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 15, 2001
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 First Quarter Net Income and Earnings Per Share;
Pretax Profit Margin Rises 42%
Greenwich, Connecticut (Business Wire) - May 15, 2001 - Equivest
Finance, Inc. (NASDAQSC:EQUI) announced today its financial results for the
quarter ended March 31, 2001. Both net income and earnings per share rose to
all-time, first quarter records, though aggregate revenues declined. Equivest
operates hotels and vacation ownership resorts at 29 locations along the eastern
and Gulf coasts of the United States and in St. Thomas, USVI. Equivest also
operates a specialty finance company providing financing for consumer purchases
of vacation intervals in its own resorts and those of independent developers.
For the quarter ended March 31, 2001, net income increased 10% to $2.9
million, compared with $2.7 million in the comparable period in 2000. Diluted
earnings per share in the first quarter of 2001 rose 11% to $0.10 on 28.2
million weighted average shares outstanding compared with earnings per share of
$0.09 during the comparable 2000 period on 28.4 million weighted average shares
outstanding. During the quarter revenues decreased $8.0 million, or 21%, to
$29.2 million, compared with $37.2 million in the comparable quarter in 2000.
The Company's aggregate pretax profit margin in the first quarter of 2001 rose
42% to 17.6% of revenues compared with 12.4% in the comparable period of the
prior year.
Richard C. Breeden, Chairman, President and Chief Executive Officer,
commented: "Our overall approach is to pursue profitability, not sales volume.
Aggregate VOI sales revenues declined nearly $8 million, or 35% lower than the
previous year. However, by eliminating marginal sales locations and unprofitable
sales and marketing efforts, the Company was able to increase profits on the
sale of VOI slightly. Pretax profits on resort operations and net interest
margin also increased during the quarter."
2
During the first quarter of 2001, aggregate pretax income from VOI
sales rose slightly to $1.5 million, compared with $1.4 million in the first
quarter of 2000. The increase in aggregate pretax profit on VOI sales came
notwithstanding a decline of $7.8 million in aggregate VOI sales revenues to
$14.6 million in the first quarter of 2001 from $22.4 million in the first
quarter of 2000. This reduction in sales revenue was attributable in substantial
part to the Company's decision to close five former sales centers and two
telemarketing centers in its Peppertree subsidiary during 2000. The aggregate
reduction in sales revenues also reflected reduced tour volumes at
non-Peppertree sales centers, partly the result of the Company eliminating
higher cost tour sources, and partly the result of slower overall economic
activity. Of the total reduction in VOI sales, $5.4 million came from former
Peppertree locations and $2.4 million came from non-Peppertree sales locations.
Lower VOI sales and marketing costs, cost of inventory and reduced G &
A expense offset the decline in VOI revenue. Sales and marketing costs during
the first quarter of 2001 fell $3.9 million, or 38%, to $6.5 million. Sales and
marketing costs in the first quarter fell to 44.4% of VOI sales revenues, down
from 46.5% in the first quarter of 2000, and 47.2% for the full year 2000. Sales
and marketing costs as a percentage of VOI sales revenue in the former
Peppertree resorts fell to 40.7% in the first quarter of 2001, compared with
50.9% in the first quarter of 2000 and 51.2% for the full year 2000.
During the first quarter, the inventory cost of VOI sales decreased
$2.2 million compared with the prior year, representing 22.3% of VOI revenues
compared with 24.2% in the comparable period in 2000. This reduced cost of goods
sold stemmed from reduced numbers of VOIs sold, as well as from a 21.8% increase
in the average VOI sale price to more than $12,840. Total provisions for
doubtful receivables remained essentially constant at $1.8 million, though this
represented 12.3% of VOI sales in the first quarter of 2001 compared with 8.0%
in the first quarter of 2000 due to lower sales volumes.
First quarter 2001 general and administrative expense declined $1.3
million, or 28%, to $3.4 million from $4.7 million in the first quarter of 2000.
This decline was due in large part to elimination of executive and other
personnel costs at Peppertree and other acquired locations. G&A expense as a
percent of revenues decreased to 11.7% of total revenues in 2001 from 12.7% in
first quarter 2000.
Net pretax interest margin rose to $3.5 million for the quarter, up
from $3.3 million in the prior year. Interest expense as a percent of interest
income decreased to 61.5% in the first quarter of 2001 from 64.6% in the
comparable period in 2000. Both a lower average cost of funds and lower average
outstanding indebtedness contributed to the increase in portfolio net interest
margin.
3
Pretax income from resort operations rose $0.5 million to $2.2 million
in the first quarter of 2001, compared to $1.7 million in the first quarter of
2000. Resort operations expense as a percent of resort management revenues fell
to 49.7% in the first period of 2001 from 60.6% in the first quarter of 2000.
During the quarter, the Company reduced aggregate notes payable by $9.6
million to $278.8 million, compared with total notes payable of $288.4 million
at December 31, 2000. Total assets at March 31, 2001 fell $5.9 million to $431.1
million from $437.0 million at December 31, 2000. Aggregate net worth rose $2.9
million, or 3.4%, during the first quarter of 2001, reaching $88.7 million at
March 31, 2001.
The company's loan receivable portfolio remained constant at $264.7
million for the quarter ended March 31, 2001, compared with $264.1 million as of
March 31, 2000. Of this amount, $146.8 million represented receivables relating
to VOI purchases in the Company's own resorts, $106.1 million represented
receivables relating to consumer loans at third party developer resorts, and the
balance represented acquisition and development loans. At March 31, 2001, the
Company maintained total portfolio reserves and over collateralization of $34.5
million, up 3% from $33.5 million at March 31, 2000. In addition, total reserves
and over collateralization as a percentage of the total loan portfolio grew
slightly, rising from 12.7% at March 31, 2000 to 13.0% at March 31, 2001. The
allowance for doubtful accounts included in total reserves was $11.3 million at
March 31, 2001, up 13% compared with $10.0 million at March 31, 2000. As of
March 31, 2001 the Company's Reserve Coverage Ratio (RCR) of total reserves and
over collateralization to consumer receivables over 60 days past due was 4.3
times on the entire consumer loan portfolio, and the RCR on all consumer
receivables over 90 days past due was 7.0 times on the entire consumer loan
portfolio, compared to an RCR of 5.1 times and 10.4 times, respectively, at
March 31, 2000.
On third party developer consumer notes receivable, 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
2001, the Company charged back to developers loans with an outstanding principal
balance of $1.6 million, up slightly from $1.5 million in the first quarter of
2000. Other than minimal processing expenses, the Company did not incur any loss
on such charge backs.
At March 31, 2001, approximately 94.4% of total notes receivable in the
Company's consumer loan portfolio were current, 2.6% were 30-60 days, 1.1% were
61-90 days, and 1.9% were over 91 days past due. At March 31, 2001, there were
890 notes with a principal balance of $5.0 million that were over 91 days past
due. Of that amount, $4.3 million were notes relating to consumer receivables in
the Company's own resorts, and $0.7 million were notes relating to third party
developers. During the first quarter of 2001 the Company wrote off 375 consumer
notes relating to purchases in its own resorts with an outstanding principal
balance of $2.9 million. With limited exceptions, the Company services the loans
in its portfolio using internal personnel and facilities, and it generally
recaptures inventory from defaulted loans for future sale.
4
During the first quarter of 2001 the Company sold approximately 1,093
VOI's at an average price of approximately $12,849, compared with 2,110 VOI's
during the first quarter of 2000 at an average price of approximately $10,550,
an increase of 21.8%. As of March 31, 2001, the company held approximately
26,730 unsold VOI's in inventory, representing more than $340 million in
potential gross sales proceeds at the current average sales price as of March
31, 2001.
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, 2001 December 31,
--------------- ------------
ASSETS (Unaudited) 2000
----------- ----------
Cash and cash equivalents $ 3,372 $ 4,805
Receivables, net 252,352 258,950
Inventory 95,333 95,578
Property and equipment, net 21,230 21,580
Goodwill, net 43,662 44,109
Other assets 15,171 11,952
----------------- -----------------
Total Assets $ 431,120 $ 436,974
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts Payable and Other Liabilities:
Accounts payable $ 8,012 $ 9,624
Accrued expenses and other liabilities 24,733 23,194
Income Taxes 30,831 29,975
----------------- -----------------
Total Accounts Payable and Other Liabilities 63,576 62,793
----------------- -----------------
Notes payable 278,807 288,375
----------------- -----------------
Total Liabilities 342,383 351,168
----------------- -----------------
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 26,180 23,249
----------------- -----------------
Total Stockholders' Equity 88,737 85,806
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 431,120 $ 436,974
================= =================
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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,
2001 2000
---- ----
Revenues:
Timeshare interval sales $ 14,581 $ 22,405
Interest 9,080 9,365
Resort operations (1) 5,003 5,011
Other income (1) 574 419
--------------------- --------------------
Total revenues 29,238 37,200
Expenses:
Provision for doubtful accounts 1,789 1,783
Interest 5,582 6,049
Cost of timeshare intervals sold 3,252 5,418
Depreciation and amortization 1,073 1,153
Sales and marketing (1) 6,477 10,416
Resort management (1) 2,487 3,038
General and administrative (1) 3,422 4,727
--------------------- --------------------
Total expenses 24,082 32,584
--------------------- --------------------
Income before provision for taxes 5,156 4,616
Provision for income taxes 2,225 1,950
--------------------- --------------------
Net income $ 2,931 $ 2,666
===================== ====================
Basic earnings per share $ 0.10 $ 0.09
Diluted earnings per share $ 0.10 $ 0.09
(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,
2001 2000
---- ----
(unaudited) (unaudited)
Revenues:
As a percentage of total revenues:
Timeshare interval sales 49.8 % 60.2 %
Interest 31.1 % 25.2 %
Resort operations 17.1 % 13.5 %
Other income 2.0 % 1.1 %
-------------- --------------
Total revenues 100.0 % 100.0 %
Expenses:
As a percentage of VOI sales:
Cost of timeshare intervals sold 22.3 % 24.2 %
Sales and marketing 44.4 % 46.5 %
Provision for doubtful accounts (1) 12.3 % 8.0 %
As a percentage of interest income:
Interest 61.5 % 64.6 %
As a percentage of resort operations:
Resort management 49.7 % 60.6 %
As a percentage of total revenues:
Provision for doubtful accounts (2) 0.0 % 0.0 %
Depreciation and amortization 3.7 % 3.1 %
General and administrative 11.7 % 12.7 %
-------------- --------------
Total expenses 82.4 % 87.6 %
-------------- --------------
Income before taxes 17.6 % 12.4 %
Provision for income taxes 7.6 % 5.2 %
-------------- --------------
Net income 10.0 % 7.2 %
(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,
2001 2000
---- ----
A&D loans $ 11,775 $ 24,999
Purchased receivables 76,181 85,938
Hypothecation loans 26,457 19,258
Consumer loans, owned 146,775 126,001
Other loans 3,497 7,877
-------------- --------------
Total loans outstanding $ 264,685 $ 264,073
Specific reserves $ 16,956 $ 18,163
General reserves 11,346 10,014
Overcollateralization 6,168 5,365
-------------- --------------
Total reserves and overcollateralization $ 34,470 $ 33,542
Total reserves and overcollateralization as
% of total loans 13.0% 12.7%
Chargebacks 1,589 1,462
Chargebacks as % of Consumer Financings (1) 1.5% 1.4%
Allowance for doubtful accounts, beginning of period
$ 11,763 $ 10,073
Provision for loan losses 1,789 1,783
Charges to allowance for doubtful accounts (2,206) (1,863)
Charges against Specific developer reserves -0- 21
-------------- --------------
Allowance for doubtful accounts, end of period $ 11,346 $ 10,014
(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.
By: /s/Gerald L. Klaben, Jr.
-----------------------
Gerald L. Klaben, Jr.
Senior Vice President & CFO
Date: May 17, 2001
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