<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD from TO
---------- ------------
FOR THE PERIOD ENDED MARCH 31, 1998 COMMISSION FILE NUMBER: 1-8303
----------------------
THE HALLWOOD GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
----------------------
DELAWARE 51-0261339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3710 RAWLINS, SUITE 1500
DALLAS, TEXAS 75219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 528-5588
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
--- ---
1,255,000 shares of Common Stock, $.10 par value per share, were
outstanding at April 30, 1998.
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<PAGE> 2
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. PART I - FINANCIAL INFORMATION PAGE
-------- ------------------------------ ----
1 Financial Statements (Unaudited):
<S> <C>
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997...................................................... 3-4
Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997................................. 5-6
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997................................. 7
Notes to Consolidated Financial Statements..................................... 8-13
2 Managements's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 14-18
PART II - OTHER INFORMATION
1 thru 6 Exhibits, Reports on Form 8-K and Signature Page............................... 19-21
</TABLE>
Page 2
<PAGE> 3
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- --------
<S> <C> <C>
ASSET MANAGEMENT
REAL ESTATE
Investments in HRP ........................ $ 6,967 $ 7,197
Receivables and other assets .............. 860 1,063
------- -------
7,827 8,260
ENERGY
Oil and gas properties, net ............... 7,890 9,589
Current assets of HEP ..................... 2,297 2,657
Noncurrent assets of HEP .................. 1,801 1,859
Receivables and other assets .............. 75 434
------- -------
12,063 14,539
------- -------
Total asset management assets .......... 19,890 22,799
OPERATING SUBSIDIARIES
TEXTILE PRODUCTS
Inventories ............................... 19,681 17,935
Receivables ............................... 17,514 14,296
Property, plant and equipment, net ........ 8,816 9,057
Other ..................................... 877 938
------- -------
46,888 42,226
HOTELS
Properties, net ........................... 14,109 14,168
Receivables and other assets .............. 1,941 1,742
------- -------
16,050 15,910
------- -------
Total operating subsidiaries assets .... 62,938 58,136
OTHER
Deferred tax asset, net ................... 2,040 2,040
Cash and cash equivalents ................. 1,695 4,737
Other ..................................... 897 1,557
Restricted cash ........................... 671 489
------- -------
Total other assets ..................... 5,303 8,823
------- -------
TOTAL .................................. $88,131 $89,758
======= =======
</TABLE>
See accompanying notes to consolidate financial statements.
Page 3
<PAGE> 4
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- --------
<S> <C> <C>
ASSET MANAGEMENT
REAL ESTATE
Accounts payable and accrued expenses ............................... $ 1,279 $ 1,295
Loan payable ........................................................ 500 500
-------- --------
1,779 1,795
ENERGY
Loan payable ........................................................ 3,467 3,867
Long-term obligations of HEP ........................................ 3,024 4,731
Current liabilities of HEP .......................................... 2,155 2,793
Accounts payable and accrued expenses ............................... 608 548
-------- --------
9,254 11,939
-------- --------
Total asset management liabilities ............................... 11,033 13,734
OPERATING SUBSIDIARIES
TEXTILE PRODUCTS
Loan payable ........................................................ 13,600 13,800
Accounts payable and accrued expenses ............................... 12,086 7,771
-------- --------
25,686 21,571
HOTELS
Loans payable ....................................................... 11,981 12,019
Accounts payable and accrued expenses ............................... 1,469 1,607
-------- --------
13,450 13,626
-------- --------
Total operating subsidiaries liabilities ......................... 39,136 35,197
OTHER
7% Collateralized Senior Subordinated Debentures .................... 21,909 24,292
Interest and other accrued expenses ................................. 788 1,364
-------- --------
Total other liabilities .......................................... 22,697 25,656
-------- --------
TOTAL LIABILITIES ................................................ 72,866 74,587
REDEEMABLE PREFERRED STOCK
Series B, 250,000 shares issued and outstanding;
stated at redemption value ...................................... 1,000 1,000
STOCKHOLDERS' EQUITY
Preferred stock, 250,000 shares issued and outstanding as Series B .. -- --
Common stock, issued 1,597,204 shares at both dates;
outstanding 1,254,751 and 1,261,757 shares, respectively ......... 160 160
Additional paid-in capital .......................................... 54,823 54,823
Accumulated deficit ................................................. (31,349) (31,693)
Treasury stock, 342,453 and 335,447 shares, respectively, at cost ... (9,369) (9,119)
-------- --------
TOTAL STOCKHOLDERS' EQUITY ....................................... 14,265 14,171
-------- --------
TOTAL ............................................................ $ 88,131 $ 89,758
======== ========
</TABLE>
See accompanying notes to consolidate financial statements.
Page 4
<PAGE> 5
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
-------- -------
<S> <C> <C>
ASSET MANAGEMENT
REAL ESTATE
Fees ........................................... $ 1,242 $ 973
Equity income (loss) from investments in HRP ... (62) 90
-------- -------
1,180 1,063
Administrative expenses ........................ 555 535
Depreciation and amortization .................. 168 168
Interest ....................................... 58 40
-------- -------
781 743
-------- -------
Income from real estate operations .......... 399 320
ENERGY
Gas revenues ................................... 863 1,062
Oil revenues ................................... 426 625
Other income ................................... 50 78
-------- -------
1,339 1,765
Operating expenses ............................. 399 328
Depreciation, depletion and amortization ....... 377 309
Administrative expenses ........................ 225 275
Interest ....................................... 146 120
-------- -------
1,147 1,032
-------- -------
Income from energy operations ............... 192 733
-------- -------
Income from asset management operations ..... 591 1,053
OPERATING SUBSIDIARIES
TEXTILE PRODUCTS
Sales .......................................... 23,315 23,505
Cost of sales .................................. 20,158 20,370
Administrative and selling expenses ............ 2,263 2,261
Interest ....................................... 269 242
-------- -------
22,690 22,873
-------- -------
Income from textile products operations ..... 625 632
</TABLE>
See accompanying notes to consolidate financial statements.
Page 5
<PAGE> 6
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
OPERATING SUBSIDIARIES (CONTINUED) -------- --------
<S> <C> <C>
HOTELS
Sales ............................................... $ 4,998 $ 5,857
Operating expenses .................................. 4,425 4,528
Depreciation and amortization ....................... 669 689
Interest ............................................ 252 365
------- --------
5,346 5,582
------- --------
Income (loss) from hotel operations .............. (348) 275
------- --------
Income from operating subsidiaries ............... 277 907
ASSOCIATED COMPANY
Income from investment in ShowBiz ................... -- 19,327
Interest ............................................ -- 1,863
------- --------
Income from associated company ................... -- 17,464
OTHER
Fee income .......................................... 137 106
Interest on short-term investments and other income . 131 192
------- --------
268 298
Administrative expenses ............................. 565 640
Interest ............................................ 239 1,106
------- --------
804 1,746
------- --------
Other loss, net .................................. (536) (1,448)
------- --------
Income before income taxes and extraordinary gain ... 332 17,976
Income taxes ........................................ 95 9,595
------- --------
Income before extraordinary gain .................... 237 8,381
Extraordinary gain from extinguishment of debt ...... 107 --
------- --------
NET INCOME ................................................. $ 344 $ 8,381
======= ========
PER COMMON SHARE
BASIC
Income before extraordinary gain .................... $ 0.19 $ 5.37
Extraordinary gain from extinguishment of debt ...... 0.08 --
------- --------
Net income ....................................... $ 0.27 $ 5.37
======= ========
ASSUMING DILUTION
Income before extraordinary gain .................... $ 0.18 $ 5.27
Extraordinary gain from extinguishment of debt ...... 0.08 --
------- --------
Net income ....................................... $ 0.26 $ 5.27
======= ========
</TABLE>
See accompanying notes to consolidate financial statements.
Page 6
<PAGE> 7
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ....................................................... $ 344 $ 8,381
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization ...................... 1,568 1,467
Undistributed income from HEP ................................. (691) (1,095)
Distributions from HEP ........................................ 413 529
Amortization of deferred gain from debenture exchange ......... (130) (147)
Gain from extinguishment of debt .............................. (107) --
Equity in net (income) loss of HRP ............................ 62 (90)
Equity in net (income) of ShowBiz ............................ -- (1,139)
Gain from sale of investment in ShowBiz ....................... -- (18,188)
Net change in deferred tax asset .............................. -- 8,960
Accrual of ShowBiz Participation Amount ....................... -- 1,675
Net change in accrued interest on 13.5% Debentures ............ -- 855
Net change in textile products assets and liabilities ......... (603) (1,826)
Net change in energy assets and liabilities ................... 291 (76)
Net change in other assets and liabilities .................... (104) 1,100
--------- ---------
Net cash provided by operating activities .................. 1,043 406
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for hotels .................................. (572) (240)
Investments in energy property and equipment ..................... (199) (26)
Net change in restricted cash for investing activities ........... (182) (160)
Investments in textile products property and equipment ........... (98) (306)
Net proceeds from sale of investment in ShowBiz .................. -- 40,235
Purchase of minority shares of HEC ............................... -- (648)
--------- ---------
Net cash provided by (used in) investing activities ........ (1,051) 38,855
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of 7% Debentures ...................................... (2,146) --
Purchase of common stock for treasury ............................ (250) --
Repayment of bank borrowings and loans payable ................... (638) (12,140)
Proceeds from bank borrowings and loans payable .................. -- 2,250
Escrow of ShowBiz Participation Amount ........................... -- (2,513)
--------- ---------
Net cash (used in) financing activities .................... (3,034) (12,403)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................. (3,042) 26,858
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................... 4,737 7,495
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................. $ 1,695 $ 34,353
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
<PAGE> 8
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND ACCOUNTING POLICIES
Interim Consolidated Financial Statements. The consolidated financial
statements of The Hallwood Group Incorporated (the "Company") have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and disclosures required by generally
accepted accounting principles, although, in the opinion of management, all
adjustments considered necessary for a fair presentation have been
included. These financial statements should be read in conjunction with the
audited consolidated financial statements and related disclosures thereto
included in Form 10-K for the year ended December 31, 1997.
Accounting Policies. The Company has adopted Statement of Financial
Accounting Standards No. 130 - Reporting Comprehensive Income, effective
January 1, 1998. The Company had no items of comprehensive income for the
periods presented herein.
2. INVESTMENTS IN REAL ESTATE AFFILIATE AND ASSOCIATED COMPANY (DOLLAR
AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998 AMOUNT AT INCOME (LOSS) FROM INVESTMENTS
--------------------- WHICH CARRIED AT FOR THE THREE MONTHS ENDED
COST OR ----------------------- MARCH 31,
BUSINESS SEGMENTS AND NUMBER OF ASCRIBED MARCH 31, DECEMBER 31, --------------------------
DESCRIPTION OF INVESTMENT UNITS VALUE 1998 1997 1998 1997
------------------------- --------- -------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
REAL ESTATE AFFILIATE
HALLWOOD REALTY PARTNERS, L.P. (A)
- General partner interest .............. -- $ 8,650 $ 4,264 $ 4,435 $ (3) $ --
- Limited partner interest .............. 413,040 5,381 2,703 2,762 (59) 90
--------- --------- --------- --------- ---------
Totals ............................... $ 14,031 $ 6,967 $ 7,197 $ (62) $ 90
========= ========= ========= ========= =========
ASSOCIATED COMPANY
SHOWBIZ PIZZA TIME, INC. (B)
- Common stock
Equity in earnings ................... $ 1,139
Gain on sale of shares ............... 18,188
---------
Totals ............................... $ 19,327
=========
</TABLE>
(A) At March 31, 1998, Hallwood Realty Corporation ("HRC"), a wholly
owned subsidiary of the Company, owned a 1% general partner
interest and the Company owned a 25% limited partner interest in
its Hallwood Realty Partners, L.P. ("HRP") affiliate. The Company
accounts for its investment in HRP using the equity method of
accounting. In addition to recording its share of net income
(loss), the Company also records its pro rata share of any partner
capital transactions reported by HRP. The carrying value of the
Company's investment in HRP includes such non-cash adjustments for
its pro-rata share of HRP's capital transactions with
corresponding adjustments to additional paid-in capital. The
cumulative amount of such adjustments from the original date of
investment through March 31, 1998, resulted in a $49,000 decrease
in the carrying value of the HRP investment.
The carrying value of the Company's general partner interest
includes the value of intangible rights to provide asset
management and property management services. The Company amortizes
that portion of the general partner interest ascribed to the
management rights. For the three months ended March 31, 1998 and
1997 such amortization was $168,000 in each period.
As discussed in Note 4, the Company has pledged 89,269 limited
partner units to collateralize a promissory note in the principal
amount of $500,000 and issued a limited negative pledge on all of
the HRP units, including the 89,269 pledged units, to secure the
energy term loan.
The quoted market price and the Company's carrying value per
limited partner unit (Quotron symbol HRY) at March 31, 1998 were
$65.87 and $6.54, respectively. The general partner interest is
not publicly traded.
Page 8
<PAGE> 9
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
(B) The Company accounted for its investment in ShowBiz Pizza Time,
Inc. ("ShowBiz") using the equity method of accounting. For the
1997 first quarter the equity income was $1,139,000.
In March 1997, the Company completed the sale of its entire
2,632,983 shares of ShowBiz common stock at $15.68 per share, net
of underwriting commissions. A portion of the proceeds from the
sale were used to repay a $7,000,000 line of credit and a
$4,000,000 promissory note. The Company reported a gain of
$18,188,000 from the transaction.
3. LITIGATION, CONTINGENCIES AND COMMITMENTS
Reference is made to Note 17 to the consolidated financial statements
contained in Form 10-K for the year ended December 31, 1997. There has been
no significant change since that time.
4. LOANS PAYABLE
Loans payable at the balance sheet dates are detailed below by business
segment (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Real Estate
Promissory note, 8%, due March 1998 ............................ $ 500 $ 500
Energy
Term loan, libor + 3.5%, due May 2000 .......................... 3,467 3,867
Textile Products
Revolving credit facility, prime + .25%, due January 2000 ...... 13,600 13,800
Hotels
Term loan, 7.86% fixed, due January 2008 ....................... 6,728 6,750
Term loan, 8.20% fixed, due November 2007 ...................... 5,253 5,269
---------- ----------
11,981 12,019
---------- ----------
Total ...................................................... $ 29,548 $ 30,186
========== ==========
</TABLE>
Further information by business segment is provided below:
Real Estate
Promissory note. In connection with the settlement of an obligation
related to the Company's Integra Hotels, Inc. subsidiary, the Company
issued a four-year, $500,000 promissory note due March 8, 1998. The note is
secured by a pledge of 89,269 HRP limited partner units. The settlement
agreement also provided that the noteholder had the right to receive an
additional payment in an amount equal to 25% of the increase in the value
of the HRP units over the base amount of $8.44 per unit, but in no event
more than an additional $500,000 (the "HRP Participation Amount"). As the
HRP per unit price was $67.50 at March 31, 1998, the Company accrued the
full amount of $500,000 as a charge to interest expense, of which $50,000
and $30,000 were recorded in the quarters ended March 31, 1998 and 1997,
respectively.
The Company tendered full payment, including the HRP Participation
Amount totaling $1,000,000, in March 1998, although it reserved its rights
to litigate the validity of an earlier tender that was rejected by the
noteholder. The noteholder refused acceptance of the tendered payment and
returned it to the Company. A trial is scheduled for July 1998.
Page 9
<PAGE> 10
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
Energy
Term loan. In November 1997, the Company's HEPGP Ltd. partnership
("HEPGP") amended, restated and increased its term loan to $4,000,000 from
the First Union Bank of North Carolina. The term loan is collateralized by
all of the Company's HEP limited partner units and its investment in HEPGP
and Hallwood GP, Inc. HEPGP has also pledged its direct interests in
certain oil and gas properties. Other significant terms include: (i)
maturity date of May 15, 2000; (ii) monthly principal payments of $133,000,
plus interest; (iii) interest rate of libor plus 3.5% (9.19% at March 31,
1998); (iv) a limited negative pledge relating to the Company's HRP limited
partner units; and (v) restrictions on the declaration of distributions or
redemptions of partnership interests. The outstanding balance at March 31,
1998 was $3,467,000.
Included in the consolidated balance sheets are the Company's share of
the long-term obligations of its affiliated entity, Hallwood Energy
Partners, L.P. ("HEP") in the amount of $3,024,000 and $4,731,000 at March
31, 1998 and December 31, 1997, respectively.
Textile Products
Revolving credit facility. In January 1997, the Company's Brookwood
subsidiary entered into a new revolving credit facility in an amount of up
to $14,000,000 ($15,000,000 between April and June 1997) with The Bank of
New York ("BNY"). The facility was amended on April 30, 1998 to temporarily
increase the facility to $17,500,000 for the period between March and
August 1998, and to permanently increase the amount to $15,000,000.
Borrowings are collateralized by accounts receivable, inventory imported
under trade letters of credit, certain finished goods inventory, the
machinery and equipment of Brookwood's subsidiaries and all of the issued
and outstanding capital stock of Brookwood and its subsidiaries. The BNY
facility expires on January 7, 2000 and bears interest, at Brookwood's
option, at one-quarter percent over prime (8.75% at March 31, 1998) or
libor plus 2.25%. Availability for direct borrowings and letter of credit
obligations under the facility are limited to the lesser of the facility or
the formula borrowing base, as defined in the agreement. The facility
contains covenants, which include maintenance of certain financial ratios,
restrictions on dividends and repayment of debt or cash transfers to the
Company. The outstanding balance at March 31, 1998 was $13,600,000.
Hotels
Term loan. In December 1997, the Company's Brock Suite Greenville, Inc.
subsidiary entered into a new $6,750,000 mortgage loan, collateralized by
the Residence Inn hotel located in Greenville, South Carolina, which
replaced the former term loan. Significant terms include: (i) fixed
interest rate of 7.86%; (ii) monthly loan payments of $51,473 based upon
25-year amortization schedule with a maturity date of January 2008; (iii)
prepayment permitted after December 1999, subject to yield maintenance
provisions and (iv) various other financial and non-financial covenants.
The outstanding balance at March 31, 1998 was $6,728,000.
Term loan. In October 1997, the Company's Brock Suite Tulsa, Inc.
subsidiary entered into a new $5,280,000 mortgage loan collateralized by
the Residence Inn hotel in Tulsa, Oklahoma, which replaced the former term
loan. Significant terms include: (i) fixed interest rate of 8.20%; (ii)
monthly loan payments of $41,454, based upon 25-year amortization schedule,
with a maturity date of November 2007; (iii) prepayment permitted after
October 2001, subject to yield maintenance provisions and; (iv) various
other financial and non-financial covenants. The outstanding balance at
March 31, 1998 was $5,253,000.
5. 7% COLLATERALIZED SENIOR SUBORDINATED DEBENTURES
In March 1993, the Company completed an exchange offer whereby
$27,481,000 of its former 13.5% Debentures were exchanged for a new issue
of 7% Collateralized Senior Subordinated Debentures due July 31, 2000 (the
"7% Debentures"), and purchased for cash $14,538,000 of its 13.5%
Debentures at 80% of face value. Interest is payable quarterly in arrears,
in cash, and the 7% Debentures are secured by a pledge of all of the
Page 10
<PAGE> 11
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
capital stock of the Brookwood and Hallwood Hotels, Inc. subsidiaries. The
common and preferred stock of Brookwood are subject to a prior pledge in
favor of BNY.
Between 1994 and 1997, the Company repurchased 7% Debentures having a
principal value of $4,673,000. These repurchases satisfied the Company's
obligation to retire 10% of the original issue ($2,748,000) prior to March
1996, and partially satisfied the Company's obligation to retire an
additional 15% of the original issue ($4,122,000) prior to March 1998. In
January 1998, the Company repurchased 7% Debentures with a face amount of
$2,253,000 for $2,146,000, to fully satisfy the balance of the sinking fund
requirement contained in the indenture. The repurchase resulted in an
extraordinary gain from debt extinguishment of $107,000 in the 1998 first
quarter.
Balance sheet amounts are detailed below (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
DESCRIPTION 1998 1997
-------------------------------------------- ---------- ------------
<S> <C> <C>
7% Debentures (face amount) ............................ $ 20,555 $ 22,808
Unrecognized gain from purchase and exchange, net of
$2,866 and $2,736 accumulated amortization,
respectively ........................................ 1,354 1,484
---------- ----------
Totals ........................................... $ 21,909 $ 24,292
========== ==========
</TABLE>
6. INCOME TAXES
The following is a summary of the income tax expense (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
Federal
Current ............... $ 10 $ 500
Deferred .............. -- 8,960
--------- ---------
Sub-total .......... 10 9,460
State .................... 85 135
--------- ---------
Total .............. $ 95 $ 9,595
========= =========
</TABLE>
As a result of the substantial tax gain from the sale of ShowBiz, the
Company recorded a related non-cash deferred federal tax charge of
$8,960,000 in the 1997 first quarter, which reflects the realization of tax
benefits from the utilization of the Company's tax net operating loss
carryforwards ("NOLs") and a current federal tax charge of $500,000 for
alternative minimum tax.
State tax expense is an estimate based upon taxable income allocated to
those states in which the Company does business, at their respective tax
rates.
The amount of the deferred tax asset (net of valuation allowance) was
$2,040,000 at March 31, 1998. The deferred tax asset arises principally
from the anticipated utilization of the Company's NOLs and tax credits from
the implementation of various tax planning strategies.
Page 11
<PAGE> 12
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
7. SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
The following transactions affected recognized assets or liabilities
but did not result in cash receipts or cash payments (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
DESCRIPTION 1998 1997
------------------------------------------- ----------- ----------
<S> <C> <C>
Supplemental schedule of noncash investing and financing activities:
Issuance of treasury stock in exchange for common shares of
ShowBiz:
Investment in ShowBiz................................................ $ -- $ 3,820
Reduction of additional paid-in capital ............................. -- 2,626
---------- ----------
Reduction in treasury stock ......................................... -- 6,446
Repayment of note payable from funds held in
restricted cash ..................................................... -- 375
Recording of proportionate share of stockholders'
equity transaction of equity investments ............................ -- 143
Supplemental disclosures of cash payments:
Interest paid .......................................................... $ 1,045 $ 1,287
Income taxes paid ...................................................... 204 90
</TABLE>
8. COMPUTATION OF EARNINGS PER SHARE
The following table reconciles the Company's net income to net income
available to common stockholders, and the number of equivalent common
shares used in the calculation of net income for the basic and assumed
dilution methods (in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
DESCRIPTION 1998 1997
------------------------------------------- ----------- ----------
<S> <C> <C>
NET INCOME
Net income, as reported ............................... $ 344 $ 8,381
Less: Dividends on preferred stock .................... -- --
---------- ----------
Net income available to common stockholders ........... $ 344 $ 8,381
========== ==========
AVERAGE SHARES OUTSTANDING
Outstanding shares - basic ............................ 1,256 1,560
Stock options ......................................... 59 29
---------- ----------
Outstanding shares - assuming dilution ................ 1,315 1,589
========== ==========
NET INCOME PER COMMON SHARE
Basic ................................................. $ 0.27 $ 5.37
Assuming dilution ..................................... $ 0.26 $ 5.27
</TABLE>
Page 12
<PAGE> 13
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
9. SUBSEQUENT EVENT
On May 6, 1998, the Company favorably settled a 1996 claim involving
the Company's former merchant banking activities for $1,025,000 in cash, which
will be reported as income in the 1998 second quarter.
Page 13
<PAGE> 14
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported net income of $344,000 for the first quarter ended
March 31, 1998, compared to net income of $8,381,000 in the 1997 period.
Total revenue for the 1998 first quarter was $31,100,000, compared to
$51,815,000 in the prior-year period. The 1997 first quarter included a
gain of $18.2 million from the sale of the Company's investment in ShowBiz,
partially offset by a related non-cash deferred tax charge of $8,960,000.
Following is an analysis of the results of operations by asset
management, operating subsidiaries and associated company divisions; and by
the real estate, energy, textile products, hotels and restaurant business
segments within those divisions.
Asset Management. The business segments of the Company's asset
management division consist of real estate and energy.
REAL ESTATE.
Revenue. Fee income of $1,242,000 for the quarter ended March 31, 1998
increased by $269,000, or 28%, from $973,000 in the prior-year period. Fees
are derived from the Company's asset management, property management,
leasing and construction supervision services provided to its Hallwood
Realty Partners, L.P. affiliate, a real estate master limited partnership
("HRP") and various third parties. The increase was due primarily to
increased leasing fees in the 1998 first quarter.
The equity income (loss) from investments in HRP represents the
Company's recognition of its pro rata share of the income (loss) reported
by HRP and amortization of negative goodwill. For the 1998 first quarter,
the Company reported a loss of $62,000 compared to income of $90,000 in the
period a year ago. The decline resulted principally from HRP's recognition
of an extraordinary loss from early debt extinguishment.
Expenses. Administrative expenses of $555,000 increased by $20,000, or
3%, in the 1998 first quarter, compared to $535,000 in the prior-year
quarter.
Amortization expense of $168,000 in both the 1998 and 1997 quarters
relate to HRC's general partner investment in HRP to the extent allocated
to management rights.
Interest expense for the quarter increased to $58,000 from $40,000 in
the prior-year quarter, due to an additional charge in the 1998 quarter for
the HRP Participation Amount discussed in Note 4.
ENERGY.
Revenue. After the Company's successful completion of the tender offer
for the minority shares of Hallwood Energy Corporation ("HEC") and the
subsequent merger of HEC in November 1996, it effectively acquired
ownership of the assets formerly held by HEC. Following the merger, certain
HEC assets were transferred to two wholly owned entities. The two entities,
in addition to other energy assets which remain with the Company,
constitute the Company's investment in the energy industry. The general
partner interest in HEP entitles the general partner to interests in HEP's
properties ranging from 2% to 25%. The Company also owns an approximate
6.5% interest in HEP limited partner units. The Company and its energy
subsidiaries account for their ownership of HEP using the proportionate
consolidation method of accounting, whereby they record their proportionate
share of HEP's revenues and expenses, current assets, current liabilities,
noncurrent assets, long-term obligations and fixed assets. HEP owns
approximately 46% of its affiliate, Hallwood Consolidated Resources
Corporation ("HCRC"), which HEP accounts for under the equity method.
Gas revenue for the 1998 quarter decreased $199,000 to $863,000 from
$1,062,000, primarily as a result of a decrease in the average gas price to
$2.09 from $2.80 mcf, partially offset by an increase in production to
Page 14
<PAGE> 15
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
412,000 mcf from 379,000 mcf. Oil revenue for the 1998 quarter decreased
$199,000 to $426,000 from $625,000, due to a decrease in the average price
per barrel to $14.20 from $22.32, partially offset by an increase in
production to 30,000 barrels from 28,000 barrels. The increase in oil and
gas production is primarily due to workover procedures performed during the
second quarter of 1997.
Other income consists primarily of acquisition fee and interest income,
as well as a share of HEP's interest income, facilities income from two
gathering systems in New Mexico, pipeline revenue, equity in income of
affiliates and miscellaneous income or expense. The decrease in other
income to $50,000 for the 1998 quarter from $78,000 in the 1997 period is
primarily due to a decrease in HEP's equity in earnings of HCRC.
Expenses. Operating expenses increased by $71,000 to $399,000 for the
1998 first quarter from $328,000 in the prior-year quarter as a result of
increased production taxes resulting from the increased production
described above.
Depreciation, depletion and amortization increased to $377,000 for the
1998 quarter compared to $309,000 in the 1997 quarter. The increase is
attributable to higher depletion in 1998 due to the increase in production.
Administrative expenses decreased by $50,000 for the 1998 quarter to
$225,000 from $275,000 in the 1997 quarter due to a decrease in allocated
internal overhead.
Interest expense increased by $26,000 to $146,000 for the 1998 quarter
compared to $120,000 in 1997, primarily due to an increase in the Company's
term loan in November 1997.
Operating Subsidiaries. The business segments of the Company's
operating subsidiaries consist of textile products and hotels.
TEXTILE PRODUCTS.
Revenue. Sales of $23,315,000 decreased $190,000, or less than 1%, in
the 1998 quarter, compared to $23,505,000 in the 1997 quarter. Sales of the
distribution business were lower in the 1998 first quarter than in 1997,
due to a major customer accelerating deliveries to the 1997 fourth quarter.
The sales decrease was partially offset by higher demand at the Kenyon
dying and finishing plant.
Expenses. Cost of sales of $20,158,000 decreased $212,000, or 1%, from
$20,370,000 in the 1997 quarter. The decrease in cost of sales was
principally the result of the decrease of sales revenue. The higher gross
profit margin for the 1998 first quarter (13.5% versus 13.3%) resulted from
lower gross profit margin in distribution businesses due to competitive
market pressures experienced in 1998 offset by higher gross profit margin
at the Kenyon plant due to operating efficiencies.
Administrative and selling expenses of $2,263,000 increased by $2,000
in the 1998 quarter from $2,261,000 for the comparable 1997 period.
Interest expense of $269,000 increased by $27,000 for the 1998 quarter
from $242,000 in 1997 due to higher average borrowings than in the
prior-year period.
HOTELS
Revenue. Sales of $4,998,000 in the 1998 quarter decreased by $859,000,
or 15% from the year-ago amount of $5,857,000. The Longboat Key Holiday Inn
revenues declined by $769,000, as a result of the completion of an
extensive renovation project, which began in October 1997 and substantially
completed in April 1998, and adverse weather conditions. For the remaining
hotel properties, average daily rate declined 3.2% and average occupancy
level declined 0.5% in the 1998 first quarter compared to the prior-year
quarter.
Page 15
<PAGE> 16
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Expenses. Operating expenses of $4,425,000 for the 1998 quarter were
down $103,000 from $4,528,000 in 1997. The reduction is primarily
attributable to reduced occupancy levels at the Longboat Key Holiday Inn.
Depreciation and amortization expense decreased by $20,000 to $669,000
for the 1998 first quarter from $689,000 in the prior-year period. The
decrease is attributable to the full amortization of the leasehold interest
for the Oklahoma City Embassy Suite in June 1997, offset by additional
depreciation from recent capital expenditures at the remaining properties.
Interest expense decreased by $113,000 to $252,000 for the 1998 quarter
from $365,000 in the 1997, principally due to the refinancing of the
mortgage loans in the 1997 fourth quarter on the Residence Inn hotels in
Tulsa, Oklahoma and Greenville, South Carolina at more favorable interest
rates.
ASSOCIATED COMPANY
Revenue. The 1997 first quarter includes income of $1,139,000 from the
Company's pro-rata share of ShowBiz results using the equity method of
accounting prior to the sale. In March 1997 the Company completed the sale
of its entire 2,632,983 ShowBiz shares at $15.68 per share, net of
underwriting commissions, and reported a gain of $18,188,000 from the
transaction. See Note 2.
Expenses. Interest expense of $1,863,000 for the 1997 first quarter was
primarily attributable to the recording of $1,675,000 for the ShowBiz
Participation Amount provisions associated with the $4,000,000 promissory
note.
OTHER
Revenue. Fee income in the 1998 first quarter of $137,000 increased
from the 1997 amount of $106,000 due to a modification of a consulting
agreement with one of the Company's affiliated companies. Interest on
short-term investments and other income decreased by $61,000 to $131,000
for the 1998 first quarter. The decrease was primarily attributable to
lower interest income earned on the Company's short-term investments, and
lower rental income from the subleasing of executive office space formerly
occupied by the Company's affiliated entity - Integra-A Hotel and
Restaurant Company.
Expenses. Administrative expenses of $565,000 for the 1998 quarter
decreased by $75,000 from the prior-year amount of $640,000 due to lower
consulting, legal and accounting fees.
Interest expense in the amount of $239,000 for the 1998 quarter
decreased by $867,000 from the prior year amount of $1,106,000. The
decrease was primarily due to the Company's repurchase of $12,875,000 of
its 13.5% Debentures pursuant to a self-tender offer completed in June 1997
and the redemption of the remaining $14,287,000 balance of its outstanding
13.5% Debentures completed in December 1997. Additionally, the Company
repurchased 7% Debentures with a face amount of $2,253,000 in January 1998,
to satisfy the balance of a sinking fund requirement contained in the
indenture. See Note 5.
Income taxes. Income taxes were $95,000 for the 1998 first quarter and
$9,595,000 in the 1997 quarter. The 1998 quarter included a $10,000 federal
current charge and $85,000 for state taxes. The 1997 quarter included an
$8,960,000 non-cash federal deferred tax charge, a federal current charge
of $500,000 for alternative minimum tax (both charges relating to the
ShowBiz sale) and $135,000 for state taxes. The state tax expense is an
estimate based upon taxable income allocated to those states in which the
Company does business at their respective tax rates. See Note 6.
As of March 31, 1998, the Company had approximately $115,000,000 of tax
net operating loss carryforwards ("NOLs") and temporary differences to
reduce future federal income tax liability. Based upon the Company's
expectations and available tax planning strategies, management has
determined that taxable income
Page 16
<PAGE> 17
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
will more likely than not be sufficient to utilize approximately $6,000,000
of the NOLs prior to their ultimate expiration in the year 2011.
Management believes that the Company has certain tax planning
strategies available, which include the potential sale of hotel properties
and certain other assets, that could be implemented, if necessary, to
supplement income from operations to fully realize the recorded tax
benefits before their expiration. Management has considered such strategies
in reaching its conclusion that, more likely than not, taxable income will
be sufficient to utilize a portion of the NOLs before expiration; however,
future levels of operating income and taxable gains are dependent upon
general economic conditions and other factors beyond the Company's control.
Accordingly, no assurance can be given that sufficient taxable income will
be generated for utilization of the NOLs. Management periodically
re-evaluates its tax planning strategies based upon changes in facts and
circumstances and, accordingly, considers potential adjustments to the
valuation allowance of the deferred tax asset. Although the use of such
carryforwards could, under certain circumstances, be limited, the Company
is presently unaware of the occurrence of any event which would result in
the imposition of such limitations.
Extraordinary gain from extinguishment of debt. The Company recognized
an extraordinary gain from debt extinguishment of $107,000 in the 1998
quarter from the purchase of 7% Debentures having a face amount of
$2,253,000 for a discounted amount of $2,146,000.
Page 17
<PAGE> 18
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's unrestricted cash and cash equivalents at March 31, 1998
totaled $1,695,000.
The Company's real estate segment generates funds principally from its
property management and leasing activities, without significant additional
capital costs. All of the HRP limited partnership units are subject to a
limited negative pledge on the Company's energy term loan. If the Company
pledges designated HRP units, as defined, having a market value up to
$2,000,000, the negative pledge can be released.
The Company's energy segment generates funds from operating and
financing activities. Cash flow is subject to fluctuating oil and gas
production and prices. In accordance with the proportionate consolidation
method of accounting, the Company reports its share of the long-term
obligations of its HEP affiliate which was $3,024,000 at March 31, 1998.
HEP's borrowings are secured by a first lien on approximately 80% in value
of HEP's oil and gas properties. HEP's unused borrowing capacity under the
revolving credit agreement was $25,014,000 at March 31, 1998. HEPGP
amended, restated and increased its term loan to $4,000,000 in November
1997 and had a balance of $3,467,000 at March 31, 1998. The term loan
contains a provision which prohibits HEPGP from making any distribution to
the Company during the term of the loan which matures in May 2000.
In February 1998, HEP closed its public offering of 1.8 million Class C
units priced at $10.00 per unit. Proceeds to HEP, net of underwriting
discounts and expenses, were approximately $16,315,000. HEP used
$14,000,000 of the net proceeds to repay borrowings and applied the
remaining amount towards the repayment of HEP's outstanding contract
settlement obligation.
Brookwood maintains a revolving line of credit facility with The Bank
of New York, which is collateralized by accounts receivable, certain
inventory and equipment. At March 31, 1998, Brookwood had $854,000 of
unused borrowing capacity on its line of credit. In April 1998, the Company
received a $500,000 cash dividend from Brookwood on its preferred stock and
is expected to receive an additional $284,000 in September 1998. Future
dividends will be paid as permitted by the revolver, which allows for
dividends to be paid to the extent of 80% of cash flow after capital
expenditures.
The Company's hotel segment generates cash flow from operating five
hotels (one Holiday Inn in Florida, one Embassy Suites and one Residence
Inn in Oklahoma, and one Residence Inn each in Alabama and South Carolina).
The sale of hotel properties may also provide a source of liquidity;
however, sales transactions may be impacted by the inability of prospective
purchasers to obtain equity capital or suitable financing. The Company has
recently renovated the Longboat Key Holiday Inn hotel with part of the
financing provided by the owner, and has been informed by Marriott that
substantial renovations will have to be made to each of the three Residence
Inn hotels prior to the renewal of their franchise in January 2000.
Management believes that it will have sufficient funds for operations
and to satisfy its obligations.
Page 18
<PAGE> 19
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item
1 Legal Proceedings
Reference is made to Note 3 to the Company's consolidated financial
statements of this Form 10-Q.
2 Changes in Securities None
3 Defaults upon Senior Securities None
4 Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 6, 1998, stockholders
of the Company voted on one proposal:
(i) To elect two directors to hold office for three years and until
their successors are elected and qualified:
<TABLE>
<CAPTION>
Nominee Directors Votes For Votes Withheld
----------------- --------- --------------
<S> <C> <C>
Charles A. Crocco, Jr. 1,111,311 31,961
J. Thomas Talbot 1,110,986 32,286
</TABLE>
As a result of the above, the nominee directors were elected for
an additional three-year term. The continuing directors are
Messrs. Gumbiner and Troup.
5 Other Information None
6 Exhibits and Reports on Form 8-K
(a) Exhibits
(i) 27.1 - Financial Data Schedule Page 21
27.2 - Restated Financial Data Schedule
27.3 - Restated Financial Data Schedule
(b) Reports on Form 8-K None
Page 19
<PAGE> 20
THE HALLWOOD GROUP INCORPORATED AND SUBSIDIARIES
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.
THE HALLWOOD GROUP INCORPORATED
Dated: May 11, 1998 By: /s/ Melvin J. Melle
---------------------------------
Melvin J. Melle, Vice President
(Duly Authorized Officer and
Principal Financial and
Accounting Officer)
Page 20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
27.3 Restated Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,695
<SECURITIES> 6,967
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 19,681
<CURRENT-ASSETS> 0
<PP&E> 160,540
<DEPRECIATION> (129,688)
<TOTAL-ASSETS> 88,131
<CURRENT-LIABILITIES> 0
<BONDS> 21,909
1,000
0
<COMMON> 160
<OTHER-SE> 14,105
<TOTAL-LIABILITY-AND-EQUITY> 88,131
<SALES> 0
<TOTAL-REVENUES> 31,100
<CGS> 0
<TOTAL-COSTS> 29,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 964
<INCOME-PRETAX> 332
<INCOME-TAX> 95
<INCOME-CONTINUING> 237
<DISCONTINUED> 0
<EXTRAORDINARY> 107
<CHANGES> 0
<NET-INCOME> 344
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 34,353 14,494 13,599
<SECURITIES> 6,929 7,076 7,128
<RECEIVABLES> 0 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 17,956 18,442 18,423
<CURRENT-ASSETS> 0 0 0
<PP&E> 155,085 156,421 159,775
<DEPRECIATION> 122,330 123,835 126,914
<TOTAL-ASSETS> 125,526 101,891 97,599
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 50,417 37,420 38,793
1,000 1,000 1,000
0 0 0
<COMMON> 160 160 160
<OTHER-SE> 17,968 12,766 12,821
<TOTAL-LIABILITY-AND-EQUITY> 125,526 101,891 97,599
<SALES> 0 0 0
<TOTAL-REVENUES> 51,815 88,073 116,186
<CGS> 0 0 0
<TOTAL-COSTS> 30,103 63,231 89,704
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 81
<INTEREST-EXPENSE> 3,736 4,391 5,845
<INCOME-PRETAX> 17,976 20,451 20,556
<INCOME-TAX> 9,595 9,726 9,776
<INCOME-CONTINUING> 8,381 10,725 10,780
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 877 877
<CHANGES> 0 0 0
<NET-INCOME> 8,381 11,602 11,657
<EPS-PRIMARY> 5.37 7.44 7.99
<EPS-DILUTED> 5.27 7.30 7.80
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 SEP-30-1996
<CASH> 1,714 7,609 6,504 7,495
<SECURITIES> 26,097 24,424 24,177 23,952
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 16,463 15,526 17,521 17,188
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 149,272 156,248 158,115 154,580
<DEPRECIATION> 120,947 122,186 123,816 121,254
<TOTAL-ASSETS> 101,462 112,890 112,731 116,796
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 48,182 48,039 50,711 50,564
1,000 1,000 1,000 1,000
0 0 0 0
<COMMON> 160 160 160 160
<OTHER-SE> (192) 2,151 2,231 5,624
<TOTAL-LIABILITY-AND-EQUITY> 101,462 112,890 112,731 116,796
<SALES> 0 0 0 0
<TOTAL-REVENUES> 27,125 59,588 87,431 115,401
<CGS> 0 0 0 0
<TOTAL-COSTS> 25,031 53,043 78,095 105,094
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 (22) (21)
<INTEREST-EXPENSE> 1,644 3,420 5,598 8,330
<INCOME-PRETAX> 450 3,125 3,760 1,998
<INCOME-TAX> 142 421 555 (4,525)
<INCOME-CONTINUING> 308 2,704 3,205 6,523
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 308 2,704 3,205 6,523
<EPS-PRIMARY> 0.23 2.00 2.40 4.93
<EPS-DILUTED> 0.23 2.00 2.39 4.89
</TABLE>
