<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
Commission File Number 0-19743
USTRAILS INC.
- - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 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: (214) 243-2228
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
----- -----
The number of shares of Common Stock, par value $.01, issued and outstanding as
of November 9, 1995 was 3,702,726.
See Exhibit Index on Page 26.
<PAGE>
USTRAILS INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1995
and June 30, 1995.......................................... 3
Consolidated Statements of Operations for the three months
ended September 30, 1995 and September 30, 1994............ 4
Consolidated Statement of Stockholders' Deficit
for the three months ended September 30, 1995.............. 5
Consolidated Statements of Cash Flows for the three months
ended September 30, 1995 and September 30, 1994............ 6
Notes to Consolidated Financial Statements................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 24
</TABLE>
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS September 30, June 30,
-------- 1995 1995
------------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 20,929 $ 50,596
Current portion of receivables, net of
allowance and discount of
$4.8 million and $5.3 million 4,853 5,376
Accounts and dues receivable, net 2,503 3,017
Inventory and other current assets 3,626 2,353
-------- --------
Total Current Assets 31,911 61,342
Restricted cash 3,035 1,629
Receivables, net of allowance and
discount of $10.9 million and
$11.4 million 10,821 13,322
Campground real estate 15,297 15,331
Resort real estate 1,292 1,352
Buildings and equipment, net of
accumulated depreciation of
$9.1 million and $8.4 million 31,418 32,039
Land held for sale 8,341 8,341
Other assets 2,494 2,530
-------- --------
Total Assets $104,609 $135,886
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- - -------------------------------------
CURRENT LIABILITIES
Accounts payable $ 1,728 $ 3,740
Accrued interest on Secured Notes 2,721 7,008
Accrued liabilities 8,394 8,140
Current portion of long-term debt --
Secured Notes, net of discount of
$3.2 million and $.2 million 15,387 18,398
Notes payable 3,513 3,537
Accrued construction costs 3,269 3,454
Deferred membership dues revenue 12,446 18,622
-------- --------
Total Current Liabilities 47,458 62,899
Secured Notes, net of discount of
$7.7 million and $11.7 million 82,552 97,092
Notes payable 1,113 1,216
Other liabilities 4,481 4,500
-------- --------
Total Liabilities 135,604 165,707
======== ========
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, 3,702,726 shares
issued and outstanding 37 37
Additional paid-in capital 17,549 17,549
Accumulated deficit subsequent to
December 31, 1991, date of
emergence from bankruptcy (total
deficit eliminated $51,752) (48,469) (47,288)
Cumulative currency translation
adjustment (112) (119)
-------- --------
Total Stockholders' Deficit (30,995) (29,821)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $104,609 $135,886
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
REVENUES
Membership dues $ 10,126 $ 10,456
Other campground/resort revenue 8,841 8,966
Membership and resort interest sales 1,361 1,249
RPI membership fees 1,200 1,273
Interest income 1,775 2,486
Gain on asset sales 256 30
Other income 1,302 683
-------- --------
Total Revenues 24,861 25,143
-------- --------
EXPENSES
Campground/resort operating expenses 16,602 16,637
Selling expenses 952 755
Provision for doubtful accounts 9 7
Cost of sales 100 204
Marketing expenses 413 435
RPI membership expenses 552 767
Corporate member services 545 459
Interest expense and amortization of
debt discount and consent fees 4,610 5,237
General and administrative expenses 2,432 3,071
Restructuring costs 215
-------- --------
Total Expenses 26,215 27,787
-------- --------
LOSS BEFORE INCOME TAXES (1,354) (2,644)
Income tax (provision) benefit 173 (102)
-------- --------
NET LOSS ($1,181) ($2,746)
======== ========
PRIMARY AND FULLY DILUTED NET LOSS PER
SHARE ($.32) ($.74)
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 3,703 3,703
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995
(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, 1995 $37 $17,549 ($47,288) ($119) ($29,821)
Foreign currency translation adjustment 7 7
Net loss for the three months ended
September 30, 1995 (1,181) (1,181)
--- ------- -------- ----- --------
BALANCE, September 30 , 1995 $37 $17,549 ($48,469) ($112) ($30,995)
=== ======= ======== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1995 1994
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Collections of receivables $ 3,420 $ 5,006
Interest received 1,608 2,111
Interest paid (7,753) (7,792)
General and administrative, corporate
member services and restructuring costs (3,358) (5,157)
Cash collected from operations,
including deferred revenue 16,493 15,613
Cash from sales of memberships and
resort interests at the point of sale 1,272 1,117
Expenditures for property operations (17,076) (14,666)
Expenditures for sales and marketing (1,472) (1,313)
Expenditures for insurance premiums (2,628) (2,839)
Payment of income taxes (18) (101)
Deposit made to secure standby letter
of credit (1,500)
Other, net 97 (219)
-------- --------
Net cash used in operating activities (10,915) (8,240)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures (363) (1,217)
Proceeds from asset sales 337 238
-------- --------
Net cash used in investing activities (26) (979)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Secured Notes (18,599)
Repayment of notes payable (127) (105)
-------- --------
Net cash used in financing activities (18,726) (105)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (29,667) (9,324)
CASH AND CASH EQUIVALENTS:
Beginning of period 50,596 50,059
-------- --------
End of period $ 20,929 $ 40,735
======== ========
</TABLE>
-- continued --
Page 6
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
September 30,
------------------------------
1995 1994
---------- ---------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss ($1,181) ($2,746)
-------- -------
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES --
Depreciation 718 626
Provision for doubtful accounts 9 7
Cost of sales 100 204
Amortization of interest yield, collection
costs and valuation allowance (312) (406)
Amortization of debt discount and
consent fees 1,144 1,211
Gain on asset sales (256) (30)
Change due to foreign currency translation 1 2
Increase in restricted cash (1,406) (170)
Decrease in receivables 3,327 4,928
Increase in other assets (819) (1,481)
Decrease in accounts payable (2,012) (520)
Decrease in accrued interest on
Secured Notes (4,287) (3,802)
Decrease in deferred membership dues revenue (6,176) (5,918)
Increase (decrease) in other liabilities 235 (145)
-------- -------
Total adjustments (9,734) (5,494)
-------- -------
NET CASH USED IN OPERATING ACTIVITIES ($10,915) ($8,240)
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 7
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
GENERAL
USTrails Inc. and its subsidiaries (the "Company") own and operate a system of
60 membership-based campgrounds located in 20 states and British Columbia,
Canada. In addition, the Company manages timeshare facilities and owns certain
real estate at eight full service resorts located in seven states and owns and
operates the resort amenities at one of these locations. The Company also
provides a reciprocal use program for members of approximately 330 recreational
facilities. The campground business represents the most significant portion of
the Company's business comprising 81% of the Company's operating revenues in
fiscal 1995. The full service resort and reciprocal use businesses provided the
remaining 19%. 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
USTrails Inc. and its wholly owned subsidiaries, National American Corporation
and its subsidiaries ("NACO"), Thousand Trails, Inc. and its subsidiaries
("Trails"), Shorewood Corporation, which does business as Resort Parks
International ("RPI"), and UST Wilderness Management Corporation ("Wilderness
Management").
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
adjustments described in Note 2.
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, 1995, filed
with the Securities and Exchange Commission ("SEC") on September 28, 1995.
NOTE 1 -- BASIS OF FINANCIAL STATEMENT PRESENTATION
The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization. Due to the
Company's emergence from bankruptcy, "fresh start reporting", as required by
AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," was reflected as of December 31, 1991
in the Company's consolidated financial statements. Under fresh start reporting,
a new reporting entity was created and assets and liabilities were restated to
reflect their reorganization value which approximated fair value at the date of
reorganization.
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the three month
periods ended September 30, 1995 and 1994, and in the consolidated balance sheet
at June 30, 1995. Certain prior period amounts in the consolidated financial
statements have been reclassified to conform to the current period presentation.
Net loss per common share is computed based on weighted average common shares
outstanding. Warrants outstanding as well as common stock equivalents that
would be assumed to be outstanding are excluded from the net loss per common
share computation as they would be anti-dilutive. The Indenture governing the
Company's 12% Secured Notes Due 1998 and Additional
Page 8
<PAGE>
Series 12% Secured Notes Due 1998 (collectively, the "Secured Notes") prohibits
the payment of dividends and, accordingly, no dividends were paid during the
three months ended September 30, 1995.
NOTE 2 -- RESTRUCTURING COSTS
At June 30, 1994, the Company recorded $1.8 million of restructuring costs for
severance pay and moving expenses related to relocating certain of its
administrative functions to Dallas, Texas. Of this $1.8 million, $391,000 was
spent in the first fiscal quarter of 1995 and applied against the accrual.
During the first fiscal quarter of 1995, the Company also incurred $215,000 of
additional costs related to expanding its Dallas office and hiring and training
new employees.
NOTE 3 -- CONTINGENCIES AND GOING CONCERN
CONTINGENCIES
Self Insurance
- - --------------
During the year ended June 30, 1994, the Company began to self-insure general
liability losses up to $250,000 per occurrence, with an annual aggregate of $2.8
million. As of September 30, 1995, the Company had insurance policies which
provided excess coverage up to $27 million per occurrence and aggregate. The
Company has provided a liability for estimated known and unknown claims related
to uninsured general liability risks of $1.8 million at September 30, 1995,
which is included in other liabilities in the accompanying consolidated balance
sheets. This liability is determined based on actuarial estimates.
Membership Base
- - ---------------
The Company derives a significant portion of its ongoing operating revenue from
its campgound members (81% in fiscal 1995). The Company's membership base has
declined from 167,000 at December 31, 1991 to 135,000 at September 30, 1995
(19%), and the membership base is presently declining at the rate of
approximately 10% per year. The Company attributes this decline to its older
membership base and to the Company's low level of membership sales during the
period. During the last two fiscal years, the Company has increased its sales
and marketing efforts in an attempt to replenish the Company's membership base.
However, unless the Company is able to significantly increase its campground
membership sales from current levels its membership base will continue to
decrease. Although the issue is not free from doubt, the Company believes that
its declining membership base will stabilize over the next few years at a level
substantially below the current level as it begins to realize results from its
sales and marketing efforts.
Environmental Issues
- - --------------------
Certain environmental issues may exist at some of the Company's campground and
resort properties concerning underground storage tanks and waste disposal, and
development of properties classified as "wetland" areas. Management has
reviewed these issues and has determined that no significant effect is
anticipated on the Company's operations or financial position.
Litigation
- - ----------
Property Owners Association, et. al. v. Beech Mountain Lakes Resorts Corp., et.
- - -------------------------------------------------------------------------------
al., Civil Action No. 3:92-CV-01597, filed on November 10, 1992, in the United
- - ---
States District Court for the Middle District of Pennsylvania. In this action,
the plaintiffs brought suit against a subsidiary of NACO and certain other
defendants alleging that the defendants made certain misrepresentations with
respect to the common areas and infrastructure in NACO's Beech Mountain resort.
The plaintiffs allege violations of the Interstate Land Sales Act, the
Pennsylvania Unfair Trade Practices and Consumer Protection Acts, breach of
contract, breach of implied warranty, and fraud, and seek unspecified damages or
rescission of their lot purchases and reimbursement of
Page 9
<PAGE>
the costs of their lots. A lis pendens has been filed in the county where NACO's
Beech Mountain resort is situated. Although discovery in this lawsuit has not
been completed, management does not believe that it will have a material adverse
effect upon the Company's operations or financial position.
Pennsylvania Attorney General Matter. During fiscal 1989, approximately 325
- - -------------------------------------
purchasers at NACO's Treasure Lake resort complained to the Pennsylvania
Attorney General that they were subjected to abrasive sales practices and
misrepresentations at the time they purchased their resort interest from NACO
and later harassed during the collection of their accounts. In fiscal 1990,
NACO entered into an Assurance of Voluntary Compliance with the Pennsylvania
Attorney General regarding these complaints. The Assurance of Voluntary
Compliance provided for arbitration of the complaints and payment by NACO of
$21,000 to satisfy awards granted pursuant to the arbitration process.
Management does not believe that the resolution of these claims will have a
material adverse effect upon the Company's operations or financial position.
Oregon and California Attorney General Matters. During fiscal 1994, the
- - -----------------------------------------------
Attorneys General of Oregon and California threatened to commence lawsuits
against the Company as a result of its practice of charging a cancellation fee
in connection with the cancellation of paid-in-full memberships. The Attorneys
General alleged that paid-in-full memberships may be terminated by the member at
any time by simply giving notice to the Company, and that it is an unlawful
trade practice for the Company to insist upon payment of a cancellation fee. In
September 1994, the Company agreed to change its practice and no longer require
a cancellation fee. The Company has entered into an Assurance of Voluntary
Compliance with the Oregon Attorney General regarding its cancellation policy.
The Company has negotiated a preliminary agreement with the California Attorney
General which provides that the Company will enter into a consent judgment
regarding its cancellation policy and also refund certain amounts to members.
This preliminary agreement is subject to negotiation of definitive
documentation. Management does not believe that the resolution of these matters
will have a material adverse effect upon the Company's operations or financial
position.
The Company is involved in certain other litigation and is subject to certain
claims arising from the normal course of business. Management believes that the
eventual outcome of these matters will not have a material adverse effect on the
Company's operations or financial position.
GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. However, the Company is
highly leveraged. As of September 30, 1995, the Company had outstanding debt of
$113.4 million (excluding trade payables and the discount on the Secured Notes)
and an equity deficit of $31.0 million. In addition, since the Company's
emergence from bankruptcy, the Company's earnings have been insufficient to
cover its fixed charges. Based upon its current business plan, the Company
believes that its future cash flow will be insufficient to enable it to repay
the balance of its outstanding Secured Notes at maturity on July 15, 1998.
Moreover, no assurance exists that the Company's future cash flow and results of
operations will enable it to make the mandatory redemptions of Secured Notes
required by the Indenture on July 15, 1996 and 1997. In addition, the Company
presently expects that it will default under the financial covenants in the
Indenture for the Secured Notes at the September 30, 1996 measurement date,
unless a waiver is obtained. Consequently, the Company believes that a
recapitalization or reorganization of the Company and its subsidiaries will be
required by no later than fiscal 1997. The Company presently intends to discuss
recapitalization or reorganization alternatives with the holders of its Secured
Notes during fiscal 1996.
Any recapitalization or reorganization would likely dilute substantially or
could eliminate the interests of the holders of the Company's common stock.
There is no assurance that the Company will be able to accomplish a timely
recapitalization or reorganization, or that the terms of a recapitalization or
reorganization would be favorable to the holders of the Company's
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<PAGE>
securities. This uncertainty raises substantial doubt about the Company's
ability to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE 4 -- NACO AND TRAILS
The Company has granted, subject to certain limitations, security interests in
substantially all of its assets, including the capital stock of its
subsidiaries, to secure the Secured Notes. In addition, all of the Company's
subsidiaries, other than an immaterial utility subsidiary, have guaranteed the
obligations of the Company under the Secured Notes and, subject to certain
limitations, have granted security interests in substantially all of their
assets to secure their guarantees. A guarantee by a subsidiary of the
obligation of its parent may be voided, in whole or in part, if the creditors of
the subsidiary, a trustee in bankruptcy of the subsidiary, or the subsidiary
itself as the debtor-in-possession in bankruptcy, determine that, among other
things, the subsidiary received less than reasonably equivalent value in
exchange for the guarantee and the subsidiary was insolvent on the date the
guarantee was made or became insolvent as a result of the guarantee. Creditors
of these companies could contend that the guarantees and grants of security
interests were not supported by sufficient consideration, and could therefore
contend that some or all of the guarantees could be unenforceable, in whole or
in part. The Company believes that these companies received adequate financial
and other benefits for their guarantees and security interests.
NACO and Trails have also granted liens, subject to certain limitations, on
substantially all of their assets to secure the repayment of their respective
indebtedness to the Company. These security interests were subordinated to the
security interests securing the guarantees of the Secured Notes. The
indebtedness that these security interests secure, however, was pledged by the
Company under the Indenture to secure the Secured Notes, and these security
interests were collaterally assigned to the Indenture trustee. Such liens,
however, are only enforceable to the extent of the underlying indebtedness
secured thereby, which at September 30, 1995, totaled $36.5 million for NACO and
$1,000 for Trails. Furthermore, the subsidiaries of NACO and Trails, other than
an immaterial utility subsidiary, each guaranteed their respective parent's
indebtedness to the Company and granted, subject to certain limitations,
security interests in substantially all of their assets to secure such
guarantees. As discussed above, these guarantees and liens are also subject to
a risk that they may be unenforceable, in whole or in part.
The assets subject to the liens of the Indenture include (i) the capital stock
of the Company's subsidiaries, including NACO and its subsidiaries, RPI,
Wilderness Management, and Trails and its subsidiaries other than an immaterial
utility subsidiary, (ii) the campgrounds and the common amenities at one resort
owned by the Company's subsidiaries, together with related improvements,
trailers, equipment, and certain other tangible personal property located
thereat to the extent existing mortgages do not prohibit such liens, (iii) the
closed campgrounds and other real estate that the Company's subsidiaries own and
are in the process of selling, (iv) the contracts receivable that the Company
and each of its subsidiaries own, (v) all indebtedness owed to the Company by
its subsidiaries, together with all related liens, and (vi) substantially all of
the cash balances of the Company and each of its subsidiaries. Currently, 57 of
the Company's 60 operating campgrounds and the common amenities at one resort
are subject to the liens of the Indenture. However, certain specified assets are
excluded from the liens of the Indenture, including certain leasehold interests,
rights and franchises that would become void if mortgaged or pledged, certain
vehicles, trailers, and movable equipment, certain cash in restricted accounts,
and the stock and assets of one immaterial utility subsidiary.
Certain of NACO's and Trails' campgrounds and resorts are also subject to
mortgages in favor of the party from whom NACO or Trails purchased the property.
Some states, including California, Oregon, and Washington, have nondisturbance
statutes that place limitations on the ability of the owner of a campground to
close the campground or a lienholder to foreclose its lien. In certain states,
these statutes permit the owner of a campground to close the campground or a
Page 11
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lienholder to foreclose its lien if the holders of memberships at the campground
receive access to a comparable campground. The mortgages on the Company's
campgrounds that were granted to secure the Company's obligations under the
Indenture, and the mortgages on the Company's campgrounds that were granted to
secure NACO's and Trails' indebtedness to the Company, contain nondisturbance
provisions that limit the ability of the lienholder to foreclose its lien unless
the holders of the related memberships receive access to a comparable
campground. The impact of the rights of members under these laws and non-
disturbance provisions is uncertain and could adversely effect the
implementation of, and the benefits or recoveries that may be available from,
"down-sizing" the Company's business, whether through foreclosure or in a
reorganization.
Set forth below are condensed consolidated statements of operations of NACO and
Trails for the three month periods ended September 30, 1995 and 1994. The
operating results of RPI are apparent in the Company's accompanying consolidated
statements of operations. The operating results of Wilderness Management are
not material and, therefore, are not presented.
These condensed consolidated statements of operations are presented to provide
additional analysis of, and should be read in conjunction with, the consolidated
financial statements of the Company.
Page 12
<PAGE>
NATIONAL AMERICAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
----------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
REVENUES
Campground membership dues $ 3,259 $ 3,478
Other campground/resort revenue --
Campgrounds 2,912 2,868
Resorts 2,334 2,516
------- -------
5,246 5,384
------- -------
Membership and resort interest sales 694 906
Interest income 329 483
Gain on asset sales 257 28
Other income 844 696
------- -------
Total Revenue 10,629 10,975
------- -------
EXPENSES
Operating expenses --
Campgrounds 5,541 5,546
Resorts 2,372 2,473
------- -------
7,913 8,019
------- -------
Selling expenses 417 466
Provision for doubtful accounts 5 5
Cost of sales 70 184
Marketing expenses 100 174
Interest expense 1,214 1,185
Corporate member services 115 138
General and administrative expenses 1,372 1,686
Restructuring costs 66
------- -------
Total Expenses 11,206 11,923
------- -------
Loss Before Taxes (577) (948)
Income tax (provision) benefit 181 (21)
------- -------
Net Loss ($396) ($969)
======= =======
</TABLE>
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<PAGE>
THOUSAND TRAILS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
---------------------------------
1995 1994
---------------- ---------------
<S> <C> <C>
REVENUES
Campground membership dues $ 6,867 $ 7,108
Other campground revenue 3,082 3,221
Membership sales 667 343
Interest income 688 967
Gain on asset sales 2
Other income 712 406
------- -------
Total Revenue 12,016 12,047
------- -------
EXPENSES
Operating expenses 8,281 8,505
Selling expenses 535 289
Provision for doubtful accounts 4 2
Cost of sales 30 20
Marketing expenses 313 261
Interest expense 78 123
Corporate member services 430 321
General and administrative expenses 1,032 1,182
Restructuring costs 111
------- -------
Total Expenses 10,703 10,814
------- -------
Income Before Taxes 1,313 1,233
Provision for income taxes (510) (494)
------- -------
Net Income $ 803 $ 739
======= =======
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with 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,
1995, filed with the SEC on September 28, 1995.
All capitalized terms, as used herein, have the same meaning as those defined in
Item 1 -- Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Continuing Losses and Negative Cash Flow. Since emerging from bankruptcy on
December 31, 1991, the Company has decreased its total indebtedness by $43.1
million, decreased its annualized operating expenses by $33.0 million (29%), and
implemented the TTN Alliance Program under which certain campground members
voluntarily increased their annual dues by an aggregate of $2.1 million.
Despite these improvements, the Company is still experiencing losses and
negative operating cash flow, which is the cash flow from operating activities
before the principal collections on the contracts receivable portfolio. The
Company has funded this cash flow deficiency with the collections from the
contracts receivable portfolio, which the Company is no longer replenishing
materially.
The Company has attempted to reverse its losses and negative operating cash flow
primarily by reducing expenses and attempting to increase revenues from its
existing membership base. The Company began instituting cost reduction measures
in fiscal 1992. These measures have included deferring maintenance at the
campgrounds and resorts, restructuring the sales and marketing departments,
laying off sales and marketing employees, consolidating departments, and
reducing staffing levels. In addition, the Company has removed nine campgrounds
from the system. The Company has also reduced service levels at the campgrounds
and changed to seasonal operations at certain campgrounds.
In addition to these cost-reduction measures, the Company has focused on ways to
increase ongoing revenue through member dues and ancillary revenue. In fiscal
1993 and 1994, the Company increased the dues of certain members because the
dues had not been increased in the past to the extent permitted, and also
implemented the TTN Alliance Program mentioned above, which increased annual
dues revenue by an aggregate of $2.1 million. The Company has also attempted to
expand its ancillary sources of revenue at the campgrounds.
Declining Membership Base. The Company's membership base has declined from
167,000 at December 31, 1991 to 135,000 at September 30, 1995 (19%), and the
membership base is presently declining at the rate of approximately 10% per
year. The Company attributes this decline to its older membership base and to
the Company's low level of membership sales during the period. During the last
two fiscal years, the Company has increased its sales and marketing efforts in
an attempt to replenish the Company's membership base. However, unless the
Company is able to significantly increase its campground membership sales from
current levels, its membership base will continue to decrease. Although the
issue is not free from doubt, the Company believes that its declining membership
base will stabilize over the next few years at a level substantially below the
current level as the Company begins to realize results from its sales and
marketing efforts.
Current Operating Strategy. The Company's current strategy is to continue to
improve its ongoing operations, attempt to replenish its campground membership
base through increased sales and marketing efforts, and determine the
appropriate level at which ongoing operations should be continued. In this
regard, the Company intends to "down-size" its business by implementing
additional cost reduction measures as its membership base continues to decline.
These cost reduction measures will likely include the closure of additional
campgrounds,
Page 15
<PAGE>
additional reductions in service levels at certain campgrounds, and
decreased general and administrative expenses. These cost reduction measures
may adversely affect the collectibility of the dues and contracts receivable and
accelerate the rate at which the Company is losing members.
Negative Interest Spread. The Company is highly leveraged and its interest
expense exceeds its interest income by a significant amount. This negative
interest spread was $2.8 million for the three months ended September 30, 1995,
and at the current level of operations, is expected to increase from $11.0 in
fiscal 1995 to $11.8 million in fiscal 1996. This negative interest spread will
continue to increase in the future because the contracts receivable portfolio is
diminishing at a significantly faster rate than the Company is able to retire
debt. Moreover, as the Company invests the collections on its contracts
receivable portfolio at significantly lower interest rates than the contracts
receivable portfolio yields, the growing spread between the interest received on
the contracts receivable and the interest paid on the Secured Notes will
adversely affect this negative interest spread.
Required Recapitalization or Reorganization. The Company is highly leveraged.
As of September 30, 1995, the Company had outstanding debt of $113.4 million
(excluding trade payables and the discount on the Secured Notes) and an equity
deficit of $31.0 million. In addition, since the Company's emergence from
bankruptcy, the Company's earnings have been insufficient to cover its fixed
charges. Based upon its current business plan, the Company believes that its
future cash flow will be insufficient to enable it to repay the balance of its
outstanding Secured Notes at maturity on July 15, 1998. Moreover, no assurance
exists that the Company's future cash flow and results of operations will enable
it to make the mandatory redemptions of Secured Notes required by the Indenture
on July 15, 1996 and 1997. In addition, the Company presently expects that it
will default under the financial covenants in the Indenture for the Secured
Notes at the September 30, 1996 measurement date, unless a waiver is obtained.
Consequently, the Company believes a recapitalization or reorganization of the
Company and its subsidiaries will be required by no later than fiscal 1997. The
Company presently intends to discuss recapitalization or reorganization
alternatives with the holders of its Secured Notes during fiscal 1996.
Any recapitalization or reorganization would likely dilute substantially or
could eliminate the interests of the holders of the Company's common stock.
There is no assurance that the Company will be able to accomplish a timely
recapitalization or reorganization, or that the terms of a recapitalization or
reorganization would be favorable to the holders of the Company's securities.
Cash. On September 30, 1995, the Company had $20.9 million of cash and cash
equivalents, a decrease of $29.7 million during the three month period. The
Company's cash declined primarily because $18.6 million was used to make a
mandatory redemption of Secured Notes on July 15, 1995, and $10.9 million was
used in operating activities, which included a $7.6 million semi-annual interest
payment on the Secured Notes.
The Company's principal sources of operating cash for the three months were $5.0
million in principal and interest collections on receivables and $16.5 million
in dues collections and other campground and resort revenues. Principal uses of
operating cash for the three months were $17.1 million in operating expenses,
$3.4 million in general and administrative expenses (including corporate member
services costs), $2.6 million in insurance premiums, and $7.8 million in
interest payments, principally related to the Secured Notes.
Excluding $3.4 million of principal collections on its contracts receivable, the
Company had negative cash flow from operations of $14.3 million for the three
months ended September 30, 1995. The Company generally experiences higher
negative cash flow during the first fiscal quarter due to the timing of billings
and collections on dues and a semi-annual payment of interest on the Secured
Notes. The Company estimates that its overall cash flow for fiscal 1996 will be
negative because of the $18.6 million used for the mandatory redemption of
Secured
Page 16
<PAGE>
Notes in July 1995. Receivable collections will continue to be used to
fund the Company's negative cash flow from operations during the current fisal
year. In the long term, however, because new membership sales are not
materially replenishing the contracts receivable, the Company will be unable to
cover negative cash flow through receivable collections, which will continue to
diminish.
Management anticipates the following significant expenditures during the
remainder of the fiscal year (in millions):
<TABLE>
<S> <C>
. Semi-annual interest payment on the Secured Notes due
January 15, 1996 $6.5
. Capital improvements, maintenance, and repairs for
campground operations 3.6
. Capital improvements to fulfill HUD obligations and
to facilitate the sale of resort assets .3
. Selling and marketing efforts 3.0
-----
$13.4
=====
</TABLE>
All of these expenditures will be funded primarily from the Company's cash
reserves and collections of principal and interest on its contracts receivable,
which collections are estimated to be approximately $9.6 million for the
remainder of fiscal 1996.
Moreover, on July 15, 1996, the Company will be required to redeem an additional
$18.6 million of Secured Notes and make a $6.5 million semi-annual interest
payment on the Secured Notes. There is no assurance that the Company will have
the funds to make these payments.
In addition to the above-described expenditures, the Company may from time to
time repurchase up to $10 million principal amount of Secured Notes in the
market if it believes market conditions are favorable.
The Indenture 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 5.8% at September 30, 1995.
Under the terms of the Indenture, cash that the Company and its subsidiaries
hold other than for operations, is generally deposited in accounts that are
pledged for the benefit of the holders of the Secured Notes. Prior to certain
defaults concerning nonpayment of principal or interest or failure to comply
with certain material covenants, including the financial covenants, the
Indenture permits the Company to withdraw money from these accounts and deposit
such money in an operating account for use in the Company's business. Should
such a default exist, the Indenture prohibits the Company from making
withdrawals from these accounts, except withdrawals used for the payment of
Secured Notes, withdrawals used for the payment of certain insurance premiums,
and a one-time withdrawal in an amount equal to $5.0 million, minus the amount
of funds in the operating account. The latter withdrawal would be insufficient
to sustain continued operations.
MATERIAL CHANGES IN FINANCIAL CONDITION
Total assets decreased by $31.3 million during the three months ended September
30, 1995. Cash decreased by $29.7 million as discussed above. Contracts
receivable decreased by $3.0 million primarily due to $3.4 million in cash
collections offset by $312,000 related to the amortization of the allowances for
interest discount and collection costs and valuation allowance. In addition,
accounts and dues receivable declined by $514,000 due primarily to the timing of
dues collections and the receipt of certain payroll tax refunds during the
period. These decreases were partially offset by (i) a $1.3 million increase in
inventory and other current assets resulting primarily from insurance premiums
for fiscal 1996 that were paid in the first quarter, and (ii) a
Page 17
<PAGE>
$1.4 million increase in restricted cash resulting primarily from a $1.5 million
cash deposit made to obtain a standby letter of credit that secures the
obligations of the Company under the employment agreement with the Company's
Chief Executive Officer.
Total liabilities decreased by $30.1 million during the three months ended
September 30, 1995. Secured Notes decreased by $17.6 million as a result of the
$18.6 million mandatory redemption of Secured Notes in July 1995, partially
offset by amortization of the discount during the period. Accounts payable
decreased by $2.0 million, due primarily to the seasonal nature of the Company's
operations, and accrued interest on the Secured Notes declined by $4.3 million
due to the timing of the semi-annual interest payments. In addition, deferred
membership dues revenue declined by $6.2 million due to revenue recognized in
excess of cash collections during the period.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 and 1994
Net Loss. The Company reported a net loss of $1.2 million or $.32 per share on
revenues of $24.9 million for the three months ended September 30, 1995. This
compares with a net loss of $2.7 million or $.74 per share on revenues of $25.1
million for the same period last year. Although revenues declined slightly
during the current period, there were greater decreases in expenses, principally
interest and general and administrative costs, which were primarily responsible
for the improvement in results. The Company expects to report a net loss for
fiscal 1996.
Page 18
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds (including Wilderness Management), full service resorts, and RPI,
excluding allocations of corporate overhead and other revenues and expenses, for
the three months ended September 30, 1995:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1995
-------------------------------------
Campgrounds Resorts Total
----------- ------- -----
<S> <C> <C> <C>
OPERATIONS
Membership dues $ 10,126 $ 10,126
Other campground/resort revenues 6,507 $ 2,334 8,841
Campground ancillary expenses (3,182) (3,182)
Other operating expenses (11,048) (2,372) (13,420)
-------- ------- --------
Operating profit (loss) 2,403 (38) 2,365
-------- ------- --------
SALES
Memberships 874 874
Resort interests 487 487
-------- ------- --------
Total sales 874 487 1,361
-------- ------- --------
Selling (702) (250) (952)
Doubtful accounts provision (5) (4) (9)
Cost of sales (40) (60) (100)
Marketing (413) (413)
-------- ------- --------
Total expenses (1,160) (314) (1,474)
-------- ------- --------
Net profit (loss) on sales (286) 173 (113)
-------- ------- --------
RESORT PARKS INTERNATIONAL
Fee income 1,200 1,200
Cost of operations (552) (552)
-------- ------- --------
RPI net contribution 648 648
-------- ------- --------
OPERATING INCOME BEFORE CORPORATE OVERHEAD
AND OTHER REVENUES AND EXPENSES $2,765 $135 2,900
======== ======= --------
OTHER REVENUES AND EXPENSES
Interest income 1,775
Interest expense and amortization of debt discount
and consent fees (4,610)
Corporate member services (545)
General and administrative expenses (2,432)
Gain on asset sales 256
Other income 1,302
--------
OPERATING LOSS BEFORE TAXES ($1,354)
========
</TABLE>
Page 19
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds (including Wilderness Management), full service resorts, and RPI,
excluding allocations of corporate overhead and other revenues and expenses, for
the three months ended September 30, 1994:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1994
-------------------------------------
Campgrounds Resorts Total
----------- ------- -----
<S> <C> <C> <C>
OPERATIONS
Membership dues $ 10,456 $ 10,456
Other campground/resort revenues 6,450 $ 2,516 8,966
Campground ancillary expenses (2,735) (2,735)
Operating expenses (11,429) (2,473) (13,902)
-------- ------- --------
Operating profit 2,742 43 2,785
-------- ------- --------
SALES
Memberships 557 557
Resort interests 692 692
-------- ------- --------
Total sales 557 692 1,249
-------- ------- --------
Selling (474) (281) (755)
Doubtful accounts provision (2) (5) (7)
Cost of sales (44) (160) (204)
Marketing (435) (435)
-------- ------- --------
Total expenses (955) (446) (1,401)
-------- ------- --------
Net profit (loss) on sales (398) 246 (152)
-------- ------- --------
RESORT PARKS INTERNATIONAL
Fee income 1,273 1,273
Cost of operations (767) (767)
-------- ------- --------
RPI net contribution 506 506
-------- ------- --------
OPERATING INCOME BEFORE CORPORATE OVERHEAD
AND OTHER REVENUES AND EXPENSES $ 2,850 $ 289 3,139
======== ======= --------
OTHER REVENUES AND EXPENSES
Interest income 2,486
Interest expense and amortization of debt discount
and consent fees (5,237)
Corporate member services (459)
General and administrative expenses (3,071)
Restructuring costs (215)
Gain on asset sales 30
Other income 683
--------
OPERATING LOSS BEFORE TAXES ($2,644)
========
</TABLE>
Page 20
<PAGE>
Campground Operations. The Company's operations are highly seasonal. The
Company receives the majority of the dues revenue from its members during the
winter, which are recognized as income ratably during the year. However, the
Company incurs a higher level of operating expenses during the summer.
Historically, the majority of the Company's sales and marketing efforts have
occurred during the summer.
Campground membership dues revenue was $10.1 million for the three months ended
September 30, 1995, compared with $10.5 million for the same period last year.
The decrease is mainly attributable to a decline in the membership base.
Other campground revenues remained relatively constant at approximately $6.5
million for the three months ended September 30, 1995 and 1994. Similarly,
campground operating expenses remained relatively constant at approximately
$14.2 million for the three months ended September 30, 1995 and 1994. However,
the Company has made or intends to make significant operational changes at the
campgrounds in fiscal 1996, including the closure of two campgrounds, reductions
in service levels at certain campgrounds, and the change to seasonal operations
at certain other campgrounds. These operational changes should result in lower
operating expenses for the remainder of fiscal 1996, compared with the prior
year.
In April 1992, the Company suspended the sale of new campground memberships
because its sales program was operating at a loss and with negative cash flow.
In the fall of 1992, the Company began to assist campground members desiring to
sell their memberships in the secondary market. During fiscal 1994, as part of
its focus on ongoing revenues from campground operations, the Company determined
that it should increase its sales and marketing efforts in order to replenish
its campground membership base. As a result, in May 1994, the Company
instituted a new sales program under which it began selling new campground
memberships on a limited basis. Since that time, the Company has been testing
membership sales programs and revising them based on results and its ongoing
market research. The Company significantly increased its sales and marketing
efforts for the summer of 1995.
During the summer of 1995 (June through September), the Company sold 1,320 new
memberships at an average sales price of $836 and an average annual dues level
of $277. Although the volume of membership sales was low, it was almost four
times greater than the number of comparable memberships sold during the summer
of 1994. In addition, the Company believes that it has improved the efficiency
of its sales processes. For example, the Company generated 10% more sales
reservations during the summer of 1995, compared with the summer of 1994, and
12% of the people making reservations purchased a membership during the summer
of 1995, compared with 3% during the summer of 1994. Similarly, the percentage
of people who purchased a membership after attending a sales presentation
increased to 28% from historical levels of 10%. Given these improvements in its
sales processes, the Company believes that it may be able to increase the level
of membership sales in the future.
Campground membership sales revenue was $874,000 for the three months ended
September 30, 1995, compared with $557,000 for the same period last year. The
Company's selling and marketing expenses exceeded its sales revenue by $241,000
and $352,000, respectively, during the two periods. These expenses exceeded
revenues due to the low volume of sales and the increased sales and marketing
efforts discussed above.
The Company's marketing efforts require significant expense, and there is no
assurance that they will produce additional revenues. Consequently, in the
short-term, the Company expects its sales and marketing efforts to continue to
adversely affect its results.
The Company has the capacity to sell approximately 59,000 additional new
memberships in the future, assuming the sale of ten memberships for each
campsite. Any down-sizing of the Company's business would reduce this capacity.
Page 21
<PAGE>
Campground Management. During fiscal 1994, a wholly owned subsidiary of the
Company, Wilderness Management, began to manage public campgrounds for the U.S.
Forest Service. As of September 30, 1995, Wilderness Management had entered
into management contracts covering 26 campgrounds containing a total of 1,002
campsites. Pursuant to these contracts, the Company incurs the expenses of
operating the campgrounds and receives the related revenues, net of a fee paid
to the Forest Service. For the three months ended September 30, 1995, the
Company recognized a net contribution of $111,000 on revenues of $541,000 from
these operations, compared with a net contribution of $84,000 on revenues of
$378,000 for the same period last year. The Company presently anticipates that
these operations will result in a positive net contribution for the full fiscal
year.
Full Service Resort Operations. The direct operating expenses of the full
service resorts exceeded revenues by $38,000 for the three months ended
September 30, 1995, compared with a contribution of $43,000 for the same period
last year. The decline in results is primarily due to lower rental revenue as a
result of the sale of a motel and certain Company-owned condominiums at selected
resorts, and lower management fee revenue in the current period. Management fee
revenue was higher in the prior period due to the collection of certain aged
accounts during that period. Timeshare management operations produced a net
contribution of $122,000 for the three months ended September 30, 1995, compared
with a net contribution of $141,000 for the same period last year.
Since June 1992, the Company has been actively selling its timeshare and lot
inventory at substantially reduced prices in order to reduce the carrying costs
on the unsold inventory, increase management fees, and eliminate the Company's
requirement to pay dues to the timeshare associations on unsold units.
Timeshare and lot sales were $487,000 for the three months ended September 30,
1995, compared with $692,000 for the same period last year. The related selling
expenses were 51% of sales for the three months ended September 30, 1995,
compared with 41% of sales for the same period last year. Selling expenses as a
percentage of sales were higher in the current period because of the lower sales
volume and certain fixed selling costs. The cost of sales as a percentage of
sales was 12% for the three months ended September 30, 1995, compared with 23%
for the same period last year. As of September 30, 1995, there were
approximately 1,700 timeshare weeks available for sale out of a total of 32,000.
The Company presently plans to dispose of a substantial portion of the remaining
resort assets over the next several years, and currently has a contract to sell
the country club and golf operations at one resort which, if completed, will
result in a gain of approximately $2.0 million. The sale transaction is
scheduled to close in fiscal 1996, although it is not assured. In addition, no
assurance exists that the Company will be able to locate a buyer for any of the
remaining resort assets or that sales on acceptable terms can be effected.
Resort Parks International. RPI produced a net contribution of $648,000 during
the three months ended September 30, 1995, compared with $506,000 for the same
period last year. The increase in the net contribution for the current period
was due primarily to lower marketing and labor costs. RPI members pay a fee to
RPI that entitles them to use any of the participating facilities, subject to
certain limitations.
Negative Interest Spread. Interest expense exceeded interest income by
approximately $2.8 million for the three months ended September 30, 1995 and
1994. The Company anticipates that, at the current level of operations, the
negative interest spread will increase from $11.0 million for fiscal 1995 to
$11.8 million for fiscal 1996, because the receivable portfolio is declining at
a significantly faster rate than the Company is able to retire debt. This
negative interest spread is expected to continue to increase thereafter as the
portfolio continues to decline.
Interest income decreased by $711,000 for the three months ended September 30,
1995, compared with the same period last year, due primarily to a decrease in
interest earned on the Company's diminishing portfolio of contracts receivable
and a $29.7 million decrease in the cash balance during the three months ended
September 30, 1995.
Page 22
<PAGE>
Interest expense decreased by $627,000 for the three months ended September 30,
1995, compared with the same period last year, due primarily to the decrease in
the outstanding Secured Notes because of the $18.6 million mandatory redemption
of Secured Notes in July 1995, and scheduled repayments of notes payable.
Gain on Asset Sales. The Company recognized a gain on the sale of assets of
$256,000 for the three months ended September 30, 1995, compared with $30,000
for the same period last year. The increase in the current period relates
primarily to the timing of asset sales. Over the next several years, the
Company intends to dispose of a substantial portion of its remaining assets at
the full service resorts, any campgrounds that are closed as the Company down-
sizes, and other undeveloped land and excess acreage associated with the
campgrounds. The Company currently has a contract to sell the country club and
golf operations at one of the full service resorts, as discussed above.
Other Income. Other income generally consists of certain non-recurring items,
transfer fees received when existing memberships are transferred in the
secondary market without assistance from the Company, settlements received on
defaulted contracts, and subscription fees received from members who subscribe
to the Company's member magazine. In addition, the Company may begin charging
members for making more than five reservations in a given year.
Other income was $1.3 million for the three months ended September 30, 1995,
compared with $683,000 for the same period last year. The increase in the
current period was due primarily to an increase in income from recoveries on
canceled contracts as a result of increased use of outside collection agencies.
Other Expenses. General and administrative expenses were $2.4 million for the
three months ended September 30, 1995, compared with $3.1 million for the same
period last year. The decrease in the current period was due primarily to cost
reductions implemented in fiscal 1995. Corporate member services costs were
$545,000 for the three months ended September 30, 1995, compared with $459,000
for the same period last year. The increase in the current period was due
primarily to increases in the cost of producing the Company's member magazine.
The Company incurred $215,000 in restructuring expenses during the three months
ended September 30, 1994, related to the relocation of certain of its
administrative functions to Dallas, Texas. See Note 2 to the consolidated
financial statements included in Item 1.
Page 23
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K during the three months
ended September 30, 1995.
EXHIBITS
No. Description
- - ---- -----------
27.1 Financial Data Schedule
Page 24
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USTRAILS INC.
Date: November 9, 1995 By: /s/ Harry J. White, Jr.
---------------------------
Harry J. White, Jr.
Vice President, Chief Financial Officer, and
Chief Accounting Officer
Page 25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description Page
- - ----- ----------- ----
<S> <C> <C>
27.1 Financial Data Schedule 27
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1994
<CASH> 23,964 0
<SECURITIES> 0 0
<RECEIVABLES> 18,177 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,911 0
<PP&E> 31,418 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 104,609 0
<CURRENT-LIABILITIES> 47,458 0
<BONDS> 102,565 0
<COMMON> 37 0
0 0
0 0
<OTHER-SE> (30,920) 0
<TOTAL-LIABILITY-AND-EQUITY> 104,609 0
<SALES> 1,361 1,249
<TOTAL-REVENUES> 24,861 25,143
<CGS> 100 204
<TOTAL-COSTS> 26,215 27,787
<OTHER-EXPENSES> 21,496 22,339
<LOSS-PROVISION> 9 7
<INTEREST-EXPENSE> 4,610 5,237
<INCOME-PRETAX> (1,354) (2,644)
<INCOME-TAX> 173 (102)
<INCOME-CONTINUING> (1,181) (2,746)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,181) (2,746)
<EPS-PRIMARY> (.32) (.74)
<EPS-DILUTED> (.32) (.74)
</TABLE>
