SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
Commission file number 0-15525
CAPITAL ASSOCIATES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1055327
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7175 WEST JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
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 outstanding of the Registrant's $.008 par value common
stock at October 1, 1996, was 5,001,994.
1 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - August 31, 1996
and May 31, 1996 3
Consolidated Statements of Income - Three Months
Ended August 31, 1996 and 1995 4
Consolidated Statements of Cash Flows - Three
Months Ended August 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Exhibit Index 15
Signature 18
2 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
ASSETS
August 31, May 31,
1996 1996
---------- ---------
Cash and cash equivalents $ 2,531 $ 2,851
Receivables from affiliated limited partnerships 798 1,849
Accounts receivable, net 705 945
Equipment held for sale or re-lease 188 177
Residual values and other receivables arising from
equipment under lease sold to private investors 3,725 3,374
Net investment in direct finance leases 13,355 14,967
Leased equipment, net 55,539 45,285
Investments in affiliated limited partnerships 8,463 8,759
Other 3,225 3,497
Deferred income taxes 1,723 1,900
Notes receivable arising from sale-leaseback
transactions 5,639 8,409
Discounted lease rentals assigned to lenders arising
from equipment sale transactions 35,865 35,498
-------- --------
$131,756 $127,511
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Recourse bank debt $ 17,567 $ 17,538
Accounts payable - equipment purchases 22,825 14,071
Accounts payable and other liabilities 9,224 9,272
Obligations under capital leases arising from
sale-leaseback transactions 5,649 8,421
Discounted lease rentals 53,603 55,328
--------- ---------
108,868 104,630
--------- ---------
Stockholders' equity:
Common stock 32 32
Additional paid-in capital 16,895 17,026
Retained earnings 6,259 6,121
Treasury stock (298) (298)
--------- ---------
Total stockholders' equity 22,888 22,881
--------- ---------
$ 131,756 $ 127,511
========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
3 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except earnings per share)
Three Months Ended
-----------------------
August 31, August 31,
1996 1995
---------- ----------
Revenue:
Equipment sales to affiliated limited
partnerships $ 12,433 $ 17,447
Other equipment sales 18,603 8,567
Leasing 3,976 2,242
Interest 1,178 2,075
Other 777 879
---------- ----------
Total revenue 36,967 31,210
---------- ----------
Costs and expenses:
Equipment sales 30,132 24,801
Leasing 2,084 1,337
Operating and other expenses 2,512 2,043
Provision for losses 25 25
Interest:
Non-recourse debt 1,551 2,296
Recourse debt 479 613
---------- ----------
Total costs and expenses 36,783 31,115
---------- ----------
Net income before income taxes 184 95
Income tax expense 46 38
---------- ----------
Net income $ 138 $ 57
========== ==========
Earnings per common and dilutive common
equivalent share:
Primary $ .03 $ .01
========== ==========
Fully diluted $ .03 $ .01
========== ==========
Weighted average number of common and dilutive
common equivalent shares outstanding used in
computing earnings per share:
Primary 5,325,000 5,394,000
========== ==========
Fully diluted 5,371,000 5,558,000
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
4 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
-----------------------
August 31, August 31,
1996 1995
---------- ----------
Net cash provided by operating activities $ 15,593 $ 12,291
-------- --------
Cash flows from investing activities:
Equipment purchased for leasing (13,876) (2,466)
Investment in leased office facility and capital
expenditures (88) (110)
Net receipts from affiliated limited partnerships 246 291
-------- --------
Net cash used for investing activities (13,718) (2,285)
-------- --------
Cash flows from financing activities:
Principal payments on discounted lease rentals (2,092) (1,354)
Proceeds from sales of common stock 6 16
Purchase of non-employee stock options (138) -
Net borrowings (payments) on revolving credit
facilities 1,112 (6,049)
Payments on Term Loan (1,083) (1,083)
-------- --------
Net cash used for financing activities (2,195) (8,470)
-------- --------
Net increase (decrease) in cash and cash equivalents (320) 1,536
Cash and cash equivalents at beginning of period 2,851 923
-------- --------
Cash and cash equivalents at end of period $ 2,531 $ 2,459
======== ========
Supplemental schedule of cash flow information:
Recourse interest paid $ 479 $ 563
Non-recourse interest paid 369 208
Income taxes paid 59 1,027
Income tax refunds received 297 -
Supplemental schedule of non-cash investing and
financing activities:
Increase in residual values and other receivables
relating to equipment sale transactions 348 3,621
The accompanying notes are an integral part
of these consolidated financial statements.
5 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. For further
information, please refer to the financial statements of Capital Associates,
Inc. (the "Company"), and the related notes, included within the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1996 (the "1996
Form 10-K"), previously filed with the Securities and Exchange Commission.
The balance sheet at May 31, 1996 has been derived from the audited
financial statements included in the Company's 1996 Form 10-K.
Certain reclassifications have been made to the prior periods' financial
statements to conform to the current periods' presentation.
2. Hemmeter Litigation
-------------------
In connection with the Hemmeter Litigation (which is discussed in Footnote
15 to Notes to Consolidated Financial Statements to the 1996 Form 10-K), on
July 29, 1996, the Company received approximately $2 million from the sale
of the equipment which had been leased to Grand Palais Riverboat, Inc. (the
"Lessee") to the purchaser of the Lessee's riverboat gaming operations.
6 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations
---------------------
General Comments
During the three months ended August 31, 1996 the Company reported net
income of $138,000 representing its seventeenth consecutive profitable
quarter.
Operating results are subject to fluctuations resulting from several
factors, including seasonality of lease originations, variations in the
relative percentages of the Company's leases entered into during the period
which are classified as DFLs or OLs or are sold for fee income as well as
the level of fee income obtained from the sale of leases in excess of lease
equipment cost. The Company will adjust the mix of OLs and DFLs and volume
of leases sold to private investors from time to time, when and as the
Company determines that it would be in its best interests, taking into
account profit opportunities, portfolio concentration and residual risk.
Lease Originations
In the ordinary course of business, the Company will continue to (1) sell
new lease originations to its PIFs (to the extent the PIFs have funds
available for such purpose) or private investors and (2) sell seasoned lease
transactions (previously originated leases held in the Company's portfolio)
to private investors. Presented below is a schedule showing new lease
originations volume and the placement of new lease originations during the
three-month period ended August 31, 1996 as compared to the comparable
period for fiscal year 1996 (in thousands).
Three Months Ended
August 31, August 31,
1996 1995
---------- ----------
Placement:
Equipment under lease sold to PIFs $11,000 $15,000
Equipment under lease sold to private
investors 13,000 7,000
Leases added to the Company's lease
portfolio (a significant portion of
which will be sold during fiscal year 1997) 18,000 8,000
------- -------
Total lease origination volume $42,000 $30,000
======= =======
7 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
Lease Originations, continued
Leasing is an alternative to financing equipment with debt. Therefore, the
ultimate profitability of the Company's leasing transactions is dependent,
in part, on the general level of interest rates. Lease rates tend to rise
and fall with interest rates, although lease rate movements generally lag
interest rate movements. Because the Company finances its lease
transactions with recourse and non-recourse debt, the ultimate
profitability of leasing transactions is dependent, in part, on the
difference between the interest rate inherent in the lease and the
underlying debt rate ("rate spread"). Certain of the Company's competitors
have access to lower cost funds than the Company. However, the Company has
developed relationships with various private investors and formed various
strategic alliances with companies that have a lower cost of capital
enabling the Company to originate and sell leases at competitive prices.
Interim Financial Results
Presented below are schedules (prepared solely to facilitate the discussion
of results of operations that follows) showing condensed income statement
categories and analyses of changes in those condensed categories derived
from the Consolidated Statements of Income.
Condensed Consolidated
Statements of Income
for the Three Months The effect on
Ended August 31, net income of
--------------------- changes between
1996 1995 periods
--------- -------- ---------------
(in thousands)
Equipment sales margin $ 904 $ 1,213 $ (309)
Leasing margin (net of interest
expense on discounted lease rentals) 1,519 684 835
Other income 777 879 (102)
Operating and other expenses (2,512) (2,043) (469)
Provision for losses (25) (25) -
Interest expense on recourse debt (479) (613) 134
Income taxes (46) (38) (8)
------- ------- -------
Net income $ 138 $ 57 $ 81
======= ======= =======
8 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
EQUIPMENT SALES MARGIN
Equipment sales revenue (and related equipment sales margin) consists of
the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------- Increase
August 31, 1996 August 31, 1995 (Decrease)
-------------------- --------------------- --------------------
Revenue Margin Revenue Margin Revenue Margin
-------- ------- -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Transactions during initial lease term:
Equipment under lease sold to PIFs $ 12,433 $ 272 $ 17,447 $ 351
Equipment under lease sold to
private investors 18,488 365 7,690 320
-------- -------- -------- --------
30,921 637 25,137 671 $ 5,784 $ (34)
-------- -------- -------- -------- -------- --------
Transactions subsequent to initial lease term:
Sales of off-lease equipment 224 127 454 283
Sales-type leases - - 223 59
Excess collections (cash collections in excess
of the associated residual value from equipment
under lease sold to private investors) 140 140 200 200
-------- -------- -------- --------
364 267 877 542 (513) (275)
Deduct related provision for losses - (25) - (25) - -
-------- -------- -------- -------- -------- --------
Realization of value in excess of
provision for losses 364 242 877 517 (513) (275)
Add back related provision for losses - 25 - 25 - -
-------- -------- -------- -------- -------- --------
364 267 877 542 (513) (275)
-------- -------- -------- -------- -------- --------
Total equipment sales $ 31,285 $ 904 $ 26,014 $ 1,213 $ 5,271 $ (309)
======== ======== ======== ======== ======== ========
</TABLE>
Transactions During Initial Lease Term
The decrease in equipment sales to PIFs was primarily due to the fact that
only three of the Company's PIFs, including Capital Preferred Yield
Fund-IV, L.P. ("CPYF-IV"), purchased significant amounts of equipment from
the Company during the three months ended August 31, 1996 as compared to
four PIFs purchasing significant amounts of equipment from the Company
during the three months ended August 31, 1995. Two of the Company's PIFs
entered their liquidation stage during fiscal year 1996 and are no longer
purchasing significant amounts of equipment from the Company.
Equipment sales to private investors increased primarily because lease
originations increased and, as discussed above, the Company sometimes
determines it would be in its best interests to place certain lease
transactions with private investors. Lease originations from one customer
accounted for approximately one-half of the total lease originations volume
for the quarter ended August 31, 1996.
9 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
Transactions Subsequent to Initial Lease Term
The Company has been successful in realizing gains on the remarketing of
its equipment after the initial lease term for the past seventeen
consecutive quarters. The remarketing of equipment for an amount greater
than its book value is reported as equipment sales margin (if the equipment
is sold) or as leasing margin (if the equipment is re-leased). The
realization of less than the carrying value of equipment (which is
typically not known until remarketing subsequent to the initial lease
termination has occurred) is recorded as provision for losses. As shown in
the table above, the realizations from sales exceeded the provision for
losses during the three-month period ended August 31, 1996, even without
considering realizations from remarketing activities recorded as leasing
margin as discussed below.
Margins from remarketing sales (i.e., sales occurring after the initial
lease term) are affected by the number and dollar amount of equipment
leases that mature in a particular quarter. In general, because the Company
did not significantly add to its own lease portfolio during the four years
prior to May 31, 1995, fewer leases have matured and less equipment has
been available for remarketing each quarter since May 31, 1995. For this
reason, remarketing revenue declined during the three-month period ended
August 31, 1996, compared to the comparable period of 1996. Remarketing
revenue and margin are expected to decline further in future quarters as
maturing leases continue to decrease. The Company's ability to remarket
additional amounts of equipment and realize a greater amount of remarketing
revenue in future periods is dependent on adding additional leases to its
portfolio. However, adding leases to the Company's portfolio will not
immediately increase the pool of maturing leases because new leases
typically are not remarketed until after the initial term (which averages
approximately four years).
The changes in the Company's equipment under lease during the three month
period ended August 31, 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
Discounted lease
Direct finance rentals, net of
leases, operating discounted lease
leases, net and rentals assigned Net investment
equipment held to lenders arising in lease
for sale or re-lease from equipment sales portfolio
-------------------- -------------------- --------------
<S> <C> <C> <C>
As of May 31, 1996 $ 60,429 $(19,830) $ 40,599
Leases added to the Company's lease portfolio
(a significant portion of which will be
sold during fiscal year 1997) financed
through the use of the Company's cash,
accounts payable, non-recourse bank debt and
recourse bank debt under its Warehouse Facility 18,441 - 18,441
Leases sold to PIFs and private investors (7,000) - (7,000)
Related provision for losses (25) - (25)
Change as a result of portfolio run-off (2,763) 2,092 (671)
-------- -------- --------
As of August 31, 1996 $ 69,082 $(17,738) $ 51,344
======== ======== ========
</TABLE>
10 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
I. Results of Operations, continued
---------------------
LEASING MARGIN AND EQUIPMENT UNDER LEASE
Leasing margin consists of the following (in thousands):
Three Months Ended
August 31,
-----------------------
1996 1995
---------- ---------
Leasing revenue $ 3,976 $ 2,242
Leasing costs and expenses (2,084) (1,337)
Net interest expense on related
discounted lease rentals (373) (221)
-------- --------
Leasing margin $ 1,519 $ 684
======== ========
Leasing margin ratio 38% 31%
== ==
Leasing margin increased primarily due to (i) approximately $350,000 of
increased leasing revenue related to the settlement of the Hemmeter
Litigation (see Footnote 2 to Notes to Consolidated Financial Statements)
and (ii) growth in the Company's lease portfolio.
OTHER INCOME
Other Income consists of the following (in thousands):
Three Months Ended
August 31,
-----------------------
1996 1995
---------- ---------
Fees and distributions from the
Company-sponsored PIFs $ 589 $ 678
Interest on income tax refunds 103 -
Interest on MBank receivable - 141
Other 85 60
------ --------
$ 777 $ 879
====== ========
11 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
OPERATING AND OTHER EXPENSES
Operating and Other Expenses increased $0.5 million (23%) for the three
months ended August 31, 1996 as compared to the comparable period in fiscal
1996. The principal components of the increase were:
* $250,000 of increased incentive compensation, primarily commissions as
a result of higher levels of originations (see page 7 of 18).
* $150,000 for costs associated with the relocation of the Company's
Chairman of the Board to Denver, Colorado.
* and that Operating and Other Expenses for the three months ended August
31, 1995 included a $200,000 credit resulting from the difference
between estimated incentive compensation and actual payments as
approved by the Company's Board of Directors.
INTEREST INCOME AND EXPENSE
Recourse interest expense decreased due to a decrease in the average
outstanding balance of recourse bank debt.
INCOME TAXES
Income tax expense is provided on income at the appropriate federal and
state statutory rates applicable to such earnings. The aggregate statutory
tax rate is 40%, adjusted for utilization of the Company's ITC carryforward
(see Note 11 to Notes to the Consolidated Financial Statements to the 1996
Form 10-K).
II. Liquidity and Capital Resources
-------------------------------
The Company's Credit Agreement is scheduled to mature on November 30, 1996.
The Company expects that the Credit Agreement will be renewed prior to the
maturity date. The Company expects to reduce the maximum availability under
the warehouse line (currently $32.0 million) while slightly increasing the
maximum availability under the working capital line (currently $5.0
million). In addition, the Company expects that the bank group will be
decreased from five to four lending institutions. The Company believes the
new bank facility will be adequate to fund current operations.
Currently the Company is offering units of CPYF-IV for sale to the public.
During the first three months of fiscal 1997, the Company sold $4.4 million
of Class A units of CPYF-IV (bringing total sales of Class A units of
CPYF-IV to $5.6 million). For the remainder of the offering period for
CPYF-IV (which ends in April 1998), the Company has $44.4 million of Class
A units in CPYF-IV available for sale, which will represent a source of
liquidity and acquisition fee income to the Company.
12 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
III. Business Plan
-------------
The Company believes that it has the necessary funding capability for
fiscal year 1997 to (1) continue to build its lease origination function
and increase its lease origination volume by expanding its field sales
force and by marketing its ability to customize products that meet customer
needs, (2) continue to modestly increase the size of its own lease
portfolio, (3) originate/acquire additional leases for sales to PIFs and
private investors and (4) build and strengthen its residual remarketing
expertise in identified equipment types such as material handling equipment
by "vertical integration" of individuals or companies with requisite
equipment expertise.
The Company's operating results may be affected by the availability of
additional sources of capital and the related costs of such capital. The
cost of funds for many of the Company's competitors is lower than the
Company's cost of funds. Therefore, the Company has expanded its debt and
equity placement capabilities with lower cost of capital sources including
private investors, private partnerships, a private income fund with an off
shore investor and other strategic alliances. These funding sources should
provide funds at a cost necessary to facilitate the Company's
competitiveness in the lease originations market.
IV. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act
---------------------------------------------------------------------------
of 1995
-------
The statements contained in this report which are not historical facts may
be deemed to contain forward- looking statements with respect to events,
the occurrence of which involve risks and uncertainties, and are subject to
factors that could cause actual future results to differ both adversely and
materially from currently anticipated results, including, without
limitation, the level of lease originations, realization of residual
values, the availability and cost of financing sources and the ultimate
outcome of any contract disputes. Certain specific risks associated with
particular aspects of the Company's business are discussed in detail
throughout Item 2 of this report and Parts I and II of the 1996 Form 10-K.
13 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
(a) Hemmeter Litigation. See Note 15 to Notes to Consolidated
Financial Statements included in the 1996 Form 10-K for a
detailed discussion of the Hemmeter Litigation. On July 29, 1996,
the Company received approximately $2 million from the sale of
the equipment which had been leased to Grand Palais Riverboat,
Inc. (the "Lessee") to the purchaser of the Lessee's riverboat
gaming operations.
(b) Other. The Company is also involved in routine legal proceedings
incidental to the conduct of its business. Management believes
that none of these legal proceedings will have a material adverse
effect on the financial condition or operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
b. Reports on Form 8-K
None
14 of 18
<PAGE>
Item No. Exhibit Index
- -------- -------------
11A Computation of Primary and Fully Diluted Earnings Per Share.
27 Financial Data Schedule
15 of 18
<PAGE>
Exhibit 11A
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended
August 31,
----------------------------
1996 1995
---------- ------------
Shares outstanding at beginning of period 4,994,000 5,091,000
Shares issued during the period
(weighted average) 2,000 19,000
Dilutive shares contingently issuable upon
exercise of options
(weighted average) 720,000 905,000
Less shares assumed to have been purchased
for treasury with assumed proceeds from
exercise of stock options
(weighted average) (327,000) (621,000)
Effect of non-employee stock option buy-out (64,000) -
----------- -----------
Total shares, primary 5,325,000 5,394,000
=========== ===========
Net income $ 138,000 $ 57,000
=========== ===========
Income per common and common
equivalent share, primary $ .03 $ .01
=========== ===========
16 of 18
<PAGE>
Exhibit 11A
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Three Months Ended
August 31,
----------------------------
1996 1995
---------- ------------
Shares outstanding at beginning of period 4,994,000 5,091,000
Shares issued during the period
(weighted average) 2,000 19,000
Dilutive shares contingently issuable upon
exercise of options
(weighted average) 720,000 905,000
Less shares assumed to have been purchased
for treasury with assumed proceeds
from exercise of stock options
(weighted average) (274,000) (457,000)
Effect of non-employee stock option buy-out (71,000) -
----------- -----------
Total shares, primary 5,371,000 5,558,000
=========== ===========
Net income $ 138,000 $ 57,000
=========== ===========
Income per common and common
equivalent share, primary $ .03 $ .01
=========== ===========
17 of 18
<PAGE>
CAPITAL ASSOCIATES INC. 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.
CAPITAL ASSOCIATES, INC.
Registrant
Date: October 4, 1996 By: /s/John E. Christensen
----------------------
John E. Christensen,
Senior Vice-President and
Chief Financial Officer
18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 2,531
<SECURITIES> 0
<RECEIVABLES> 1,503
<ALLOWANCES> 48
<INVENTORY> 188
<CURRENT-ASSETS> 0
<PP&E> 55,539
<DEPRECIATION> 0
<TOTAL-ASSETS> 131,756
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 22,856
<TOTAL-LIABILITY-AND-EQUITY> 131,756
<SALES> 31,036
<TOTAL-REVENUES> 36,967
<CGS> 30,132
<TOTAL-COSTS> 36,783
<OTHER-EXPENSES> 2,512
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 2,030
<INCOME-PRETAX> 184
<INCOME-TAX> 46
<INCOME-CONTINUING> 138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
