UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
- --------------
Commission file number 000-22979
TRENDWEST RESORTS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1004403
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
12301 N.E. 10th Place
Bellevue, Washington 98005
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (425) 990-2300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of the registrant's no-par voting common stock outstanding
as of November 6, 1998: 17,158,766 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
<TABLE>
<CAPTION>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
December 31, September 30,
Assets 1997 1998
---------------- ----------------
<S> <C> <C>
(Unaudited)
Assets:
Cash $ 70 974
Restricted cash 1,219 2,505
Notes receivable, net of allowance for doubtful accounts, sales
returns and deferred gross profit 73,075 93,745
Accrued interest and other receivables 7,435 7,510
Residual interest in notes receivable sold 15,235 20,954
Receivable from Parent -- 2,022
Inventories 44,534 40,060
Property and equipment, net 7,057 12,580
Deferred income taxes 924 1,160
Other assets 2,201 4,565
---------------- ----------------
Total assets $ 151,750 186,075
================ ================
================ ================
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Liabilities:
Accounts payable 944 692
Accrued liabilities 3,862 7,750
Accrued construction in progress 10,480 1,599
Borrowing under bank line of credit -- 30,000
Due to Parent 1,947 --
Allowance for recourse liability and deferred gross profit on notes
receivable sold 8,757 11,291
Income taxes payable to Parent 2,755 --
Income taxes payable 880 600
---------------- ----------------
---------------- ----------------
Total liabilities 29,625 51,932
Stockholders' equity:
Preferred stock, no par value. Authorized 10,000,000 shares;
no shares issued or outstanding -- --
Common stock, no par value. Authorized 90,000,000 shares;
issued and outstanding 17,593,366 and 17,158,766 shares at December 66,742 61,848
31, 1997 and September 30, 1998, respectively.
Retained earnings 55,383 72,295
---------------- ----------------
Total stockholders' equity 122,125 134,143
Commitments and contingencies -- --
---------------- ----------------
Total liabilities and stockholders' equity $ 151,750 186,075
================ ================
================ ================
See accompanying notes to the condensed combined and consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Combined and Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------------------------- ----------------------------------
1997 1998 1997 1998
----------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Vacation Credit sales, net $ 35,575 46,530 96,395 123,403
Finance income 2,930 3,368 8,766 9,628
Gains on sales of notes receivable 1,277 1,828 4,441 7,003
Resort management services 217 521 1,495 1,517
Other 473 946 1,825 2,459
----------------- ---------------- --------------- -----------------
Total revenues 40,472 53,193 112,922 144,010
----------------- ---------------- --------------- -----------------
Costs and operating expenses:
Vacation Credit cost of sales 9,219 13,438 25,444 34,119
Resort management services 302 347 830 946
Sales and marketing 16,306 22,346 44,845 61,003
General and administrative 3,348 4,246 9,615 12,312
Provision for doubtful accounts and recourse
liability 2,494 3,220 6,654 8,535
Interest 294 204 1,739 242
----------------- ---------------- --------------- -----------------
Total costs and operating expenses 31,963 43,801 89,127 117,157
----------------- ---------------- --------------- -----------------
Income before income taxes 8,509 9,392 23,795 26,853
Income tax expense 3,076 3,508 8,582 9,941
----------------- ---------------- --------------- -----------------
Net income $ 5,433 5,884 15,213 16,912
================= ================ =============== =================
================= ================ =============== =================
Basic and diluted net income per common share $ .34 .34 1.02 .97
Basic and diluted weighted average shares
of common stock outstanding 15,923,174 17,308,564 14,920,981 17,498,086
See accompanying notes to the condensed combined and consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Combined and Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine months ended September 30,
-----------------------------------------------
1997 1998
------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,213 16,912
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 487 769
Amortization of residual interest in notes receivable sold 2,966 4,882
Provision for doubtful accounts, sales returns and recourse liability 8,491 11,114
Recoveries of notes receivable charged off 151 159
Residual interest in notes receivable sold (4,551) (7,993)
Unrealized gain on residual interest in notes receivable sold (1,243) (534)
Change in deferred gross profit (1,013) (884)
Deferred income tax expense (benefit) 512 (236)
Issuance of notes receivable (83,234) (107,651)
Proceeds from sale of notes receivable 23,611 72,152
Proceeds from repayment of notes receivable 19,242 23,302
Purchase of notes receivable (11,071) (18,402)
Changes in certain assets and liabilities:
Restricted cash (439) (1,286)
Inventories (7,373) 4,474
Accounts payable and accrued liabilities 1,041 (5,245)
Income taxes payable to Parent 594 (2,755)
Income taxes payable 1,671 (280)
Other (1,296) (2,538)
------------------- ----------------------
Net cash used in operating activities (36,241) (14,040)
------------------- ----------------------
Cash flows used in investing activities -Purchase of property and equipment (1,120) (6,193)
------------------- ----------------------
Cash flows from financing activities:
Proceeds from notes payable 16,803 --
Payments on notes payable (1,055) --
Net borrowings under bank line of credit -- 30,000
Increase in Receivable from Parent (7,562) (2,022)
Decrease in Due to Parent (21,316) (1,947)
Issuance of common stock 51,912 --
Repurchase of common stock -- (4,894)
------------------- ----------------------
Net cash provided by financing activities 38,782 21,137
------------------- ----------------------
Net increase in cash 1,421 904
Cash at beginning of period 93 70
------------------- ----------------------
Cash at end of period $ 1,514 974
=================== ======================
See accompanying notes to the condensed combined and consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Combined and Consolidated Statements of Cash Flows
(continued)
(dollars in thousands)
(unaudited)
Nine month ended September 30,
-----------------------------------------------
1997 1998
------------------- ----------------------
<S> <C> <C>
Supplemental disclosures of cash flow information cash paid during the period
for:
Interest $ 1,975 422
Income taxes 5,622 13,212
Supplemental schedule of noncash investing and financing activities:
Reduction of notes payable through transfer of notes receivable $ 16,803 --
Issuance of Notes Receivable in exchange for other assets sold 489 --
See accompanying notes to combined and consolidated financial statements.
</TABLE>
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Notes to the Condensed Combined and Consolidated
Financial Statements
(dollars in thousands except per share amounts)
(Unaudited)
Note 1 - Background
Trendwest Resorts, Inc. (Company) markets, sells and finances timeshare
ownership interests in the form of perpetual timeshare credits (Vacation
Credits) in WorldMark, the Club (WorldMark). Vacation Credits are created
through the transfer to WorldMark of resort units acquired or developed by the
Company. The Company derives revenues primarily from Vacation Credit sales and,
to a lesser extent, from the financing of Vacation Credit sales and from its
management agreement with WorldMark.
These condensed combined and consolidated financial statements do not include
certain information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and are of a normal recurring nature. Operating results for the
three months and nine months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1998.
These statements should be read in conjunction with the audited combined and
consolidated financial statements and footnotes included in the Company's 1997
Form 10-K filed with the Securities and Exchange Commission (SEC). The
accounting policies used in preparing these condensed combined and consolidated
financial statements are the same as those described in such Form 10-K.
Note 2 - New Accounting Pronouncements
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This Statement is effective as of the beginning of the
first quarter of the fiscal year beginning after June 15, 1999.
In April, 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AICPA) issued Statement of Position
(SOP) 98-5, Reporting on the Costs of Start-Up Activities. This SOP is effective
for financial statements for fiscal years beginning after December 15, 1998.
The Company does not anticipate a material impact on its financial position or
results of operations from the future adoption of these two standards.
Note 3 - Capital Transactions
On July 7, 1998, the Board of Directors authorized the Company to repurchase up
to 436,000 shares of its common stock on the open market or in privately
negotiated transactions. During the three months ended September 30, 1998, the
Company repurchased 434,600 shares.
Note 4 - Sale and Securitization of Notes Receivable
In March 1998, the Company sold $37.4 million of Notes Receivable to a
wholly-owned special purpose company, Trendwest Funding II, Inc. In addition,
the Bank Group sold $93.0 million of Notes Receivable purchased from TW
Holdings, Inc. to Trendwest Funding II, Inc. The special purpose company sold
the receivables to TRI Funding II, Inc. (TRI), a special purpose entity
wholly-owned by Trendwest Funding II, Inc., and TRI issued $130.4 million in two
classes of senior and subordinated notes to institutional investors. The 1998-1,
Class A notes were issued for $125.0 million at a fixed rate of 6.88%. The
1998-1, Class B notes were issued for $5.4 million at a fixed rate of 7.98%. The
Class A notes and Class B notes were rated `A" and `BBB' by Fitch IBCA, Inc.,
respectively, and are secured by the Notes Receivable owned by TRI. The ratings
reflect credit enhancements of a 4% over-collateralization and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009.
Note 5 - Basic and Diluted Net Income Per Common Share
On August 15, 1997, the Company consummated the offering of 3,176,250 shares of
the Company's common stock at $18 per share resulting in net proceeds, after
deducting the related issuance costs, of approximately $51,772. In addition, the
Company issued 5,193,693 shares of common stock to the Parent to acquire two
wholly owned subsidiaries, TW Holdings and Trendwest Funding (Consolidation
Transactions). Effective June 30, 1997, TW Holdings and Trendwest Funding were
wholly-owned subsidiaries of the Company.
Basic and diluted net income per common share has been computed based on the
number of shares of Trendwest common stock outstanding and assumes the 5,193,693
shares issued to the Parent in connection with the 1997 Consolidation
Transactions have been outstanding for all periods presented.
The following illustrates the reconciliation of weighted average shares used for
basic net income per share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------------- ----------------------------------
1997 1998 1997 1998
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Basic
9,727,288
Weighted average shares - Trendwest 10,729,481 17,308,564 17,498,086
Effect of consolidation transactions 5,193,693 -- 5,193,693 --
---------------- --------------- --------------- --------------
Basic and diluted weighted average
shares outstanding 15,923,174 17,308,564 14,920,981 17,498,086
=============== =============== ================ ===============
</TABLE>
Net income available to common shareholders for basic net income per share was
$5,433 and $5,884 for the three months ended September 30, 1997 and 1998, and
$15,213 and $16,912 for the nine months ended September 30, 1997 and 1998,
respectively.
There were no dilutive securities outstanding for the periods presented
resulting in basic and diluted net income per share being equal.
At September 30, 1998, there were options to purchase 491,500 shares of common
stock outstanding which were antidilutive in 1998 and therefore not included in
the computation of diluted net income per share.
Note 6 - Inventories
Inventories consist of Vacation Credits and construction in progress as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
----------------- ------------------
<S> <C> <C>
Vacation Credits $ 1,722 12,964
Construction in progress 42,812 27,096
----------------- ------------------
Total inventories $ 44,534 40,060
================= ==================
</TABLE>
<PAGE>
Note 7 - Allowance For Doubtful Accounts, Recourse Liability and Sales Returns
The activity in the allowance for doubtful accounts, recourse liability and
sales returns is as follows for the year ended December 31, 1997 and the nine
months ended September 30, 1998:
<TABLE>
<CAPTION>
1997 1998
----------------- ------------------
<S> <C> <C>
Balances at beginning of period $ 11,241 15,240
Provision for doubtful accounts, sales returns and 11,114
recourse liability 11,755
Notes receivable charged-off and sales returns net of
Vacation Credits recovered (7,888) (7,069)
Recoveries 132 159
----------------- ------------------
Balances at end of period $ 15,240 19,444
================= ==================
Allowance for doubtful accounts and sales returns $ 9,935 11,140
Recourse liability on notes receivable sold 5,305 8,304
----------------- ------------------
$ 15,240 19,444
================= ==================
</TABLE>
Total notes receivable outstanding, including notes receivable sold,
amounted to $242,286 and $290,982 at December 31, 1997 and September 30, 1998,
respectively.
Note 8 - Commitments and Contingencies
(a) Purchase Commitments
The Company routinely enters into purchase agreements with various developers to
acquire and build resort properties. At September 30, 1998 the Company had
outstanding purchase commitments of $46.4 million related to properties under
development and $7.3 million related to the purchase of land and construction of
a new Corporate headquarters building.
(b) Litigation
The Company is involved in various claims and lawsuits arising from the ordinary
course of business. Management believes that outcome of these matters will not
have a material adverse effect on the Company's financial position, results of
operations, or liquidity.
Note 9 - Related Party Transactions
On September 22, 1998 and October 13, 1998, the Company repurchased from R&R
Vista $7.1 million and $3.8 million, respectively, of notes receivable at face
value plus accrued interest. These notes receivable were previously sold to R&R
Vista with full recourse. R&R Vista is an Oregon general partnership comprised
of Richard L. Wendt, chairman of the board of JELD-WEN and Roderick C. Wendt,
President of JELD-WEN and a director of the Company.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 1998 to the three months
ended September 30, 1997
The Company achieved total revenues of $53.2 million for the three months ended
September 30, 1998 compared to $40.5 million for the three months ended
September 30, 1997, an increase of 31.4%. The principal reason for the overall
improvement was a 30.6% increase in Vacation Credit sales from $35.6 million for
the three months ended September 30, 1997 to $46.5 million for the three months
ended September 30, 1998. The increase in Vacation Credit sales was primarily
the result of a 30.3% increase in the number of Vacation Credits sold from 27.4
million during the three months ended September 30, 1997 to 35.7 million during
the three months ended September 30, 1998. The increase in Vacation Credits sold
was largely attributable the addition of new off-site sales offices opened after
September, 1997 in Woodland Hills, California, opened in October of 1997;
Burlingame, California, opened in March, 1998; Scottsdale, Arizona, opened in
May, 1998; and San Diego, California opened in June, 1998. Wolf Creek, an
on-site sales office in Eden Utah, opened in June, 1998, also contributed to the
increase in vacation credits sold. Revenue from Upgrade Sales increased 23.5%
from $5.1 million for the three months ended September 30, 1997 to $6.3 million
for the three months ended September 30, 1998 due primarily to an increase of
21.2% in the number of Vacation Credits sold as Upgrades during the three months
ended September 30, 1997 compared to the three months ended September 30, 1998.
The average price per Vacation Credit sold increased from $1.27 per credit for
the three months ended September 30, 1997 versus $1.29 per credit for the three
months ended September 30, 1998 reflecting the increased selling price of
Vacation Credits of approximately 4% effective June 29, 1998. The percentage
increase in the average selling price of Vacation Credits was less than the
percentage increase in the selling price of Vacation Credits because of the
recognition of sales made prior to the price increase.
Finance income increased 17.2% from $2.9 million for the three months ended
September 30, 1997 to $3.4 million for the three months ended September 30,
1998. The increase in finance income primarily reflects the increase in carrying
balances of Notes Receivable for the two periods compared. Gains on sales of
Notes Receivable increased 38.5% from $1.3 million for the three months ended
September 30, 1997 to $1.8 million for the three months ended September 30, 1998
due primarily to an increase in the principal balances of Notes Receivable sold
of 23.7% from $11.8 million to $14.6 million for the two periods compared and
lower interest rates in 1998.
Vacation Credit cost of sales increased from $9.2 million for the three months
ended September 30, 1997 to $13.4 million for the three months ended September
30, 1998, an increase of 45.7%. As a percentage of Vacation Credit sales,
Vacation Credit cost of sales increased from 25.8% to 28.8% of Vacation Credit
sales for the two periods compared. This is primarily the result of the Clear
Lake and Angels Camp resorts in California which came on line in the third
quarter. Clear Lake experienced construction delays and cost overruns due to
inclement weather and the Angels Camp resort had a product cost higher than the
historical average. Management expects product cost as a percentage of Vacation
Credit sales to remain at approximately 29.0% for the remainder of the year.
Sales and marketing costs increased 36.8% from $16.3 million for the three
months ended September 30, 1997 to $22.3 million for the three months ending
September 30, 1998. As a percentage of Vacation Credit sales, sales and
marketing costs increased from 45.8% for the three months ended September 30,
1997 to 48.0% for the three months ended September 30, 1998. Sales and marketing
costs for the three month period ended September 30, 1998, as compared to the
same period last year, were impacted by three new sales offices opened late in
the second quarter of this year with no new openings in the second or third
quarter last year. The Scottsdale, San Diego and Wolf Creek sales offices
experienced lower closing percentages, which initially occur in a new sales
office less than one year old, resulting in higher marketing costs as a
percentage of Vacation Credit sales. The payment of minimum compensation amounts
to sales representatives during this initial period resulted in higher
commission costs as a percentage of Vacation Credit sales. Effective July 6,
1998 management initiated changes to the sales commission program for new and
upgrade sales and raised performance targets for additional bonuses which has
resulted in an overall decrease in sales and marketing costs when expressed as a
percentage of Vacation Credit sales. Management expects sales and marketing
costs as a percentage of Vacation Credit sales to continue to decrease in the
fourth quarter and come more in line with historical results.
General and administrative expenses increased 27.3% from $3.3 million for the
three months ended September 30, 1997 to $4.2 million for the three months ended
September 30, 1998. As a percentage of total revenue, general and administrative
costs decreased from 8.1% for the three months ended September 30, 1997 to 7.9%
for the three months ended September 30, 1998. The decrease in general and
administrative expenses is due to increased economies of scale resulting from
increased sales without adding additional overhead.
Provision for doubtful accounts and recourse liability increased 28.0% from $2.5
million for the three months ended September 30, 1997 to $3.2 million for the
three months ended September 30, 1998. As a percentage of Vacation Credit sales,
the provision remained comparable at 7.0% for the three months ended September
30, 1997 and 6.9% for the three months ended September 30, 1998.
<PAGE>
Comparison of the nine months ended September 30, 1998 to the nine months ended
September 30, 1997
The Company achieved total revenues of $144.0 million for the nine months ended
September 30, 1998 compared to $112.9 million for the nine months ended
September 30, 1997, an increase of 27.5%. The principal reason for the overall
improvement was a 28.0% increase in Vacation Credit sales from $96.4 million for
the nine months ended September 30, 1997 to $123.4 million for the nine months
ended September 30, 1998. The increase in Vacation Credit sales was primarily
the result of a 28.6% increase in the number of Vacation Credits sold from 74.2
million during the nine months ended September 30, 1997 to 95.4 million during
the nine months ended September 30, 1998. The increase in Vacation Credits sold
was largely attributable to new off-site sales offices opened in Burlingame,
California, in March 1998; Woodland Hills, California, opened in October 1997;
and increased Upgrade sales. The maturation of the off-site sales offices in
Costa Mesa, California opened in February 1997 and relocating the Vallejo,
California office to Walnut Creek, California also contributed to the increase
in Vacation Credit Sales. Revenue from Upgrade Sales increased 33.1% from $14.2
million for the nine months ended September 30, 1997 to $18.9 million for the
nine months ended September 30, 1998 due primarily to an increase of 36.3% in
the number of Vacation Credits sold as Upgrades during the nine months ended
September 30, 1997 compared to the nine months ended September 30, 1998. The
average price per Vacation Credit sold remained comparable at $1.27 per credit
for the two periods compared.
Finance income increased 9.1% from $8.8 million for the nine months ended
September 30, 1997 compared to $9.6 million for the nine months ended September
30, 1998. The 1997 period benefited from an $.8 million recognition of the
unrealized gain on residual interest in Notes Receivable sold, resulting
primarily from the adoption of Statement of Financial Accounting Standards
Number 125 (SFAS 125). Absent this benefit, the increase in finance income
reflects the increase in carrying balances of Notes Receivable for the two
periods compared. Gains on sales of Notes Receivable increased 59.1% from $4.4
million for the nine months ended September 30, 1997 to $7.0 million for the
nine months ended September 30, 1998 due to notes receivable sold, which
qualified for sales recognition, increasing from $38.9 million to $66.5 million,
an increase of 71.0% for the two periods compared. The percentage increase in
gains on sales of notes receivable is less than the percentage increase in notes
receivable sold because of a reduction to gains on sales of note receivable of
$.7 million from upfront fees relating to the March 1998 asset backed
securitization. The asset backed securitization resulted in recording gains on
$33.6 million of Notes Receivable sold and reduced the Company's interest rate
risk in the future, if interest rates were to increase, on $130.4 million of
notes receivable sold.
Vacation Credit cost of sales increased from $25.4 million for the nine months
ended September 30, 1997 to $34.1 million for the nine months ended September
30, 1998, an increase of 34.3%, primarily reflecting the increase in sales of
Vacation Credits. As a percentage of Vacation Credit sales, Vacation Credit cost
of sales increased from 26.3% of Vacation Credit sales for the nine months ended
September 30, 1997 to 27.6% of Vacation Credit sales for the nine months ended
September 30, 1998. Management expects product cost as a percentage of Vacation
Credit sales to remain at approximately 29.0% for the remainder of the year.
This is primarily the result of the Clear Lake and Angels Camp resorts in
California which came on line in the third quarter. Clear lake experienced
construction delays and cost overruns due to inclement weather and the Angels
Camp resort had a product cost higher than the historical average.
Sales and marketing costs increased 36.2% from $44.8 million for the nine months
ended September 30, 1997 to $61.0 million in the nine months of 1998. As a
percentage of Vacation Credit sales, sales and marketing costs increased from
46.5% for the nine months ended September 30, 1997 to 49.4% for the nine months
ended September 30, 1998. This increase reflects start-up costs and delays
incurred during the second quarter associated with opening the Scottsdale,
Arizona; Wolf Creek, Utah; and San Diego, California sales offices. These
offices also experienced lower closing percentages, which initially occur in a
new sales office less than one year old, resulting in higher marketing costs as
a percentage of Vacation Credit sales. Also, the payment of minimum compensation
amounts during this initial period to sales representatives contributed to
higher commission costs as a percentage of Vacation Credit sales. In addition,
training costs associated with new sales and office personnel in the Southwest
and Mountain Region also contributed to higher sales and marketing costs for the
nine months ended September 30, 1998. Effective January 1, 1998, the Company
increased commissions on new sales and raised performance targets for additional
bonuses. During the first six months of 1998, the sales force met these new
performance targets resulting in net increased commission costs. Effective July
6, 1998, management made changes to these performance targets as well as other
aspects of the overall commission program. During the last three months of the
nine months ended September 30, 1998, commissions as a percentage of Vacation
Credit sales have been decreasing and reflected the changes made and the
increase in the selling price of Vacation Credits. Management expects sales and
marketing costs as a percentage of Vacation Credit sales to decrease and come
more in line with historical results for the remainder of the year as a result
of the aforementioned changes to commissions, the effect of increased sales at
new sales offices, and the increase in the selling price of Vacation Credits.
General and administrative expenses increased 28.1% from $9.6 million for the
nine months ended September 30, 1997 to $12.3 million for the nine months ended
September 30, 1998. As a percentage of total revenue, general and administrative
costs were comparable at 8.5% of total revenue for the two periods compared.
Provision for doubtful accounts and recourse liability increased 26.9% from $6.7
million for the nine months ended September 30, 1997 to $8.5 million for the
nine months ended September 30, 1998. As a percentage of Vacation Credit sales,
the provision remained comparable at 7.0% and 6.9% for the nine months ended
September 30, 1997 and 1998, respectively.
The Company maintains an allowance for doubtful accounts for the Notes
Receivable owned by the Company and an allowance for recourse liability for the
Notes Receivable that have been sold by the Company. The aggregate amount of
these allowances at December 31, 1997 and September 30, 1998 were $15.2 million,
and $19.4 million, respectively, representing approximately 6.3% and 6.7%,
respectively, of the total portfolio of Notes Receivable at those dates,
including the Notes Receivable that had been sold by the Company. No assurance
can be given that these allowances will be adequate, and if the amount of the
Notes Receivable that are ultimately written off materially exceed the related
allowances, the Company's business, results of operations and financial
condition could be materially adversely affected.
The Company estimates its allowance for doubtful accounts and recourse liability
by analysis of bad debts by each sales site by year of Note Receivable
origination. The Company uses this historical analysis, in conjunction with
other factors such as local economic conditions and industry trends. The Company
also utilizes experience factors of more mature sales sites in establishing the
reserve for bad debts at new sales offices. The Company generally charges off
all receivables when they become 180 days past due and returns the credits
associated with such charge-offs to inventory. At December 31, 1997, 1.9% of the
Company's total receivables portfolio of $242.3 million were more than 60 days
past due compared to 1.8% of the $291.0 million of receivables at September 30,
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash from operations from down payments on sales of
Vacation Credits which are financed, cash sales of Vacation Credits, principal
and interest on Notes Receivable, and proceeds from sales and borrowings
collateralized by Notes Receivable. The Company also generates cash on the
interest differential between the interest charged on the Notes Receivable and
the interest paid on loans collateralized by Notes Receivable.
During the nine months ended September 30, 1997 and 1998, cash used in operating
activities was $36.2 million and $14.0 million, respectively. Cash generated
from operating activities increased principally due to the increased sales of
Notes Receivable. For the first nine months of 1997, cash used in operating
activities was principally for the issuance and purchase of Notes Receivable of
$94.3 million to finance the purchase of Vacation Credits by Owners and an
increase in inventory of $7.4 million due to additional construction in progress
to meet increasing sales demand. Cash provided by operating activities resulted
primarily from sales and repayments of Notes Receivable of $42.8 million and net
income of $15.2 million. For the nine months ended September 30, 1998, cash used
in operating activities was principally for the issuance and purchase of Notes
Receivable of $126.1 million to finance the purchase of Vacation Credits by
Owners. Cash provided by operating activities resulted primarily from the sale
and repayment of Notes Receivable of $95.5 million and net income of $16.9
million.
Net cash used in investing activities for the nine months ended September 30,
1997 and 1998 was $1.1 and $6.2 million, respectively. Cash used in the
acquisition of property and equipment was primarily used to acquire furniture
and fixtures, data processing equipment, and construction of a new corporate
office building required to meet the growth of the Company.
Net cash provided by financing activities for the nine months ended September
30, 1997 and 1998, was $38.8 million and $21.1 million, respectively. For the
nine months ended September 30, 1997, cash provided by financing activities
resulted primarily from $51.9 million in proceeds, net of expenses, from the
Company's August 15, 1997 public offering of 3,176,250 shares of common stock.
Additionally, cash was provided by the issuance of notes payable of $16.8
million in conjunction with the sale of Notes Receivable from TW Holdings which
was treated as a secured borrowing as the transaction did not meet the sales
recognition criteria of SFAS 125. The note payable was extinguished in a
non-cash transaction by transferring notes receivable to the note holder. For
the nine months ended September 30, 1998, cash used in financing activities was
principally the result of repurchasing 434,600 shares of common stock. Cash
provided was principally the result of outstanding borrowings of $30.0 million
on the Company's $30.0 million revolving credit facility.
Financing of Notes Receivable has been accomplished by use of a $98.0 million
Receivable Transfer Agreement from the Bank Group through TW Holdings. As of
September 30, 1998, Notes Receivable totaling $27.0 million had been transferred
to the Bank Group. The agreement with the Bank Group is subject to annual
renewal each year and was last renewed on June 18, 1998 at a required yield to
the bank group of LIBOR plus 112.5 basis points. In the future, the Company may
hypothecate its Notes Receivable.
The Company has a $10 million open line of credit with the Parent which bears
interest at prime plus 1% (currently 9.5%) per annum. The line of credit is
payable on demand. As of September 30, 1998, there was not any outstanding
indebtedness to the Parent. The Company may advance excess funds to the Parent
at prime rate minus 2% (currently 6.5%) per annum. At September 30, 1998 there
was a $2.0 million Receivable from Parent.
The Company has a Credit Agreement with a group of banks to provide the Company
with a three-year unsecured revolving credit facility for $30 million. The
credit agreement provides for borrowings at the reference rate as announced by
Bank of America, National Trust & Savings Association or at LIBOR plus 100 basis
points. The Credit Agreement provides for a commitment fee to the banks of 30
basis points per annum on the total unused amount of the commitment.
Availability under the line of credit is subject to a borrowing base which is a
percentage of unencumbered Notes Receivable and inventory, including property
under development. Under the terms of the Credit Agreement, the Company is
required to maintain certain interest coverage ratios and capitalization ratios.
The Credit Agreement also imposes limitations on certain liens and carrying
amounts of inventory and matures on February 12, 2001. The Company plans to use
this facility to meet short-term working capital needs. Outstanding borrowings
under this credit facility at September 30, 1998 were $30.0 million and were
primarily the result of repurchasing common stock, payments on the new corporate
headquarters, and higher notes receivable balances arising from increased
vacation credit sales.
In March 1998, the Company sold $37.4 million of Notes Receivable to a
wholly-owned special purpose company, Trendwest Funding II, Inc. In addition,
the Bank Group sold $93.0 million of Notes Receivable purchased from TW
Holdings, Inc. to Trendwest Funding II, Inc. The special purpose company sold
the receivable to TRI Funding II, Inc. (TRI), a special purpose entity
wholly-owned by Trendwest Funding II, Inc., and TRI issued $130.4 million in two
classes of senior and subordinated notes to institutional investors. The 1998-1,
Class A notes were issued for $125.0 million at a fixed rate of 6.88%. The
1998-1, Class B notes were issued for $5.4 million at a fixed rate of 7.98%. The
Class A notes and Class B notes were rated `A' and `BBB' by Fitch IBCA, Inc.,
respectively, and are secured by the Notes Receivable owned by TRI. The ratings
reflect credit enhancements of a 4% over-collateralization and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009.
Through the end of 1999, the Company anticipates spending approximately $76
million for acquisitions and development of new resort properties and for
expansion and development activities. The Company plans to fund these
expenditures with cash generated from operations, including further sales and
securitizations of Notes Receivable. The Company believes that, with respect to
its current operations, cash generated from operations and future borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the end of 1999.
WorldMark maintains a replacement reserve for the WorldMark Resorts which is
funded from the annual assessments of the Owners. At September 30, 1998, the
amount of such reserve was approximately $7.5 million. The replacement reserve
is utilized to refurbish and replace the interiors and furnishings of the
condominium units and to maintain the exteriors and common areas in WorldMark
Resorts in which all units are owned by WorldMark. The Company may advance funds
to WorldMark from time to time.
Since completed units at various resort properties are acquired or developed in
advance and a significant portion of the purchase price of Vacation Credits is
financed by the Company, the Company continually needs funds to acquire and
develop property, to carry Notes Receivable contracts and to provide working
capital. The Company has historically secured additional funds through loans
from the Parent and the sale of Notes Receivable through the Finance
Subsidiaries. See "Risk Factors - Dependence on Acquisitions of Additional
Resort Units for Growth; Need for Additional Capital" of the Company's 1997 Form
10-K.
In the future, the Company may negotiate additional credit facilities, or issue
corporate debt or equity securities. Any debt incurred or issued by the Company
may be secured or unsecured, at a fixed or variable interest rate, and may be
subject to such additional terms as management deems appropriate.
YEAR 2000 STATUS
The Company is addressing the Year 2000 issue with a corporate wide initiative
led by the Director of Information Systems and involving the Vice President of
Administration and the Chief Operating Officer. The initiative includes the
identification of affected software, the development of a plan for correcting
the software in the most effective manner, the implementation of that plan and
the monitoring of that implementation. The program also includes communications
with the company's significant suppliers to determine the extent to which the
company's systems are vulnerable to any failures by them to address the Year
2000 issue. In most instances, the company will renovate existing code
applications, replace older software with new programs and systems, which will
significantly upgrade the existing software as well as appropriately interpret
the calendar Year 2000 and beyond. Although the timing of these replacements is
influenced by the Year 2000 issue, in most instances they will involve capital
expenditures that would have occurred in the normal course of business.
The Company has analyzed each line of code within the specific applications and
has determined how any Year 2000 issues will be addressed. Code revisions have
been completed, tested and released to the live Reservations application on
September 10, 1998, one month ahead of schedule. All other critical applications
are currently scheduled for completion of remediation by April 1, 1999 and
non-critical applications are scheduled for completion by October 1, 1999. The
Company is currently on track with its implementation schedule and is in the
process of developing a contingency plan in case the remediation is not
completed.
The Company is also monitoring the Year 2000 compliance program of Sage Systems,
Inc. (Sage), the Servicer of the Company's Notes Receivable portfolio. Sage has
represented that its Year 2000 remediation is complete. The Company currently is
reviewing each line of Sage's code to verify their Year 2000 compliance.
The Company has incurred approximately $.5 million to date to modify or replace
software in order to remediate the Year 2000 issue and anticipates future
expenditures of approximately $.5 million. In the worst case, if the remediation
is not completed in time, management will employ additional personnel and use PC
based applications to maintain critical functions.
Based on its current assessments and remediation plans, the Company does not
expect that it will suffer any material disruption of its business as a result
of the Year 2000 issue. If the Company's remediations were to fail, it would
implement its contingency plan. In such an event, it is likely that there would
be temporary disruption of customer service and customer inconvenience and
additional costs from the implementation of the contingency plan. It is not
possible to quantify those costs at the present time. Although the company
believes its contingency plan, when completed, will satisfactorily address these
issues. There can be no assurance that the Company's contingency plan will
function as anticipated or that the results of operations of the Company will
not be adversely affected.
Statements herein contain forward looking information concerning the Company's
future prospects and other forecasts and statements of expectations. Actual
results may differ materially from those expressed in the forward looking
statements made by the Company due to, among other things, the Company's ability
to develop or acquire additional resort properties, find acceptable debt or
equity capital to fund such development, achieve planned sales levels, as well
as other risk factors described in the Company's SEC reports and filings.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings Incorporated by reference. See Note 8 of "Notes
to Condensed Combined and Consolidated Financial Statements."
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matter to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Restated Articles of Incorporation (1)
2.2 Restated Bylaws (1)
11 Statement re: Computation of Earnings per share.
Incorporated by reference. See Note 5 of "Notes to Condensed
and Combined and Consolidated Financial Statements."
10.38 Purchase Agreement among Registrant, Roderick C. Wendt,
and Richard L. Wendt, dated September 22, 1998.
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-26861).
(b) Reports on Form 8-K
None
<PAGE>
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, thereunto duly authorized.
TRENDWEST RESORTS, INC.
Date: November 13, 1998 /s/ WILLIAM F. PEARE
---------------------------- -----------------------------------------
William F. Peare
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: November 13, 1998 /s/ GARY A. FLORENCE
----------------------------- ------------------------------------------
Gary A. Florence
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is made
this 22nd day of September, 1998, by and between Trendwest Resorts, Inc.
(hereinafter referred to as "Buyer") and R & R Vista, an Oregon partnership with
R. L. Wendt and R. C. Wendt the two partners (hereinafter referred to as
"Seller"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the following terms
shall have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts receivable of
Seller which are described and listed in Exhibit A hereto, free and clear of all
liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be executed
by the Seller and Buyer at the Closing in the form of attached Exhibit B
covering transfer of the Seller's interest in the Acquired Purchase contracts.
c. "Bill of Sale" means the instrument to be executed by the Seller and
delivered to the Buyer at the Closing in the form of attached Exhibit C.
d. "Buyer" means Trendwest Resorts, Inc., located at 12301 NE 10th Place,
Bellevue, Washington 98005.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective Time" has the meaning specified in Section 3 hereof.
<PAGE>
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
j. "Seller" means R & R Vista, an Oregon partnership with R. L. Wendt and
R. C. Wendt the two partners, located at 2120 Fairmount St., Klamath Falls,
Oregon 97601.
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED PURCHASE CONTRACTS. Subject
to the terms and conditions and in reliance upon the representations and
warranties contained in this Agreement, Seller shall sell to Buyer and Buyer
shall acquire from Seller the Acquired Purchase Contracts.
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Seller's offices, located in Klamath Falls, Oregon at 10:00 a.m. (local time) on
September 22, 1998 (or such other place, date and time as shall be agreed upon
by Buyer and Seller). The date of the Closing is referred to in this Agreement
as the "Closing Date". When completed, the Closing shall be effective as of
12:01 a.m. (local time) on September 22, 1998 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts, Buyer
shall pay to Seller the total sum of Seven Million One Hundred Thirty Eight
Thousand Two Hundred Sixty Eight and 80/100ths Dollars ($7,138,268.80)
(hereinafter referred to as "Purchase Price"), payable, at Closing, in
immediately available funds of the United States by wire transfer. The Purchase
Price includes both outstanding principal and accrued interest on the Acquired
Purchase Contracts.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Buyer as follows:
5.1 Standing and Authority of Seller. Seller is a partnership duly
organized and validly existing in good standing under the laws of the State of
Oregon and possesses all requisite power and authority to enter into and perform
this Agreement. This Agreement is a valid and binding obligation of Seller, duly
enforceable in accordance with its terms.
<PAGE>
5.2 Title and Condition of Acquired Assets. Seller has good, marketable and
indefeasible title to all of the Acquired Purchase Contracts at the Closing and
as of the Effective Time, free and clear of all mortgages, liens, charges,
claims, leases, restrictions and encumbrances whatsoever. There is no agreement
of any kind whereby any Person or Persons have any right to acquire or obtain
(by purchase, gift, merger, consolidation or otherwise) an interest in any of
the Acquired Purchase Contracts.
5.3 Compliance with Instruments. Seller is not in default under, or in
breach of any material term or provision of contract, lease, agreement or other
instrument to which the Acquired Purchase Contracts are bound. The execution,
delivery and performance of this Agreement by Seller does not and will not
conflict with or result in a breach of or a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, any of the
terms, conditions or provisions of any (as so defined) indenture, contract,
agreement, license, lease or other instrument to which the Acquired Purchase
Contracts are bound.
5.4 Authorization by Seller. The execution, delivery and performance of
this Agreement by Seller have been duly and validly authorized by all necessary
action on the part of Seller and this Agreement is a valid, binding and
enforceable obligation of Seller except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting or limiting the rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Seller or under the
authority of Seller is or will be entitled to any broker's, finder's or similar
fee, directly or indirectly from the Buyer in connection with the asset purchase
contemplated in this Agreement.
5.6 Disclosure. To Seller's knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of the Seller
to transfer, assign, and deliver the Acquired Purchase Contracts to Buyer
pursuant to this Agreement is subject to the satisfaction (unless waived in
writing by Seller) of each of the following conditions at and as of the Closing.
<PAGE>
6.1 Performance of Obligations by Buyer. Buyer shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Buyer under this Agreement prior to or at the Closing.
6.2 Purchase Price. Seller shall have received, the Purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. Buyer shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Buyer of this Agreement or consummation by Buyer
of the transactions contemplated thereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to
purchase the Acquired Purchase Contracts from Seller pursuant hereto is subject
to the satisfaction (unless waived in writing by Buyer) of each of the following
conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Seller contained in Section 5 hereof shall be true and correct in
all material respects on and as of the date of this Agreement and at and as of
the Closing as though made at and as of the Closing, except as affected by the
transactions contemplated by this Agreement.
7.2 Performance of Obligations by Seller. Seller shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Seller under this Agreement prior to or at the Closing including without
limitation the delivery to Buyer of: (a) a duly executed Bill of Sale
transferring to Buyer all of the Acquired Purchase Contracts free of all liens
and encumbrances; and, (b) a duly executed Assignment and Assumption Agreement
transferring the Acquired Purchase Contracts.
7.3 Consents and Notices. Seller shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Seller of this Agreement or consummation by Seller
of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
8. FURTHER COOPERATION. After the Closing, each party, at the request of
the other and without additional consideration, shall execute and deliver or
cause to be executed and delivered from time to time such further instruments
and shall take such further action as the requesting party may reasonably
require in order to carry out more effectively the intent and purpose of this
Agreement.
<PAGE>
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be
waived without affecting any of the rights, conditions, or limitations relating
to the other terms and conditions of this Agreement at any time by an instrument
in writing signed by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time by an instrument in
writing signed by all parties hereto.
10. EXPENSES. Each party will be responsible for its own attorneys',
accounting and other professional fees incurred in connection with the purchase
contemplated in this Agreement.
11. PRORATIONS. The parties will prorate as of the Effective Time, all
interest and principle receivable and periodic charges which relate to the
Acquired Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and
inure to the benefit of and be enforceable by each of the parties hereto and
their respective successors and assigns. Neither this Agreement nor any
obligation hereunder shall be assigned or assignable by Buyer or Seller without
the prior written consent of the other parties hereto.
13. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served if in writing or delivered personally or
sent by certified or registered mail, postage prepaid, addressed as follows:
To Seller: R & R Vista
2120 Fairmount St.
Klamath Falls, Oregon 97601
Attn: R. C. Wendt
To Buyer: Trendwest Resorts, Inc.
12301 NE 10th Place
Bellevue, WA 98005
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
<PAGE>
E-CREST/3-95PUR.EC Page 15. DESCRIPTIVE HEADINGS. The descriptive headings
of the several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER: SELLER:
Trendwest Resorts, Inc. R & R Vista
By: ____________________ By: ____________________
Its:____________________ R. C. Wendt
By: ____________________
R. L. Wendt
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, (i) R & R Vista, an Oregon partnership ("Assignor"),
assigns, transfers and sets over to Trendwest Resorts, Inc. ("Assignee"), all of
Assignor's right, title and interest as of the Effective Time in the Acquired
Purchase Contracts described in that certain Purchase Agreement dated as of
September 22, 1998, between Assignor and Assignee ("Agreement"), and listed in
the attached Schedule; and (ii) Assignee hereby assumes and agrees to perform
all obligations of Assignor under said contracts, which arise or mature after
the Effective Time.
This Assignment and Assumption Agreement is executed pursuant to the
Agreement, which contains warranties, rights and limitations with respect to the
obligations assigned and assumed hereunder and which Agreement is incorporated
herein by this reference. All capitalized terms in this instrument shall have
the meanings set forth in the Agreement, unless separately defined herein.
DATED this 22nd day of September, 1998.
Trendwest Resorts, Inc. R & R Vista
By: ____________________ By: ____________________
Its:____________________ R. C. Wendt
By: ____________________
R. L. Wendt
<PAGE>
BILL OF SALE
FOR VALUE RECEIVED, R & R Vista, an Oregon partnership ("Seller") sells,
assigns and transfers to Trendwest Resorts, Inc. ("Buyer"), all of Seller's
right, title and interest in the Acquired Purchase Contracts as of the Effective
Time. The property being conveyed pursuant to this Bill of Sale is listed on
Appendix "A", attached hereto.
This Bill of Sale is given pursuant to that certain Purchase Agreement
dated as of September 22, 1998, between Seller and Buyer ("Agreement"), which is
incorporated herein by reference and which contains certain warranties and
disclaimers applicable for this instrument. All capitalized terms in this Bill
of Sale shall have the meanings specified in the Agreement.
DATED this 22nd day of September, 1998.
R & R Vista
By: ____________________
R. C. Wendt
By: ____________________
R. L. Wendt
<PAGE>
Exhibit B
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, (i) R & R Vista, an Oregon partnership ("Assignor"),
assigns, transfers and sets over to Trendwest Resorts, Inc. ("Assignee"), all of
Assignor's right, title and interest as of the Effective Time in the Acquired
Purchase Contracts described in that certain Purchase Agreement dated as of
September 22, 1998, between Assignor and Assignee ("Agreement"), and listed in
the attached Schedule; and (ii) Assignee hereby assumes and agrees to perform
all obligations of Assignor under said contracts, which arise or mature after
the Effective Time.
This Assignment and Assumption Agreement is executed pursuant to the
Agreement, which contains warranties, rights and limitations with respect to the
obligations assigned and assumed hereunder and which Agreement is incorporated
herein by this reference. All capitalized terms in this instrument shall have
the meanings set forth in the Agreement, unless separately defined herein.
DATED this 22nd day of September, 1998.
Trendwest Resorts, Inc. R & R Vista
By: ____________________ By: ____________________
Its:____________________ R. C. Wendt
By: ____________________
R. L. Wendt
<PAGE>
Exhibit C
BILL OF SALE
FOR VALUE RECEIVED, R & R Vista, an Oregon partnership ("Seller") sells,
assigns and transfers to Trendwest Resorts, Inc. ("Buyer"), all of Seller's
right, title and interest in the Acquired Purchase Contracts as of the Effective
Time. The property being conveyed pursuant to this Bill of Sale is listed on
Appendix "A", attached hereto.
This Bill of Sale is given pursuant to that certain Purchase Agreement
dated as of September 22, 1998, between Seller and Buyer ("Agreement"), which is
incorporated herein by reference and which contains certain warranties and
disclaimers applicable for this instrument. All capitalized terms in this Bill
of Sale shall have the meanings specified in the Agreement.
DATED this 22nd day of September, 1998.
R & R Vista
By: ____________________
R. C. Wendt
By: ____________________
R. L. Wendt
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
AND CONSOLIDATED FINANCIAL STATEMENTS OF TRENDWEST RESORTS, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,479
<SECURITIES> 0
<RECEIVABLES> 104,885
<ALLOWANCES> 11,140
<INVENTORY> 40,060
<CURRENT-ASSETS> 0
<PP&E> 15,184
<DEPRECIATION> 2,604
<TOTAL-ASSETS> 186,075
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,848
<OTHER-SE> 72,295
<TOTAL-LIABILITY-AND-EQUITY> 186,075
<SALES> 123,403
<TOTAL-REVENUES> 144,010
<CGS> 34,119
<TOTAL-COSTS> 35,065
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,535
<INTEREST-EXPENSE> 242
<INCOME-PRETAX> 26,853
<INCOME-TAX> 9,941
<INCOME-CONTINUING> 16,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,912
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
