,807
Interest paid............................. (7,682) (14,404)
General and administrative, corporate
member services, nonrecurring............ (11,104) (9,674)
expenses and restructuring costs
Cash collected from operations,
including deferred revenue............... 50,741 57,156
Cash from sales of memberships and
resort interests at the point of sale.... 2,788 2,633
Expenditures for property operations...... (30,704) (38,027)
Expenditures for sales and marketing...... (3,408) (3,416)
Expenditures for insurance premiums....... (374) (3,005)
Payment of income taxes................... (480) (11)
Reduction of (deposit made to secure)
standby letter of credit................. 1,500 (1,500)
Other, net................................ 120 100
------------ ---------------
Net cash provided by operating
activities................................. 10,164 3,751
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures...... (620) (954)
Proceeds from asset sales................. 2,958 7,048
------------ ---------------
Net cash provided by investing
activities................................. 2,338 6,094
------------ ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial borrowings under Credit
Agreement................................ 32,000
Net repayments under Credit Agreement..... (26,700)
Payment of debt issuance costs............ (3,132)
Retirement of Secured Notes............... (50,169)
Mandatory redemption of Secured Notes..... (18,599)
Repurchase of Secured Notes............... (5,275)
Repayment of notes and mortgages.......... (357) (312)
------------ ---------------
Net cash used in financing activities....... (48,358) (24,186)
------------ ---------------
DECREASE IN CASH AND CASH EQUIVALENTS....... (35,856) (14,341)
CASH AND CASH EQUIVALENTS:
Beginning of period........................ 37,403 50,596
------------- ---------------
End of period.............................. $ 1,547 $ 36,255
============= ===============
</TABLE>
-- continued --
Page 7
<PAGE>
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended March 31,
-----------------------------------
1997 1996
----------------- -------------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C>
Net income................................ $ 2,025 $ 6,150
--------------- -------------
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY
OPERATING ACTIVITIES --
Depreciation............................ 2,072 2,163
Amortization of interest discount,
collection costs and
valuation allowance................... (548) (856)
Amortization of debt issue costs and
deferred gain.......................... 1,508
Amortization of debt discount and
consent fees........................... 3,409
Gain on asset dispositions.............. (1,581) (4,004)
Reduction of allowance for doubtful
accounts, net.......................... (4,146)
Reversal of contingent liability........ (568)
Extraordinary gain on repurchase of
Secured Notes.......................... (1,390)
Decrease (increase) in restricted cash.. 1,557 (1,393)
Decrease in receivables................. 6,080 9,143
Decrease in other assets................ 1,546 899
Decrease in accounts payable............ (1,974) (2,315)
Decrease in accrued interest............ (2,101) (4,435)
Increase in deferred membership dues
revenue................................ 2,467 1,168
Decrease in other liabilities........... (950) (227)
Other, net.............................. 63 153
--------------- --------------
Total adjustments......................... 8,139 (2,399)
--------------- --------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES............................... $10,164 $ 3,751
=============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 8
<PAGE>
THOUSAND TRAILS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
GENERAL
Thousand Trails, Inc., a Delaware corporation ("Thousand Trails"), is the
successor by merger to USTrails Inc., a Nevada corporation ("USTrails").
Thousand Trails and its subsidiaries (the "Company") own and operate a system of
58 membership-based campgrounds located in 19 states and British Columbia,
Canada. In addition, the Company provides a reciprocal use program for members
of approximately 300 recreational facilities. The Company also owns certain
real estate at eight resorts located in seven states and owns and operates the
resort amenities at one of these locations. Prior to November 21, 1996, the
Company also managed timeshare facilities at these resorts (see Note 4). The
campground business represents the most significant portion of the Company's
business comprising 89% of the Company's operating revenues in fiscal 1997 to
date. The reciprocal use and resort businesses provided the remaining 11%.
Operating revenues consist primarily of membership dues received from campground
members, fee revenue from members of the reciprocal use program, and management
fees, guest fees and other fees and revenues received from the campground and
resort operations.
Effective November 20, 1996, the Company, then known as USTrails, reincorporated
in the state of Delaware and changed its name to Thousand Trails, Inc. The
reincorporation was effected through a merger with a newly formed wholly owned
subsidiary of USTrails that was approved by USTrails' stockholders at their
annual meeting (see Note 3).
The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. (successor by merger to USTrails) and the following wholly
owned subsidiaries: National American Corporation and its subsidiaries ("NACO"),
Resort Parks International, Inc. ("RPI"), UST Wilderness Management Corporation
("Wilderness Management"), and until July 16, 1996, Thousand Trails, Inc., a
Washington corporation, and its subsidiaries ("Trails"). On July 16, 1996,
Trails was merged into the Company.
The accompanying consolidated financial statements of the Company have not been
examined by independent accountants, but in the opinion of management, the
unaudited interim financial statements furnished herein reflect all adjustments
which are necessary for a fair presentation of the results for the interim
periods. All such adjustments are of a normal recurring nature, except for the
items described in the footnotes to the consolidated financial statements.
This Quarterly Report on Form 10-Q should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended June 30, 1996, filed
with the Securities and Exchange Commission on September 26, 1996.
NOTE 1 -- BASIS OF FINANCIAL STATEMENT PRESENTATION
The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization. Due to the
Company's emergence from bankruptcy, fresh start reporting, as required by AICPA
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," was reflected as of December 31, 1991 in the
Company's consolidated financial statements. Under fresh start reporting, a new
reporting entity was created and assets and liabilities were restated to reflect
their reorganization value which approximated fair value at the date of
reorganization.
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the three and
nine month periods ended March 31, 1997 and 1996, and in the consolidated
balance sheet at June 30, 1996. Certain
Page 9
<PAGE>
prior period amounts in the consolidated financial statements have been
reclassified to conform to the current period presentation.
Net income per common share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding, as determined
by the treasury stock method, whereby proceeds, if any, from the assumed
exercise of common stock equivalents, would be used to purchase shares at
current market prices. As part of the Restructuring discussed in Note 2, on
July 17, 1996, the Company issued an aggregate of 3,680,550 shares of common
stock as partial consideration for the retirement of the Secured Notes. These
shares represent approximately 50% of the shares of common stock currently
outstanding.
Since inception, the Company has not paid any dividends. The Credit Agreement
("Credit Agreement") between the Company and Foothill Capital Corporation
("Foothill") prohibits the payment of any cash dividends without the consent of
Foothill until the borrowings under the Credit Agreement are repaid. In
addition, the Indenture for the 12% Senior Subordinated PIK Notes Due 2003 ("PIK
Notes") prohibits the payment of any cash dividends until the PIK Notes are
repaid.
NOTE 2 -- SECURED NOTE RESTRUCTURING AND LONG TERM DEBT
SECURED NOTE RESTRUCTURING
At June 30, 1996, the Company had outstanding $101.5 million principal amount of
Secured Notes. At that time, there was a substantial risk that the resources
available to the Company would be insufficient to cover its continuing operating
needs and the mandatory sinking fund and interest payments due on the Secured
Notes on July 15, 1996. In addition, the Company faced default under the
financial covenants in the Indenture for the Secured Notes if waivers were not
obtained by September 30, 1996. On July 17, 1996, however, the Company
consummated a restructuring (the "Restructuring"), in which all of the Secured
Notes were retired. The Restructuring provided a new capital structure for the
Company. This new capital structure initially included $40.2 million principal
amount of PIK Notes that do not require the cash payment of interest until
fiscal 2001, do not contain financial covenants, and mature on July 15, 2003
without earlier scheduled principal payments. The new capital structure also
includes the Credit Agreement with Foothill that, in addition to financing $32.0
million of the retirement of the Secured Notes and related costs, provides the
Company with a working capital facility which reduces in availability through
final maturity on July 16, 1999. Availability of such working capital is
subject to continued compliance by the Company with the financial covenants,
amortization schedule, and other requirements of the Credit Agreement, including
certain covenants respecting minimum earnings before interest, taxes,
depreciation and amortization, and minimum tangible net worth. As part of the
Restructuring, the Company also issued an aggregate of 3,680,550 shares of
common stock as partial consideration for the retirement of the Secured Notes.
These shares represent approximately 50% of the shares of common stock currently
outstanding (see Note 3).
The Restructuring was accounted for as a Troubled Debt Restructuring whereby the
restructured debt was recorded at the carrying value of the old debt, and no
gain or loss was recorded on the transaction. As a result, the $40.2 million
principal amount of PIK Notes issued in the Restructuring was recorded with a
deferred gain of $303,000. This deferred gain is being amortized as a reduction
of interest expense using the effective interest method over the term of the
notes.
The Company incurred $1.1 million of legal expenses and other direct costs in
connection with the completion of the Restructuring which have been presented as
restructuring costs in the accompanying consolidated statement of operations for
the nine months ended March 31, 1997. In addition, the Company incurred debt
issuance costs of $3.1 million, including $570,000 of prepaid interest, related
to obtaining the Credit Agreement with Foothill. These costs, which
Page 10
<PAGE>
include legal costs, financial advisory fees and other direct costs of obtaining
the loans, have been capitalized, and are being amortized over the term of the
Credit Agreement. The unamortized portion of the debt issuance costs is
reflected in other assets in the accompanying consolidated balance sheet at
March 31, 1997.
BALANCE SHEET PRESENTATION OF LONG TERM DEBT
Balance sheet presentation of the current and long term components of the
Company's outstanding debt is reflected below, as of March 31, 1997 and June 30,
1996 (dollars in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
--------- --------
<S> <C> <C>
CURRENT PORTION OF LONG TERM DEBT :
Secured Notes, net of discount of $7.1
million............................... $28,264
Notes and mortgages payable............ $ 75 266
------- -------
$ 75 $28,530
======= =======
LONG TERM DEBT:
Borrowings under Credit Agreement..... $ 5,300
PIK Notes, including deferred
gain of $.3 million................... 42,864
Secured Notes......................... $66,086
Notes and mortgages payable........... 556 836
------- -------
$48,720 $66,922
======= =======
Total long term debt................. $48,795 $95,452
======= =======
</TABLE>
Page 11
<PAGE>
NOTE 3 -- REINCORPORATION MERGER
On November 19, 1996, the stockholders of USTrails approved the merger (the
"Merger") of USTrails into the Company, a newly formed, wholly-owned Delaware
subsidiary, pursuant to the Agreement and Plan of Merger dated as of October 1,
1996, between USTrails and the Company (the "Merger Agreement"). The Merger was
consummated on November 20, 1996. Pursuant to the terms of the Merger
Agreement, the Company is the surviving corporation. Each share of USTrails
common stock, par value $.01 per share ("USTrails Common Stock"), outstanding
prior to the Merger was converted into the right to receive one share of the
Company's common stock, par value $.01 per share ("Company Common Stock"), and
each outstanding stock option, warrant or other right to purchase or receive
USTrails Common Stock was converted into a similar stock option, warrant or
other right to acquire Company Common Stock. The principal purposes of the
Merger were to implement the transfer restrictions described below and to change
USTrails' state of incorporation to Delaware.
Transfer of Company Common Stock is subject to restrictions designed to avoid an
"ownership change" within the meaning of section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"). Such restrictions are set forth in
Article IX of the Company's Restated Certificate of Incorporation. Article IX
generally restricts, until June 30, 2011 (or earlier in certain events), direct
or indirect transfer of Company Common Stock that would without the approval of
the board of directors of the Company (i) increase to more than 4.75% the
percentage ownership of Company Common Stock of any person who at any time
during the preceding three-year period did not own more than 4.75% of the
Company Common Stock, (ii) increase the percentage of Company Common Stock owned
by any person that during the preceding three-year period owned more than 4.75%
of the Company Common Stock, or by any group of persons treated as a "5 Percent
Shareholder" (as defined in the Code but substituting "4.75%" for "5 Percent"),
or (iii) cause an "ownership change" of the Company. Article IX provides that
any direct or indirect transfer of Company Common Stock in violation of Article
IX is void ab initio as to the purported transferee, and the purported
transferee will not be recognized as the owner of shares acquired in violation
of Article IX for any purpose, including for purposes of voting and receiving
dividends or other distributions in respect of Company Common Stock. Any shares
purportedly acquired in violation of Article IX will be transferred to a trustee
who will be required to sell them. See the Company's Proxy
Statement/Prospectus, dated October 3, 1996 (the "Proxy Statement/Prospectus"),
in which the terms of such restrictions were previously reported.
NOTE 4 -- SALE OF TIMESHARE OPERATIONS
On November 21, 1996, the Company sold its timeshare management operations and
timeshare inventory to a newly formed corporation owned by two former employees
(the "Buyer"). The sales price was $850,000, of which $50,000 was paid in cash
at closing with the balance represented by a promissory note in the principal
amount of $800,000. The principal of the note is payable $300,000 on or before
May 15, 1997, and $500,000 on or before May 15, 1998. Interest accrues on the
note at the rate of 14 1/2% per annum and is payable at the time of the
principal installments. The Buyer may extend payment of $150,000 of the second
principal installment for up to one year, with interest accruing at 20% per
annum. The note is secured by liens on substantially all assets of the Buyer, a
pledge of the Buyer's outstanding stock, and the personal guarantees of the two
shareholders of the Buyer. In April 1997, the Buyer made an early payment on
the note of $150,000 plus accrued interest.
A deferred gain of $397,000 recorded in connection with this sale is being
recognized on the installment method of accounting as payments on the note are
received. The deferred gain has been netted against the principal amount of the
note which is included in other current and long term assets in the accompanying
consolidated balance sheet at March 31, 1997.
Page 12
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NOTE 5 -- RECEIVABLES
CONTRACTS RECEIVABLE
At March 31, 1996, the Company reduced the allowance for doubtful accounts on
the contracts receivable by $5.1 million. The adjustment was made because the
cancellation rate on these contracts receivable had decreased, and the Company
had experienced lower contract losses than originally anticipated. These
amounts are included in nonrecurring income in the accompanying consolidated
statements of operations for the three and nine month periods ending March 31,
1996.
The allowance for doubtful accounts is an estimate of the receivables that will
cancel in the future and is determined based on historical cancellation rates
and other factors deemed relevant to the analysis. The Company does not
presently anticipate further adjustments to the allowance for doubtful accounts
on the contracts receivable. However, the allowance and the rate at which the
Company provides for future losses on its contracts receivable could be
increased or decreased in the future based on the Company's actual collection
experience.
MEMBERSHIP DUES RECEIVABLE
At March 31, 1996, the Company recorded a provision for uncollectible membership
dues receivable of $1.0 million related to certain aged dues accounts that were
determined to be uncollectible at March 31, 1996. The charge is included as a
reduction to nonrecurring income in the accompanying consolidated statements of
operations for the three and nine month periods ending March 31, 1996.
NOTE 6 -- GAIN ON ASSET DISPOSITIONS
The Company recognized a gain on the disposition of assets of $1.6 million and
$4.0 million for the nine months ended March 31, 1997 and 1996, respectively.
The gain in the current nine month period resulted primarily from the sale of
three campgrounds and certain other real estate at the campgrounds and resorts.
The gain in the prior period resulted primarily from the sale of the common
amenities at one of the full service resorts and two non-operating campgrounds,
and the disposition of two operating campgrounds that were abandoned. Over the
next several years, the Company intends to dispose of the remaining assets that
it owns at the resorts, any campgrounds that are closed as the Company
downsizes, and other undeveloped land and excess acreage associated with the
campgrounds. However, no assurance exists that the Company will be able to
locate a buyer for these assets or that sales on acceptable terms can be
effected.
NOTE 7 -- EXTRAORDINARY ITEM
On January 31, 1996, the Company repurchased $7.4 million principal amount of
Secured Notes from unrelated sellers for $5.3 million, including accrued
interest. The Company recognized a gain of $1.4 million on these transactions,
which is presented as an extraordinary item in the consolidated statements of
operations for the three and nine month periods ending March 31, 1996.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
Self Insurance
- --------------
The Company is self-insured for general liability losses up to $250,000 per
occurrence, with an annual aggregate exposure to the Company of $2.0 million.
The Company's liability insurance program provides coverage in excess of the
self-insured amounts up to an annual limit of $26.8 million. The Company has
provided a liability for estimated known and unknown claims related to uninsured
general liability risks of $1.9 million at March 31, 1997, which is included in
other liabilities in the accompanying consolidated balance sheet. This
liability is determined based on actuarial estimates.
Page 13
<PAGE>
CEO Bonus Accrual
- -----------------
In May 1995, the Company entered into an employment agreement with its Chief
Executive Officer ("CEO") which provided, among other things, that the CEO would
receive a one-time bonus equal to between 4% and 6% of the amount by which the
enterprise value of the Company (including the value of its debt and equity)
exceeded $75.0 million at the time the CEO elected to receive the bonus. As a
result, at March 31, 1996, the Company recorded a $530,000 contingent liability
related to the vested portion of this bonus, which was then 50% vested. The
$530,000 charge is included in nonrecurring expenses in the accompanying
consolidated statements of operations for the three and nine month periods
ending March 31, 1996.
The CEO's bonus would have been adversely affected by the consummation of the
Restructuring. As a result, on June 29, 1996, the CEO exercised his right to
receive the bonus. The CEO is entitled to $1,270,589, of which $952,927 was
paid on July 9, 1996. The additional $317,662 is payable on May 11, 1997,
provided that the CEO is employed by the Company on that date. The Company
accrued the entire amount of the bonus at June 30, 1996. The Company obtained
an irrevocable standby letter of credit on which the CEO could draw payment if
the Company failed to pay any portion of the bonus after receiving a request
from the CEO. The letter of credit was secured by a $1.5 million cash deposit,
which was reduced to $317,662 after payment of the initial bonus amount, and
released in February 1997.
Workers' Compensation Insurance
- -------------------------------
In fiscal 1996, the Company improved its method of determining workers'
compensation premiums, whereby it no longer records the cost of such premiums
based on estimates that are subject to potential audit adjustments at year end.
As a result, at March 31, 1996, the Company reversed its recorded contingent
liability related to workers' compensation premium audits. The $568,000
reversal is included in nonrecurring income in the accompanying consolidated
statements of operations for the three and nine month periods ending March 31,
1996.
Declining Membership Base
- -------------------------
The Company derives a significant portion of its ongoing operating revenue from
its campground members (89% in fiscal 1997 to date). The Company's membership
base has declined significantly during the past several years and is presently
declining at the rate of approximately 8% per year. The Company attributes this
continuing attrition principally to its aging membership base, of whom
approximately 50% are senior citizens. The Company must significantly increase
its campground membership sales over current levels in order to stop the decline
in the Company's membership base. As a result, the success of the Company's
business strategy over the long term is dependent upon the Company's ability to
market new memberships in sufficient numbers on a cost-effective basis.
Environmental Issues
- --------------------
Certain environmental issues may exist at some of the Company's campgrounds
concerning underground storage tanks, sewage treatment plants and septic
systems, and waste disposal. Management has reviewed these issues and believes
that they will not have a material adverse impact on the Company's operations or
financial position.
Litigation
- ----------
Johnnie Lacy v. Thousands Trails, Inc., Civil Action No C-96 004411, filed
- ---------------------------------------
February 1, 1996, in the United States District Court for the Northern District
of California. In this action, which purports to be a class action, the
plaintiff alleges that the Company has failed to comply with the Americans with
Disabilities Act and related California statutes with respect to certain of its
campgrounds. The plaintiff alleges that the Company has failed to remove
barriers to access by persons with disabilities where such barrier removal is
readily achievable. The plaintiff seeks unspecified damages and injunctive
relief. Although this case is still in the early stages of development,
management does not believe that it will have a material adverse impact on the
Company's operations or financial position.
Page 14
<PAGE>
The Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Company's
operations or financial position.
NOTE 9 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of non-cash investing and financing activities required
by Statement of Financial Accounting Standards No. 95 "Statement of Cash Flows"
are presented below for the nine months ended March 31, 1997 and 1996 (dollars
in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1997
-----------------
Non-cash transactions related to the
Restructuring (see Note 2)
- ----------------------------------------
<S> <C>
Retirement of Secured Notes............. ($44,181)
Issuance of PIK Notes................... 40,521
Issuance of Common Stock................ 2,990
Write-off of unamortized portion of
consent fees........................... 670
Non-cash transactions related to the
timeshare sale (see Note 4)
- ----------------------------------------
Note receivable from buyers............. $ 800
Deferred gain........................... (397)
Book value of timeshare inventory sold.. (18)
Book value of fixed assets sold......... (193)
Net receivables written off............. (242)
Non-cash payment of PIK Note interest
- ----------------------------------------
PIK Notes issued in lieu of cash
interest on January 15, 1997........... $ 2,372
Nine Months Ended
March 31,
1996
-----------------
Abandonment of two operating
campgrounds and elimination of
related nonrecourse obligations........ $ 2,518
</TABLE>
Page 15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the year ended June 30,
1996, filed with the SEC on September 26, 1996.
All capitalized terms used herein have the same meaning as those defined in Item
1 -- Financial Statements.
In this Management's Discussion and Analysis of Financial Condition and Results
of Operations, the Company makes certain statements as to its expected financial
condition, results of operations, cash flows, and business strategy and plans
for periods after March 31, 1997. All of these statements are forward-looking
statements made pursuant to the safe harbor provisions of Section 21(E) of the
Securities Exchange Act of 1934, as amended. These statements are not
historical and involve risks and uncertainties. The Company's actual financial
condition, results of operations, cash flows, and business strategy and plans
for future periods may differ materially due to several factors, including but
not limited to the Company's ability to control costs and implement its sales
and marketing plan, the actual rate of decline in the campground membership
base, the actual use of the campgrounds by members and guests, the effects on
members and guests of the Company's plans to downsize its business, the
Company's success in collecting its contracts receivable and selling assets, and
the other factors affecting the Company's operations described in this report,
and in the Company's Annual Report on Form 10-K for the year ended June 30,
1996.
LIQUIDITY AND CAPITAL RESOURCES
STABILIZED OPERATIONS. Since reorganizing under Chapter 11 on December 31,
1991, the Company's annualized operating revenues have decreased by $26.3
million (29%). Over the same period, the Company has decreased its annualized
operating expenses by $52.1 million (46%), and implemented a program under which
certain campground members voluntarily increased their annual dues by an
aggregate of $2.1 million. During this period, the Company has concentrated on
increasing continuing revenues and decreasing continuing expenses. The Company
has closed eleven campgrounds and has changed other campgrounds to seasonal
operations, reduced staff, consolidated its administrative functions, deferred
maintenance, and reduced service levels. The Company has also disposed of
certain campgrounds and other non-core assets. However, the Company's
membership base has declined significantly during this period, and the
membership base is presently declining at the rate of approximately 8% per year.
The Company attributes this continuing attrition principally to its aging
membership base, approximately 50% of whom are senior citizens.
During fiscal 1996, the Company stabilized its operations, which it had been
seeking to accomplish since emerging from Chapter 11 proceedings in 1991, and
achieved a positive contribution from operations of $4.8 million. For the nine
months ended March 31, 1997, the Company had a positive contribution from
operations of $6.5 million, compared with $4.9 million for the same period last
year. For this purpose, the contribution from operations is defined as
operating income before interest income and expense, gains on asset
dispositions, restructuring costs, taxes and other nonrecurring income and
expenses. See the tables on pages 19-20 and 25-26 for the elements of the
contribution from operations and the Company's operating income before taxes for
the periods presented.
CURRENT BUSINESS STRATEGY. The Company's current strategy is to improve its
campground operations, stabilize its campground membership base through
increased sales and marketing efforts, and determine the appropriate level for
its ongoing campground operations. The Company has conducted an extensive
marketing study, redesigned its membership products, and developed a sales and
marketing operation. Consistent with this strategy, the Company intends
Page 16
<PAGE>
to downsize its business by implementing additional cost reduction measures
while its membership base declines. These cost reduction measures will likely
include the closure and disposition of additional campgrounds and decreases in
general and administrative expenditures. The disposition of campgrounds will
require addressing the rights of members associated with such campgrounds. The
impact of these rights is uncertain and could adversely affect the availability
or timing of disposition opportunities or the ability of the Company to realize
recoveries from asset dispositions. Moreover, the possibility of additional
campground dispositions may adversely affect the collection of dues and
contracts receivable from members.
CASH. On March 31, 1997, the Company had $1.5 million of cash and cash
equivalents, a decrease of $35.9 million during the nine month period. The
Company's cash declined primarily because $28.6 million was used to retire the
Secured Notes and pay legal and other costs related to the Restructuring
(including accrued interest), and $26.7 million was used to repay borrowings
under the Credit Agreement with Foothill. These expenditures were partially
offset by $2.9 million of proceeds from asset sales and cash generated from
operations.
In the Restructuring, $50.2 million of cash was paid to the holders of the
Secured Notes as full or partial consideration for the retirement of the Secured
Notes, and $6.2 million of cash was paid to the holders of the Secured Notes for
the semi-annual interest due July 15, 1996, and additional interest through the
date of the Restructuring. In addition, $1.1 million of cash was used to pay
for expenses related to the Restructuring, and $3.1 million of cash was used to
pay the costs of obtaining the Credit Agreement with Foothill. The Company
funded these cash payments with $28.6 million of its cash and $32.0 million of
new borrowings under the Credit Agreement with Foothill.
The Company's principal sources of operating cash for the nine months ended
March 31, 1997, were $8.8 million in principal and interest collections on
contracts receivable and $50.7 million in dues collections and other campground
and resort revenues. Principal uses of operating cash for the nine months ended
March 31, 1997, were $30.7 million in operating expenses, $11.1 million in
general and administrative expenses (including corporate member services costs,
restructuring costs, and nonrecurring expenses), $3.4 million in sales and
marketing expenditures, and $7.7 million in interest payments, $6.2 million of
which was related to the Secured Notes that were retired in the Restructuring.
Under the Credit Agreement with Foothill, as of March 31, 1997, the Company had
a term loan totaling $5.1 million outstanding and a revolving loan in the
maximum amount of $21.5 million, of which $221,000 was outstanding and $21.3
million was available for borrowing. Under the Credit Agreement, the Company
must use all collections of principal and interest on the contracts receivable
and all proceeds from asset sales to reduce borrowings under the Credit
Agreement. In addition, the Company must make specified principal reductions on
these borrowings over time based on a monthly calculation of eligible contracts
receivable and an amortization schedule set forth in the Credit Agreement. The
maximum amount of the revolving loan declines as these principal reductions are
made. The Credit Agreement must be paid in full on July 16, 1999.
The Company's cash flows are highly seasonal. The Company receives the majority
of the dues revenue from its members during the winter and incurs a higher level
of operating expenses during the summer. As a result of dues receipts, as of
April 25, 1997, the outstanding loans under the Credit Agreement had been
reduced to a total of $2.1 million, and $20.9 million was available for
borrowing. The Company anticipates having increased borrowings under the Credit
Agreement during the summer months.
Based upon its current business plan, the Company believes that future cash
flows provided from operations, asset sales, and borrowings available under the
revolving loan will be adequate for the Company's operating and other cash
requirements during the remaining term of the Credit Agreement. All cash held
by the Company and its wholly owned subsidiaries is generally deposited in
accounts that are controlled by and pledged to Foothill.
Page 17
<PAGE>
MATERIAL CHANGES IN FINANCIAL CONDITION
Total assets decreased by $47.0 million during the nine months ended March 31,
1997. Cash decreased by $35.9 million as discussed above. Contracts receivable
decreased by $5.6 million due primarily to $6.2 million in cash collections
offset by $548,000 related to the amortization of the allowances for interest
discount and collection costs and valuation allowance. Inventory and other
current assets decreased by $2.2 million due primarily to the amortization of
insurance premiums for fiscal 1997 that were paid in June 1996. Campground and
resort properties decreased by a total of $3.7 million due primarily to the sale
of four campgrounds, the timeshare operations at the resorts, certain other real
estate at the campgrounds and resorts, and depreciation during the period. In
addition, restricted cash decreased by $1.6 million resulting primarily from the
release of the cash deposit securing the letter of credit obtained in connection
with the CEO's employment agreement (see Note 8 to the consolidated financial
statements in Item 1). These decreases were offset by a $1.9 million increase
in other assets, due primarily to $3.1 million of debt issuance costs incurred
in connection with obtaining the Credit Agreement with Foothill, reduced by
amortization during the period.
Total liabilities decreased by $52.0 million during the nine months ended March
31, 1997. The Company's total outstanding debt decreased by $46.7 million due
primarily to the retirement of $101.5 million principal amount of Secured Notes
in the Restructuring, partially offset by the issuance of $40.2 million
principal amount of PIK Notes, $2.4 million of PIK Notes issued in lieu of
interest, and net borrowings under the Credit Agreement. Accrued interest
declined by $4.5 million due to the $6.2 million of interest paid on the Secured
Notes in July 1996, partially offset by $1.1 million of non-cash interest
accruing on the PIK Notes for the period from January 16, 1997, through March
31, 1997. Accounts payable decreased by $2.0 million due primarily to the
seasonality of the business and accrued liabilities decreased by $1.2 million
due primarily to the payment of a one-time bonus to the CEO. These decreases
were partially offset by deferred membership dues revenue, which increased by
$2.4 million due to cash collections in excess of revenue recognized during the
period.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1997 AND 1996
NET INCOME. The Company reported net income of $2.0 million or $.27 per share
on revenues of $55.7 million for the nine months ended March 31, 1997, and net
income of $6.2 million or $1.66 per share on revenues of $70.0 million for the
same period last year. The difference between periods was due primarily to
nonrecurring items, and lower gains on asset dispositions, campground operating
costs, and interest expense in the current period. The results for the current
period include $1.1 million of costs related to the Restructuring. The results
for the prior period include a $1.4 million extraordinary gain on the repurchase
of Secured Notes, $4.7 million of nonrecurring income from the reversal of
certain reserves, $530,000 of nonrecurring expenses associated with a one-time
bonus for the CEO, and $79,000 of costs related to the Restructuring.
Page 18
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds (including Wilderness Management), full service resorts, and RPI,
excluding allocations of corporate overhead and other revenues and expenses, for
the nine months ended March 31, 1997:
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1997
----------------------------------------------
Campgrounds Resorts Total
------------ ------------ ------------
<S> <C> <C> <C>
CAMPGROUND/RESORT OPERATIONS
Membership dues............................... $ 29,700 $ 29,700
Other campground/resort revenues.............. 10,731 $ 2,121 12,852
Campground ancillary expenses................. (5,067) (5,067)
Other operating expenses...................... (23,679) (2,480) (26,159)
--------- --------- ---------
Profit (loss) on campground/resort
operations..................................... 11,685 (359) 11,326
--------- --------- ---------
SALES
Memberships................................... 2,499 2,499
Resort interests.............................. 467 467
--------- --------- ---------
Total sales..................................... 2,499 467 2,966
--------- --------- ---------
Selling costs................................. (2,087) (342) (2,429)
Marketing expenses............................ (953) (953)
--------- --------- ---------
Total expenses.................................. (3,040) (342) (3,382)
--------- --------- ---------
Profit (loss) on sales.......................... (541) 125 (416)
--------- --------- ---------
RESORT PARKS INTERNATIONAL
Fee income.................................... 3,000 3,000
Cost of operations............................ (1,443) (1,443)
--------- --------- ---------
RPI net contribution............................ 1,557 1,557
--------- --------- ---------
$ 12,701 ($234) 12,467
========= ========= =========
Other income.................................. 2,720
Corporate member services..................... (1,152)
General and administrative expenses........... (7,564)
---------
OPERATING INCOME BEFORE INTEREST INCOME AND
EXPENSE, GAIN ON ASSET DISPOSITIONS,
RESTRUCTURING COSTS, AND TAXES................ 6,471
---------
Interest income............................... 2,875
Interest expense and amortization of
debt issuance costs and deferred gain........ (7,321)
Gain on asset dispositions.................... 1,581
Restructuring costs........................... (1,101)
---------
OPERATING INCOME BEFORE TAXES.................. $ 2,505
=========
</TABLE>
Page 19
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds (including Wilderness Management), full service resorts, and RPI,
excluding allocations of corporate overhead and other revenues and expenses, for
the nine months ended March 31, 1996:
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1996
----------------------------------------------
Campgrounds Resorts Total
------------ ------------ ------------
<S> <C> <C> <C>
CAMPGROUND/RESORT OPERATIONS
Membership dues............................. $ 29,956 $ 29,956
Other campground/resort revenues............ 11,195 $ 5,446 16,641
Campground ancillary expenses............... (5,681) (5,681)
Operating expenses.......................... (25,612) (5,942) (31,554)
--------- --------- ---------
Profit (loss) on campground/resort
operations.................................. 9,858 (496) 9,362
--------- --------- ---------
SALES
Memberships................................. 1,780 1,780
Resort interests............................ 1,018 1,018
--------- --------- ---------
Total sales................................... 1,780 1,018 2,798
--------- --------- ---------
Selling costs............................... (1,872) (675) (2,547)
Marketing expenses.......................... (929) (929)
--------- --------- ---------
Total expenses................................ (2,801) (675) (3,476)
--------- --------- ---------
Profit (loss) on sales........................ (1,021) 343 (678)
--------- --------- ---------
RESORT PARKS INTERNATIONAL
Fee income.................................. 3,438 3,438
Cost of operations.......................... (1,709) (1,709)
--------- --------- ---------
RPI net contribution.......................... 1,729 1,729
--------- --------- ---------
$ 10,566 ($153) 10,413
========= ========= =========
Other income................................ 3,280
Corporate member services................... (1,235)
General and administrative
expenses................................... (7,543)
---------
OPERATING INCOME BEFORE INTEREST INCOME AND EXPENSE,
GAIN ON ASSET DISPOSITIONS, RESTRUCTURING COSTS,
NONRECURRING INCOME AND EXPENSE, TAXES AND
EXTRAORDINARY ITEM........................... 4,915
---------
Interest income............................. 5,146
Interest expense and amortization
of debt discount and consent fees.......... (13,399)
Gain on asset dispositions.................. 4,004
Nonrecurring income......................... 4,714
Nonrecurring expenses....................... (530)
Restructuring costs......................... (79)
---------
OPERATING INCOME BEFORE TAXES AND
EXTRAORDINARY ITEM........................... $ 4,771
=========
</TABLE>
Page 20
<PAGE>
CAMPGROUND OPERATIONS. The Company's operations are highly seasonal. The
Company receives the majority of the dues revenue from its members during the
winter, which are recognized as income ratably during the year. However, the
Company incurs a higher level of operating expenses during the summer. In
addition, a majority of the Company's sales and marketing efforts occur during
the summer.
Campground membership dues revenue was $29.7 million for the nine months ended
March 31, 1997, compared with $30.0 million for the same period last year. The
decline in dues revenue was due primarily to the net loss of campground members
between periods, partially offset by the effect of annual dues increases.
Other campground revenues were $10.7 million for the nine months ended March 31,
1997, compared with $11.2 million for the same period last year. The related
campground ancillary expenses were $5.1 million for the nine months ended March
31, 1997, compared with $5.7 million for the same period last year. The
decreases in other campground revenues and the related ancillary expenses were
due primarily to the closure of four campgrounds during fiscal 1996 and
reductions in service levels at certain other campgrounds.
Other campground operating expenses decreased by $1.9 million to $23.7 million
for the nine months ended March 31, 1997, from $25.6 million for the same period
last year. This decrease resulted primarily from the operational changes made
at the campgrounds in fiscal 1996, which included reducing campground management
and personnel, closing and disposing of four campgrounds, and changing to
seasonal operations at additional campgrounds with low usage during off-season
periods.
During the balance of fiscal 1997, the Company intends to continue to evaluate
its campground operations to determine the appropriate level for such
operations, and it expects to implement additional cost reduction measures while
its membership base continues to decline. These cost reduction measures will
likely include the closure and disposition of additional campgrounds.
Campground membership sales revenue was $2.5 million for the nine months ended
March 31, 1997, compared with $1.8 million for the same period last year,
reflecting a significantly higher volume of sales in the current period, but at
lower average prices. Sales of new campground memberships increased to 2,518
for the nine months ended March 31, 1997, from 1,834 for the nine months ended
March 31, 1996, while sales of upgrade memberships increased to 1,467 for the
nine months ended March 31, 1997, from 182 for the nine months ended March 31,
1996. These increases were due primarily to special promotional programs
implemented during the first six months of fiscal 1997. As a result of these
special promotional programs, however, sales revenue declined for the three
months ended March 31, 1997, compared with the same period last year, because
fewer prospects were available to attend Company sales presentations. The
number of prospects declined because the Company had already contacted most of
its members in connection with the special promotions during the first six
months of the fiscal year. The Company presently generates sales prospects
principally through member and RV dealer referrals.
The Company is working to increase the number of prospects that attend its sales
presentations, which has not met the Company's expectations in fiscal 1997. In
this regard, during the three months ended March 31, 1997, the Company entered
into a joint marketing arrangement with Fleetwood Industries, Inc., the largest
manufacturer of recreational vehicles ("RVs"). Under this marketing
arrangement, purchasers of Fleetwood RVs will receive a temporary membership and
be invited to visit one of the Company's campgrounds. In the future, the
Company intends to pursue joint marketing relationships with other companies.
Selling and marketing expenses exceeded sales revenues by $541,000 and $1.0
million for the nine months ended March 31, 1997 and 1996, respectively, due to
the low volume of sales. These expenses exceeded sales revenue because of the
increased marketing activity, and the low volume of sales in both periods which
did not cover fixed costs.
Page 21
<PAGE>
The Company's marketing efforts require significant expense, and in the short
term, the Company expects that its selling and marketing expenses will exceed
its campground membership sales revenue on an annual basis. The Company must
significantly increase its campground membership sales over current levels in
order to stop the continuing decline in the Company's membership base. The
success of the Company's business strategy over the long term is dependent upon
the Company's ability to market new memberships in sufficient numbers on a cost-
effective basis.
CAMPGROUND MANAGEMENT. Wilderness Management, a wholly owned subsidiary of the
Company, manages public campgrounds for the US Forest Service. For the nine
months ended March 31, 1997, these operations produced revenues of $800,000 with
related expenses (excluding certain shared administrative costs) of $701,000.
This compares with revenues for the same period last year of $596,000 and
related expenses (excluding certain shared administrative costs) of $547,000.
The increase in revenues and expenses between periods is due to new contracts
entered into in fiscal 1997.
RESORT PARKS INTERNATIONAL. RPI charges its members a fee for a membership that
entitles them to use any of the participating facilities, subject to certain
limitations. For the nine months ended March 31, 1997, RPI's operations
produced a net contribution of $1.6 million, compared with $1.7 million for the
same period last year. The decline in results between periods is due to lower
revenues in the current period that were not completely offset by expense
reductions. RPI's revenues have declined as a result of declining sales in the
membership camping industry generally. To maintain its net contribution in the
future, RPI is working to introduce new products to increase its revenues;
however, there is no assurance that it will be successful.
RESORT OPERATIONS. During the periods presented, the Company's resort
operations consisted primarily of timeshare management and timeshare and lot
sales. On November 21, 1996, the Company sold its timeshare management
operations and timeshare inventory to a newly formed corporation owned by two
former employees. See Note 4 to the consolidated financial statements included
in Item 1 of Part I of this report.
The resort operations produced a negative contribution of $234,000 for the nine
months ended March 31, 1997, compared with a negative contribution of $153,000
for the same period last year. The sale of the timeshare operations has
significantly reduced both the revenues and expenses from the resort operations.
The Company expects a negative contribution from the resort operations in the
future as it continues its efforts to sell the remaining assets it owns at the
resorts. These assets consist primarily of approximately 600 residential lots
and other miscellaneous real estate. The Company presently plans to dispose of
the remaining assets that it owns at the resorts over the next several years.
However, there is no assurance that the Company will be able to locate a buyer
for any of the remaining resort assets or that sales on acceptable terms can be
effected.
INTEREST INCOME AND EXPENSE. Interest income was $2.9 million for the nine
months ended March 31, 1997, compared with $5.1 million for the same period last
year. In these periods, interest income included amortization of the allowance
for interest discount and valuation allowance related to the contracts
receivable of $297,000 and $465,000, respectively. The $2.2 million decrease
in interest income between periods was due to a decrease in interest earned on
the Company's diminishing portfolio of contracts receivable and significantly
lower cash balances between years.
Interest expense was $7.3 million for the nine months ended March 31, 1997,
compared with $13.4 million for the same period last year. In the current
period, interest expense included amortization of $1.5 million related to the
debt issuance costs incurred in connection with obtaining the Credit Agreement
with Foothill. The $6.1 million decrease in interest expense between periods
was due to the repurchase of $7.4 million principal amount of Secured Notes in
January 1996, a net $46.7 million reduction in the Company's outstanding debt
resulting from
Page 22
<PAGE>
the Restructuring and subsequent repayments under the Credit Agreement, a $2.5
million reduction in mortgage notes due to the abandonment of two operating
campgrounds in the Fall of 1995, and scheduled repayments of notes payable.
As a result of the Restructuring, interest expense has decreased significantly
for fiscal 1997 compared with fiscal 1996, due to the reduction in the total
amount of debt outstanding. Moreover, since the Company is prohibited from
paying cash interest on the PIK Notes until the borrowings under the Credit
Agreement with Foothill are repaid, during the repayment period, a significant
portion of the Company's interest expense will represent non-cash interest on
the PIK Notes. The payment-in-kind feature of the PIK Notes will decrease the
Company's cash interest costs over this period. However, the payment-in-kind
feature of the PIK Notes will also increase the principal amount of PIK Notes
outstanding at the rate of 12% per year, compounded semi-annually, which will
increase interest expense in the future and also decrease the rate at which the
Company is able to retire its total debt outstanding.
GAIN ON ASSET DISPOSITIONS. The Company recognized a gain on the disposition of
assets of $1.6 million for the nine months ended March 31, 1997, compared with
$4.0 million for the same period last year. The gain in the current period
resulted primarily from the sale of three campgrounds and certain other real
estate at the campgrounds and resorts. The gain in the prior period resulted
primarily from the sale of the common amenities at one of the full service
resorts and two non-operating campgrounds, and the disposition of two operating
campgrounds that were abandoned. Over the next several years, the Company
intends to dispose of the remaining assets that it owns at the resorts, any
campgrounds that are closed as the Company downsizes, and other undeveloped land
and excess acreage associated with the campgrounds. however, no assurance exists
that the Company will be able to locate a buyer for these assets or that sales
on acceptable terms can be effected.
OTHER INCOME. Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, settlements received on defaulted contracts, subscription fees
received from members who subscribe to the Company's member magazine, and fees
received from members who make more than five operator-assisted reservations in
a given year, rather than use the Company's automated reservation system. Other
income was $2.7 million for the nine months ended March 31, 1997, compared with
$3.3 million for the same period last year. The decrease in the current period
was due primarily to a decrease in income from recoveries on canceled contracts
and dues.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
approximately $7.5 million for the nine months ended March 31, 1997 and 1996.
The Company's continuing efforts to lower its administrative costs were
substantially offset by higher legal costs incurred in the current period in
connection with the Company's reincorporation/merger, the registration of the
PIK Notes, and the formation of a new wholly owned subsidiary to provide debt
collection services for third parties. Approximately $61,000 of costs were
incurred as of March 31, 1997, in connection with the formation and licensing of
the new subsidiary. It is too early to predict how quickly the Company might
commence third party collection activities, or at what level of volume.
NONRECURRING INCOME. The Company recognized $4.7 million of nonrecurring income
during the nine months ended March 31, 1996, which included $4.1 million
resulting from a net reduction in the allowance for doubtful accounts related to
contracts and dues receivable, and $568,000 from the reduction of a contingent
liability.
NONRECURRING EXPENSES. The Company incurred $1.1 million and $79,000 of costs
during the nine months ended March 31, 1997 and 1996, respectively, related to
the Restructuring. In addition, at march 31, 1996, the Company accrued $530,000
of nonrecurring expense associated with a one-time bonus for the Company's CEO.
See Note 8 to the consolidated financial statements included in Item 1 of Part I
of this report.
Page 23
<PAGE>
EXTRAORDINARY GAIN. On January 31, 1996, the Company repurchased $7.4 million
principal amount of Secured Notes from unrelated sellers for $5.3 million,
including accrued interest. The Company recognized a gain of $1.4 million on
these transactions.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NET INCOME. The Company reported net income of $49,000 or $.01 per share on
revenues of $16.0 million for the three months ended March 31, 1997, and net
income of $8.0 million or $2.17 per share on revenues of $26.3 million for the
same period last year. The difference between periods was due primarily to
nonrecurring items in the prior period and lower gains on asset dispositions,
campground operating costs, and interest expense in the current period. The
results for the prior period included a $1.4 million extraordinary gain on the
repurchase of Secured Notes, $4.7 million of nonrecurring income related to the
reversal of certain reserves, $530,000 of nonrecurring costs associated with a
one-time bonus for the CEO, and $79,000 of costs related to the Restructuring.
Page 24
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds (including Wilderness Management), full service resorts, and RPI,
excluding allocations of corporate overhead and other revenues and expenses, for
the three months ended March 31, 1997:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
---------------------------------
Campgrounds Resorts Total
----------- ------- ------
<S> <C> <C> <C>
CAMPGROUND/RESORT OPERATIONS
Membership dues......................... $ 9,783 $ 9,783
Other campground/resort revenues........ 2,303 $ 263 2,566
Campground ancillary expenses........... (1,076) (1,076)
Other operating expenses................ (7,420) (461) (7,881)
------- ------- -------
Profit (loss) on campground/resort
operations............................... 3,590 (198) 3,392
------- ------- -------
SALES
Memberships............................. 436 436
Resort interests........................ 119 119
------- ------- -------
Total sales............................... 436 119 555
------- ------- -------
Selling costs........................... (497) (109) (606)
Marketing expenses...................... (318) (318)
------- ------- -------
Total expenses............................ (815) (109) (924)
------- ------- -------
Profit (loss) on sales.................... (379) 10 (369)
------- ------- -------
RESORT PARKS INTERNATIONAL
Fee income.............................. 1,057 1,057
Cost of operations...................... (506) (506)
------- ------- -------
RPI net contribution...................... 551 551
------- ------- -------
$ 3,762 ($188) 3,574
======= ======= =======
Other income............................ 833
Corporate member services............... (340)
General and administrative expenses..... (2,853)
-------
OPERATING INCOME BEFORE INTEREST INCOME
AND EXPENSE, GAIN ON ASSET DISPOSITIONS,
RESTRUCTURING COSTS, AND TAXES........... 1,214
-------
Interest income......................... 880
Interest expense and amortization
of debt issuance costs and
deferred gain.......................... (2,243)
Gain on asset dispositions.............. 366
-------
OPERATING INCOME BEFORE TAXES............. $ 217
=======
</TABLE>
Page 25
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds (including Wilderness Management), full service resorts, and RPI,
excluding allocations of corporate overhead and other revenues and expenses, for
the three months ended March 31, 1996:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
---------------------------------
Campgrounds Resorts Total
----------- ------- ------
<S> <C> <C> <C>
CAMPGROUND/RESORT OPERATIONS
Membership dues........................... $ 9,913 $ 9,913
Other campground/resort revenues.......... 2,136 $ 1,551 3,687
Campground ancillary expenses............. (1,063) (1,063)
Operating expenses........................ (7,256) (1,751) (9,007)
======= ======= =======
Profit (loss) on campground/resort
operations................................. 3,730 (200) 3,530
------- ------- -------
SALES
Memberships............................... 559 559
Resort interests.......................... 318 318
------- ------- -------
Total sales................................. 559 318 877
------- ------- -------
Selling costs............................. (549) (182) (731)
Marketing expenses........................ (266) (266)
------- ------- -------
Total expenses.............................. (815) (182) (997)
------- ------- -------
Profit (loss) on sales...................... (256) 136 (120)
------- ------- -------
RESORT PARKS INTERNATIONAL
Fee income................................ 1,204 1,204
Cost of operations........................ (536) (536)
------- ------- -------
RPI net contribution........................ 668 668
------- ------- -------
$ 4,142 ($64) 4,078
======= ======= =======
Other income.............................. 1,073
Corporate member services................. (331)
General and administrative
expenses................................. (2,582)
-------
OPERATING INCOME BEFORE INTEREST INCOME
AND EXPENSE, GAIN ON ASSET DISPOSITIONS,
NONRECURRING INCOME AND EXPENSE,
RESTRUCTURING COSTS, TAXES AND
EXTRAORDINARY ITEM......................... 2,238
-------
Interest income........................... 1,742
Interest expense and amortization
of debt discount and consent fees........ (4,358)
Gain on asset dispositions................ 3,086
Nonrecurring income....................... 4,714
Nonrecurring expenses..................... (530)
Restructuring costs....................... (79)
-------
OPERATING INCOME BEFORE TAXES AND...........
EXTRAORDINARY ITEM $ 6,813
=======
</TABLE>
Page 26
<PAGE>
CAMPGROUND OPERATIONS. Campground membership dues revenue was $9.8 million for
the three months ended March 31, 1997, compared with $9.9 million for the same
period last year. The slight decrease in dues revenue was due primarily to the
net loss of campground members between periods, partially offset by the effect
of annual dues increases.
Other campground revenues were $2.3 million for the three months ended March 31,
1997, compared with $2.1 million for the same period last year. The related
campground ancillary expenses were approximately $1.1 million for these same
periods. The increase in revenues between periods was primarily due to higher
rental income from extended stay programs implemented at certain campgrounds in
fiscal 1997.
Other campground operating expenses were $7.4 million for the three months ended
March 31, 1997, compared with $7.3 million for the same period last year. The
slight increase in expenses between periods resulted primarily from insurance
credits received in the prior period and higher maintenance costs incurred in
the current period.
Campground membership sales revenue was $436,000 for the three months ended
March 31, 1997, compared with $559,000 for the same period last year. Sales of
new campground memberships decreased to 387 during the three months ended March
31, 1997, from 456 during the three months ended March 31, 1996, while sales of
upgrade memberships increased to 135 during the three months ended March 31,
1997, from 59 during the three months ended March 31, 1996. Sales revenue
declined during the current period because fewer prospects were available to
attend Company sales presentations. The number of prospects declined because
the Company had already contacted most of its members during the first six
months of the fiscal year in connection with special promotions. The Company
presently generates sales prospects principally through member and RV dealer
referrals.
As discussed previously, the Company is working to increase the number of
prospects that attend its sales presentations, which has not met the Company's
expectations in fiscal 1997. In this regard, during the current period, the
Company entered into a joint marketing arrangement with Fleetwood Industries,
Inc., the largest manufacturer of RVs. Under this marketing arrangement,
purchasers of Fleetwood RVs will receive a temporary membership and be invited
to visit one of the Company's campgrounds. In the future, the Company intends
to pursue joint marketing relationships with other companies.
Selling and marketing expenses exceeded sales revenues by $379,000 and $256,000
for the three months ended March 31, 1997 and 1996, respectively, due to the low
volume of sales. These expenses exceeded sales revenue because of the increased
marketing activity, and the low volume of sales in both periods which did not
cover fixed costs.
CAMPGROUND MANAGEMENT. For the three months ended March 31, 1997, the Company's
campground management operations produced revenues of $21,000 with related
expenses (excluding certain shared administrative costs) of $18,000. This
compares with revenues for the same period last year of $14,000 and related
expenses (excluding certain shared administrative costs) of $35,000. The
improvement in results between periods is due primarily to the timing of certain
expense reimbursements from the US Forest Service received in the current
period. The campground management operations generally incur a loss during the
third fiscal quarter due to certain fixed expenses and the seasonal closure of
the campgrounds.
RESORT PARKS INTERNATIONAL. For the three months ended March 31, 1997, RPI's
operations produced a net contribution of $551,000, compared with $668,000 for
the same period last year. The decline in results between periods is due to
lower revenues in the current period that were not completely offset by expense
reductions.
RESORT OPERATIONS. For the three months ended March 31, 1997, the resort
operations produced a negative contribution of $188,000, compared with a
negative contribution of $64,000 for the same period last year. As discussed
above, the sale of the timeshare operations has significantly
Page 27
<PAGE>
reduced both the revenues and expenses from the resorts operations. The Company
expects a negative contribution from the resort operations in the future as it
continues its efforts to sell the remaining assets it owns at the resorts.
INTEREST INCOME AND EXPENSE. Interest income was $880,000 for the three months
ended March 31, 1997, compared with $1.7 million for the same period last year.
In these periods, interest income included amortization of the allowance for
interest discount and valuation allowance related to the contracts receivable of
$94,000 and $160,000, respectively. The $862,000 decrease in interest income
between periods was due to a decrease in interest earned on the Company's
diminishing portfolio of contracts receivable and significantly lower cash
balances between years.
Interest expense was $2.2 million for the three months ended March 31, 1997,
compared with $4.4 million for the same period last year. In the current
period, interest expense included amortization of $571,000 related to the debt
issuance costs incurred in connection with obtaining the Credit Agreement with
Foothill. The $2.2 million decrease in interest expense between periods was due
to the repurchase of $7.4 million principal amount of Secured Notes in January
1996, a net $46.7 million reduction in the Company's outstanding debt resulting
from the Restructuring and subsequent payments under the Credit Agreement, a
$2.5 million reduction in mortgage notes due to the abandonment of two operating
campgrounds in the Fall of 1995, and scheduled repayments of notes payable.
GAIN ON ASSET DISPOSITIONS. The Company recognized a gain on the disposition of
assets of $366,000 for the three months ended March 31, 1997, compared with a
gain of $3.1 million for the same period last year. The gain in the prior
period resulted primarily from the sale of the common amenities at one of the
full service resorts and two non-operating campgrounds. The decrease in the
current period resulted primarily from the timing of asset sales.
OTHER INCOME. For the three months ended March 31, 1997, other income was
$833,000 compared with $1.1 million for the same period last year. The decrease
in the current period was due primarily to a decrease in income from recoveries
on canceled contracts and dues.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$2.9 million for the three months ended March 31, 1997, compared with $2.6
million for the same period last year. The increase between periods is due to
higher legal fees incurred in the current period in connection with the
Company's reincorporation/merger, the registration of the PIK Notes, and the
formation of a new wholly owned subsidiary to provide debt collection services
for third parties.
NONRECURRING INCOME. The Company recognized $4.7 million of nonrecurring income
during the three months ended March 31, 1996, which included $4.1 million
resulting from a net reduction in the allowance for doubtful accounts related to
contracts and dues receivable, and $568,000 from the reduction of a contingent
liability. See Notes 5 and 8 to the consolidated financial statements included
in Item 1 of Part I of this report.
NONRECURRING EXPENSE. At March 31, 1996, the Company accrued $530,000 of
nonrecurring expense associated with a one-time bonus for the CEO. See Note 8
to the consolidated financial statements included in Item 1 of Part I of this
report.
EXTRAORDINARY GAIN. On January 31, 1996, the Company repurchased $7.4 million
principal amount of Secured Notes from unrelated sellers for $5.3 million,
including accrued interest. The Company recognized a gain of $1.4 million on
these transactions.
Page 28
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following documents are filed as exhibits to this report.
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -------------------------------------------------
<S> <C>
11.1 Statement re: Computation of Per Share Earnings.
27.1 Financial Data Schedule.
</TABLE>
REPORTS ON FORM 8-K
None.
Page 29
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOUSAND TRAILS, INC.
Date: April 29, 1997 By: /s/ Harry J. White, Jr.
----------------------
Harry J. White, Jr.
Vice President, Chief Financial Officer, and
Chief Accounting Officer
Page 30
<PAGE>
EXHIBIT 11.1
THOUSAND TRAILS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Dollars and common shares in thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended March 31, Ended March 31,
1997 1996
--------------- ---------------
<S> <C> <C>
PRIMARY:
Weighted average number of common shares outstanding...................... 7,155 3,703
Weighted average common stock equivalents (vested options under
the Company's employee and director stock option plans).................. 314 -
--------------- ---------------
Weighted average number of common shares outstanding...................... 7,469 3,703
=============== ===============
Income before extraordinary item.......................................... $2,025 $4,760
Extraordinary item........................................................ - 1,390
--------------- ---------------
Net income allocable to common shareholders............................... $2,025 $6,150
=============== ===============
Income before extraordinary item.......................................... $0.27 $1.29
Extraordinary item........................................................ - 0.37
--------------- ---------------
Primary net income per common share....................................... $.027 $1.66
=============== ===============
FULLY DILUTED:
Weighted average number of common shares outstanding...................... 7,155 3,703
Weighted average common stock equivalents (vested options under
the Company's employee and director stock option plans).................. 388 -
--------------- ---------------
Weighted average number of common shares outstanding...................... 7,543 3,703
=============== ===============
Income before extraordinary item.......................................... $2,025 $4,760
Extraordinary item........................................................ - 1,390
--------------- ---------------
Net income allocable to common shareholders............................... $2,025 $6,150
=============== ===============
Income before extraordinary item.......................................... $0.27 $1.29
Extraordinary item........................................................ - 0.37
--------------- ---------------
Fully diluted net income per common share................................. $.027 $1.66
=============== ===============
</TABLE>
Page 1 of 2
<PAGE>
THOUSAND TRAILS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Dollars and common shares in thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Ended March 31, Ended March 31,
1997 1996
--------------- ---------------
<S> <C> <C>
PRIMARY:
Weighted average number of common shares outstanding...................... 7,383 3,703
Weighted average common stock equivalents (vested options under
the Company's employee and director stock option plans).................. 599 -
--------------- ---------------
Weighted average number of common shares outstanding...................... 7,982 3,703
=============== ===============
Income before extraordinary item.......................................... $ 49 $6,645
Extraordinary item........................................................ - 1,390
--------------- ---------------
Net income allocable to common shareholders............................... $49 $8,035
=============== ===============
Income before extraordinary item.......................................... $0.01 $1.80
Extraordinary item........................................................ - 0.37
--------------- ---------------
Primary net income per common share....................................... $0.01 $2.17
=============== ===============
FULLY DILUTED:
Weighted average number of common shares outstanding...................... 7,383 3,703
Weighted average common stock equivalents (vested options under
the Company's employee and director stock option plans).................. 723 -
--------------- ---------------
Weighted average number of common shares outstanding...................... 8,106 3,703
=============== ===============
Income before extraordinary item.......................................... $ 49 $6,645
Extraordinary item........................................................ - 1,390
--------------- ---------------
Net income allocable to common shareholders............................... $49 $8,035
=============== ===============
Income before extraordinary item.......................................... $0.01 $1.80
Extraordinary item........................................................ - 0.37
--------------- ---------------
Fully diluted net income per common share................................. $0.01 $2.17
=============== ===============
</TABLE>
Page 2 of 2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> $1,547 0
<SECURITIES> 0 0
<RECEIVABLES> 7,669 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,516 0
<PP&E> 24,765 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 62,786 0
<CURRENT-LIABILITIES> 33,322 0
<BONDS> 48,795 0
0 0
0 0
<COMMON> 74 0
<OTHER-SE> (22,924) 0
<TOTAL-LIABILITY-AND-EQUITY> 62,786 0
<SALES> 2,966 2,798
<TOTAL-REVENUES> 55,694 69,977
<CGS> 0 0
<TOTAL-COSTS> 53,189 65,206
<OTHER-EXPENSES> 45,868 51,807
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,321 13,399
<INCOME-PRETAX> 2,505 4,771
<INCOME-TAX> 480 11
<INCOME-CONTINUING> 2,025 4,760
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 1,390
<CHANGES> 0 0
<NET-INCOME> $2,025 $6,150
<EPS-PRIMARY> $0.27 $1.66
<EPS-DILUTED> $0.27 $1.66
</TABLE>
