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): August 7, 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 INCOME FOR SECOND QUARTER AND FIRST SIX MONTHS;
DILUTED EPS RISES 25% TO $0.10 FOR SECOND QUARTER;
SECOND QUARTER PROFIT MARGIN RISES 49%
Greenwich, Connecticut (Business Wire) - August 7, 2001 - Equivest
Finance, Inc. (NASDAQSC:EQUI) announced today its financial results for the
quarter ended June 30, 2001. Both net income and earnings per share rose to
all-time, second 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, with more than
83,500 owners of vacation interests in its properties. 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 June 30, 2001, net income increased 18% to $2.9
million, compared with $2.5 million in the comparable period in 2000. Diluted
earnings per share in the second quarter of 2001 rose 25% to $0.10 compared with
earnings per share of $0.08 during the comparable 2000 period. During the second
quarter revenues decreased $8.7 million, or 22%, to $30.4 million, compared with
$39.1 million in the comparable quarter in 2000, due almost entirely to a
reduced volume of sales of vacation ownership intervals ("VOIs"). The Company's
aggregate pretax profit margin in the second quarter of 2001 rose 49% to 16.2%
of revenues, compared with 10.9% in the comparable period of the prior year. Net
income and earnings per share as reported were adversely affected by a loss of
$0.5 million, or $0.01 per share, on the sale of a parcel of surplus property
obtained in an acquisition.
For the six months ended June 30, 2001, net income increased 14% to
$5.8 million compared with $5.1 million in the comparable period in 2000.
Diluted earnings per share for the six months of 2001 rose 18% to $0.20 compared
with earnings per share of $0.17 during the comparable 2000 period. During the
first six months of 2000, revenues decreased $16.6 million, or 22%, to $59.7
million, compared with $76.3 million in the comparable quarter in 2000. The
Company's aggregate pretax profit margin in the first six months of 2001 rose
45% to 16.9% of revenues compared with 11.6% in the first half of 2000.
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During the first half of 2001, the Company reduced aggregate notes
payable by $20.4 million to $267.9 million, compared with total notes payable of
$288.4 million at December 31, 2000. This reduction in debt principally reflects
repayment of inventory loans through VOI sales, and use of cash flow to reduce
indebtedness. The Company was also able to reduce total assets at June 30, 2001
to $423.4 million from $437.0 million at December 31, 2000. Aggregate net worth
rose to $91.7 million at June 30, 2001, representing 21.7% of assets, compared
with $85.8 million or 19.6% of assets at December 31, 2000. At June 30, 2001 the
Company's debt/equity ratio was 2.9:1, compared with 3.7:1 at June 30, 2000.
Richard C. Breeden, Chairman, President and Chief Executive Officer,
commented: "Throughout 2001, our approach has been to reduce expenses,
strengthen profit margins and reduce indebtedness. By eliminating marginal sales
locations, reducing both sales commissions and marketing costs and increasing
average prices, we increased our pretax profit margin during the first half of
2001 by 45% to 16.9% of revenues. We also reduced total debt by more than $20
million, or just under 6% of total liabilities, in the first six months of the
year. Each of the three major facets of the Company's business - VOI sales,
resort management services and financing activities - recorded increased profits
in the second quarter of 2001 compared to the comparable period in 2000 on lower
revenues. We believe that this balance in profit generation is a positive factor
for future performance, as are higher profit margins and a strengthened balance
sheet."
During the second quarter of 2001, operating profit from VOI sales
rose slightly to $3.1 million, compared with $2.8 million in the second quarter
of 2000. Total VOI sales revenues were $15.8 million in the second quarter of
2001, down 34% from $23.8 million in the second 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. Of the total reduction in VOI sales, $6.8
million was related to the former Peppertree locations and $1.2 million was
related to non-Peppertree sales locations, most of which related to deferral of
sales revenues relating to construction in Newport, which deferral did not occur
in 2000.
Operating profit from VOI sales for the six months of 2001 was
consistent with the performance in the second quarter. For the six months ended
June 30, 2001, operating profit from VOI sales increased to $6.1 million from
$5.8 million for the same period in 2000, though total VOI sales fell 34% to
$30.7 million from $46.3 million in the first half of 2000.
Sales and marketing costs during the second quarter of 2001 fell $5.9
million, or 43%, to $7.6 million, a rate of reduction substantially in excess of
the reduction in sales. During the second quarter VOI sales and marketing costs
fell to 48.4% of VOI sales revenues, representing a decline from 56.8% in the
second quarter of 2000, and from 54.7% for the full year 2000. Sales and
marketing costs as a percentage of VOI sales revenue in the former Peppertree
resorts decreased to 53.1% in the second quarter of 2001, compared with 63.2% in
the second quarter of 2000 and 64.0% for the full year 2000. Costs as a
percentage of VOI sales revenues were reduced principally by reducing sales
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commissions, reducing higher cost tours, reducing personnel headcount and
increasing average sales prices.
"By increasing our profit margin on revenues to 16.9% of revenues in
the first half of 2001 from 11.6% in the first half of 2000, the Company is
making more money while using up over one-third less inventory, something that
we believe is quite positive for the long run outlook. Increased profit margins
were helped by an increase in average prices for VOIs and point packages year on
year, as well as a significant reduction in costs." noted Mr. Breeden.
During the second quarter of 2001 the Company sold 1,362 VOI's at an
average price of approximately $11,807, compared with 2,238 VOI's during the
second quarter of 2000 at an average price of approximately $10,615, an increase
of 11%. As of June 30, 2001, the company held approximately 26,400 unsold VOI's
in inventory, representing more than $312 million in potential gross sales
proceeds at the current average sales price as of June 30, 2001.
During the second quarter, the inventory cost of aggregate VOI sales
decreased to $3.7 million from $5.6 million the prior year, representing 23.4%
of VOI revenues compared with 23.5% in the comparable period in 2000. This
reduced cost of goods sold stemmed mostly from reduced numbers of VOIs sold.
Total provisions for doubtful receivables decreased 23% to $1.5 million for the
second quarter of 2001 from $1.9 million for the same period in 2000, reflecting
lower VOI notes receivable originated in the quarter compared to the prior
period. However, the Company increased the rate of provisions for doubtful
receivables to 8.4% of VOI sales in the second quarter of 2001 compared with
8.0% in the second quarter of 2000.
Second quarter 2001 general and administrative expense increased $0.1
million, or 6%, to $3.1 million from $3.0 million in the second quarter of 2000.
G&A expense increased to 10.3% of total revenues for the second quarter of 2001
from 7.6% for the same period in 2000, due principally to lower total revenues.
Net interest margin rose to $4.3 million for the quarter, an increase
from $3.1 million in the prior year. Interest expense as a percent of interest
income decreased to 53.6% in the second quarter of 2001 from 67.7% in the
comparable period in 2000. The increase in portfolio net interest margin is a
result of lower average cost of funds and lower average outstanding
indebtedness.
Operating profit from resort operations rose $0.1 million to $2.1
million in the second quarter of 2001, compared to $2.0 million in the second
quarter of 2000. Resort operations expense as a percent of resort management
revenues fell to 58.0% in the second quarter of 2001 from 61.8% in the second
quarter of 2000.
The company's loan receivable portfolio decreased to $255.7 million
as of June 30, 2001, compared with $270.4 million as of June 30, 2000, a decline
of 5% largely attributable to repayment of A&D loans, increased loan prepayments
and slower sales originations. Of the portfolio, $143.5 million represented
receivables relating to VOI purchases in the Company's own resorts, $101.0
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million represented receivables relating to consumer loans at third party
developer resorts, and the balance represented acquisition and development
loans.
At June 30, 2001, the Company maintained total portfolio reserves and
over collateralization of $31.3 million, a decline of 8% from $34.0 million at
June 30, 2000. In addition, total reserves and over collateralization as a
percentage of the total loan portfolio fell slightly, dropping from 12.6% at
June 30, 2000 to 12.3% at June 30, 2001. The allowance for doubtful accounts
included in total reserves was $9.3 million at June 30, 2001, a decline of 14%
compared with $10.8 million at June 30, 2000. However, while reserves as a
percentage of the total portfolio fell slightly, reserves as a percentage of
delinquent loans increased significantly. As of June 30, 2001 the Company's
Reserve Coverage Ratio (RCR) of total reserves and over collateralization to
consumer receivables over 60 days past due was 5.7 times on the entire consumer
loan portfolio, up from an RCR of 4.4 times 60 day past due loans at June 30,
2000. Similarly, the RCR on all consumer receivables over 90 days past due was
11.7 times on the entire consumer loan portfolio, up from a RCR of 7.4 times at
June 30, 2000.
During the second quarter the Company began construction of a new 20
unit building in Newport, Rhode Island, and opened the first of two new
buildings at its resort in Williamsburg, Va. The Company deferred recognition of
approximately $1.1 million in VOI sales revenue in Newport during the first six
months of 2001 relating to sale of interests in the building now under
construction. The Company expects to continue its trend of lower sales volume,
higher profit margins and retirement of indebtedness through the balance of
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)
JUNE 30, 2001 DECEMBER 31, 2000
-------------- -----------------
ASSETS (UNAUDITED)
Cash and cash equivalents $ 2,282 $ 4,805
Receivables, net 244,727 258,950
Inventory 94,555 95,578
Property and equipment, net 20,907 21,580
Goodwill, net 43,248 44,109
Other assets 17,637 11,952
-------- --------
Total Assets $423,356 $436,974
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts Payable and Other Liabilities:
Accounts payable $ 6,988 $ 9,624
Accrued expenses and other liabilities 25,808 23,194
Income Taxes 30,923 29,975
-------- --------
Total Accounts Payable and Other Liabilities 63,719 62,793
-------- --------
Notes payable 267,937 288,375
-------- --------
Total Liabilities 331,656 351,168
-------- --------
STOCKHOLDERS' EQUITY
Cumulative Redeemable Preferred Stock--Series 2 Class A,
$3 par value; 15,000 shares authorized, 11,650 and 10,000 shares issued
and outstanding at June 30, 2001 and December 31, 2000, respectively
35 30
Common Stock, $.01 par value; 50,000,000 shares authorized, 28,106,822 and
28,089,722 shares issued and outstanding at June 30, 2001 and December
31, 2000, respectively
281 281
Additional paid-in capital 63,935 62,246
Retained earnings 27,449 23,249
-------- --------
Total Stockholders' Equity 91,700 85,806
-------- --------
Total Liabilities and Stockholders' Equity $423,356 $436,974
======== ========
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EQUIVEST FINANCE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
Three months ended Six months ended
June 30, June 30,
2001 2000 (1) 2001 2000 (1)
---- -------- ---- --------
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES:
Timeshare interval sales $ 15,791 $ 23,759 $ 30,698 $ 46,314
Interest 9,307 9,506 18,387 18,786
Resort operations 5,087 5,231 10,119 10,037
Other income 231 601 456 1,167
------------- ------------------ ------------------- ------------------
Total revenues 30,416 39,097 59,660 76,304
EXPENSES:
Provision for doubtful accounts 1,467 1,906 3,256 3,689
Interest 4,988 6,435 10,571 12,595
Cost of timeshare intervals sold 3,691 5,586 6,941 10,953
Depreciation and amortization 1,158 1,238 2,291 2,366
Sales and marketing 7,640 13,494 14,687 25,920
Resort management 2,951 3,233 5,744 6,193
Loss on sale of asset 455 --- 455 ---
General and administrative 3,147 2,962 5,640 5,728
------------- ------------------ ------------------- ------------------
Total expenses 25,497 34,854 49,585 67,444
------------- ------------------ ------------------- ------------------
Income before provision for taxes 4,919 4,243 10,075 8,860
Provision for income taxes 2,000 1,775 4,225 3,725
------------- ------------------ ------------------- ------------------
NET INCOME $ 2,919 $ 2,468 $ 5,850 $ 5,135
============= ================== =================== ==================
Basic earnings per share $ 0.10 $ 0.08 $ 0.20 $ 0.17
Diluted earnings per share $ 0.10 $ 0.08 $ 0.20 $ 0.17
(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
Three months ended Six months ended
June 30, June 30,
2001 2000 (1) 2001 2000 (1)
---- -------- ---- --------
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES:
As a percentage of total revenues:
Timeshare interval sales 51.8 % 60.8 % 51.4 % 60.7 %
Interest 30.6 % 24.2 % 30.8 % 24.6 %
Resort operations 16.8 % 13.5 % 17.0 % 13.2 %
Other income 0.8 % 1.5 % 0.8 % 1.5 %
---------------- ----------------- ----------------- --------------------
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
EXPENSES:
As a percentage of VOI sales:
Cost of timeshare intervals sold 23.4 % 23.5 % 22.6 % 23.6 %
Sales and marketing 48.4 % 56.8 % 47.8 % 56.0 %
Provision for doubtful accounts (1) 8.4 % 8.0 % 9.7 % 8.0 %
As a percentage of interest income:
Interest 53.6 % 67.7 % 57.5 % 67.0 %
As a percentage of resort operations:
Resort management 58.0 % 61.8 % 56.8 % 61.7 %
As a percentage of total revenues:
Provision for doubtful accounts (2) 0.4 % 0.0 % 1.1 % 0.0 %
Depreciation and amortization 3.8 % 3.2 % 3.8 % 3.1 %
General and administrative 10.3 % 7.6 % 9.5 % 7.5 %
---------------- ----------------- ----------------- --------------------
Total expenses 83.8 % 89.2 % 83.1 % 88.4 %
---------------- ----------------- ----------------- --------------------
Income before taxes 16.2 % 10.8 % 16.9 % 11.6 %
Provision for income taxes 6.6 % 4.5 % 7.1 % 4.9 %
---------------- ----------------- ----------------- --------------------
NET INCOME 9.6 % 6.3 % 9.8 % 6.7 %
(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)
June 30, June 30,
2001 2000
---- ----
A&D loans $ 11,154 $ 23,537
Purchased receivables 70,019 82,906
Hypothecation loans 26,879 18,143
Consumer loans, owned 143,549 137,607
Other loans 4,133 8,219
----------------- -----------------
Total loans outstanding $ 255,734 $ 270,412
Specific reserves $ 16,050 $ 17,870
General reserves 9,259 10,804
Overcollateralization 6,042 5,310
----------------- -----------------
Total reserves and overcollateralization $ 31,351 $ 33,984
Total reserves and overcollateralization as % of
total loans 12.3% 12.6%
Chargebacks 3,738 3,027
Chargebacks as % of Consumer Financings (1) 3.9% 3.0%
Allowance for doubtful accounts, beginning of year
$ 11,763 $ 10,073
Provision for loan losses 3,256 3,689
Allowance related to an acquisition -0- 501
Charges to allowance for doubtful accounts (5,760) (3,459)
Charges against specific developer reserves -0- -0-
----------------- -----------------
Allowance for doubtful accounts, end of period $ 9,259 $ 10,804
(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: August 8, 2001 By: /S/GERALD L. KLABEN, JR.
------------------------------------
Name: GERALD L. KLABEN, JR.
Title:SENIOR VICE PRESIDENT & CFO
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