SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2000
EQUIVEST FINANCE, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-29015 59-2346270
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
100 NORTHFIELD STREET
GREENWICH, CONNECTICUT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 422-9088
INFORMATION TO BE INCLUDED IN REPORT
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Press Release
EQUIVEST FINANCE ANNOUNCES
RECORD FIRST QUARTER REVENUES
AND EARNINGS; EARNINGS PER SHARE
INCREASE 50%
Greenwich, Connecticut (Business Wire) - May 9, 2000 - Equivest Finance,
Inc. (NASDAQSC:EQUI) announced today its financial results for the first quarter
ended March 31, 2000. The Company set all-time records for first quarter
performance in revenues, net income and earnings per share. Equivest provides
high quality vacation ownership opportunities to its approximately 75,000 owners
at 29 resorts located on the eastern and Gulf coasts of the United States and in
St. Thomas, USVI. Equivest also operates a specialty finance company providing
financing to independent resort developers and their customers.
For the quarter ended March 31, 2000, revenues rose 224% to a record $38.2
million, compared with $11.8 million in the comparable quarter in 1999. Net
income for the first quarter of 2000 increased 68% to $2.7 million, compared
with $1.6 million in the comparable period in 1999. Diluted earnings per share
in the first quarter of 2000 rose 50% to $0.09 on 28.4 million weighted average
shares outstanding compared with earnings per share of $0.06 during the
comparable 1999 period on 25.8 million weighted average shares outstanding.
Total assets as of March 31, 2000 were $425.5 million, an increase of 57%
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compared with $271.7 million at March 31, 1999. Total capital at March 31, 2000
was $78.0 million, an increase of 37% from $57.1 million at March 31, 1999. The
growth in assets and net worth as of March 31, 2000 reflects two acquisitions
during 1999, as well as the Company's operating results during the year then
ended. These acquisitions were the purchase of six resorts and other assets from
the Kosmas Group International, Inc. ("KGI"), and the acquisition by merger of
Peppertree Resorts, Ltd. and certain affiliated companies ("Peppertree"), both
as previously reported.
During the first quarter of 2000, sales of vacation ownership intervals
("VOI's") increased 354% to $22.4 million, or 59% of total revenues, from $4.9
million for the same period in 1999. Interest income was $9.4 million, or 25% of
total revenues, an increase of 70% compared to $5.5 million for the first
quarter of 1999. Resort management operations generated $5.8 million in revenue,
representing 15% of total revenues, an increase of 470% compared to $1.0 million
for the first quarter of 1999.
During the first quarter, the cost of VOI sales rose to 24.2% from 23.8%
in the comparable period in 1999. Sales and marketing costs rose to 49.9% of VOI
sales for the first quarter 2000, compared with 42.9% for the prior year period,
but down from 57.7% in the fourth quarter of 1999. The Company increased
provisions for doubtful receivables to 8% of VOI sales in the first quarter of
2000 compared with 5.8% in the first quarter of 1999. Interest expense as a
percent of interest income increased to 64.6% in the first quarter of 2000 from
40.2% in the comparable period in 1999, reflecting greater levels of outstanding
indebtedness. Resort operations expense as a percent of resort management
revenues fell to 68.9% in 2000 from 86.6%
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in the first quarter of 1999. First quarter 2000 general and administrative
expense fell to 10.4% of total revenues from 11.9% in first quarter 1999.
The company's loan receivable portfolio grew 51% to $264.1 million for the
quarter ended March 31, 2000, compared with $174.3 million as of March 31, 1999.
Of this amount, $126.0 million represented receivables relating to VOI purchases
in the Company's own resorts, $120.2 million represented receivables relating to
consumer loans at third party developer resorts, and the balance represented
acquisition and development loans. At March 31, 2000, the Company maintained
total portfolio reserves and over collateralization of $33.5 million, up 34%
from $25.0 million at March 31, 1999. However, total reserves and over
collateralization as a percentage of the total loan portfolio shrank from 14.3%
at March 31, 1999 to 12.7% at March 31, 2000. The allowance for doubtful
accounts included in total reserves was $10.0 million at March 31, 2000, up 103%
compared with $4.9 million at March 31, 1999. This increase reflects additions
relating to the KGI and Peppertree transactions and their related portfolios, as
well as the Company's normal provisioning policies. As of March 31, 2000 the
Company's Reserve Coverage Ratio (RCR) of total reserves and over
collateralization to all consumer receivables over 60 days past due was 5.2
times on the entire consumer loan portfolio, and the RCR on all consumer
receivables over 90 days past due was 10.4 times on the entire consumer loan
portfolio.
On third party developer consumer notes receivables, the Company has a
right to put, or charge back, defaulted receivables to the developer once any
such receivable becomes 60 or more days past due. During the first quarter of
2000, the Company charged back to developers loans with an outstanding principal
balance of $1.5 million, while in the first quarter of 1999, the Company
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charged back loans with an outstanding principal balance of $1.7 million. Such
chargebacks during the first quarter of 2000 fell to 1.4% of total third party
consumer loans as of March 31, 2000, from 1.7% during the quarter ended March
31, 1999. Other than minimal processing expenses, the Company did not incur any
loss on such charge backs.
At March 31, 2000, approximately 94.9% of total notes receivable in the
Company's consumer loan portfolio were current, 2.5% were 30-60 days, 1.3% were
61-90 days, and 1.3% were over 91 days past due. At March 31, 2000, there were
583 notes with a principal balance of $3.2 million that were over 91 days past
due. Of that amount, $2.1 million were notes relating to consumer receivables in
the Company's own resorts, and $1.1 million were notes relating to third party
developers. During the first quarter of 2000 the Company wrote off 392 consumer
notes with an outstanding principal balance of $1.9 million. With limited
exceptions, the Company services the loans in its portfolio internally, using
its own personnel and the facilities of its wholly-owned subsidiary Resort
Funding, Inc., although loans currently owned by Peppertree are the subject of
outsourcing arrangements for collection services.
During the first quarter of 2000, the Company sold approximately 2,110
VOI's at an average price of approximately $10,550, compared with 485 VOI's
during the first quarter of 1999 at an average price of approximately $10,170.
As of March 31, 2000, the company held approximately 25,577 unsold VOI's in
inventory, representing more than $265 million in potential gross sales proceeds
at the current average sales price as of March 31, 2000.
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Richard C. Breeden, Chairman, President and Chief Executive Office of
Equivest commented: "This was the Company's strongest-ever first quarter, with a
50% jump in earnings per share and records for first quarter revenue and net
income. Costs fell and margins improved from the fourth quarter of 1999, and we
continue to work on further opportunities to reduce sales and marketing expense
levels, and to increase overall margins."
Certain statements in this press release are forward-looking. They may be
identified by the use of forward-looking words or phrases such as "believe,"
"expect", "anticipate," "should," "planned," "estimated," and "potential." These
forward-looking statements are based on the Company's current expectations. The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
such forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause actual results
and experience to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development, and
results of the Company's businesses include a downturn in the real estate cycle,
lack of available qualified prospects to tour the Company's resorts, competition
from other developers, lack of appropriate sites for future developments,
failure to complete construction in a timely and cost-efficient manner, or other
factors which result in lower sales of vacation ownership interests, possible
financial difficulties of one or more of the developers with whom the Company
does business, including the risk of carrying non-performing assets or losses if
defaulted loans prove to have insufficient collateral backing, fluctuations in
interest rates, prepayments by consumers or indebtedness, inability of
developers to honor replacement obligations for defaulted consumer notes, and
competition from organizations with greater financial resources.
For Information Contact:
Gerald L. Klaben, Jr., Chief Financial Officer (203) 618-0065
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EQUIVEST FINANCE, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
March 31, 2000 December 31,
-------------- ------------
ASSETS (Unaudited) 1999
- ------------------------------------------------------------ ----------- ----
Cash and cash equivalents $ 2,066 $ 8,011
Receivables, net 252,477 247,082
Investment in real estate joint venture 4,416 4,416
Inventory 87,658 87,925
Property and equipment, net 17,828 18,123
Goodwill, net 41,049 41,374
Other assets 20,035 10,055
--------- ---------
Total Assets $ 425,529 $ 416,986
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------
LIABILITIES
Accounts Payable and Other Liabilities:
Accounts payable $ 9,486 $ 6,288
Accrued expenses and other liabilities 23,911 20,833
Taxes payable 748 5,609
Deferred income taxes 19,726 19,536
--------- ---------
Total Accounts Payable and Other Liabilities 53,871 52,266
--------- ---------
Notes payable 293,630 289,358
--------- ---------
Total Liabilities 347,501 341,624
--------- ---------
STOCKHOLDERS' EQUITY
Cumulative Redeemable Preferred Stock--Series 2 Class
A,
$3 par value; 15,000 shares authorized, 10,000 shares
Issued and outstanding 30 30
Common Stock, $.01 par value; 50,000,000 shares
authorized, 28,089,722 shares outstanding in 2000 and
28,089,722 outstanding in 1999
281 281
Additional paid-in capital 62,246 62,246
Retained earnings 15,471 12,805
--------- ---------
Total Stockholders' Equity 78,028 75,362
--------- ---------
Total Liabilities and Stockholders' Equity $ 25,529 $ 416,986
========= =========
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================================================================================
EQUIVEST FINANCE, INC. and SUBSIDIARIES
UNAUDITED
Consolidated Statement of Income
(Dollars in thousands, except share data)
Three months ended
March 31,
2000 1999
---- ----
Revenues:
Timeshare interval sales $ 22,405 $ 4,932
Interest 9,365 5,521
Resort operations(1) 5,810 1,020
Other income 585 290
Total revenues 38,165 11,763
Expenses:
Provision for doubtful accounts 1,783 435
Interest 6,049 2,221
Cost of timeshare intervals sold 5,418 1,174
Depreciation and amortization 1,153 748
Sales and marketing 11,176 2,118
Resort management(1) 4,003 883
General and administrative 3,967 1,396
Total expenses 33,549 8,975
Income before provision for taxes 4,616 2,788
Provision for income taxes 1,950 1,200
Net income $ 2,666 $ 1,588
Basic earnings per share $ 0.09 $ 0.06
Diluted earnings per share $ 0.09 $ 0.06
================================================================================
(1) Certain amounts from prior year have been reclassified to conform to
current year classifications.
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EQUIVEST FINANCE, INC. and SUBSIDIARIES
Selected Financial Data as a Percentage of Total Revenues
Three months ended
March 31,
2000 1999
---- ----
(unaudited) (unaudited)
Revenues:
As a percentage of total revenues:
Timeshare interval sales 58.6% 41.8%
Interest 24.6% 46.9%
Resort operations 15.2% 8.8%
Other income 1.6% 2.5%
----- -----
Total revenues 100.0% 100.0%
Expenses:
As a percentage of VOI sales:
Cost of timeshare intervals sold 24.2% 23.8%
Sales and marketing 49.9% 42.9%
Provision for doubtful accounts (1) 8.0% 5.8%
As a percentage of interest income:
Interest 64.6% 40.2%
As a percentage of resort operations:
Resort management 68.9% 86.6%
As a percentage of total revenues:
Provision for doubtful accounts (2) 0.0% 1.3%
Depreciation and amortization 3.0% 6.4%
General and administrative 10.4% 11.9%
----- -----
Total expenses 87.9% 76.3%
----- -----
Income before taxes 12.1% 23.7%
Provision for income taxes 5.1% 10.2%
----- -----
Net income 7.0% 13.5%
(1) Based on provision for doubtful receivables recorded on timeshare
development.
(2) Based on provision for doubtful receivables recorded on timeshare
financing.
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EQUIVEST FINANCE, INC. and SUBSIDIARIES
Selected Financial Data
(Dollars in thousands)
March 31, March 31,
2000 1999
---- ----
A&D loans $ 24,999 $ 28,141
Purchased receivables 85,938 93,139
Hypothecation loans 19,258 9,365
Consumer loans, owned 126,001 39,197
Other loans 7,877 4,492
--------- ---------
Total loans outstanding $ 264,073 $ 174,334
Specific reserves $ 18,163 $ 18,118
General reserves 10,014 4,929
Overcollateralization 5,365 1,941
--------- ---------
Total reserves and
overcollateralization $ 33,542 $ 24,988
Total reserves and
overcollateralization as % of
total loans 12.7% 14.3%
Chargebacks 1,547 2,119
Chargebacks as % of Consumer
Financings (1) 1.5% 2.1%
Allowance for doubtful accounts,
beginning of period $ 10,073 $ 3,835
Provision for loan losses 1,783 435
Allowance related to an acquisition -0- 832
Charges to allowance for doubtful
accounts (1,863) (173)
Charges against Specific developer
reserves 21 -0-
--------- ---------
Allowance for doubtful accounts, end of period $ 10,014 $ 4,929
(1) Consumer Financing includes Purchased receivables and Hypothecation loans.
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SIGNATURES
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 hereunto duly authorized.
EQUIVEST FINANCE, INC.
Date: May 10, 2000 By: /s/
---------------------------------
Name: Richard G. Winkler, Senior VP,
Title: Secretary and General Counsel
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