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 17, 1999
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 RESULTS -
Pretax Earnings Increase 32% on
Revenue Increase of 156%
Greenwich, Connecticut (Business Wire) - May 17, 1999 - Equivest Finance, Inc.
(NASD:EQUI) today reported financial results for the first quarter ended March
31, 1999.
First quarter pretax income increased 32% to a record $2.8 million,
compared with $2.1 million in the first quarter of 1998. Revenues increased 156%
to a record $13.0 million for the first quarter of 1999, compared with $5.1
million in the first quarter of 1998. None of the reported earnings or revenues
resulted from gains on the sale of loans or other receivables. EBITDA for the
first quarter of 1999 was $5.6 million, up 37% from $4.1 million in the first
quarter of 1998.
Net income for the first quarter was $1.59 million, with earnings per
share of $.06 diluted on 25.8 million weighted average outstanding shares. Net
income in the first quarter of 1998 was $1.45 million, or earnings per share of
$.06 diluted on 22.3 million weighted average outstanding shares. During the
first quarter of 1998, the company's effective rate of federal income taxation
was significantly lower than the first quarter of 1999 due to the impact of
utilization of net operating loss carryforwards in 1998.
The operating results reported today have not been materially affected by
Equivest's acquisition of six resorts and other assets from The Kosmas Group
International, Inc., as this acquisition closed immediately prior to the end of
the reporting period. However, the balance sheet reported today reflects the
assets and liabilities acquired as part of the Kosmas transaction. Total assets
increased $74.4 million to $271.7 million at March 31, 1999, up 38% compared
with December 31, 1998, and up 99% compared with $136.9 million at March 31,
1998. Total net worth increased $3.5 million to $57.1 million at March 31, 1999,
up 7% compared with December 31, 1998, and up 68% compared with $34.0 million at
March 31, 1998.
On a proforma basis, if the financial results of the company had included
the results of the acquired Kosmas resorts since January 1, 1999, revenues for
the first quarter would have been $23.8 million, up 83% from the Company's
actual first quarter 1999 revenues. Pro
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forma revenues would have been up 367% from actual revenues in the first quarter
of 1998. Proforma pretax income for the first quarter of 1999 would have been
$3.1 million, up 10% from the actual 1999 first quarter pretax income. Proforma
pretax income was up 46% from actual 1998 first quarter pretax income.
Net income on a pro forma basis for the first quarter of 1999 would have
been $1.8 million, up 11% from actual 1999 first quarter net income, and up 21%
from actual 1998 first quarter net income, which benefited from a lower
effective tax rate. Earnings per share pro forma fully diluted would have been
$.06, compared with $.06 actual for the first quarter. The lower rate of
increase represented by pro forma pretax income compared with pro forma revenues
reflects the fact that the Kosmas organization was in a distress situation prior
to the sale of the acquired resorts to the Company. Management of the resorts
during the pro forma period was under the Kosmas cost structure and management
organization for all but five days of the first quarter. The Company expects
that its lower cost structure and management will positively impact the margins
of the acquired resorts in the future, but there is no assurance that this will
take place, or of how much time will be required to achieve the necessary
operating improvements.
The Company's loan portfolio increased $32.5 million, or 23%, to $174.3
million at March 31, 1999, compared with $141.8 million in the prior year. Loan
originations rose 36% to $26.4 million for the first quarter of 1999, compared
with $19.4 million for the comparable period in 1998. Interest income remained
the single largest component of revenue in the first quarter of 1999, but fell
as a percentage of revenue from 94% in the first quarter of 1998 to 42.4% in the
first quarter of 1999. This resulted from the addition of Eastern Resorts
Corporation's ("ERC") Vacation Ownership Interval ("VOI") sales and resort
management revenue, which did not exist during the first quarter of 1998, but
which represented 38% and 18% of revenues in the first quarter of 1999,
respectively.
Total VOI sales were $4.9 million for the first quarter, compared with
zero in the year earlier period. These sales result from the acquisition in
August, 1998 of ERC. ERC had VOI sales of $2.7 million in the first quarter of
1998. Thus, VOI sales during the first quarter of 1999 were up 82% compared with
ERC's sales in the year earlier period. VOI sales by Equivest during the fourth
quarter of 1998, which was the first full quarter following the acquisition of
ERC, were $3.5 million. VOI sales in the quarter ended March 31, 1999 rose $1.4
million (or 43%) compared with the previous quarter ended December 31, 1998.
Richard C. Breeden, Chairman, President and Chief Executive Officer of
Equivest commented: "This is the ninth consecutive quarter in which Equivest has
posted quarterly year-on-year increases in pretax profit, with each quarter
showing a minimum increase of 30% over the year earlier quarter. During the
first quarter of 1999 we continued this trend and also set a new record level of
both profitability and revenues. During the quarter, we also acquired six new
resorts that added finished VOI inventory with a gross sales value of more than
$175 million to the company. We are delighted to add the many employees of the
new resorts to our company, and to welcome their owners to the Equivest family
of resorts. We are now
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engaged in an active effort to restructure the operations at the acquired
properties, which have been effected by the difficulties of their former parent
organization. Over time, we will seek to increase their margins in line with
their potential, and with those of our other resorts."
Equivest now provides high quality vacation opportunities at 13 locations
in Rhode Island, Massachusetts, Maryland, Florida, Louisiana and the U.S. Virgin
Islands. In the future, the Company plans to construct a new resort on land that
it owns on Pennsylvania Avenue in Washington, D.C., and possibly, to expand to
other locations as opportunities warrant. There are more than 23,000 owners of
intervals in Equivest's resorts, and Equivest has more than 26,000 finished VOI
intervals currently available for sale. Equivest also finances the construction
of resorts by independent developers and consumer purchases of VOI's. Through
its finance arm, Equivest also currently finances more than 23,000 consumer
customers who own intervals in more than 65 resorts in the U.S., Canada, Europe
and the Caribbean.
Certain statements in this press release are forward-looking. These 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 of indebtedness, inability of
developers to honor replacement obligations for defaulted consumer notes, and
competition from organizations with greater financial resources.
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EQUIVEST FINANCE, INC. AND SUBSIDIARIES
(UNAUDITED)
COMPARATIVE CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
ASSETS March 31, 1999 December 31, 1998
-------------- -----------------
Cash and cash equivalents $ 4,404 $ 3,487
Receivables, net 156,223 142,326
Investment in real estate joint venture 3,699 2,971
Inventory 60,126 10,361
Deferred financing costs, net 3,272 3,756
Cash - restricted 1,294 1,422
Accrued interest receivable 1,215 971
Property and equipment, net 10,638 3,048
Goodwill, net 27,075 27,247
Stock registration costs 1,610 1,480
Other assets 2,190 315
-------- --------
Total Assets $271,746 $197,384
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 6,300 $ 2,213
Accrued expenses and other liabilities 10,552 3,985
Taxes payable 4,824 1,994
Deferred income taxes 2,569 2,569
Notes payable 190,446 133,117
-------- --------
Total Liabilities 214,691 143,878
-------- --------
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Cumulative Redeemable Preferred Stock--Series 2
Class A, $3 par value; 15,000 shares
authorized, 10,000 shares Outstanding 30 30
Common Stock, $.01 par value; 50,000,000 shares
authorized, 25,688,351 shares issued and
outstanding in 1999, and 25,198,351 shares
issued and outstanding in 1998 257 252
Additional paid-in capital 51,071 49,115
Retained earnings 5,697 4,109
-------- --------
Total Preferred and Common Stock and Other
Capital 57,055 53,506
-------- --------
Total Liabilities and Stockholder's Equity $271,746 $197,384
======== ========
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EQUIVEST FINANCE, INC. AND SUBSIDIARIES
(UNAUDITED)
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except share data)
3 Months Ended March 31,
1999 1998
---- ----
REVENUE
Interest $ 5,521 $ 4,769
Timeshare interval sales 4,932 -0-
Resort operations 2,271 -0-
Other income 290 314
------------ ------------
Total Revenue 13,014 5,083
------------ ------------
COSTS AND EXPENSES
Interest 2,221 1,653
Cost of timeshare intervals sold 1,174 -0-
Sales and marketing 2,118 -0-
Resort management 2,133 -0-
Depreciation and amortization 748 341
Provision for doubtful receivables 435 225
General and administrative 1,396 757
------------ ------------
Total Costs and Expenses 10,225 2,976
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,789 2,107
PROVISION FOR INCOME TAXES 1,200 655
------------ ------------
NET INCOME $ 1,589 $ 1,452
============ ============
Earnings Per Common Share
Weighted average shares outstanding 25,203,795 21,845,505
Fully diluted average shares outstanding 25,767,809 22,302,392
Net income $ 1,589 $ 1,452
Preferred stock dividend requirement (150) (151)
------------ ------------
Net income after preferred stock dividends $ 1,439 $ 1,301
============ ============
Primary earnings per share $ 0.06 $ 0.06
============ ============
Fully diluted earnings per share $ 0.06 $ 0.06
============ ============
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EQUIVEST FINANCE, INC. AND SUBSIDIARIES
(UNAUDITED)
Selected Financial Data as a Percentage of Total Revenues
Three months ended
March 31
1999 1998
------ ------
Revenue:
Interest 42.4% 93.8%
Timeshare interval sales 37.9 --
Resort operations 17.5 --
Other income 2.2 6.2
------ ------
Total revenue 100.0% 100.0%
Expenses:
Interest 17.1% 32.5%
Cost of timeshare intervals sold 9.0 --
Sales and marketing 16.3 --
Resort management 16.4 --
Depreciation and amortization 5.7 6.7
Provision for doubtful accounts 3.3 4.4
General and administrative 10.8 14.9
------ ------
Total expenses 78.6% 58.5%
------ ------
Income before taxes 21.4% 41.5%
Provision for income taxes 9.2% 12.9%
------ ------
Net income 12.2% 28.6%
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EQUIVEST FINANCE, INC. AND SUBSIDIARIES
(UNAUDITED)
Selected Financial Data
(Dollars in Thousands)
March 31, March 31,
1999 1998
A&D Loans $ 28,141 $ 46,337
Purchased receivables 93,139 84,178
Hypothecation loans 9,365 10,370
Consumer loans, owned 39,197 -0-
Other loans 4,492 941
--------- ---------
Total loans outstanding $ 174,334 $ 141,826
Specific reserves $ 18,118 $ 16,308
General reserves 4,929 2,667
Overcollateralization 1,941 1,869
--------- ---------
Total reserves and overcollateralization $ 24,988 $ 20,844
Total reserves and overcollateralization as
% of total loans 14.3% 14.7%
Chargebacks (2) 2,119 1,612
Chargebacks as a % of Consumer Financing (1)(2) 2.1% 1.7%
Allowance for doubtful accounts, beginning of year $ 3,835 $ 2,442
Provision for loan losses 435 225
Allowance related to the Kosmas transaction 832 -0-
Charges to allowance for doubtful accounts (173) -0-
Charges against specific developer reserves -0- -0-
--------- ---------
Allowance for doubtful accounts, end of period $ 4,929 $ 2,667
(1) Consumer Financing includes purchased receivables and hypothecation loans.
(2) Represents quarterly amounts.
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Item 6. Resignation of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
Not Applicable
Item 8. Change in Fiscal Year
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S
Not Applicable.
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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 18, 1999 By: /s/ Gerald L. Klaben, Jr.
-------------------------------------
Name: Gerald L. Klaben, Jr.
Title: Senior Vice President
& Chief Financial Officer
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