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): 04/05/01
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: (203) 618-0065
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 2000 NET
EARNINGS; EARNINGS PER SHARE, AND REVENUES.
Greenwich, Connecticut (Business Wire) - April 5, 2001 - Equivest
Finance, Inc. (NASDAQ:EQUI) announced today its financial results for the fourth
quarter of 2000 and the year ended December 31, 2000. The Company set all time
records for net income, earnings per share and revenues for the full year, and
also for the fourth quarter. This is the fifth consecutive year that Equivest
has recorded its highest ever net income, earnings per share and revenues.
Equivest is an integrated developer and operator of vacation ownership resort
properties headquartered in Greenwich, Connecticut. It owns or operates 29
resorts located principally on the east and gulf coasts of the United States, as
well as the U.S. Virgin Islands. The Company also operates a specialty finance
company providing financing for consumer purchases of vacation intervals in its
own resorts and those of independent developers.
During the year ended December 31, 2000, pretax income was $20.0
million, up 31% from $15.2 million in 1999 prior to a one-time write-off of $1.6
million in accrued costs relating to a Registration Statement filed with the SEC
in 1998 (the "1998 Registration") covering a proposed public offering that was
never completed. Net income in 2000 prior to the charge for the 1998
Registration was $11.4 million, up 31% from $8.7 million in 1999. Diluted
earnings per share prior to the impact of costs relating to the 1998
Registration rose 23% to $0.38 on 28.4 million weighted average shares
outstanding for the year ended December 31, 2000, compared with earnings per
share of $0.31 for the previous year on 26.4 million weighted average shares
outstanding. EBITDA prior to the charge for the 1998 Registration was $48.7
million, up 52.0% from $32.1 million in 1999.
For the year ended December 31, 2000, revenues were up 78% to $158.3
million, compared to $89.1 million in 1999. Total sales of vacation ownership
intervals ("VOIs") rose to $97.4 million in 2000, up 138% from $40.9 million in
1999. To a large degree these increases reflect revenues associated with
companies or properties acquired in 1999 or 2000.
The costs of the 1998 Registration have previously been paid by the
Company, and such costs have been previously reported as accrued costs of an SEC
registration. None of the costs were actually incurred in 2000, and most of such
costs were legal and accounting professional fees incurred in the fourth quarter
of 1998. This one-time charge has no impact on the Company's cash flow, and
though recorded in the fourth quarter of 2000, the charge relates entirely to
prior years. The charge reduced net income by $1 million, or $0.03 per share.
2
Pretax income after the charge relating to the 1998 Registration was
$18.3 million, up 21% from 1999. Net income after the charge was $10.4 million,
up 20% from 1999. Diluted earnings per share after the charge for the 1998
Registration rose 13% to $0.35.
Richard C. Breeden, Chairman, President and Chief Executive Officer of
Equivest commented: "Calendar year 2000 was an important year in which we set
new records for earnings for the fifth straight year. During the last five
years, net income increased more than 585%, from $1.7 million to $11.4 million.
Earnings per share diluted grew more than 440%, from $0.07 to $0.38. Revenues
increased more than 1,000%, from $14.3 million to $158.3 million. Book value per
share increased more than 600%, from $0.43 to $3.05." Net income and earnings
per share described above are based on results for 2000 prior to the charge
relating to the 1998 Registration.
Mr. Breeden also noted: "Throughout 2000, we worked to restructure our
Peppertree subsidiary to eliminate marginal operations and to reduce costs.
Excessive Peppertree costs have been reduced by several million dollars per
year, and we believe it will begin to contribute to the bottom line in 2001.
Sales and marketing costs as a percentage of VOI sales revenue at Peppertree
fell from 63.9% in 1999 for the short period following the acquisition to 51.2%
for 2000. We expect further reductions in 2001 as cuts made in the second half
of 2000 will be in place for a full year. Sales and marketing costs for the
Company as a whole fell in 2000 to 47.2% from 47.6% in 1999 not withstanding the
higher cost levels at Peppertree."
For the fourth quarter of 2000, before considering the impact of the
charge for the 1998 Registration, the Company had pretax income of $4.9 million
compared to $2.9 million in the fourth quarter of 1999, an increase of 72%. Net
income on the same basis in the fourth quarter of 2000 was $2.7 million compared
to $1.4 million in the comparable period for 1999, an increase of 89%. Earnings
per share fully diluted were $0.09 per share in the fourth quarter of 2000
compared to $0.05 in the comparable period of 1999, up 80%. For the quarter
ended December 31, 2000, revenues rose 19% to a record $34.1 million, compared
with $28.7 million in the comparable quarter in 1999.
After the impact of the charge relating to the 1998 Registration,
pretax income for the quarter ended December 31, 2000 rose 14% to $3.3 million,
up from $2.9 million reported in the year earlier period. Net income after the
charge was $1.8 million for the quarter, an increase of 23% from $1.4 million
for the comparable period in 1999. Earnings per share after the charge were
$0.06 in the fourth quarter of 2000, an increase of 20.0% from the $0.05 in the
fourth quarter of 1999.
Total assets as of December 31, 2000 were $437.0 million, an increase
of 5% compared with $417.0 million at year-end 1999. Total capital at December
31, 2000 was $85.8 million, an increase of 14% from $75.3 million at year-end
1999. For the full year 2000, the VOI cost of sales increased to 23.9% from
23.6% in 1999. Sales and marketing expense declined to 47.2% of VOI sales, down
from 47.6% in 1999. Resort operations expense for 2000 fell to 61.5% of resort
operations revenue, down from 80.0% in 1999. General and administrative expense
increased to 11.7% of total revenues for 2000, up from 10.3% for the prior year.
Interest expense as a percent of interest income in 2000 was 61.8%, up from
51.6% in the year earlier period.
3
The company's loan receivable portfolio grew 6% to $275.1 million for
the year ended December 31, 2000, compared with $260.1 million as of December
31, 1999. At December 31, 2000, past due loans totaled $5 million, or 1.8% of
the loan portfolio. This amount was down 23.8% from $6.5 million, or 2.5% of the
loan portfolio, at December 31, 1999. During 2000 the Company took $9.1 million
in provisions for loan losses, and wrote off $7.9 million in loans, or 2.8% of
the loan portfolio. At year end 2000 the Company maintained total portfolio
reserves and over collateralization of $35.2 million, or 12.8% of the total loan
portfolio, up 7% from $32.9 million, or 12.6% of the total loan portfolio, at
December 31, 1999. The allowance for doubtful accounts included in total
reserves was $11.8 million at December 31, 2000, up 16.8% compared with $10.1
million at December 31, 1999.
The Company has historically provided acquisition and development loans
to third party developers as part of a strategy for acquiring the right to
finance consumer receivables relating to VOI purchases. Because of the high risk
of such loans and more attractive returns on capital available to the Company in
other areas, the Company recently announced that it does not currently plan to
extend construction loans to third party developers in the future beyond current
commitments, which are not significant in amount, though it plans to continue
financing consumer receivables for third party borrowers. During the year ended
December 31, 2000, 100% of the aggregate growth in the Company's consumer
receivable portfolio and interest income came from loans relating to purchases
of VOIs in the Company's own resorts.
During 2000, the Company sold over 8,200 VOI's at an average price of
more than $10,800, and it sold over 1,700 VOI's at an average price of more than
$11,400 during the fourth quarter. As of December 31, 2000, the company held
approximately 27,700 unsold VOI's in inventory, representing more than $300
million in potential gross sales proceeds at the current average sales price as
of December 31, 2000.
The Company recently reached agreements with two of its lenders on long
term extensions of credit lines that had maturities in November, 2000, and which
have been the subject of short term extensions while longer extensions were
negotiated. The Bank of America has extended the maturity of the remaining
balance of $15.4 million on an original $20.7 million facility that was used for
an acquisition until February 2003. This extension is subject to existing
covenants and certain conditions, including $3.5 million of additional principal
payments out of the proceeds of sales of land and other unused assets the
company plans to sell over the next year.
Credit Suisse First Boston Mortgage Capital LLC ("CSFB") had loaned the
Company approximately $150 million, representing a combination of revolving loan
facilities to the Company that were originally extended in 1997, and first
mortgage loans on certain properties the Company acquired in an acquisition from
a troubled timeshare company. Of this amount, approximately $39 million remains
outstanding, and CSFB has extended the maturity of the remaining principal
amount until February 2002.
4
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
5
EQUIVEST FINANCE, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
December 31, December 31,
ASSETS 2000 1999
- -------------------------------------------------------------------------- ---- ----
Cash and cash equivalents $ 4,805 $ 8,010
Receivables, net 258,950 247,082
Investment in real estate joint venture -- 4,416
Inventory 95,577 87,925
Property and equipment, net 21,580 18,123
Goodwill, net 44,110 41,374
Other assets 11,952 10,055
----------------- -----------------
Total Assets $ 36,974 $ 16,985
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------
LIABILITIES
Accounts Payable and Other Liabilities:
Accounts payable $ 9,624 $ 6,288
Accrued expenses and other liabilities 23,194 20,832
Taxes payable 8,239 5,609
Deferred income taxes 21,736 19,536
----------------- -----------------
Total Accounts Payable and Other Liabilities 62,793 52,265
----------------- -----------------
Notes payable 288,375 289,358
----------------- -----------------
Total Liabilities 351,168 341,623
----------------- -----------------
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 281 281
Additional paid-in capital 62,246 62,246
Retained earnings 23,249 12,805
----------------- -----------------
Total Stockholders' Equity 85,806 75,362
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 436,974 $ 416,985
================= =================
6
EQUIVEST FINANCE, INC. and SUBSIDIARIES
COMPARATIVE CONDENSED STATEMENT OF INCOME
(Dollars in thousands except per share data)
Three months ended Year ended
December 31, December 31,
2000 1999 2000 1999
----- ---- ---- ----
Revenues:
Timeshare interval sales $ 19,606 $ 12,677 $ 97,367 $ 40,910
Interest 9,236 7,953 38,137 25,962
Resort operations 4,296 7,751 20,741 20,568
Other income
1,002 315 2,011 1,650
---------------- ---------------- ---------------- ----------------
Total revenues 34,140 28,696 158,256 89,090
Expenses:
Provision for doubtful accounts 2,880 742 9,079 2,192
Interest 4,534 4,543 23,560 13,389
Cost of timeshare intervals sold 4,305 2,919 23,240 9,667
Depreciation and amortization 1,567 1,305 5,145 3,512
Sales and marketing 9,153 7,292 45,923 19,464
Resort management 1,629 5,561 12,745 16,453
Nonrecurring stock registration costs 1,649 -- 1,649 --
General and administrative 5,143 3,468 18,571 9,217
---------------- ---------------- ---------------- ----------------
Total expenses 30,860 25,830 139,912 73,894
---------------- ---------------- ---------------- ----------------
Income before provision for taxes 3,280 2,866 18,344 15,196
Provision for income taxes 1,500 1,425 7,900 6,500
---------------- ---------------- ---------------- ----------------
Net income $ 1,780 $ 1,441 $ 10,444 $ 8,696
================ ================ ================ ================
Basic earnings per share $ 0.06 $ 0.05 $ 0.35 $ 0.31
Diluted earnings per share $ 0.06 $ 0.05 $ 0.35 $ 0.31
Summary results excluding 1998 Registration:
Revenues $ 34,140 $ 28,696 $158,256 $ 89,090
Expenses 29,211 25,830 138,263 73,894
---------------- ---------------- ---------------- ----------------
Income before provision for taxes 4,929 2,866 19,993 15,196
---------------- ---------------- ---------------- ----------------
Provision for income taxes 2,200 1,425 8,600 6,500
---------------- ---------------- ---------------- ----------------
Net income $ 2,729 $ 1,441 $ 11,393 $ 8,696
================ ================ ================ ================
Basic earnings per share $ 0.09 $ 0.05 $ 0.38 $ 0.31
Diluted earnings per share $ 0.09 $ 0.05 $ 0.38 $ 0.31
7
EQUIVEST FINANCE, INC. and SUBSIDIARIES
Selected Financial Data as a Percentage of Total Revenues
Three months ended Year ended
December 31, December 31,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
As a percentage of total revenues:
Timeshare interval sales 57.4 % 44.2 % 61.5 % 45.9 %
Interest 27.1 % 27.7 % 24.1 % 29.1 %
Resort operations 12.6 % 27.0 % 13.1 % 23.1 %
Other income 2.9 % 1.1 % 1.3 % 1.9 %
-------------- -------------- -------------- ------------------
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Expenses:
As a percentage of VOI sales:
Cost of timeshare intervals sold 22.0 % 23.0 % 23.9 % 23.6 %
Sales and marketing 46.7 % 57.5 % 47.2 % 47.6 %
Provision for doubtful accounts (1) 14.7 % 5.9 % 9.3 % 5.0 %
As a percentage of interest income:
Interest 49.1 % 57.1 % 61.8 % 51.6 %
As a percentage of resort operations:
Resort management 37.9 % 71.7 % 61.5 % 80.0 %
As a percentage of total revenues:
Provision for doubtful accounts (2) 0.0 % 0.0 % 0.0 % 0.2 %
Depreciation and amortization 4.6 % 4.5 % 3.3 % 3.9 %
General and administrative 15.1 % 12.1 % 11.7 % 10.3 %
-------------- -------------- -------------- ------------------
Total expenses 90.4 % 90.0 % 88.4 % 82.9 %
-------------- -------------- -------------- ------------------
Income before taxes 9.6 % 10.0 % 11.6 % 17.1 %
Provision for income taxes 4.4 % 5.0 % 5.0 % 7.3 %
-------------- -------------- -------------- ------------------
Net income 5.2 % 5.0 % 6.6 % 9.8 %
(1) Based on provision for doubtful receivables recorded on timeshare
development.
(2) Based on provision for doubtful receivables recorded on timeshare
financing.
8
EQUIVEST FINANCE, INC. and SUBSIDIARIES
Selected Financial Data
(Dollars in thousands)
December 31, December 31,
2000 1999
----- ----
A&D loans $ 15,956 $ 27,945
Purchased receivables 80,208 91,028
Hypothecation loans 27,068 16,925
Consumer loans, owned 147,810 120,895
Other loans 4,040 3,297
--------- ---------
Total loans outstanding $ 275,082 $ 260,090
Specific reserves $ 17,406 $ 18,507
General reserves 11,763 10,073
Overcollateralization 5,981 4,308
--------- ---------
Total reserves and overcollateralization $ 35,150 $ 2,888
Total reserves and overcollateralization as
% of total loans 12.8% 12.6%
Chargebacks 5,796 5,542
Chargebacks as % of Consumer Financings (1) 5.4% 5.1%
Allowance for doubtful accounts, beginning of year $ 10,073 $ 3,835
Provision for loan losses 9,078 2,192
Allowance related to an acquisition 501 6,639
Charges to allowance for doubtful accounts (2,593) (7,889)
--------- ---------
Allowance for doubtful accounts, end of year $ 11,763 $ 10,073
(1) Consumer Financing includes Purchased receivables and Hypothecation loans.
9
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: April 6, 2001 By: /s/ Gerald L. Klaben, Jr.
-------------------------------
Name:Gerald L. Klaben, Jr.
Title: CFO & SVP