<PAGE> 1
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, 1998
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 [ ]
The number of shares of Common Stock, par value $.01, issued and outstanding as
of May 12, 1998 was 7,437,083.
<PAGE> 2
THOUSAND TRAILS, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1998
and June 30, 1997..........................................................3
Consolidated Statements of Operations for the nine months
ended March 31, 1998 and March 31, 1997....................................4
Consolidated Statements of Operations for the three months
ended March 31, 1998 and March 31, 1997....................................5
Consolidated Statement of Stockholders' Deficit for the nine months
ended March 31, 1998.......................................................6
Consolidated Statements of Cash Flows for the nine months ended
March 31, 1998 and March 31, 1997..........................................7
Notes to Consolidated Financial Statements...................................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................17
Item 3. Quantitative and Qualitative Disclosures About Market Risk..................29
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................30
</TABLE>
Page 2
<PAGE> 3
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,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,711 $ 1,343
Current portion of receivables, net of allowances and discount of
$1.4 million and $1.7 million 2,339 3,134
Current portion of deferred membership selling expenses 518 478
Inventory and other current assets 3,306 4,078
------------ ------------
Total Current Assets 14,874 9,033
Restricted cash 1,136 1,407
Receivables, net of allowances and discount of $2.5 million and
$3.3 million 1,707 4,383
Campground land 13,328 13,359
Lot inventory 32 342
Buildings and equipment, net of accumulated depreciation of
$14.5 million and $12.8 million 21,965 23,211
Land held for sale 5,190 7,382
Deferred membership selling expenses 987 913
Other assets 2,671 3,272
------------ ------------
Total Assets $ 61,890 $ 63,302
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 1,723 $ 1,864
Accrued interest 826 1,693
Other accrued liabilities 6,784 7,485
Current portion of long term debt 5,864
Accrued construction costs 2,796 2,809
Current portion of deferred revenue 20,636 19,455
------------ ------------
Total Current Liabilities 32,765 39,170
Long term debt 32,980 38,230
Deferred revenue 4,249 4,158
Other liabilities 3,432 3,912
------------ ------------
Total Liabilities 73,426 85,470
------------ ------------
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, 7,420,416
and 7,383,276 shares issued and outstanding 74 74
Additional paid-in capital 20,540 20,502
Accumulated deficit subsequent to December 31, 1991, date of
emergence from bankruptcy (32,020) (42,613)
Cumulative currency translation adjustment (130) (131)
------------ ------------
Total Stockholders' Deficit (11,536) (22,168)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 61,890 $ 63,302
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 3
<PAGE> 4
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,
-----------------------------------
1998 1997
--------------- --------------
REVENUES (Restated)
<S> <C> <C>
Membership dues $ 28,065 $ 29,700
Other campground/resort revenue 11,939 12,852
Membership and resort interest sales 2,929 2,617
RPI membership fees 2,855 3,000
Interest income 1,862 2,875
Gain on asset sales 3,747 1,581
Nonrecurring income 1,083
Other income 2,496 2,720
------------ ------------
Total Revenues 54,976 55,345
------------ ------------
EXPENSES
Campground/resort operating expenses 28,018 31,225
Selling expenses 2,347 2,321
Marketing expenses 1,099 953
RPI membership expenses 1,576 1,443
Corporate member services 1,083 1,152
Interest expense and amortization 3,576 7,321
General and administrative expenses 6,310 7,564
Restructuring costs 1,101
------------ ------------
Total Expenses 44,009 53,080
------------ ------------
INCOME BEFORE INCOME TAXES 10,967 2,265
Income tax provision (374) (480)
------------ ------------
NET INCOME $ 10,593 $ 1,785
============ ============
NET INCOME PER SHARE-- BASIC $ 1.43 $ .25
============ ============
NET INCOME PER SHARE-- DILUTED $ 1.26 $ .24
============ ============
SHARES USED TO CALCULATE NET INCOME PER SHARE:
Basic 7,398 7,170
============ ============
Diluted 8,405 7,529
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4
<PAGE> 5
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,
------------------------------------
1998 1997
--------------- ---------------
REVENUES (Restated)
<S> <C> <C>
Membership dues $ 9,069 $ 9,783
Other campground/resort revenue 2,600 2,566
Membership and resort interest sales 872 438
RPI membership fees 1,153 1,057
Interest income 685 880
Gain on asset sales 366
Nonrecurring income 588
Other income 669 833
------------ ------------
Total Revenues 15,636 15,923
------------ ------------
EXPENSES
Campground/resort operating expenses 7,847 8,957
Selling expenses 805 570
Marketing expenses 473 318
RPI membership expenses 648 506
Corporate member services 381 340
Interest expense and amortization 1,074 2,243
General and administrative expenses 2,159 2,853
------------ ------------
Total Expenses 13,387 15,787
------------ ------------
INCOME BEFORE INCOME TAXES 2,249 136
Income tax provision (142) (168)
------------ ------------
NET INCOME (LOSS) $ 2,107 $ (32)
============ ============
NET INCOME (LOSS) PER SHARE-- BASIC $ .28 $ 0
============ ============
NET INCOME (LOSS) PER SHARE-- DILUTED $ .25 $ 0
============ ============
SHARES USED TO CALCULATE NET INCOME (LOSS) PER SHARE:
Basic 7,416 7,383
============ ============
Diluted 8,395 7,383
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 5
<PAGE> 6
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(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, 1997 $ 74 $ 20,502 $ (42,613) $ (131) $ (22,168)
Issuance of common stock 38 38
Foreign currency translation
adjustment 1 1
Net income for the nine months
ended March 31, 1998 10,593 10,593
---------- ---------- ---------- ---------- ----------
BALANCE, March 31, 1998 $ 74 $ 20,540 $ (32,020) $ (130) $ (11,536)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 6
<PAGE> 7
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended March 31,
-----------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Collections of principal on receivables $ 4,432 $ 6,211
Interest received 1,663 2,556
Interest paid (854) (7,682)
General and administrative, corporate member services and
restructuring costs (7,630) (11,104)
Cash collected from operations, including deferred dues
revenue 47,230 50,741
Cash from sales of campground memberships and resort
interests at the point of sale 2,646 2,788
Expenditures for property operations (28,016) (30,704)
Expenditures for sales and marketing (3,279) (3,408)
Expenditures for insurance premiums (751) (374)
Payment of income taxes (374) (480)
Termination of indemnification trust 590
Reduction of standby letter of credit 1,500
Other, net 268 120
------------ ------------
Net cash provided by operating activities 15,925 10,164
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures (1,165) (620)
Proceeds from insurance claims 1,119
Proceeds from asset sales 6,152 2,958
Issuance of Common Stock 38
------------ ------------
Net cash provided by investing activities 6,144 2,338
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under Credit Agreement (14,097) (26,700)
Initial borrowings under Credit Agreement 32,000
Retirement of Secured Notes (50,169)
Payment of debt issuance costs (3,132)
Repayment of notes and mortgages (604) (357)
------------ ------------
Net cash used in financing activities (14,701) (48,358)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,368 (35,856)
CASH AND CASH EQUIVALENTS:
Beginning of period 1,343 37,403
------------ ------------
End of period $ 8,711 $ 1,547
============ ============
</TABLE>
-- continued --
Page 7
<PAGE> 8
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended March 31,
-----------------------------------
1998 1997
-------------- ---------------
(Restated)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 10,593 $ 1,785
------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES --
Depreciation 1,912 2,072
Amortization of interest discount, collection costs and
valuation allowance (393) (548)
Amortization of debt issue costs 1,536
Net deferral of sales revenue 225 349
Net deferral of selling expenses (114) (109)
Gain on asset sales (3,747) (1,581)
Gain on insurance settlement (588)
Decrease in restricted cash 271 1,557
Decrease in receivables 3,809 6,080
Decrease in other assets 1,437 1,546
Decrease in accounts payable (141) (1,974)
Increase (decrease) in accrued interest 2,743 (2,101)
Increase in deferred membership dues revenue 1,047 2,467
Decrease in other liabilities (1,497) (950)
Other, net 368 35
------------ ------------
Total adjustments 5,332 8,379
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 15,925 $ 10,164
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 8
<PAGE> 9
THOUSAND TRAILS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
GENERAL
Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the "Company") own and operate a system of 54 membership-based
campgrounds located in 17 states and British Columbia, Canada. In addition, the
Company provides a reciprocal use program for members of approximately 325
recreational facilities and manages 130 public campgrounds for the US Forest
Service. Prior to November 21, 1996, the Company also managed timeshare
facilities at eight resorts located in seven states. The campground business
represents the most significant portion of the Company's business currently
comprising 92% of the Company's operating revenues. The reciprocal use and
resort businesses provide the remaining 8%. 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.
The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: Coast
Financial Services, Inc. ("Coast"), National American Corporation and its
subsidiaries ("NACO"), Resort Parks International, Inc. ("RPI"), Thousand Trails
(Canada), Inc., UST Wilderness Management Corporation ("Wilderness"), 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, 1997, filed
with the Securities and Exchange Commission on September 29, 1997.
NOTE 1 -- BASIS OF FINANCIAL STATEMENT PRESENTATION
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.
Page 9
<PAGE> 10
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the nine and
three month periods ended March 31, 1998 and 1997, and in the consolidated
balance sheet as of June 30, 1997.
Restatement
During the first quarter of fiscal 1998, the staff of the Securities and
Exchange Commission (the "SEC") informed the Company that the SEC will now
require the Company to recognize revenue from the sale of campground memberships
that do not convey a deeded interest in real estate on a straight-line basis
over the expected life of the memberships sold. This new accounting method
differs from the revenue recognition method historically used by the Company for
over 20 years. Accordingly, to show comparable results for the periods
presented, the accompanying consolidated financial statements for the nine and
three month periods ended March 31, 1997, have been restated from those
originally reported to reflect this change in accounting method. The deferral of
historical sales revenues and expenses resulting from this change in accounting
method had no impact on the Company's liquidity or cash flows.
The following table provides selected summarized information illustrating the
effect of the restatement on the Company's consolidated results of operations
for the nine and three month periods ended March 31, 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, 1997 March 31, 1997
------------------------------ -------------------------------
As As Originally As As Originally
Restated Reported Restated Reported
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Membership and resort interest sales $ 2,617 $ 2,966 $ 438 $ 555
Total revenues 55,345 55,694 15,923 16,040
Net income (loss) 1,785 2,025 (32) 49
</TABLE>
Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), which is effective for financial statements
of public companies issued for periods ending after December 15, 1997.
Under SFAS 128, the Company reports basic earnings per share rather than primary
earnings per share, and diluted earnings per share rather than fully diluted
earnings per share. The computation of basic earnings per share produces a
higher reported per share amount than primary earnings per share, while the
computation of diluted earnings per share currently produces approximately the
same reported per share amount as fully diluted earnings per share. Basic net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding during the period. Diluted
net income per 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. Diluted net loss per common share is computed based on weighted average
common shares outstanding only. Warrants outstanding, as well as common stock
equivalents that would be assumed outstanding, are excluded from the diluted net
loss per share computation as they would be anti-dilutive.
The tables below set forth the information necessary to compute basic and
diluted net income (loss) per share for the nine and three month periods ended
March 31, 1998 and 1997, including
Page 10
<PAGE> 11
a summary of the components of the numerators and denominators of the basic and
diluted net income (loss) per share computations for the periods presented
(dollars and shares in thousands, except per share amounts):
<TABLE>
<CAPTION>
Net Income Per Share For the Nine Months Ended
--------------------------------------------------------
March 31, 1998 March 31, 1997
------------------------- --------------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
(Restated)
<S> <C> <C> <C> <C>
Net Income $ 10,593 $ 10,593 $ 1,785 $ 1,785
========== ========== ========== ==========
Weighted Average Number of Shares:
Common Stock 7,398 7,398 7,170 7,170
Dilutive Options -- 982 -- 359
Dilutive Warrants -- 25 -- --
---------- ---------- ---------- ----------
7,398 8,405 7,170 7,529
========== ========== ========== ==========
Net Income Per Share $ 1.43 $ 1.26 $ .25 $ .24
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Net Income (Loss) Per Share For the Three Months Ended
--------------------------------------------------------
March 31, 1998 March 31, 1997
------------------------- --------------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
(Restated)
<S> <C> <C> <C> <C>
Net Income (Loss) $ 2,107 $ 2,107 $ (32) $ (32)
========== ========== ========== ==========
Weighted Average Number of Shares:
Common Stock 7,416 7,416 7,383 7,383
Dilutive Options -- 973 -- --
Dilutive Warrants -- 6 -- --
---------- ---------- ---------- ----------
7,416 8,395 7,383 7,383
========== ========== ========== ==========
Net Income (Loss) Per Share $ .28 $ .25 $ 0 $ 0
========== ========== ========== ==========
</TABLE>
The computations of net income (loss) per share for the nine and three month
periods ended March 31, 1997, have been restated to reflect the effects of
adopting the new method of accounting for campground membership sales revenues
and expenses (see Note 1) and to reflect the adoption of SFAS 128.
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 during the term of the Credit Agreement. In addition, the Indenture for
the Company's 12% Senior Subordinated Pay-In-Kind Notes Due 2003 ("PIK Notes")
prohibits the payment of any cash dividends until the PIK Notes are repaid.
Reclassifications
Certain reclassifications have been made to prior period information to conform
with the current period presentation.
Page 11
<PAGE> 12
NOTE 2 -- SECURED NOTE RESTRUCTURING AND LONG TERM DEBT
SECURED NOTE RESTRUCTURING
On July 17, 1996, the Company consummated a restructuring (the "Restructuring")
of its 12% Secured Notes Due 1998 ("Secured Notes"), whereby all of the
$101,458,000 principal amount of Secured Notes outstanding were retired for
$50.2 million of cash, $40.2 million principal amount of PIK Notes, and
3,680,550 shares of common stock. The Restructuring provided the Company with a
new capital structure and decreased the Company's outstanding debt to a level
the Company believes it can support under its downsized operations.
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. A deferred gain of $303,000
recorded in connection with the Restructuring is being amortized as a reduction
of interest expense using the effective interest method over the term of the PIK
Notes.
The Company incurred $1.1 million of legal expenses and other direct costs
during the nine months ended March 31, 1997, in connection with the completion
of the Restructuring.
CREDIT AGREEMENT WITH FOOTHILL
In connection with the Restructuring, the Company entered into the Credit
Agreement with Foothill, under which Foothill made loans to the Company in the
initial amount of $32.0 million. During fiscal 1997, the Company repaid
substantially all of its initial borrowings under the Credit Agreement. On May
16, 1997, the Company and Foothill entered into an amendment to the Credit
Agreement which significantly modified its original terms and which, among other
things, permitted the Company to borrow $12.6 million to repurchase PIK Notes as
discussed below. As a result of repayments in the ordinary course of business,
the Company repaid all outstanding borrowings under the Credit Agreement in
January 1998. As of March 31, 1998, the Company had a revolving loan under the
Credit Agreement in the maximum amount of $6.6 million, which was all available
for borrowing.
The Company incurred $3.1 million of costs to obtain the Credit Agreement, which
were capitalized as debt issue costs. In May 1997, the $1.3 million unamortized
balance of these debt issue costs was charged to expense upon amendment of the
Credit Agreement.
PIK NOTES AND PIK NOTE REPURCHASES
In the Restructuring, the Company issued $40.2 million principal amount of PIK
Notes. On January 15, 1997, the Company issued an additional $2.4 million
principal amount of PIK Notes in lieu of cash interest. On June 25, 1997, the
Company repurchased $13.4 million principal amount of PIK Notes at a cost of
$12.6 million, including accrued interest. On July 15, 1997 and January 15,
1998, the Company issued an additional $1.8 million and $1.9 million principal
amount of PIK Notes, respectively, in lieu of cash interest. As a result of
these transactions, as of March 31, 1998, $32.8 million principal amount of PIK
Notes were outstanding.
Page 12
<PAGE> 13
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, 1998 and June 30,
1997 (dollars in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT PORTION OF LONG TERM DEBT :
Borrowings under Credit Agreement -- $ 5,799
Notes and mortgages payable -- 65
------------ ------------
-- $ 5,864
============ ============
LONG TERM DEBT:
Borrowings under Credit Agreement -- $ 8,298
PIK Notes, including a deferred gain of $.2 million $ 32,980 29,393
Notes and mortgages payable -- 539
------------ ------------
$ 32,980 $ 38,230
============ ============
Total long term debt $ 32,980 $ 44,094
============ ============
</TABLE>
NOTE 3 -- SALE OF TIMESHARE OPERATIONS
On November 21, 1996, the Company sold its timeshare management operations and
timeshare inventory at eight resorts 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. At March 31, 1998, the Company had received
$400,000 of principal on the note and the remaining $400,000 is due on May 15,
1998. Interest accrues on the note at the rate of 14 1/2% per annum and is
payable with the principal installments. The Buyer may extend payment of
$150,000 of the remaining principal installment for up to one year, with
interest accruing at 20% per annum. The note is secured by liens on
substantially all of the assets of the Buyer, a pledge of the Buyer's
outstanding stock, and the personal guarantees of the two shareholders of the
Buyer.
A deferred gain of $471,000 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. The net amount is included in inventory and other current assets in the
accompanying consolidated balance sheets as of March 31, 1998 and June 30, 1997.
NOTE 4 -- 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 $1.8 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 $2.0 million at March 31, 1998, which is included in
other liabilities in the accompanying consolidated balance sheet. This liability
is determined based on actuarial estimates.
Page 13
<PAGE> 14
Workers' Compensation Insurance
In December 1997, the Company received a $495,000 refund for deposits made in
previous years to cover workers' compensation claims in excess of those covered
by the standard premium. These deposits were expensed in the years the deposits
were made because the Company anticipated that the deposits would be used to
cover workers' compensation claims. This refund is presented as nonrecurring
income in the accompanying consolidated statement of operations for the nine
months ended March 31, 1998.
Declining Membership Base
The Company derives a significant portion of its ongoing operating revenue from
its campground members (currently 92%). The Company's membership base has
declined significantly over the past five fiscal years, and net of new sales,
the membership base is presently declining at the rate of approximately 7% per
year. The Company attributes this continuing attrition principally to its aging
membership base, of whom approximately 50% are senior citizens. In addition, in
fiscal 1998, the Company transferred 1,775 members at two campgrounds to the
entity that purchased the campgrounds from the Company. Moreover, the Company
estimates that the memberships sold in recent fiscal years will have an expected
life that is significantly shorter than the expected life of the memberships
previously sold by the Company. To stop the continuing decline in the Company's
membership base, the Company must significantly increase its campground
membership sales over current levels or acquire members in another manner, such
as through the purchase of competing membership campground organizations. There
is no assurance that the Company will be successful in these efforts.
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
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 5 -- 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, 1998 and 1997 (dollars
in thousands):
<TABLE>
<CAPTION>
Nine Months
Ended
March 31,
1998
----------------
<S> <C>
Non-cash payment of PIK Note interest (see Note 2):
PIK Notes issued in lieu of cash interest payment on January 15, 1998 $ 1,858
PIK Notes issued in lieu of cash interest payment on July 15, 1997 1,752
</TABLE>
Page 14
<PAGE> 15
<TABLE>
<CAPTION>
Nine Months
Ended
March 31,
1997
----------------
<S> <C>
Non-cash transactions related to the Restructuring (see Note 2):
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 3):
Note receivable from Buyer $ 800
Deferred gain (471)
Book value of timeshare inventory sold (58)
Book value of fixed assets sold (165)
Net receivables written off (156)
</TABLE>
NOTE 6 -- SUMMARIZED FINANCIAL INFORMATION
All of the Company's wholly owned subsidiaries (other than an inconsequential
utility subsidiary) (collectively, the "Subsidiary Guarantors") have fully and
unconditionally guaranteed, on a joint and several basis, the Company's
obligations under the PIK Notes that were issued on July 17, 1996, as well as
the PIK Notes issued in lieu of cash payment of interest (see Note 2).
Set forth on the next page is selected financial information for Thousand
Trails, Inc. ("TTI"), NACO, RPI, Wilderness, and Coast, and the eliminations
necessary to arrive at the information for the Company on a consolidated basis
as of and for the periods presented. The financial information as of and for the
nine and three month periods ended March 31, 1997, has been restated to reflect
a change in accounting method for the recognition of revenue from campground
membership sales (see Note 1). The assets and operations of Wilderness and Coast
are not material and have, therefore, been combined with the balances of RPI for
purposes of this presentation. The Company has not presented separate financial
statements and other disclosures concerning the Subsidiary Guarantors because
management believes such information is not material to investors. This
summarized financial information is presented to provide additional analysis of,
and should be read in conjunction with, the consolidated financial statements of
the Company.
All of the Company's debt and equity interests in the Subsidiary Guarantors have
been pledged by the Company to secure its obligations under the Credit Agreement
with Foothill. In the event of a default and foreclosure under the Credit
Agreement, distributions from, and the assets of, the Subsidiary Guarantors may
not be available to satisfy other obligations of the Company, including the
obligations of the Company to the holders of the PIK Notes.
Page 15
<PAGE> 16
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Nine Months Ended March 31,
------------------------------------------------------------------------------------------
1998 1997
(Restated)
------------------------------------------ ------------------------------------------
Operating Net Operating Net
Revenues Income(1) Income Revenues Income(1) Income
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
TTI $ 33,778 $ 8,980 $ 10,593 $ 33,777 $ 5,320 $ 1,881
NACO 20,214 693 2,408 20,437 307 16
RPI, Wilderness &
Coast 3,796 1,374 788 3,801 1,658 942
Eliminations(2) (2,812) (3,196) (3,196) (2,670) (1,054) (1,054)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 54,976 $ 7,851 $ 10,593 $ 55,345 $ 6,231 $ 1,785
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------------------
1998 1997
(Restated)
------------------------------------------ ------------------------------------------
Net Operating Net
Operating Income Income Income
Revenues Income(1) (Loss) Revenues (Loss)(1) (Loss)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
TTI $ 9,882 $ 2,012 $ 2,107 $ 10,007 $ 1,055 $ 64
NACO 5,605 (245) 54 5,710 (290) (313)
RPI, Wilderness &
Coast 1,015 453 116 1,079 555 404
Eliminations(2) (866) (170) (170) (873) (187) (187)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 15,636 $ 2,050 $ 2,107 $ 15,923 $ 1,133 $ (32)
========== ========== ========== ========== ========== ==========
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
As of March 31, 1998 As of June 30, 1997
------------------------------ ------------------------------
Total Total Total Total
Assets Liabilities Assets Liabilities
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TTI $ 44,588 $ 56,124 $ 51,733 $ 73,901
NACO 31,003 43,930 29,637 44,972
RPI, Wilderness &
Coast 2,592 2,117 6,736 2,039
Eliminations(2) (16,293) (28,745) (24,804) (35,442)
------------ ------------ ------------ ------------
Total $ 61,890 $ 73,426 $ 63,302 $ 85,470
============ ============ ============ ============
</TABLE>
________________
(1) Defined as income before interest income and expense, gain on asset
sales, nonrecurring income, restructuring costs and taxes.
(2) Entries to record subsidiaries' results on a consolidated basis.
Page 16
<PAGE> 17
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,
1997, filed with the SEC on September 29, 1997.
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 strategies and plans
for periods after March 31, 1998. All of these statements are forward-looking
statements made pursuant to the safe harbor provisions of Section 21E 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 strategies and plans for future
periods may differ materially due to several factors, including but not limited
to the Company's continued 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 efforts 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, 1997.
CHANGE IN ACCOUNTING METHOD
During the first quarter of fiscal 1998, the staff of the Securities and
Exchange Commission (the "SEC") informed the Company that the SEC will now
require the Company to recognize revenue from the sale of campground memberships
that do not convey a deeded interest in real estate on a straight-line basis
over the expected life of the memberships sold. This new accounting method
differs from the revenue recognition method historically used by the Company for
over 20 years. Accordingly, to show comparable results for the periods
presented, the consolidated financial statements for the nine and three month
periods ended March 31, 1997, have been restated from those originally reported
to reflect this change in accounting method (see Note 1 to the consolidated
financial statements included in Item 1). The deferral of historical sales
revenues and expenses resulting from this change in accounting method had no
impact on the Company's liquidity or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT BUSINESS STRATEGY. The Company's current business strategy is to improve
its campground operations and stabilize its campground membership base through
increased sales and marketing efforts or the possible acquisition of members
through the purchase of other membership campground operations. The Company
believes there is a viable market for campground memberships and that it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company also believes it may
be possible to acquire members through the purchase of competing membership
campground operations, many of whom are experiencing financial difficulties.
Page 17
<PAGE> 18
The Company's membership base has been declining. In response to this decline,
the Company has downsized its business by closing and disposing of campgrounds
and decreasing campground operating costs and general and administrative
expenses. The Company intends to continue to keep the size of its campground
system in an appropriate relation to the size of its membership base. In this
regard, if the membership base continues to decline, the Company may close and
dispose of additional campgrounds and it will seek to decrease other expenses.
At the same time, the Company intends to expand its sales and marketing efforts
with a view to stopping the membership decline. The Company also intends to
explore the possible acquisition of members through the purchase of competing
membership campground organizations. The Company believes that the ultimate size
of its campground system and the amounts realized from future asset sales will
depend principally upon the degree to which the Company can successfully
implement this strategy.
CASH. On March 31, 1998, the Company had $8.7 million of cash and cash
equivalents, an increase of $7.4 million from June 30, 1997. During the nine
months ended March 31, 1998, the Company's operating activities produced $15.9
million of cash, and asset sales provided cash proceeds of $6.2 million. In
addition, the Company received $1.1 million of proceeds from insurance claims
during the period. The Company used this cash primarily to repay $14.7 million
of borrowings and to make capital expenditures totaling $1.2 million.
The Company's principal sources of operating cash for the nine months ended
March 31, 1998, were $47.2 million in dues collections and other campground and
resort revenues, $6.1 million in principal and interest collections on contracts
receivable, and $2.6 million in cash collected from sales of campground
memberships and lots at the point of sale. Principal uses of operating cash for
the nine months ended March 31, 1998, were $28.0 million in operating expenses,
$7.6 million in administrative expenses (including general and administrative
expenses and corporate member services costs), and $3.3 million in sales and
marketing expenditures.
As of March 31, 1998, the Company had no borrowings outstanding under the Credit
Agreement with Foothill, and had available borrowings under the revolving loan
in the maximum amount of $6.6 million. Under the terms of 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 repaid all outstanding borrowings under the Credit Agreement in
January 1998. The Company anticipates that it will not be required to borrow to
fund its normal operations during the fourth quarter of fiscal 1998. In
addition, although the Company incurs a higher level of operating expenses
during the summer months, it anticipates that it will not be required to borrow
under the revolving loan to fund its normal operations through calendar 1998.
However, the Company has entered into a new commitment with Foothill that will
provide the Company the flexibility to borrow additional funds to use for the
possible acquisition of members through the purchase of competing membership
campground operations or for the possible purchase of securities. If utilized,
this additional availability would result in higher outstanding debt under the
Credit Agreement. This new facility is subject to the negotiation and execution
of definitive loan documentation.
Page 18
<PAGE> 19
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.
The Credit Agreement limits the type of investments in which the Company may
invest its available cash, resulting in a relatively low yield. Investments of
cash had a weighted average yield of 5.5% at March 31, 1998.
MATERIAL CHANGES IN FINANCIAL CONDITION
Total assets decreased by $1.4 million during the nine months ended March 31,
1998. Cash increased by $7.4 million as discussed above. Contracts receivable
decreased by $3.5 million due primarily to $4.4 million in cash collections
partially offset by new financed sales and amortization of the allowances for
interest discount, collection costs, and valuation discount. Inventory and other
current assets decreased by $772,000 due primarily to amortization of insurance
premiums for fiscal 1998 that were paid in June 1997. Buildings and equipment
decreased by $1.2 million due primarily to depreciation, partially offset by
capital improvements made at certain campgrounds. Land held for sale decreased
by $2.2 million due primarily to the sale of certain campgrounds during the
period. Other assets decreased by $601,000 due primarily to the partial
termination of the Company's indemnification trusts.
Total liabilities decreased by $12.0 million during the nine months ended March
31, 1998. Accounts payable and other accrued liabilities decreased by $842,000
due to a $665,000 payment made to certain states for unclaimed property, and
lower accrued payroll and other related liabilities at March 31, 1998, due to
the seasonality of the business. The Company's outstanding debt decreased by
$11.1 million during the period due to repayments of the Credit Agreement and
mortgage notes, partially offset by the issuance of additional PIK Notes in lieu
of cash interest. Other liabilities decreased by $480,000, primarily as a result
of the payment of recorded liabilities in connection with the sale of certain
campgrounds. Offsetting these decreases, deferred revenue increased by $1.3
million, primarily due to the collection of $1.0 million of dues in excess of
dues revenue recognized during the period and a $225,000 net increase in
deferred sales revenue.
RESULTS OF OPERATIONS
The following discussion and analysis are based on the historical results of
operations of the Company for the nine and three month periods ended March 31,
1998 and 1997, as restated (see "Change in Accounting Method"). The deferral of
historical sales revenues and expenses resulting from the change in accounting
method had no impact on the Company's liquidity or cash flows.
The financial information set forth below should be read in conjunction with the
Company's consolidated financial statements included in Item 1.
Page 19
<PAGE> 20
NINE MONTHS ENDED MARCH 31, 1998 AND 1997
NET INCOME. The Company reported net income of $10.6 million or $1.43 per share
on revenues of $55.0 million for the nine months ended March 31, 1998. This
compares with net income of $1.8 million or $.25 per share on revenues of $55.3
million for the same period last year. The Company's results improved in the
current period due primarily to higher gains on asset sales and lower expenses,
principally campground operating costs, general and administrative expenses, and
interest. In addition, the Company had $1.1 million of nonrecurring income in
the current period and $1.1 million of restructuring costs in the prior period.
Although operating revenues declined in the current period, these decreases were
offset by greater decreases in operating expenses.
The table on the following page shows separately the results of the campground
operations, Resort Parks International, and resort operations, without any
allocation of corporate expenses, as well as corporate expenses and other
revenues and expenses in the aggregate, for the nine months ended March 31, 1998
and 1997, as restated (see "Change in Accounting Method").
Page 20
<PAGE> 21
THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
------------------------------
1998 1997
------------ ------------
(Restated)
<S> <C> <C>
CAMPGROUND OPERATIONS
Membership dues $ 28,065 $ 29,700
Campground revenues 11,500 10,731
Cost of campground revenues (5,162) (5,067)
Operating expenses (22,262) (23,679)
------------ ------------
Contribution from campground operations 12,141 11,685
------------ ------------
SALES
Sales revenues 2,283 2,150
Selling expenses (1,900) (1,978)
Marketing expenses (1,099) (953)
------------ ------------
Loss on sales (716) (781)
------------ ------------
RESORT PARKS INTERNATIONAL
Revenues 2,855 3,000
Expenses (1,576) (1,443)
------------ ------------
Contribution from RPI 1,279 1,557
------------ ------------
12,704 12,461
------------ ------------
RESORT OPERATIONS
Revenues 1,085 2,588
Expenses (1,041) (2,822)
------------ ------------
Contribution (loss) from resort operations 44 (234)
------------ ------------
12,748 12,227
------------ ------------
Other income 2,496 2,720
Corporate member services (1,083) (1,152)
General and administrative expenses (6,310) (7,564)
------------ ------------
OPERATING INCOME BEFORE INTEREST INCOME AND
EXPENSE, GAIN ON ASSET SALES, NONRECURRING
INCOME, RESTRUCTURING COSTS, AND TAXES 7,851 6,231
------------ ------------
Interest income 1,862 2,875
Interest expense (3,576) (7,321)
Gain on asset sales 3,747 1,581
Nonrecurring income 1,083
Restructuring costs (1,101)
------------ ------------
OPERATING INCOME BEFORE TAXES $ 10,967 $ 2,265
============ ============
</TABLE>
Page 21
<PAGE> 22
OPERATING INCOME. During the nine months ended March 31, 1998, the Company
achieved a contribution from operations of $7.9 million, an improvement over the
$6.2 million achieved in the same period last year. Although operating revenues
declined in the current period, the decrease was offset by greater decreases in
operating expenses. For this purpose, the contribution from operations is
defined as operating income before interest income and expense, gain on asset
sales, nonrecurring income, restructuring costs, and taxes. See the table on the
previous page for the elements of the contribution from operations and the
Company's operating income before taxes for the historical periods presented.
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 $28.1 million for the nine months ended
March 31, 1998, compared with $29.7 million for the same period last year. The
decline in dues revenue was due primarily to the net loss of campground members
during the year, partially offset by the effect of the annual dues increase.
Other campground revenues were $11.5 million for the nine months ended March 31,
1998, compared with $10.7 million for the same period last year. The related
expenses were approximately $5.1 million for both periods. The increase in other
campground revenues in the current period was due primarily to revenues received
from harvesting timber at certain campgrounds, an increase in overnight fees
from a section of one campground that is open to the public on an overnight fee
basis, and an increase in revenue from the Company's campground management
operations, as discussed below.
Other campground operating expenses were $22.3 million for the nine months ended
March 31, 1998, compared with $23.7 million for the same period last year. The
decrease between periods resulted primarily from the closure and sale of certain
campgrounds during fiscal 1997 and the first half of fiscal 1998.
The Company intends to continue to keep the size of its campground system in an
appropriate relation to the size of its membership base. In this regard, if the
membership base continues to decline, the Company may close and dispose of
additional campgrounds and it will seek to decrease other expenses. Although the
Company believes that the anticipated changes should result in lower future
operating expenses, no assurance can be given that such changes will not reduce
revenues by an amount in excess of the expense reductions.
The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate on a straight-line basis over the
expected life of the memberships sold (see "Change in Accounting Method"). For
the nine months ended March 31, 1998 and 1997, the Company recognized campground
membership sales revenues of $2.3 million and $2.2 million, respectively. These
amounts include revenues of $1.8 million and $1.3 million, respectively, that
were deferred in prior periods. Moreover, during these same periods, the Company
deferred revenues of $2.0 million and $1.6 million, respectively, which will be
recognized in future periods.
Sales revenues increased slightly in the current period because a smaller net
amount of sales revenues were deferred in the current period. Although revenue
from the sale of new
Page 22
<PAGE> 23
memberships increased on fewer units sold at significantly higher average sales
prices, this increase was offset by a decrease in revenue from the sale of
upgrade memberships.
The Company has expanded its sales and marketing efforts with a view to stopping
the decline in its membership base. However, the sales levels in fiscal 1997 and
the first three quarters of fiscal 1998 did not meet the Company's expectations,
and the Company does not expect its membership sales levels to increase over
historical levels during the fourth quarter of fiscal 1998. In an effort to
improve its membership sales, the Company has been working to increase the
number of prospects that attend its sales presentations. In this regard, the
Company recently 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 receive a
temporary membership and are invited to visit one of the Company's campgrounds.
The Company recently entered into a similar marketing arrangement with a major
RV financing company and plans to seek other similar alliances. The Company has
also recently entered into reciprocal sales agreements with two other companies
in an effort to increase sales.
Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the nine months ended March
31, 1998 and 1997, the Company recognized selling expenses of $1.9 million and
$2.0 million, respectively. These amounts include expenses of $407,000 and
$269,000, respectively, that were deferred in prior periods. Moreover, for these
same periods, the Company deferred expenses of $521,000 and $378,000,
respectively, which will be recognized in future periods.
Selling and marketing expenses exceeded sales revenues by $716,000 and $781,000
for the nine months ended March 31, 1998 and 1997, respectively. These expenses
exceeded sales revenues because of the increased marketing activity and low
volume of sales, which did not cover fixed costs. In addition, the Company
deferred more sales revenues than selling expenses during the periods presented.
The Company's selling and marketing efforts require significant expense, the
majority of which must be expensed in the current period, while the related
sales revenues are generally deferred and recognized on a straight-line basis
over the expected life of the memberships sold. As a consequence, the Company
expects that its selling and marketing expenses will continue to exceed its
campground membership sales revenue. This disparity will increase if the Company
is successful in growing campground membership sales. However, the Company
intends to keep the cash it expends on selling and marketing expenses within a
close relation to the cash it receives from campground membership sales.
The Company's membership base has declined significantly over the past five
fiscal years, and net of new sales, the membership base is presently declining
at the rate of approximately 7% per year. The Company attributes this continuing
attrition principally to its aging membership base, of whom approximately 50%
are senior citizens. In addition, in fiscal 1998, the Company transferred 1,775
members at two campgrounds to the entity that purchased the campgrounds from the
Company. Moreover, the Company estimates that the memberships sold in recent
fiscal years will have an expected life that is significantly shorter than the
expected life of the memberships previously sold by the Company. To stop the
continuing decline in the Company's membership base, the Company must
significantly increase its campground membership sales over current levels or
acquire members in another manner, such as through the purchase of
Page 23
<PAGE> 24
competing membership campground organizations. 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, a wholly owned subsidiary of the Company,
manages public campgrounds for the US Forest Service. For the nine months ended
March 31, 1998, these operations produced revenues of $911,000 with related
expenses (excluding certain shared administrative costs) of $744,000. This
compares with revenues for the same period last year of $801,000 and related
expenses (excluding certain shared administrative costs) of $701,000. The
increase in revenues and expenses between periods was 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, 1998, RPI's operations produced
a net contribution of $1.3 million on revenues of $2.9 million, compared with a
contribution of $1.6 million on revenues of $3.0 million for the same period
last year. The decline in results between periods was primarily due to costs
incurred to provide directories to new members recently gained through a new
program, and the decrease in revenues between periods. 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. The Company's operations at the resorts presently consist of
the sale of residential lots and the rental of a small number of condominium
units. Historically, the Company also managed the timeshare facilities and sold
timeshare interests at the resorts. In November 1996, the Company sold the
timeshare operations and remaining timeshare inventory at the resorts, which
significantly decreased the revenues and expenses from the resort operations.
For the nine months ended March 31, 1998, the resort operations produced a net
contribution of $44,000, compared with a loss of $234,000 for the same period
last year. The improvement in the current period resulted primarily from a bulk
sale of lots that did not require the payment of commissions. The Company does
not expect a positive contribution from the resort operations in the future as
its continues its efforts to sell the remaining assets it owns at the resorts.
These assets consist primarily of approximately 200 residential lots and other
miscellaneous real estate.
INTEREST INCOME AND EXPENSE. Interest income was $1.9 million for the nine
months ended March 31, 1998, compared with $2.9 million for the same period last
year. During these periods, interest income included amortization of the
allowances for interest and valuation discounts related to the contracts
receivable of $393,000 and $548,000, respectively. The $1.0 million decrease in
interest income between periods was due primarily to a decrease in interest
earned on the Company's diminishing portfolio of contracts receivable, partially
offset by interest earned on invested cash in the current period.
Interest expense was $3.6 million for the nine months ended March 31, 1998,
compared with $7.3 million for the same period last year. The $3.7 million
decrease in interest expense between periods was due primarily to repayments of
borrowings under the Credit Agreement, a reduced interest rate on the amended
Credit Agreement, and the repayment of outstanding mortgage notes.
Page 24
<PAGE> 25
The Company repaid all outstanding borrowings under the Credit Agreement and its
remaining mortgage notes in the third quarter of fiscal 1998, which will cause
interest expense to decrease during the balance of fiscal 1998. In addition,
since the Credit Agreement prohibits the Company from paying cash interest on
the PIK Notes, during the remaining term of the Credit Agreement, 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 during 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 SALES. The Company recognized a gain on the sale of assets of $3.7
million for the nine months ended March 31, 1998, compared with $1.6 million for
the same period last year. The increase in the current period was due to the
timing of asset sales. During the current period, the Company sold certain
campgrounds and other excess real estate at the campgrounds and resorts. 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 excess acreage associated with the campgrounds. The sale of
campgrounds requires 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 sale opportunities or the ability of the Company
to realize recoveries from asset sales. In addition, although the Company has
recently been successful in selling assets, no assurance exists that the Company
will be able to locate a buyer for any of the remaining 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 and delinquent
dues, 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 $2.5 million for the nine months
ended March 31, 1998, compared with $2.7 million for the same period last year.
The decrease between periods was due primarily to lower recoveries on canceled
contracts and delinquent dues in the current period.
The Company also had $1.1 million of nonrecurring income in the current period
from a $495,000 refund of insurance deposits made in prior years and a $588,000
gain on an insurance settlement for flood and fire damage at certain
campgrounds.
OTHER EXPENSES. Administrative expenses, including corporate member service
costs and general and administrative expenses, were $7.4 million for the nine
months ended March 31, 1998, compared with $8.7 million for the same period last
year, reflecting the Company's continuing efforts to lower costs.
During the nine months ended March 31, 1997, the Company incurred $1.1 million
of restructuring costs in connection with the consummation of the Restructuring.
The Company also incurred $3.1 million of costs in connection with obtaining the
Credit Agreement with Foothill, which were capitalized as debt issue costs. In
May 1997, the $1.3 million unamortized balance of these debt issue costs was
charged to expense upon amendment of the Credit Agreement.
Page 25
<PAGE> 26
THREE MONTHS ENDED MARCH 31, 1998, AND 1997
NET INCOME. The Company reported net income of $2.1 million or $.28 per share on
revenues of $15.6 million for the three months ended March 31, 1998. This
compares with a net loss of $32,000 or $0 per share on revenues of $15.9 million
for the same period last year. The Company's results improved in the current
period due primarily to lower expenses, principally campground operating costs,
general and administrative expenses, and interest. In addition, the Company had
$588,000 of nonrecurring income in the current period.
The table on the following page shows separately the results of the campground
operations, Resort Parks International, and resort operations, without any
allocation of corporate expenses, as well as corporate expenses and other
revenues and expenses in the aggregate, for the three months ended March 31,
1998 and 1997, as restated (see "Change in Accounting Method").
Page 26
<PAGE> 27
THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1998 1997
------------ ------------
(Restated)
<S> <C> <C>
CAMPGROUND OPERATIONS
Membership dues $ 9,069 $ 9,783
Campground revenues 2,541 2,303
Cost of campground revenues (1,118) (1,076)
Operating expenses (6,604) (7,420)
------------ ------------
Contribution from campground operations 3,888 3,590
------------ ------------
SALES
Sales revenues 804 319
Selling expenses (641) (461)
Marketing expenses (473) (318)
------------ ------------
Profit (loss) on sales (310) (460)
------------ ------------
RESORT PARKS INTERNATIONAL
Revenues 1,153 1,057
Expenses (648) (506)
------------ ------------
Contribution from RPI 505 551
------------ ------------
4,083 3,681
------------ ------------
RESORT OPERATIONS
Revenues 127 382
Expenses (289) (570)
------------ ------------
Contribution from resort operations (162) (188)
------------ ------------
3,921 3,493
------------ ------------
Other income 669 833
Corporate member services (381) (340)
General and administrative expenses (2,159) (2,853)
------------ ------------
OPERATING INCOME BEFORE INTEREST INCOME AND
EXPENSE, GAIN ON ASSET SALES, NONRECURRING
INCOME, AND TAXES 2,050 1,133
------------ ------------
Interest income 685 880
Interest expense (1,074) (2,243)
Gain on asset sales 366
Nonrecurring income 588
------------ ------------
OPERATING INCOME BEFORE TAXES $ 2,249 $ 136
============ ============
</TABLE>
Page 27
<PAGE> 28
OPERATING INCOME. During the three months ended March 31, 1998, the Company
achieved a positive contribution from operations of $2.1 million, compared with
$1.1 million in the same period last year. Although operating revenues declined
in the current period, the decrease was offset by greater decreases in operating
expenses. For this purpose, the contribution from operations is defined as
operating income before interest income and expense, gain on asset sales,
nonrecurring income, and taxes. See the table on the previous page for the
elements of the contribution from operations and the Company's operating income
before taxes for the historical periods presented.
CAMPGROUND OPERATIONS. Campground membership dues revenue was $9.1 million for
the three months ended March 31, 1998, compared with $9.8 million for the same
period last year. The decline in dues revenue was due primarily to the net loss
of campground members during the year, partially offset by the effect of the
annual dues increase.
Other campground revenues were $2.5 million for the three months ended March 31,
1998, compared with $2.3 million for the same period last year. The related
expenses were approximately $1.1 million for both periods. The increase in other
campground revenues in the current period was due primarily to revenues from
harvesting timber at certain campgrounds.
Other campground operating expenses decreased to $6.6 million for the three
months ended March 31, 1998, from $7.4 million for the same period last year.
This decrease resulted primarily from the closure and sale of certain
campgrounds during fiscal 1997 and the first half of fiscal 1998.
For the three months ended March 31, 1998 and 1997, the Company recognized
campground membership sales revenues of $804,000 and $319,000, respectively.
These amounts include revenues of $627,000 and $315,000, respectively, that were
deferred in prior periods. Moreover, during these same periods, the Company
deferred revenues of $405,000 and $432,000, respectively, which will be
recognized in future periods.
Sales revenues increased by $485,000 in the current period due partially to the
recognition of a higher amount of sales revenue that had been deferred in prior
years. In addition, $146,000 of the increase resulted from the sale of
approximately the same number of units at significantly higher average sales
prices.
For the three months ended March 31, 1998 and 1997, the Company recognized
selling expenses of $641,000 and $461,000, respectively. These amounts include
expenses of $143,000, and $90,000, respectively, that were deferred in prior
periods. Moreover, for these same periods, the Company deferred expenses of
$105,000 and $126,000, respectively, which will be recognized in future periods.
Selling and marketing expenses exceeded sales revenues by $310,000 and $460,000
for the three months ended March 31, 1998 and 1997. The expenses exceeded sales
revenue because of the increased marketing activity and low volume of sales,
which did not cover fixed costs.
CAMPGROUND MANAGEMENT. For the three months ended March 31, 1998, the Company's
campground management operations produced revenues of $16,000 with related
expenses (excluding certain shared administrative costs) of $31,000. This
compares with revenues for the same period last year of $22,000 and related
expenses (excluding certain shared administrative costs) of $18,000. The loss in
the current period is due to start-up costs incurred in connection with several
new management contracts.
Page 28
<PAGE> 29
RESORT PARKS INTERNATIONAL. For the three months ended March 31, 1998, RPI's
operations produced a net contribution of $505,000 on revenues of $1.2 million,
compared with a net contribution of $551,000 on revenues of $1.1 million for the
same period last year. The increase in revenues in the current period was due to
a new program implemented in fiscal 1998 to add new members, and higher renewals
in the month of March 1998. Expenses increased as a result of costs incurred to
provide directories to the new members added through the new program.
RESORT OPERATIONS. For the three months ended March 31, 1998, the resort
operations produced a negative contribution of $162,000, compared with a
negative contribution of $188,000 for the same period last year.
INTEREST INCOME AND EXPENSE. Interest income was $685,000 for the three months
ended March 31, 1998, compared with $880,000 for the same period last year.
During these periods, interest income included amortization of the allowance for
interest discount and valuation allowance related to the contracts receivable of
$148,000 and $176,000, respectively. The decrease in interest income between
periods was due primarily to a decrease in interest earned on the Company's
diminishing portfolio of contracts receivable, partially offset by interest
earned on invested cash in the current period.
Interest expense was $1.1 million for the three months ended March 31, 1998,
compared with $2.2 million for the same period last year. The decrease in
interest expense between periods was primarily due to repayments of borrowings
under the Credit Agreement, a reduced interest rate on the amended Credit
Agreement, and the repayment of outstanding mortgage notes.
GAIN ON ASSET SALES. Although the Company has had significant asset sales during
fiscal 1998, the timing was such that no asset sales closed during the third
quarter. During the three months ended March 31, 1997, the Company recognized a
gain on the sale of assets of $366,000.
OTHER INCOME. Other income was $669,000 for the three months ended March 31,
1998, compared with $833,000 for the same period last year. Other income
decreased in the current period due primarily to lower recoveries on canceled
contracts and delinquent dues.
The Company also had $588,000 of nonrecurring income in the current period from
an insurance settlement for flood and fire damage at certain campgrounds.
OTHER EXPENSES. Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.5 million for the three
months ended March 31, 1998, compared with $3.2 million for the same period last
year, reflecting the Company's continuing efforts to lower costs.
INFLATION. During the periods presented, the Company's results were not affected
materially by inflation. However, should the rate of inflation increase in the
future, the Company's expenses are likely to increase at a greater rate than it
can increase the annual dues paid by the campground members because the Company
cannot increase the dues on existing contracts of senior citizens and disabled
members who notify the Company of their age or disability and request that their
dues be frozen. At the present time, approximately 35% of the members have
requested that their dues be frozen because of their age or disability.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Page 29
<PAGE> 30
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>
10.1 Third Amendment to Loan and Security Agreement dated as of
January 5, 1998, between the Company and Foothill Capital
Corporation.
10.2 Consent and First Amendment to Pledge and Security Agreement,
dated as of October 31, 1997, between certain subsidiaries of
the Company and Foothill Capital Corporation.
10.3 Supplement No. 2 to Grantor Trust Agreement, dated as of
January 22, 1998, between the Company and a majority of the
persons presently named as beneficiaries under the Grantor
Trust Agreement, dated as of May 8, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee.
10.4 Supplement to Grantor Trust Agreement, dated as of January 22,
1998, between NACO and a majority of the persons presently
named as beneficiaries under the Grantor Trust Agreement, dated
as of September 30, 1991, between NACO and Union Bank of
California, N.A., as Trustee.
11.1 Statement re: Computation of Per Share Earnings.
27.1 Financial Data Schedule - March 31, 1998.
27.2 Restated Financial Data Schedule - March 31, 1997 and 1996.
27.3 Restated Financial Data Schedule - December 31, 1996 and 1995.
27.4 Restated Financial Data Schedule - September 30, 1996 and 1995.
27.5 Restated Financial Data Schedule - June 30, 1995.
</TABLE>
REPORTS ON FORM 8-K
None.
Page 30
<PAGE> 31
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: May 12, 1998 By: /s/ Harry J. White, Jr.
--------------------------------------------
Harry J. White, Jr.
Vice President, Chief Financial Officer, and
Chief Accounting Officer
Page 31
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1 Third Amendment to Loan and Security Agreement dated as of
January 5, 1998, between the Company and Foothill Capital
Corporation.
10.2 Consent and First Amendment to Pledge and Security Agreement,
dated as of October 31, 1997, between certain subsidiaries of
the Company and Foothill Capital Corporation.
10.3 Supplement No. 2 to Grantor Trust Agreement, dated as of
January 22, 1998, between the Company and a majority of the
persons presently named as beneficiaries under the Grantor
Trust Agreement, dated as of May 8, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee.
10.4 Supplement to Grantor Trust Agreement, dated as of January 22,
1998, between NACO and a majority of the persons presently
named as beneficiaries under the Grantor Trust Agreement, dated
as of September 30, 1991, between NACO and Union Bank of
California, N.A., as Trustee.
11.1 Statement re: Computation of Per Share Earnings.
27.1 Financial Data Schedule - March 31, 1998.
27.2 Restated Financial Data Schedule - March 31, 1997 and 1996.
27.3 Restated Financial Data Schedule - December 31, 1996 and 1995.
27.4 Restated Financial Data Schedule - September 30, 1996 and 1995.
27.5 Restated Financial Data Schedule - June 30, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
THOUSAND TRAILS, INC.
This Third Amendment to Loan and Security Agreement ("the Amendment")
is entered into as of January 5, 1998 by and between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with an office located
11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333,
on the one hand, and NATIONAL AMERICAN CORPORATION, a Nevada corporation
("National American"), THOUSAND TRAILS, INC., a Delaware corporation ("Thousand
Trails"), and the other party borrowers signatory hereto (each, together with
National American and Thousand Trails, individually a "Borrower" and
collectively, jointly and severally, "Borrowers"), on the other hand, in light
of the following facts:
FACTS
FACT ONE: Foothill and Borrowers have previously entered into that
certain Loan and Security Agreement, dated as of July 10, 1996 (as amended and
supplemented, the "Agreement").
FACT TWO: Foothill and borrowers have agreed to amend the Agreement
as provided herein.
NOW, THEREFORE, Foothill and borrower hereby amend and supplement the
Agreement as follows:
1. Schedule 5.4 (5/97) of the Agreement is amended by deleting "Palm
Springs Acreage* $1,800,000" in its entirety and substituting "Palm Springs
Acreage* $760,000" in lieu thereof.
2. In the event of a conflict between the terms and provisions of
this Amendment and the terms and provisions of the Agreement, the terms of this
Amendment shall govern. In all other respects, the Agreement, as amended and
supplemented hereby, shall remain in full force and effect.
IN WITNESS WHEREOF, Foothill and Borrower have executed this Amendment
as of the date first written above.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Lisa M. Gonzales
---------------------------------------
Lisa M. Gonzales
Assistant Vice President
<PAGE> 2
"Borrowers"
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
THOUSAND TRAILS, INC.,
a Delaware corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
THOUSAND TRAILS (CANADA) INC.,
a British Columbian corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
TT OFFSHORE, LTD,
a Virginia corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
BEECH MOUNTAIN LAKES CORPORATION,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
2
<PAGE> 3
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
CB RESORT CORPORATION,
a Massachusetts corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
CHIEF CREEK CORPORATION,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
3
<PAGE> 4
COAST FINANCIAL SERVICES, INC.,
a Delaware corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
DIXIE RESORT CORPORATION,
a Mississippi corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
FOXWOOD CORPORATION,
a South Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
LAKE ROYALE CORPORATION,
a North Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
4
<PAGE> 5
LAKE TANSI VILLAGE, INC.,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
LML RESORT CORPORATION,
an Alabama corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
NATCHEZ TRACE WILDERNESS PRESERVE
CORPORATION, a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
QUAIL HOLLOW PLANTATION CORPORATION, a
Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
5
<PAGE> 6
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
RESORT LAND CORPORATION,
an Arkansas corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
RESORT PARKS INTERNATIONAL, INC.,
a Georgia corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
TANSI RESORT, INC.,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
6
<PAGE> 7
THE KINSTON CORPORATION,
a South Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
WESTERN FUN CORPORATION,
a Texas corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
WESTWIND MANOR CORPORATION,
a Texas corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
WOLF RUN MANOR CORPORATION,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------------
Name: Walter B. Jaccard
Title: Vice President
7
<PAGE> 8
UST WILDERNESS MANAGEMENT CORPORATION, a
Nevada corporation
By: /s/ Walter B. Jaccard
----------------------------------------
Name: Walter B. Jaccard
Title: Vice President
8
<PAGE> 1
EXHIBIT 10.2
CONSENT AND FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENTS
This CONSENT AND FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENTS
("Amendment") is made and entered into as of the 31st day of October, 1997, by
and among NATIONAL AMERICAN CORPORATION, a Nevada corporation, with its chief
executive office located at 2711 LBJ Freeway, Suite 200, Dallas, Texas 75234
("NACO"), FOXWOOD CORPORATION, a South Carolina corporation, with its chief
executive office located at 2711 LBJ Freeway, Suite 200, Dallas, Texas 75234
("Foxwood"), and FOOTHILL CAPITAL CORPORATION, a California corporation, with a
place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333 ("Foothill"), and is made with reference to the
following facts:
W I T N E S S E T H:
WHEREAS, on or about July 10, 1996, Foothill and, inter alia, NACO and
Foxwood entered into that certain Loan and Security Agreement ("Loan
Agreement") which provided for borrowings from time to time and pledges of
various security interests to secure the repayments of such borrowings, all on
the terms and conditions set forth therein; and
WHEREAS, in accordance with the terms of the Loan Agreement, on or
about July 10, 1996 NACO and Foothill entered into that certain Pledge and
Security Agreement ("NACO Pledge Agreement"), whereby, among other things,
Borrower pledged the stock of various subsidiaries to Foothill, all as more
fully set forth on Exhibit "A" attached thereto; and
WHEREAS, one of the subsidiaries whose stock was pledged by Borrower,
Foxwood, similarly executed a Pledge and Security Agreement dated as of July
10, 1996 ("Foxwood Pledge Agreement") whereby Foxwood pledged all of its
interest in certain of its subsidiaries, including inter alia, the stock of
Carolina Landing Corporation ("Carolina"); and
<PAGE> 2
WHEREAS, NACO desires to acquire the stock of Carolina from Foxwood,
and repledge it to Foothill, to which Foothill has consented, on the terms and
conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Exhibit "A" to the NACO Pledge Agreement is deleted in its
entirety, and Exhibit "A" attached hereto and incorporated by reference hereby
is substituted in its place and stead.
2. Exhibit "A" to the Foxwood Pledge Agreement is amended by
deleting therefrom the reference to Carolina Landing Corporation.
3. NACO and Foxwood each represents and warrants to Foothill that
as of the date of the execution of this agreement, stock certificate #2 in the
amount of 250 shares represents all of the outstanding shares of the stock of
Carolina Landing Corporation.
4. Foothill hereby consents to the sale by Foxwood to Borrower of
the stock of Carolina. Such consent does not constitute a waiver of
Foothill's right to refuse consent to any other proposed future corporate
restructurings, acquisitions, or dispositions.
5. Except as expressly modified herein, the Foxwood Pledge
Agreement, the NACO Pledge Agreement, and the Loan Agreement remain in full
force and effect and are reaffirmed by the parties hereto.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By
-------------------------------------
Title:
--------------------------------
2
<PAGE> 3
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By: s/Walter B. Jaccard
------------------------------------
Title: Vice President
--------------------------------
FOXWOOD CORPORATION,
a South Carolina corporation
By: s/Walter B. Jaccard
------------------------------------
Title: Vice President
--------------------------------
3
<PAGE> 4
EXHIBIT A
Stock
<TABLE>
<CAPTION>
Name of Company Stock Certificate No. No. of Shares
- ---------------------------------------------------- --------------------- -------------
<S> <C> <C>
1. Beech Mountain Lakes Corporation 1 10
2. Carolina Landing Corporation 2 250
3. Carriage Manor Corporation 1 3
4. Cherokee Landing Corporation 1 250
5. Chief Creek Corporation 3 500
6. Lawrence E. Steelman & Co., Inc. 4 80
(now Dixie Resort Corporation)
7. Lawrence E. Steelman & Co., Inc. 5 20
(now Dixie Resort Corporation)
8. Foxwood Corporation 1 250
9. GL Land Development Corporation 1 5
10. GL Land Development Corporation 2 245
11. LML Resort Corporation 1 1,000
12. Lake Royale Corporation 1 250
13. Lake Tansi Village, Inc. 1 10
14. Natchez Trace Wilderness Preserve Corporation 3 500
15. Quail Hollow Plantation Corporation 1 100
16. Quail Hollow Village, Inc. 1 10
17. Recreation Land Corporation 1 500
18. Recreation Properties, Inc. 1 100
19. The Villas of Hickory Hills, Inc. 4 500
</TABLE>
4
<PAGE> 1
EXHIBIT 10.3
SUPPLEMENT NO. 2 TO GRANTOR TRUST AGREEMENT
THIS SUPPLEMENT NO. 2 TO GRANTOR TRUST AGREEMENT (this "Supplement") is
made and entered into as of the 22nd day of January, 1998, by THOUSAND TRAILS,
INC., a Delaware corporation (the "Company"), and a majority of the persons
presently named as beneficiaries under the Grantor Trust Agreement, dated as of
May 8, 1991, as supplemented (the "Trust Agreement"), between the Company and
UNION BANK OF CALIFORNIA, N. A., as Trustee (the "Trustee").
RECITALS
A. The Company, as the successor to USTrails Inc., a Nevada corporation
formerly known as NACO Finance Corporation, entered into the Trust Agreement to
provide, among other things, for the funding of its indemnification obligations
to its directors and officers under indemnification agreements, its constituent
instruments, and applicable law.
B. Pursuant to Section 12 of the Trust Agreement, the Company and a
majority of the persons presently named as beneficiaries under the Trust
Agreement desire to provide for the partial termination of the trust created by
the Trust Agreement (the "Trust") and for the distribution to the Company of
fifty percent (50%) of the assets in the Trust as of January 31, 1998.
C. There is no litigation or other proceeding pending or threatened
with respect to any Claim (as defined in the Trust Agreement) and no beneficiary
under the Trust Agreement has given notice that any Claim is likely to be
asserted in the future on the grounds of evidence known to or suspected by such
beneficiary.
AGREEMENTS
NOW, THEREFORE, the Company and a majority of the persons presently
named as beneficiaries under the Trust Agreement, intending to be legally bound,
hereby agrees as follows:
1. Pursuant to Section 12 of the Trust Agreement, the Company and the
twelve (12) persons signing below, who represent more than a majority of the
nineteen (19) persons presently named as beneficiaries under the Trust
Agreement, hereby agree and consent to the partial termination of the Trust and
to the distribution to the Company of an amount equal to fifty percent (50%) of
the market value of the assets in the Trust as of January 31, 1998. For this
purpose, the Trustee is authorized and directed to (a) determine the market
value of the assets in the Trust as of January 31, 1998, and (b) liquidate and
distribute to the Company an amount equal to fifty percent (50%) of the market
value of the assets in the Trust as of January 31, 1998.
<PAGE> 2
2. Except for the partial termination of the Trust and distribution of
Trust assets provided for herein, the terms of the Trust Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, this Supplement has been executed and delivered as
of the date first above written.
THOUSAND TRAILS, INC.
By: /s/ William J. Shaw
-------------------------------------
William J. Shaw
President and Chief Executive Officer
-2-
<PAGE> 3
AGREEMENT AND CONSENT OF BENEFICIARIES
The undersigned, a beneficiary of the Trust Agreement referred to in the
Supplement to Grantor Trust Agreement attached hereto (the "Supplement"), hereby
acknowledges receipt of, and consents and agrees to, the terms of the
Supplement.
Dated: January 22, 1998 /s/ Andrew M. Boas
-------------------------- ----------------------------
Andrew M. Boas
Dated: January 22, 1998 /s/ R. Gerald Gelinas
-------------------------- ----------------------------
R. Gerald Gelinas
Dated: January 22, 1998 /s/ Donald W. Hair
-------------------------- ----------------------------
Donald W. Hair
Dated: January 22, 1998 /s/ Kenneth E. Hendrycy
-------------------------- ----------------------------
Kenneth E. Hendrycy
Dated: January 22, 1998 /s/ Walter B. Jaccard
-------------------------- ----------------------------
Walter B. Jaccard
Dated: January 22, 1998 /s/ William P. Kovacs
-------------------------- ----------------------------
William P. Kovacs
Dated: January 22, 1998 /s/ Donald R. Leopold
-------------------------- ----------------------------
Donald R. Leopold
Dated: January 22, 1998 /s/ H. Sean Mathis
-------------------------- ----------------------------
H. Sean Mathis
Dated: January 22, 1998 /s/ David A. McCrum
-------------------------- ----------------------------
David A. McCrum
Dated: January 22, 1998 /s/ Douglas K. Nelson
-------------------------- ----------------------------
Douglas K. Nelson
Dated: January 22, 1998 /s/ William J. Shaw
-------------------------- ----------------------------
William J. Shaw
Dated: January 22, 1998 /s/ Harry J. White, Jr.
-------------------------- ----------------------------
Harry J. White, Jr.
-3-
<PAGE> 1
EXHIBIT 10.4
SUPPLEMENT TO GRANTOR TRUST AGREEMENT
THIS SUPPLEMENT TO GRANTOR TRUST AGREEMENT (this "Supplement") is made
and entered into as of the 22nd day of January, 1998, by NATIONAL AMERICAN
CORPORATION, a Nevada corporation (the "Company"), and a majority of the persons
presently named as beneficiaries under the Grantor Trust Agreement, dated as of
September 30, 1991 (the "Trust Agreement"), between the Company and UNION BANK
OF CALIFORNIA, N. A., as Trustee (the "Trustee").
RECITALS
A. The Company entered into the Trust Agreement to provide, among other
things, for the funding of its indemnification obligations to its directors and
officers under indemnification agreements, its constituent instruments, and
applicable law.
B. Pursuant to Section 12 of the Trust Agreement, the Company and a
majority of the persons presently named as beneficiaries under the Trust
Agreement desire to provide for the termination of the trust created by the
Trust Agreement (the "Trust") and for the distribution to the Company of all of
the assets in the Trust as of January 31, 1998.
C. There is no litigation or other proceeding pending or threatened
with respect to any Claim (as defined in the Trust Agreement) and no beneficiary
under the Trust Agreement has given notice that any Claim is likely to be
asserted in the future on the grounds of evidence known to or suspected by such
beneficiary.
AGREEMENTS
NOW, THEREFORE, the Company and a majority of the persons presently
named as beneficiaries under the Trust Agreement, intending to be legally bound,
hereby agrees as follows:
1. Pursuant to Section 12 of the Trust Agreement, the Company and the
seven (7) persons signing below, who represent a majority of the thirteen (13)
persons presently named as beneficiaries under the Trust Agreement, hereby agree
and consent to the termination of the Trust and to the distribution to the
Company of all of the assets in the Trust as of January 31, 1998. For this
purpose, the Trustee is authorized and directed to (a) determine the market
value of the assets in the Trust as of January 31, 1998, and (b) liquidate and
distribute to the Company an amount equal to one hundred percent (100%) of the
market value of the assets in the Trust as of January 31, 1998.
IN WITNESS WHEREOF, this Supplement has been executed and delivered as
of the date first above written.
<PAGE> 2
NATIONAL AMERICAN CORPORATION
By: /s/ William J. Shaw
-----------------------------------------
William J. Shaw
President and Chief Executive Officer
AGREEMENT AND CONSENT OF BENEFICIARIES
The undersigned, a beneficiary of the Trust Agreement referred to in the
foregoing Supplement to Grantor Trust Agreement (the "Supplement"), hereby
acknowledges receipt of, and consents and agrees to, the terms of the
Supplement.
Dated: January 22, 1998 /s/ R. Gerald Gelinas
------------------------- ---------------------------
R. Gerald Gelinas
Dated: January 22, 1998 /s/ Donald W. Hair
------------------------- ---------------------------
Donald W. Hair
Dated: January 22, 1998 /s/ Kenneth E. Hendrycy
------------------------- ---------------------------
Kenneth E. Hendrycy
Dated: January 22, 1998 /s/ Walter B. Jaccard
------------------------- ---------------------------
Walter B. Jaccard
Dated: January 22, 1998 /s/ David A. McCrum
------------------------- ---------------------------
David A. McCrum
Dated: January 22, 1998 /s/ William J. Shaw
------------------------- ---------------------------
William J. Shaw
Dated: January 22, 1998 /s/ Harry J. White, Jr.
------------------------- ---------------------------
Harry J. White, Jr.
-2-
<PAGE> 1
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,
1998 1997
-------------- --------------
<S> <C> <C>
BASIC:
Weighted average number of common shares outstanding 7,398 7,170
============== ==============
Net income allocable to common shareholders $ 10,593 $ 1,785
============== ==============
Net income per common share -- basic $ 1.43 $ 0.25
============== ==============
DILUTED:
Weighted average number of common shares outstanding 7,398 7,170
Weighted average common stock equivalents -
Dilutive options 982 359
Dilutive warrants 25 --
-------------- --------------
Weighted average number of common shares outstanding 8,405 7,529
============== ==============
Net income allocable to common shareholders $ 10,593 $ 1,785
============== ==============
Net income per common share -- diluted $ 1.26 $ 0.24
============== ==============
</TABLE>
Note that the calculations for the nine and three month periods ended March 31,
1997, have been restated to reflect the change in accounting method adopted by
the Company in fiscal 1997, and retroactively applied to all reporting periods
presented (see Note 1 to the consolidated financial statements included in Item
1 of Part I).
Page 1 of 2
<PAGE> 2
Exhibit 11.1
<TABLE>
<CAPTION>
Three Months Three Months
Ended March 31, Ended March 31,
1998 1997
-------------- --------------
<S> <C> <C>
BASIC:
Weighted average number of common shares outstanding 7,416 7,383
============== ==============
Net income (loss) allocable to common shareholders $ 2,107 $ (32)
============== ==============
Net income (loss) per common share -- basic $ 0.28 $ (0)
============== ==============
DILUTED:
Weighted average number of common shares outstanding 7,416 7,383
Weighted average common stock equivalents -
Dilutive options 973 --
Dilutive warrants 6 --
-------------- --------------
Weighted average number of common shares outstanding 8,395 7,383
============== ==============
Net income allocable to common shareholders $ 2,107 $ (32)
============== ==============
Net income per common share -- diluted $ 0.25 $ (0)
============== ==============
</TABLE>
Page 2 of 2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 8,711
<SECURITIES> 0
<RECEIVABLES> 4,046
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,874
<PP&E> 21,965
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,890
<CURRENT-LIABILITIES> 32,765
<BONDS> 32,980
0
0
<COMMON> 74
<OTHER-SE> (11,480)
<TOTAL-LIABILITY-AND-EQUITY> 61,890
<SALES> 2,929
<TOTAL-REVENUES> 54,976
<CGS> 0
<TOTAL-COSTS> 44,009
<OTHER-EXPENSES> 40,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,576
<INCOME-PRETAX> 10,967
<INCOME-TAX> 374
<INCOME-CONTINUING> 10,593
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,593
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<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 JUN-01-1995
<PERIOD-END> MAR-31-1997<F1> MAR-31-1996<F1>
<CASH> 1,547 36,255
<SECURITIES> 0 0
<RECEIVABLES> 7,669 15,541
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,964 44,581
<PP&E> 24,765 27,838
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 64,772 112,147
<CURRENT-LIABILITIES> 35,348 55,327
<BONDS> 48,793 95,214
0 0
0 0
<COMMON> 74 37
<OTHER-SE> (27,125) (27,368)
<TOTAL-LIABILITY-AND-EQUITY> 64,772 112,147
<SALES> 2,617 2,067
<TOTAL-REVENUES> 55,345 69,246
<CGS> 0 0
<TOTAL-COSTS> 53,080 65,021
<OTHER-EXPENSES> 45,759 51,622
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,321 13,399
<INCOME-PRETAX> 2,265 4,225
<INCOME-TAX> 480 11
<INCOME-CONTINUING> 1,785 4,214
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 1,390
<CHANGES> 0 0
<NET-INCOME> 1,785 5,604
<EPS-PRIMARY> 0.25 1.51
<EPS-DILUTED> 0.24 1.51
<FN>
<F1>THE MARCH 31, 1997 AND 1996 FINANCIAL DATA HAS BEEN RESTATED TO REFLECT A
CHANGE IN ACCOUNTING METHOD RETROACTIVELY APPLIED BY THE COMPANY IN FISCAL
1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> DEC-31-1996<F1> DEC-31-1995<F1>
<CASH> 2,403 30,105
<SECURITIES> 0 0
<RECEIVABLES> 9,437 12,996
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,736 39,990
<PP&E> 25,442 30,515
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 69,535 109,262
<CURRENT-LIABILITIES> 32,564 59,546
<BONDS> 58,264 100,946
0 0
0 0
<COMMON> 74 37
<OTHER-SE> (27,093) (35,221)
<TOTAL-LIABILITY-AND-EQUITY> 69,535 109,262
<SALES> 2,179 1,434
<TOTAL-REVENUES> 39,422 43,194
<CGS> 0 0
<TOTAL-COSTS> 37,293 45,600
<OTHER-EXPENSES> 32,215 36,559
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,078 9,041
<INCOME-PRETAX> 2,129 (2,406)
<INCOME-TAX> 312 (157)
<INCOME-CONTINUING> 1,817 (2,249)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,817 (2,249)
<EPS-PRIMARY> 0.26 (0.61)
<EPS-DILUTED> 0.25 (0.61)
<FN>
<F1>THE DECEMBER 31, 1996 AND 1995 FINANCIAL DATA HAS BEEN RESTATED TO REFLECT A
CHANGE IN ACCOUNTING METHOD RETROACTIVELY APPLIED BY THE COMPANY IN FISCAL 1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> SEP-30-1996<F1> SEP-30-1995<F1>
<CASH> 3,057 20,929
<SECURITIES> 0 0
<RECEIVABLES> 11,203 15,674
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,728 32,282
<PP&E> 26,184 31,418
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 74,079 106,302
<CURRENT-LIABILITIES> 34,606 49,246
<BONDS> 63,761 102,565
0 0
0 0
<COMMON> 74 37
<OTHER-SE> (27,335) (34,335)
<TOTAL-LIABILITY-AND-EQUITY> 74,079 106,302
<SALES> 922 1,117
<TOTAL-REVENUES> 22,354 24,617
<CGS> 0 0
<TOTAL-COSTS> 20,656 26,153
<OTHER-EXPENSES> 18,201 21,543
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,455 4,610
<INCOME-PRETAX> 1,698 (1,536)
<INCOME-TAX> 123 (173)
<INCOME-CONTINUING> 1,575 (1,363)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,575 (1,363)
<EPS-PRIMARY> 0.23 (0.37)
<EPS-DILUTED> 0.23 (0.37)
<FN>
<F1>THE SEPTEMBER 30, 1996 AND 1995 FINANCIAL DATA HAS BEEN RESTATED TO REFLECT
A CHANGE IN ACCOUNTING METHOD RETROACTIVELY APPLIED BY THE COMPANY IN FISCAL
1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995<F1>
<CASH> 50,596
<SECURITIES> 0
<RECEIVABLES> 18,698
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,691
<PP&E> 32,039
<DEPRECIATION> 0
<TOTAL-ASSETS> 137,517
<CURRENT-LIABILITIES> 64,601
<BONDS> 120,243
0
0
<COMMON> 37
<OTHER-SE> (32,972)
<TOTAL-LIABILITY-AND-EQUITY> 137,517
<SALES> 4,074
<TOTAL-REVENUES> 91,392
<CGS> 0
<TOTAL-COSTS> 102,965
<OTHER-EXPENSES> 82,005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,960
<INCOME-PRETAX> (11,573)
<INCOME-TAX> 255
<INCOME-CONTINUING> (11,828)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,828)
<EPS-PRIMARY> (3.19)
<EPS-DILUTED> (3.19)
<FN>
<F1>THE FISCAL 1995 FINANCIAL DATA HAS BEEN RESTATED TO REFLECT A CHANGE IN
ACCOUNTING METHOD RETROACTIVELY APPLIED BY THE COMPANY IN FISCAL 1997.
</FN>
</TABLE>
