- - ------------------------------------------------------------------------------
UNITED STATES
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 period ended March 31, 1998
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-24728
-------------------------
EQUITY CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
75-2521142
(I.R.S. employer identification number)
415 SOUTH FIRST STREET, SUITE 210
LUFKIN, TEXAS
(Address of principal executive offices)
75901
(Zip Code)
(409) 631-8700
(Registrant's telephone number, including area code)
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No
The number of shares of the registrant's Common Stock outstanding as of
May 11, 1998 was 21,403,716.
- - ------------------------------------------------------------------------------
<PAGE>
EQUITY CORPORATION INTERNATIONAL
INDEX
Page
Part I. Financial Information ----
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet
March 31, 1998 and December 31, 1997.....................3
Consolidated Statement of Operations
Three Months Ended March 31, 1998 and 1997...............4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1998 and 1997...............5
Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 1998........................6
Notes to the Consolidated Financial Statements..............7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.........................11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K...........................16
Signature...................................................................17
FORWARD-LOOKING-STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements contained herein other than statements of
historical fact are forward-looking statements. When used in this Form 10-Q,
the words "anticipate", "believe", "estimate" and "expect" and similar
expressions are intended to identify forward-looking statements. Such
statements reflect the Company's current views with respect to future events
and are subject to certain risks, uncertainties and assumptions, including
competition for and availability of funeral home and cemetery acquisitions, the
ability of the Company to successfully implement its revenue enhancement and
cost containment programs at acquired funeral homes and cemeteries, the
Company's ability to retain key management personnel and to continue to attract
and retain skilled funeral home and cemetery management personnel, state and
federal regulations, changes in the death rate or acceleration of the trend
towards cremation, availability and cost of capital and general industry and
economic conditions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, believed, estimated or expected.
The Company does not intend to update these forward-looking statements.
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
EQUITY CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, Dec. 31,
(In thousands, except share data) 1998 1997
- - ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 10,167 $ 8,039
Receivables, net of allowances..................... 20,078 15,412
Inventories........................................ 9,921 9,134
Other.............................................. 2,437 2,181
--------- ---------
Total current assets............................ 42,603 34,766
Preneed funeral contracts............................. 254,919 235,891
Cemetery properties, at cost.......................... 116,873 117,087
Long-term receivables, net of allowances.............. 58,146 55,393
Property, plant and equipment, at cost (net).......... 111,145 94,684
Deferred charges and other assets..................... 25,855 24,284
Names and reputations (net)........................... 194,540 155,595
--------- ---------
Total assets.................................... $ 804,081 $ 717,700
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........... $ 14,303 $ 14,077
Income taxes payable............................... 2,702 51
Current maturities of long-term debt............... 833 858
Deferred income taxes.............................. 2,264 2,114
--------- ---------
Total current liabilities....................... 20,102 17,100
Deferred preneed funeral contract revenues............ 261,210 242,185
Convertible subordinated debentures................... 143,750 --
Long-term debt........................................ 80,295 171,303
Deferred cemetery costs............................... 26,961 27,224
Deferred income taxes................................. 31,593 31,106
Other liabilities..................................... 1,906 2,250
Commitments and contingencies.........................
Stockholders' equity:
Preferred stock.................................... -- --
Common stock, $.01 par value; 50,000,000 shares
authorized; 21,397,048 and 21,119,362 shares issued
and outstanding in 1998 and 1997, respectively.. 214 211
Capital in excess of par value..................... 198,168 191,902
Retained earnings.................................. 39,944 34,502
Accumulated other comprehensive income............. (62) (83)
--------- ---------
Total stockholders' equity...................... 238,264 226,532
--------- ---------
Total liabilities and stockholders' equity...... $ 804,081 $ 717,700
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
EQUITY CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(In thousands, except per share data) 1998 1997
- - ---------------------------------------------------------------------
<S> <C> <C>
Net revenues:
Funeral.................................. $ 32,792 $ 20,449
Cemetery................................. 14,409 10,131
Other.................................... -- 1,674
-------- --------
47,201 32,254
Cost and expenses:
Funeral.................................. 22,789 14,294
Cemetery................................. 9,894 7,036
Other.................................... -- 924
-------- --------
32,683 22,254
-------- --------
Total gross profit.......................... 14,518 10,000
General and administrative
expenses................................. 2,473 1,735
-------- --------
Operating income............................ 12,045 8,265
Interest expense, net....................... 3,123 781
-------- --------
Income before income taxes.................. 8,922 7,484
Provision for income taxes.................. 3,480 2,994
-------- --------
Net income.................................. $ 5,442 $ 4,490
======== ========
Earnings per share:
Basic.................................... $ 0.26 $ 0.22
======== ========
Diluted.................................. $ 0.25 $ 0.22
======== ========
Weighted average number
of common and equivalent
shares outstanding:
Basic.................................... 21,167 20,089
======== ========
Diluted.................................. 23,514 20,412
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
EQUITY CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
(In thousands) 1998 1997
- - ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 5,442 $ 4,490
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization................... 2,951 1,557
Provision for bad debts and contract
cancellations.................................. 2,066 1,272
Gain on sale of assets.......................... (38) (765)
Deferred income taxes........................... 500 770
Changes in assets and liabilities, net of effects
from acquisitions:
Receivables...................................... (8,377) (3,751)
Inventories...................................... (106) (32)
Other current assets............................. (234) 369
Other long-term assets........................... (604) (546)
Accounts payable and accrued liabilities......... 330 284
Income taxes payable............................. 2,650 1,501
Preneed funeral contracts and associated
deferred revenues............................... (2) (171)
-------- --------
Net cash provided by operating activities..... 4,578 4,978
-------- --------
Cash flows from investing activities:
Capital expenditures............................... (4,591) (2,247)
Proceeds from sale of assets....................... 148 50
Acquisitions, net of cash acquired................. 1,802 (14,610)
-------- --------
Net cash used in investing activities......... (2,641) (16,807)
-------- --------
Cash flows from financing activities:
Issuance of convertible debentures, net............ 139,134 --
Net proceeds from issuance of common stock......... 142 22,131
Borrowings on long-term debt....................... 6,413 --
Payments on long-term debt......................... (145,498) (18,153)
-------- --------
Net cash provided by financing
activities................................... 191 3,978
-------- --------
Increase (decrease) in cash and cash equivalents...... 2,128 (7,851)
Cash and cash equivalents at beginning of period...... 8,039 12,654
-------- --------
Cash and cash equivalents at end of period............ $ 10,167 $ 4,803
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
EQUITY CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK CAPITAL IN OTHER
------------------- EXCESS OF RETAINED COMPREHENSIVE STOCKHOLDERS'
(In thousands,except share data) SHARES AMOUNT PAR VALUE EARNINGS INCOME EQUITY
---------- ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997..... 21,119,362 $ 211 $ 191,902 $ 34,502 $ (83) $ 226,532
Comprehensive income:
Net income................ -- -- -- 5,442 -- 5,442
Foreign currency
translation adjustment... -- -- -- -- 21 21
-------- --------- ----------
Total.................. -- -- -- 5,442 21 5,463
-------- --------- ----------
Common stock issued:
Acquisitions.............. 266,211 3 6,124 -- -- 6,127
Option exercises.......... 11,475 -- 142 -- -- 142
---------- ------ --------- -------- --------- ----------
Balance, March 31, 1998........ 21,397,048 $ 214 $ 198,168 $ 39,944 $ (62) $ 238,264
========== ====== ========= ======== ========= ==========
</TABLE>
The Company's comprehensive income for the three months ended March 31, 1997
consisted solely of net income.
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
EQUITY CORPORATION INTERNATIONAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Unaudited
(Dollars in thousands, except per share amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Equity Corporation International and all majority owned
subsidiaries (the "Company") and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information in
the notes to the consolidated financial statements normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted pursuant to these rules and
regulations. In the opinion of management, all adjustments, consisting of
normal recurring accruals, considered necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the
periods presented have been included. Operating results for interim periods are
not necessarily indicative of the results that may be expected for the year.
Capitalized terms not defined herein have the meanings as defined in the notes
to the consolidated financial statements included in the Company's annual
report on Form 10-K for the year ended December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1997.
2. ACQUISITIONS
The following table is a summary of acquisitions made during the three months
ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
- - ---------------------------------------------------
<S> <C> <C>
Number acquired:
Funeral homes........ 36 19
Cemeteries........... -- 3
Purchase price.......... $56,792 $29,752
</TABLE>
The purchase price for these acquisitions consisted of cash, Common Stock and
debt issued or assumed. Also included in the 1997 purchase price is $924 which
represents the net book value of funeral home assets exchanged for one of the
acquired cemeteries (Note 5). The excess of purchase price over the fair value
of assets acquired and liabilities assumed is included in Names and reputations
(net) on the Consolidated Balance Sheet and will be amortized over a 40-year
period. In connection with acquisitions, the Company enters into customary
employment, consulting and noncompetition agreements with certain employees and
former owners of the businesses acquired. In certain situations, the Company
will prepay a portion of the noncompetition agreements and amortize such
prepayments on a straight-line basis over the terms of the agreements. The
purchase prices indicated above do not include $250 and $62 for noncompetition
agreements which were prepaid to individuals related to businesses acquired in
1998 and 1997, respectively. The acquisitions have been accounted for as
purchases and their operating results have been included since their respective
dates of acquisition.
7
<PAGE>
The net effect of acquisitions (including the exchange discussed above) on the
Consolidated Balance Sheet was as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
(In thousands) 1998 1997
- - ------------------------------------------------------------------------------
<S> <C> <C>
Current assets........................................ $ 2,126 $ 1,341
Preneed funeral contracts............................. 16,518 12,424
Long-term receivables................................. -- 5,708
Cemetery properties................................... -- 7,804
Property, plant and equipment......................... 13,586 5,601
Deferred charges and other assets..................... (3,103) (168)
Names and reputations................................. 40,347 14,885
Current liabilities................................... (125) (790)
Deferred preneed funeral contract revenues............ (16,518) (12,383)
Long-term debt........................................ (48,052) (10,653)
Deferred cemetery costs............................... -- (5,018)
Deferred income taxes................................. (137) --
Common stock issued................................... (6,127) (3,367)
--------- ---------
Total.............................................. (1,485) 15,384
Less cash acquired................................. 317 774
--------- ---------
Cash (acquired from) used for acquisitions......... $ (1,802) $ 14,610
========= =========
</TABLE>
The following represents the unaudited pro forma results of operations for the
three months ended March 31, 1998 and 1997, assuming the above noted
acquisitions and exchange had occurred as of January 1, 1997:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1998 1997
- - ------------------------------------------------------------------------------
<S> <C> <C>
Net revenues.......................................... $ 49,788 $ 38,423
Net income............................................ 5,577 4,897
Earnings per common and equivalent share:
Basic............................................... $ 0.26 $ 0.24
========= =========
Diluted............................................. $ 0.25 $ 0.24
========= =========
</TABLE>
8
<PAGE>
3. PRENEED FUNERAL CONTRACTS AND DEFERRED PRENEED FUNERAL CONTRACT REVENUES
The Company sells preneed funeral contracts through various programs providing
for future funeral services at prices prevailing when the agreement is signed.
These contracts are included in the Consolidated Balance Sheet as Preneed
funeral contracts. Payments on these contracts are generally placed in trust
(pursuant to state law) or are used to pay premiums on life insurance policies
issued by third party insurers. When the services are performed, approximately
$113,281 and $104,523 will be funded by trusts and approximately $141,638 and
$131,368 will be funded by insurance policies as of March 31, 1998 and December
31, 1997, respectively. Accumulated earnings from trust funds and increasing
insurance benefits have been included to the extent that they have accrued
through March 31, 1998 and December 31, 1997, respectively. The cumulative
total has been reduced by allowable cash withdrawals for trust earning
distributions and amounts retained by the Company pursuant to various state
laws. At March 31, 1998 and December 31, 1997, the amounts collected and held
in trusts, at cost, which approximates market, were approximately $101,517 and
$93,900, respectively. The amounts in trusts and all life insurance policies
are generally transferred to the customer upon contract cancellation.
"Deferred preneed funeral contract revenues" includes the contract amount of
all price guaranteed funeral services and accumulated trust earnings and
increasing insurance benefits earned. The Company defers recognition of trust
earnings and insurance benefits until performance of the funeral service. Upon
performance of the funeral service, the Company will recognize the fixed
contract price and related accumulated trust earnings or increasing insurance
benefits as funeral service revenues.
4. DEBT
The Company maintains a revolving credit agreement with a group of banks that
provides for a $225,000 line of credit to be used for acquisition financing and
general corporate purposes. The Tranche A commitments under the Credit Facility
provide for $150,000 of borrowings outstanding at any one time expiring
September 2, 2002. The Tranche B commitments under the Credit Facility provide
for $75,000 of borrowings outstanding at any one time expiring September 1,
1998, subject to annual renewal options. Borrowings under the Credit Facility
bear interest, at the Company's option, at either (i) the prime rate or (ii)
the London Interbank Offered Rate plus an applicable margin, depending on the
Company's Leverage Ratio, as defined. In addition, the Company pays a
commitment fee on unused funds. The weighted average interest rates on amounts
borrowed under the Credit Facility were 6.63% and 6.83% at March 31, 1998 and
December 31, 1997, respectively. The Credit Facility contains customary
restrictive covenants requiring the Company to maintain certain financial
ratios, is guaranteed by substantially all of the Company's subsidiaries and is
collateralized by a pledge of stock of certain of the Company's subsidiaries.
The Credit Facility will permit the payment of dividends on the Company's
Common Stock only to the extent the Company maintains a specified net worth.
Balances outstanding under the Credit Facility totaled $68,168 and $156,700 at
March 31, 1998 and December 31, 1997, respectively.
In February 1998, the Company completed the private placement of $143,750
aggregate principal amount of 4.5% convertible subordinated debentures due 2004
(the "Debentures") including approximately $18,750 related to the exercise of
the over-allotment option granted by the Company to the underwriters. The
Debentures mature on December 31, 2004, are convertible into shares of the
Company's Common Stock at a conversion price of $27.09 per share and may not be
redeemed by the Company prior to February 26, 2001. The net proceeds to the
Company from this private placement were used to pay down the Credit Facility.
Selling commissions and related expenses incurred in connection with the
private placement have been deferred and are being amortized ratably over the
term of the Debentures.
9
<PAGE>
5. DISPOSITIONS
During January 1997, the Company acquired a cemetery from Service Corporation
International, a former significant stockholder of the Company, in exchange for
one of the Company's funeral home facilities. This was a strategic business
decision as the acquired cemetery is in close proximity to one of the Company's
existing funeral home facilities. In connection with the transaction, the
Company received consideration of $1,674, including $250 in cash, and
recognized a gain of approximately $750.
6. EARNINGS PER SHARE
The Company reports earnings per share in accordance with the provisions of
SFAS No. 128, "Earnings per Share". The prior year period has been restated to
conform to the new requirements. A reconciliation of the numerators and
denominators of the basic and diluted per-share computations for net income
follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
(In thousands, except per share data) 1998 1997
---------------------
<S> <C> <C>
Income (numerator)
Net income (Basic).................................. $ 5,442 $ 4,490
Effect of assumed conversion of
convertible debt.................................. 422 --
--------- ---------
Net income assuming conversion (Diluted) ........... $ 5,864 $ 4,490
========= =========
Shares (denominator)
Shares - Basic...................................... 21,167 20,089
Options............................................. 334 303
Convertible debt.................................... 1,991 --
Other............................................... 22 20
--------- ---------
Shares - Diluted.................................... 23,514 20,412
========= =========
Earnings per share:
Basic............................................... $ 0.26 $ 0.22
========= =========
Diluted............................................. $ 0.25 $ 0.22
========= =========
</TABLE>
The following items were excluded from the calculation of diluted earnings per
share for the three months ended March 31, 1998, because their effect on
earnings per share would have been antidilutive:
Options to purchase an aggregate 66,000 shares of common stock at exercise
prices ranging from $22.75 per share to $23.75 per share. The options,
which expire on dates ranging from May 2007, to December 2007, were still
outstanding at March 31, 1998.
A $2,200 principal amount 5.25% convertible subordinated note due January
29, 2008. This note is convertible into 74,074 shares of Common
Stock beginning January 29, 2000.
7. RECENT FASB PRONOUNCEMENTS
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130 "Reporting Comprehensive Income", effective January
1, 1998. Currently, the Company's components of comprehensive income consist of
net income and the foreign currency translation adjustment related to the
operations of the Company's Canadian subsidiaries. The Company has elected to
report comprehensive income within the statement of stockholders' equity as
permitted by SFAS No. 130.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company provides services and products in both the funeral home and
cemetery segments of the death care industry. The Company has a growth
strategy that emphasizes an aggressive acquisition program and the
implementation of revenue enhancement and cost-containment programs. As part of
this growth strategy, the Company maintains a separate corporate development
department headed by a senior management executive with substantial death care
experience. The department is responsible for identifying, evaluating,
negotiating and closing acquisitions of funeral homes and cemeteries. With the
Company's knowledge of non-metropolitan markets and experienced management
team, the Company believes that it is well positioned to take advantage of the
continuing consolidation trend in the death care industry. The Company's future
results of operations will depend in large part on the Company's ability to
continue to make acquisitions on attractive terms and to successfully integrate
and manage the acquired properties.
RESULTS OF OPERATIONS
The following is a discussion of the Company's results of operations for the
three month periods ended March 31, 1998 and 1997. For purposes of this
discussion, funeral homes and cemeteries owned and operated for the entirety of
each period being compared are referred to as existing operations.
Correspondingly, operations acquired or opened during either period being
compared are referred to as acquired operations. All dollar amounts are
reported in thousands unless otherwise indicated.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1997:
Total net revenues for the three months ended March 31, 1998 increased 46.3% to
$47,201 from $32,254 for the three months ended March 31, 1997. The increase
in net revenues reflects a $15,932 increase in net revenues attributable to
acquired operations and a $689, or 2.4% increase in net revenues from existing
operations. The substantial increase in net revenues from acquired operations
is due primarily to the full quarter results of the Company's 1997 acquisitions
and the partial quarter results of the 36 funeral homes acquired during the
three months ended March 31, 1998. The increase in net revenues from existing
operations is due primarily to increases in preneed sales at the Company's
cemetery operations. Included in net revenues for the three months ended March
31, 1997 are proceeds of $1,674 received in connection with the 1997
acquisition of a cemetery in exchange for one of the Company's funeral homes
Gross profit for the three months ended March 31, 1998 increased 45.2% to
$14,518 from $10,000 for the three months ended March 31, 1997. The increase
in gross profit is due primarily to a $4,758 increase attributable to acquired
operations and $510, or 5.7% increase from existing operations. The increase
in gross profit from existing operations was attributable to the increase in
preneed cemetery sales noted above, along with improvements in operational
efficiencies at both funeral home and cemetery operations. Included in gross
profit for the prior year quarter is a $750 gain recorded in connection with
the exchange noted above.
11
<PAGE>
FUNERAL HOME SEGMENT. The following table sets forth certain information
regarding the net revenues and gross profit of the Company from its funeral
home operations during the three months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three months
ended March 31, Change
(Dollars in thousands) 1998 1997 Amount Percent
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues:
Existing operations.................. $ 19,193 $ 19,351 $ (158) (0.8)%
Acquired operations.................. 13,599 1,098 12,501 *
------ ------ ------
Total funeral net revenues........ $ 32,792 $ 20,449 $ 12,343 60.4%
====== ====== ======
Gross profit:
Existing operations.................. $ 6,094 $ 5,921 $ 173 2.9%
Acquired operations.................. 3,909 234 3,675 *
------ ------ ------
Total funeral gross profit........ $ 10,003 $ 6,155 $ 3,848 62.5%
====== ====== ======
- - ------
*Not meaningful
Total funeral net revenues for the three months ended March 31, 1998 increased
60.4% to $32,792 from $20,449 for the prior year quarter, due primarily to the
full quarter results of the Company's 1997 acquisitions. The decrease in
revenues from existing operations is primarily attributable to a slight
decrease in the number of funeral services performed, offset in part by an
increase in the average revenue per funeral service performed.
Total funeral gross profit for the three months ended March 31, 1998 increased
62.5% to $10,003 from $6,155 for the three months ended March 31, 1997. Funeral
gross margin improved to 30.5% from 30.1% due to margin improvements achieved
from the Company's existing and acquired operations. Funeral gross margin at
existing operations improved to 31.8% from 30.6% for the prior year first
quarter due primarily to merchandising and cost containment programs initiated
by the Company in late 1997.
12
<PAGE>
CEMETERY SEGMENT. The following table sets forth certain information regarding
the net revenues and gross profit of the Company from its cemetery operations
during the three months ended March 31, 1998 and 1997.
</TABLE>
<TABLE>
<CAPTION>
Three months
ended March 31, Change
(Dollars in thousands) 1998 1997 Amount Percent
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues:
Existing operations.................. $ 10,728 $ 9,881 $ 847 8.6%
Acquired operations.................. 3,681 250 3,431 *
------ ------ ------
Total cemetery net revenues....... $ 14,409 $ 10,131 $ 4,278 42.2%
====== ====== ======
Gross profit:
Existing operations.................. $ 3,393 $ 3,056 $ 337 11.0%
Acquired operations.................. 1,122 39 1,083 *
------ ------ ------
Total cemetery gross profit....... $ 4,515 $ 3,095 $ 1,420 45.9%
====== ====== ======
- - ------
*Not meaningful
Total cemetery net revenues for the three months ended March 31, 1998 increased
42.2% to $14,409 from $10,131 for the prior year quarter, due primarily to the
full quarter results of the Company's 1997 acquisitions. Cemetery net revenues
attributable to existing operations for the three months ended March 31, 1998
increased 8.6% to $10,728 from $9,881 for the prior year quarter, due primarily
to increases in preneed sales. Cemetery gross margin at existing operations
increased to 31.6% from 30.9% in 1997 due to operating leverage off of fixed
costs, partially offset by increases in selling expenses associated with the
increase in preneed sales. Cemetery gross margin for the Company's 1997
cemetery acquisitions improved to 30.5% for the three months ended March 31,
1998, reflecting the success of programs initiated by management to
significantly reduce the maturation cycle of new acquisitions. Gross margin for
acquired operations have historically been lower than gross margin for the
Company's existing operations until they have been operated by the Company long
enough to fully implement the preneed marketing programs to leverage off of the
maintenance and fixed operating costs which start being incurred immediately
after acquisition.
General and administrative expenses for the three months ended March 31, 1998
increased $738, or 42.5% over the three months ended March 31, 1997. This
increase resulted primarily from increased personnel and travel costs
associated with the Company's continued growth. General and administrative
expenses as a percentage of net revenues, excluding the effects of the asset
exchange in 1997 noted above, decreased to 5.2% in the three months ended March
31, 1998 from 5.7% in the first quarter of 1997, reflecting increased economies
of scale as expenses are spread over a larger revenue base.
Interest expense for the three months ended March 31, 1998 increased to $3,123
from $781 for the three months ended March 31, 1997, due primarily to
significantly higher average debt levels. Average indebtedness outstanding for
the 1998 first quarter increased to $198.5 million from $46.0 million for the
same period in 1997 primarily as a result of acquisition activity coupled with
the use of approximately $13.0 million of funds received in connection with an
equity offering to pay down the Company's Credit Facility in the first quarter
of 1997.
The Company's effective tax rate for the three months ended March 31, 1998 was
39.0% compared to 40.0% for the first quarter of 1997. The Company expects the
effective tax rate for income generated in the remainder of 1998 will be
approximately 39.0%.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on cash flow from operations and third
party borrowings to finance its operations and on third party borrowings, the
issuance of notes payable and, in certain situations, the issuance of shares of
Common Stock to sellers of funeral homes and cemeteries to finance its
acquisition program. Recently acquired funeral homes typically generate
positive cash flow immediately following acquisition. In contrast, recently
acquired cemeteries typically generate negative cash flow during an
approximately three to nine month start-up period following the introduction of
an aggressive preneed cemetery sales effort, although in some cases this period
has exceeded nine months. This negative cash flow is typically offset by
positive cash flow from mature cemetery operations.
Cash and cash equivalents totaled $10.2 million at March 31, 1998, representing
an increase of $2.1 million from December 31, 1997. For the three months ended
March 31, 1998, net cash flow provided from operating activities was
approximately $4.6 million, cash used in investing activities totaled
approximately $2.6 million and cash provided from financing activities amounted
to approximately $0.2 million. Significant components of cash flow generated
from operating activities include net income adjusted for non-cash items
partially offset by an increase in receivables of $8.4 million primarily
attributable to a 37.3% increase in preneed cemetery sales which are usually
financed on an installment basis over 36 months. Significant components of cash
used in investing activities included capital expenditures of $4.6 million
related to, among other things, additions and improvements at several funeral
home facilities, the acquisition of professional vehicles and maintenance
equipment and upgrades to computer systems and peripheral equipment.
Significant components of cash provided by financing activities included (i)
$139.1 million of net proceeds received in February 1998 in connection with the
issuance of the Company's convertible subordinated debentures described below
and the use of these proceeds to pay down the Company's Credit Facility; and
(ii) borrowings of approximately $6.4 million which were used to extinguish
certain seller financed notes and for general corporate purposes.
Long-term debt, including current maturities, at March 31, 1998 totaled $224.9
million as compared to $172.2 million at December 31, 1997. The increase was
principally attributable to first quarter acquisition activity. Long-term debt
at March 31, 1998 consisted of $143.8 million of convertible subordinated
debentures, $68.2 million drawn under the Credit Facility and $12.9 million
owed under various notes payable to sellers of funeral homes and cemeteries.
In February 1998, the Company completed an underwritten private placement of
$143.8 million aggregate principal amount of 4.5% convertible subordinated
debentures (the "Debentures"), including approximately $18.8 million related to
the exercise of the over-allotment option granted by the Company to the
underwriters. The Debentures mature on December 31, 2004, are convertible into
shares of the Company's Common Stock at a conversion price of $27.09 per share,
and may not be redeemed by the Company prior to February 26, 2001. The net
proceeds from the private placement were used to pay down the Credit Facility.
Selling commissions and related expenses incurred in connection with the
private placement have been deferred and are being amortized ratably over the
term of the Debentures.
Borrowings under the Credit Facility bear interest, at the Company's option, at
either (i) the prime rate or (ii) the London Interbank Offered Rate plus an
applicable margin, depending on the Company's Leverage Ratio, as defined. The
weighted average interest rates on amounts borrowed under the Credit Facility
were 6.63% and 6.83% at March 31, 1998 and December 31, 1997, respectively. In
addition, the Company pays commitment fees on unused funds depending on the
Company's Leverage Ratio. The Tranche A commitments under the Credit Facility
provide for $150 million of borrowings outstanding at any one time expiring
September 2, 2002. The Tranche B commitments under the Credit Facility provide
for $75 million of borrowings outstanding at any one time expiring September 1,
1998, subject to annual renewal options. The Credit Facility contains customary
restrictive covenants, permits the payment of dividends only to the extent the
Company maintains a specified net worth and requires the Company to maintain
certain financial ratios. The Credit Facility is guaranteed by substantially
all of the Company's subsidiaries and is collateralized by a pledge of the
stock of certain of the Company's subsidiaries. At March 31, 1998, $156.8
million was available for borrowings under the Credit Facility. Any amounts
repaid under the Credit Facility are available for future borrowings under the
terms of the Credit Facility.
14
The Company currently expects to acquire funeral homes and cemeteries for
purchase prices aggregating approximately $150 to $160 million in 1998. The
Company anticipates that the consideration for future acquisitions will consist
of a combination of cash, long-term notes, the assumption of existing
indebtedness of the acquired businesses, and, in some cases, the issuance of
additional shares of the Company's Common Stock. In April 1998, the Company
filed, and had declared effective, a "shelf" registration statement for the
issuance of up to 2,500,000 shares of Common Stock, including shares previously
available under the Company's former acquisition shelf registration statement,
to be used in connection with future acquisitions. The Company anticipates
making routine capital expenditures of approximately $11 million in 1998. In
addition, the Company anticipates spending approximately $20 million over the
next 12 to 18 months for major construction and development projects, including
the construction of six new funeral homes, three of which will be built on
existing Company-owned cemetery property.
Management believes that cash flow from operations and the borrowing capacity
available under the Credit Facility as a result of the repayment of such
indebtedness with the net proceeds of the Debentures should be sufficient to
meet its anticipated capital expenditures and other operating requirements and
to substantially fund acquisitions through 1998. The Company continually
evaluates alternatives, including additional debt or equity financing, to
ensure adequate funding for its operations, including planned capital
expenditures and projected acquisitions. However, because future cash flows and
the availability of financing at terms favorable to the Company are subject to
a number of variables, such as the number, size and rate of acquisitions made
by the Company, there can be no assurance that the Company's capital resources
will be sufficient to fund planned future levels of capital expenditures and
acquisitions. Additional debt and equity financings may be required in
connection with future acquisitions. The availability of these capital sources
will depend on prevailing market conditions and interest rates and the then-
existing financial condition of the Company.
SEASONALITY
Although the deathcare business is relatively stable and fairly predictable,
the Company's results of operations may periodically fluctuate due to limited
seasonality. Revenues from the Company's funeral home operations tend to be
somewhat greater in the first and fourth quarters of each calendar year while
revenues from its cemetery operations tend to be somewhat greater in the second
and fourth quarters of each calendar year.
INFLATION
Inflation has not had a significant impact on the results of operations of the
Company during the last three years.
RECENT FASB PRONOUNCEMENTS
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130 "Reporting Comprehensive Income", effective January
1, 1998. Currently, the Company's components of comprehensive income consist of
net income and the foreign currency translation adjustment related to the
operations of the Company's Canadian subsidiaries. The Company has elected to
report comprehensive income within the statement of stockholders' equity as
permitted by SFAS No. 130.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Amendment No. 1 to the Amended and Restated Credit Agreement, dated
February 19, 1998, among the Company, the Banks named therein and
NationsBank of Texas, N. A., as Agent for the Banks.
10.2* - Registration Rights Agreement dated February 25, 1998 between the
Company and the Initial Purchasers (filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-3 (Reg. No. 333-50861)).
10.3* - Indenture dated February 25, 1998 between the Company and Bankers
Trust Company (filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-3 (Reg. No. 333-50861)).
27 - Financial Data Schedule
* Incorporated by reference to the indicated filing.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated January 26, 1998
in which the Company reported under Item 5 that it had issued a press
release reporting preliminary fourth quarter 1997 earnings and revised
expectations for 1998. No financial statements were filed.
The Company filed a Current Report on Form 8-K dated February 12, 1998
in which the Company reported under Item 5 that it had issued a press
release announcing the offering, through an underwritten private
placement, of $125 million aggregate principal amount of convertible
subordinated debentures due 2004.
The Company filed a Current Report on Form 8-K dated February 25, 1998
in which the Company reported under Item 5 that it had issued a press
release announcing the completion of the private placement of $125 million
aggregate principal amount of 4.5% convertible subordinated
debentures due 2004.
16
<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.
Date: May 15, 1998
EQUITY CORPORATION INTERNATIONAL
By: /s/ W. Cardon Gerner
------------------------
Senior Vice President
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
17
</TABLE>
AMENDMENT NO. 1
This Amendment No. 1 dated as of February 19, 1998 ("Agreement") is among
Equity Corporation International, a Delaware corporation ("Borrower"), the
banks party to the Credit Agreement described below ("Banks"), and NationsBank
of Texas, N.A., as Agent for the Banks ("Agent").
INTRODUCTION
A. The Borrower, Agent and the Banks are parties to the Amended and Restated
Credit Agreement dated as of September 2, 1997 (as the same may be amended,
modified or supplemented from time-to-time, the "Credit Agreement").
B. The Borrower, the Agent and the Banks wish to amend certain provisions
contained in the Credit Agreement.
THEREFORE, the Borrower, the Agent and the Banks hereby agree as follows:
Section 1. Definitions; References. Unless otherwise defined in this
Agreement, each term used in this Agreement which is defined in the Credit
Agreement has the meaning assigned to such term in the Credit Agreement.
Section 2. Amendments. The Credit Agreement shall be amended as follows:
(a) Definition of Credit Documents. The definition of "Credit Documents"
contained in Section 1.01 shall be amended by deleting the phrase "Pledge
Agreement" and replacing it with the phrase "Pledge Agreements".
(b) Definition of Restricted Payments. The definition of "Restricted
Payments" contained in Section 1.01 shall be deleted and replaced with the
following:
"Restricted Payment" means (a) the declaration or making by the Borrower
or any of its Subsidiaries of any dividends or other distributions (in
cash, property, or otherwise) on, or any payment for the purchase,
redemption or other acquisition of, any shares of any capital stock (or
other ownership interests) of such Person, other than dividends payable in
such Person's stock or other ownership interests, as applicable, (b) the
making by the Borrower or any of its Subsidiaries of any payment
(scheduled or otherwise) in respect of Subordinated Debt, whether for
principal, interest, fees, indemnities or any other amount (except that
the conversion of any Subordinated Debt into common stock of the Borrower
or the issuance by the Borrower of shares of its common stock in exchange
for the extinguishment of amounts owing in respect of Subordinated Debt
shall not constitute a "Restricted Payment"), and (c) any defeasance or
covenant defeasance by the Borrower or any of its Subsidiaries in respect
of Subordinated Debt of such Person.
(c) Definition of Subordinated Debt. The definition of "Subordinated Debt"
contained in Section 1.01 shall be deleted and replaced with the following new
definition:
"Subordinated Debt" means (a) the Subordinated Notes and (b) all other
Debt of the Borrower that (i) is debt for borrowed money, (ii) is
unsecured, (iii) has no recourse to any of the Subsidiaries of the
Borrower (whether through a guaranty executed by any such Subsidiary, a
pledge of assets by such Subsidiary or otherwise), and (iv) is
subordinated on terms that are acceptable to the Agent and the Majority
Banks.
(d) New Definitions. The following new definitions are added to Section 1.01
in alphabetical order:
"Indenture" means the Indenture dated February 25, 1998 providing for the
issuance by the Borrower of the Subordinated Notes.
"Subordinated Notes" means the 4.5% Convertible Subordinated Debentures
due 2004 issued by the Borrower (including any such Convertible
Subordinated Debentures issued as a result of the exercise of any over-
allotment option) in an aggregate principal amount not to exceed
$143,750,000.
(e) Section 3.02. Section 3.02 is amended by deleting the phrase "Pledge
Agreement" in clause (a)(i) and replacing it with the phrase "Pledge
Agreements".
(f) Section 6.02. Section 6.02 is amended by deleting the amount
"$125,000,000" in clause (i) of such Section and replacing it with the amount
"$143,750,000."
(g) Section 6.05. Section 6.05 is amended by deleting such Section and
replacing it with the following:
Section 6.05. Restricted Payments. Neither the Borrower nor any of its
Subsidiaries shall make any Restricted Payments except that (a) the
Subsidiaries of the Borrower may make Restricted Payments to the Borrower
and other Subsidiaries of the Borrower, (b) so long as no Default exists
or would result from the making of such Restricted Payment, the Borrower
may (i) pay dividends to its shareholders in respect of its capital
stock, (ii) pay scheduled payments of interest and principal in respect of
Subordinated Debt, and (iii) redeem the Subordinated Notes with either
additional Subordinated Debt or equity, and (c) so long as no Default
exists or would result from the making of such Restricted Payment, the
Subsidiaries of the Borrower may make Restricted Payments to an Unrelated
Person (as defined in Section 6.10) and may purchase, redeem or otherwise
acquire any shares of capital stock or other ownership interests of a
Subsidiary held by such Unrelated Person.
(h) Section 6.10. Section 6.10 is amended by adding the following new
sentence to the end of Section 6.10:
Notwithstanding any of the foregoing to the contrary, nothing in this
Section 6.10 shall prohibit a Person that is neither the Borrower nor a
Subsidiary of the Borrower (such Person being an "Unrelated Person") from
owning a portion of the capital stock of any Subsidiary of the Borrower
except ECI Services, Inc., ECI Cemetery Services, Inc. and ECI Capital
Corporation ("ECI Entity") if such ownership by such Unrelated Party is,
in the good faith determination of the Borrower, necessary or desirable to
enable the Borrower or one of its Subsidiaries to maintain its ownership
interest in the ECI Entity, or enable the ECI Entity to continue to own
and legally operate its business or continue to legally conduct such
business under the name currently in use.
(i) Section 6.14. The following new Section 6.14 is added to the Credit
Agreement:
Section 6.14. Subordinated Debt. The Borrower shall not amend, modify or
supplement, or permit any Subsidiary to amend, modify or supplement (or
consent to any amendment, modification or supplement of), any document,
agreement or instrument evidencing, or existing in connection with, the
Subordinated Debt (or any replacements, substitutions or renewals
thereof), and including, without limitation, the Subordinated Notes and
the Indenture, or make any payment required as a result of such an
amendment, modification or supplement, where such amendment, modification
or supplement provides for the following or which has any of the following
effects:
(i) increases the overall principal amount of the Subordinated Debt or
increases the amount of any single scheduled installment of principal or
interest;
(ii) shortens or accelerates the date upon which any installment of principal
or interest becomes due or adds any additional mandatory redemption
provisions;
(iii) shortens the final maturity date of the Subordinated Debt or otherwise
accelerates the amortization schedule with respect thereto;
(vi) amends or modifies any financial or negative covenant (or covenant which
prohibits or restricts the Borrower or a Subsidiary of the Borrower from
taking certain actions) in a manner which is more onerous or more restrictive
to the Borrower (or any Subsidiary of the Borrower) or which is otherwise
materially adverse to the Borrower or the Banks or, in the case of adding
covenants, which places additional restrictions on the Borrower (or a
Subsidiary of the Borrower) or which requires the Borrower or any such
Subsidiary to comply with more restrictive financial ratios or which requires
the Borrower to better its financial performance from that set forth in the
existing financial covenants;
(vii) amends, modifies or adds any affirmative covenant in a manner which,
when taken as a whole, is materially adverse to the Borrower or the Banks; or
(viii) amends or modifies in any manner either (A) the definitions of "Change
of Control" or "Senior Secured Indebtedness" contained in the Indenture or (B)
any of the subordination provisions contained in Article V of the Indenture.
Section 3. Representations and Warranties. The Borrower represents and
warrants to the Agent and the Banks that:
(a) The representations and warranties set forth in the Credit Agreement and
in the other Credit Documents are true and correct in all material respects as
of the date of this Agreement;
(b) The execution, delivery and performance of this Agreement are within the
corporate power and authority of the Borrower and have been duly authorized by
appropriate proceedings and (ii) this Agreement constitutes a legal, valid,
and binding obligation of the Borrower enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the rights of creditors generally and
general principles of equity; and
(c) As of the effectiveness of this Agreement, no Default or Event of Default
has occurred and is continuing.
Section 4. Effectiveness. This Agreement shall become effective as provided
herein upon satisfaction of the following conditions precedent:
(a) the Borrower, the Agent and the Banks shall have duly and validly
executed originals of this Agreement;
(b) the Agent and the Banks shall have received duly executed originals in
form and substance satisfactory to the Agent and the Banks of (i) the Pledge
Agreement in the form of the attached Exhibit A ("Pledge Agreement") providing
for the pledge by the Borrower of 51% of the outstanding shares of ECI
Services, Inc. and 51% of the outstanding shares of ECI Cemetery Services,
Inc. (collectively, the "Pledged Shares"); (ii) stock certificates evidencing
the Pledged Shares together with stock powers with respect to such Pledged
Shares executed in blank; (iii) any UCC-1 financing statements required in
connection with the perfection of the security interests granted under the
terms of the Pledge Agreement executed by the Borrower; (iv) (A) certified
copies of the resolutions of the Board of Directors of the Borrower approving
the Pledge Agreement and each other agreement executed in connection
therewith, and of the articles or certificate of incorporation and bylaws of
the Borrower (or a certification that such articles or certificate of
incorporation or bylaws have not been amended or modified since the date of
the Credit Agreement), and all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Agreement and
each other agreement executed in connection herewith, and (B) certificates of
good standing, existence and authority for each of the Borrower; and (v) a
certificate of the Secretary or an Assistant Secretary of the Borrower dated
as of the date of this Agreement certifying the names and true signatures of
officers of the Borrower authorized to sign this Agreement and the other
Credit Documents executed in connection herewith; and
(c) the Agent and the Banks shall have received certified copies of the
Indenture and the Offering Memorandum executed and delivered in connection
with the issuance of the Convertible Subordinated Debentures.
Section 5. Choice of Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas.
Section 6. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original.
THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THE CREDIT
AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 19th day of February, 1998.
BORROWER:
EQUITY CORPORATION INTERNATIONAL
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
BANKS:
NATIONSBANK OF TEXAS, N.A.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
SOCIETE GENERALE,
SOUTHWEST AGENCY
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
THE SUMITOMO BANK, LIMITED
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
WELLS FARGO BANK, (TEXAS)
NATIONAL ASSOCIATION
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
CIBC INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
TORONTO-DOMINION (TEXAS), INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
BANK OF AMERICA TEXAS, N.A.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
CORESTATES BANK, N.A.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
COOPERATIVE CENTRALE RAIFFEISEN
BOERENLEENBANK, N.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
BANQUE PARIBAS
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AND INCOME STATEMENT AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 10,167
<SECURITIES> 0
<RECEIVABLES> 18,448
<ALLOWANCES> 2,617
<INVENTORY> 9,921
<CURRENT-ASSETS> 42,603
<PP&E> 127,076
<DEPRECIATION> 15,931
<TOTAL-ASSETS> 804,081
<CURRENT-LIABILITIES> 20,102
<BONDS> 224,045
0
0
<COMMON> 214
<OTHER-SE> 238,050
<TOTAL-LIABILITY-AND-EQUITY> 804,081
<SALES> 21,201
<TOTAL-REVENUES> 47,201
<CGS> 6,749
<TOTAL-COSTS> 32,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 420
<INTEREST-EXPENSE> 3,123
<INCOME-PRETAX> 8,922
<INCOME-TAX> 3,480
<INCOME-CONTINUING> 5,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,442
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
</TABLE>
