UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended June 30, 1997
[ ] 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: 1-8096
FAIRFIELD COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0390438
(State of Incorporation) (I.R.S. Employer Identification No.)
11001 Executive Center Drive, Little Rock, Arkansas 72211
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (501) 228-2700
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 12 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
------ -----
APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes X No
----- -----
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of July 31, 1997 totaled 16,970,448.
1
TABLE OF CONTENTS
Page
No.
----
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1997 3
Consolidated Statements of Earnings for the Three
and Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
PART I - FINANCIAL INFORMATION
- ------ ---------------------
ITEM I - FINANCIAL STATEMENTS
- ------ --------------------
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
June 30, December 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,090 $ 7,008
Loans receivable, net 170,161 152,069
Real estate inventories 47,113 42,284
Restricted cash and escrow accounts 6,292 7,777
Property and equipment, net 15,465 14,527
Deferred tax assets, net 9,555 16,576
Other assets 13,327 13,558
-------- --------
$265,003 $253,799
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Financing arrangements $ 61,124 $ 58,110
Deferred revenue 20,702 20,332
Accounts payable 5,177 7,171
Net liabilities of assets
held for sale - 8,293
Other liabilities 30,541 25,594
-------- --------
117,544 119,500
-------- --------
Stockholders' equity:
Common stock, $.01 par value,
25,000,000 shares authorized
and 16,685,130 and 16,574,169
outstanding as of June 30, 1997
and December 31, 1996, respectively 134 134
Paid-in capital 93,219 91,879
Retained earnings 54,882 43,580
Unamortized value of restricted stock (776) (1,294)
Treasury stock, at cost, 2,313,993
shares as of June 30, 1997 and
2,335,295 as of Decmber 31, 1996 - -
-------- --------
147,459 134,299
-------- --------
$265,003 $253,799
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Vacation ownership, net $44,976 $32,414 $ 70,169 $51,112
Lots, net 2,682 3,043 4,637 4,267
Resort management 4,369 3,852 8,075 6,956
Interest 5,529 4,861 10,958 9,523
Other 3,777 4,353 7,273 6,432
------- ------- -------- -------
61,333 48,523 101,112 78,290
------- ------- -------- -------
EXPENSES
Cost of sales:
Vacation ownership 11,126 8,160 17,497 12,892
Lots 719 688 1,212 942
Provision for loan losses 2,029 1,599 3,150 2,731
Selling 22,135 17,439 36,255 28,364
Resort management 4,087 3,164 7,305 5,826
General and administrative 4,184 3,800 8,130 7,122
Interest, net 1,273 1,709 2,476 3,565
Other 3,232 3,854 6,297 5,595
------- ------- -------- -------
48,785 40,413 82,322 67,037
------- ------- -------- -------
Earnings before provision
for income taxes 12,548 8,110 18,790 11,253
Provision for income taxes 5,011 3,171 7,488 4,421
------- ------- -------- -------
Net earnings $ 7,537 $ 4,939 $ 11,302 $ 6,832
======= ======= ======== =======
NET EARNINGS PER SHARE $.42 $.30 $.63 $.42
==== ==== ==== ====
WEIGHTED AVERAGE SHARES
OUTSTANDING 17,946,929 16,228,191 17,927,964 16,104,666
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
Six Months Ended
June 30,
--------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 11,302 $ 6,832
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 1,329 1,011
Amortization 1,025 404
Provision for loan losses 3,150 2,731
Other 424 (120)
Utilization of pre-confirmation
income tax attributes - 3,500
Changes in operating assets and liabilities:
Real estate inventories (4,834) (2,455)
Deferred tax assets 7,021 -
Deferred revenue, accounts payable
and other liabilities 3,196 3,895
Other (202) (1,393)
--------- ---------
Net cash provided by operating activities 22,411 14,405
--------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment, net (2,220) (3,305)
Principal collections on loans receivable 46,959 40,240
Originations of loans receivable (68,148) (44,189)
Net investment activities of net liabilities of
assets held for sale (8,293) 281
Other - 706
--------- ---------
Net cash used in investing activities (31,702) (6,267)
--------- ---------
FINANCING ACTIVITIES
Proceeds from financing arrangements 160,889 118,329
Repayments of financing arrangements (157,875) (125,755)
Issuances of stock under employee stock plans 874 48
Net decrease in restricted cash
and escrow accounts 1,485 36
--------- ---------
Net cash provided by (used in)
financing activities 5,373 (7,342)
--------- ---------
Net (decrease) increase in cash
and cash equivalents (3,918) 796
Cash and cash equivalents, beginning of period 7,008 2,095
--------- ---------
Cash and cash equivalents, end of period $ 3,090 $ 2,891
========= =========
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 2,580 $ 3,969
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1 - BACKGROUND
- ------ ----------
The accompanying consolidated financial statements of Fairfield Communities,
Inc. ("Fairfield") and its wholly owned subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the rules and instructions
of the Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The interim financial information
is unaudited, but reflects all adjustments consisting only of normal recurring
accruals which are, in the opinion of management, necessary for a fair
presentation of the results of operations for such interim periods. Operating
results for the three and six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the entire year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Annual Report on Form 10-K for the year
ended December 31, 1996.
Certain previously reported amounts in the consolidated financial statements
have been reclassified to conform to the presentation used for the current
period. All significant intercompany balances and transactions have been
eliminated in consolidation.
NOTE 2 - PROPOSED MERGER
- ------ ---------------
On August 10, 1997, the Company announced the signing of a merger agreement
to acquire Vacation Break U.S.A., Inc. ("VBUSA"), for approximately $190 million
of the Company's common stock. VBUSA develops, markets and operates vacation
ownership interests in Florida and a hotel interest in the Bahamas. Under the
terms of the agreement, the Company has agreed to issue approximately 5.8
million shares of common stock in exchange for all of the outstanding stock of
VBUSA, based upon an exchange rate of 0.6075 shares of Company common stock in
exchange for each share of VBUSA common stock. For accounting purposes, the
merger is expected to be accounted for as a pooling-of-interests. The
proposed merger is subject to the approval of the stockholders of both
companies, regulatory approval and other customary conditions.
NOTE 3 - COMMON STOCK SPLIT
- ------ ------------------
On June 5, 1997, Fairfield's Board of Directors authorized a three-for-two
common stock split in the form of a stock dividend effective July 15, 1997 to
shareholders of record on July 1, 1997. All references to numbers of shares,
per share amounts and average shares outstanding in the consolidated financial
statements have been restated.
NOTE 4 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
- ------ ----------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share, disclose both primary and diluted earnings
per share and restate all prior periods. Under the new requirements, primary
earnings per share will be renamed basic earnings per share and will exclude
the dilutive effect of stock options. The impact is expected to result in an
increase in primary earnings per share for the three months ended June 30, 1997
and 1996 of $.03 and for the six months ended June 30, 1997 and 1996 of $.05
and $.04, respectively. The impact of Statement No. 128 on fully diluted
earnings per share, which has been renamed diluted earnings per share, is not
expected to be significant.
6
NOTE 5 - VACATION OWNERSHIP REVENUES
- ------ ---------------------------
Vacation ownership revenues are summarized as follows (In thousands):
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Vacation ownership revenues $44,081 $32,127 $69,334 $50,430
Less: Deferred revenue on
current year sales, net (767) (994) (2,946) (1,718)
Add: Revenue recognized on
prior year sales 1,662 1,281 3,781 2,400
------- ------- ------- -------
$44,976 $32,414 $70,169 $51,112
======= ======= ======= =======
</TABLE>
NOTE 6 - LOANS RECEIVABLE
- ------ ----------------
Loans receivable consisted of the following (In thousands):
<TABLE>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Contracts $174,171 $154,906
Mortgages 10,254 11,413
-------- --------
184,425 166,319
Less allowance for loan losses (14,264) (14,250)
-------- --------
$170,161 $152,069
======== ========
</TABLE>
NOTE 7 - REAL ESTATE INVENTORIES
- ------ -----------------------
Real estate inventories are summarized as follows (In thousands):
<TABLE>
June 30, December 31,
1997 1996
---- ----
<S> <S> <S>
Land:
Under development $16,719 $16,196
Undeveloped 5,813 5,515
------- -------
22,532 21,711
------- -------
Residential housing:
Vacation ownership 20,466 16,765
Homes 4,115 3,808
------- -------
24,581 20,573
------- -------
$47,113 $42,284
======= =======
</TABLE>
7
NOTE 8 - FINANCING ARRANGEMENTS
- ------ ----------------------
Financing arrangements are summarized as follows (In thousands):
<TABLE>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Notes payable collateralized by
contracts receivable:
FCC Notes $24,714 $29,944
FFC Notes 16,204 24,370
Notes payable - other 3,005 3,796
Revolving credit agreements 17,201 -
------- -------
$61,124 $58,110
======= =======
</TABLE>
At June 30, 1997, notes payable collateralized by contracts receivable were
secured by a pool of contracts receivable totaling $62.8 million.
NOTE 9 - NET LIABILITIES OF ASSETS HELD FOR SALE
- ------ ---------------------------------------
During the first quarter of 1997, the Company transferred $7.9 million in cash
and the assets collateralizing the 10% Senior Subordinated Secured
Notes (the "FCI Notes"), with an appraised market value of $7.2 million, (the
"Real Estate Collateral"), in settlement of the FCI Notes. The indenture
trustee, at the direction of the majority noteholders, has filed suit, pending
in the United States District Court for the Southern District of New York,
contesting the Company's method of satisfying this obligation and claiming a
default under the indenture securing the FCI Notes. This action alternatively
(a) disputes the Company's right to transfer the Real Estate Collateral in
satisfaction of the FCI Notes, seeking instead a cash payment of $7.2 million,
plus penalty interest and the fees and expenses of the action, or (b) disputes
the $7.9 million cash transfer, seeking instead the issuance of 882,352 shares
of the Company's Common Stock (on a post-split basis, the "Contested Shares"),
previously reserved for issuance if a deficiency resulted on the FCI Notes
at maturity. Under the indenture for the FCI Notes, the noteholders are
entitled to retain, as a premium, up to $2 million from the proceeds of the
collateral transferred in satisfaction of the FCI Notes (including, if
applicable, shares of the Company's Common Stock) in excess of the amount of
principal and accrued interest due at maturity. The Company has been advised
that the noteholders have approved the sale of the Real Estate Collateral for
$4.4 million. The Company intends to vigorously defend this action and
believes that it has substantive defenses. The Contested Shares are not
included in the number of shares outstanding for earnings per share or other
purposes.
NOTE 10 - SUPPLEMENTAL INFORMATION
- ------- ------------------------
Other revenues for the six months ended June 30, 1997 and 1996 include home
sales totaling $5.3 million and $4.5 million, respectively. Other expenses
for the six months ended June 30, 1997 and 1996 include costs of home sales,
including selling expenses, totaling $4.6 million and $4.1 million,
respectively.
Included in other assets at June 30, 1997 and December 31, 1996
are (i) $3.1 million and $2.9 million, respectively, related to the assets of
the Company's life insurance subsidiary and (ii) unamortized capitalized
financing costs totaling $2.0 million and $2.3 million, respectively.
Included in other liabilities at June 30, 1997 and December 31, 1996 are (i)
accruals totaling $9.8 million and $8.9 million, respectively, related to the
Company's employee benefits, (ii) deposits associated with sales contracts
totaling $3.3 million and $2.9 million, respectively, and (iii) $1.1 million
and $1.5 million, respectively, related to the liabilities of the Company's
life insurance subsidiary.
8
Interest capitalized totaled $0.4 million and $0.2 million for the six
months ended June 30, 1997 and 1996, respectively.
NOTE 11 - CONTINGENCIES
- ------- -------------
The Company is party to litigation concerning the FCI Notes (see
Note 9). Additionally, the Company is involved in various other or threatened
lawsuits and contingencies on an ongoing basis as a result of its day-to-day
operations. However, the Company does not believe that any of these other or
threatened lawsuits or contingencies will have a materially adverse effect on
the Company's financial position or results of operations.
9
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Vacation Ownership
------------------
Gross sales of vacation ownership interests ("VOIs") increased 37.5% to
$69.3 million for the six months ended June 30, 1997 as compared to $50.4
million for the six months ended June 30, 1996. Gross VOI sales at the
Company's destination resorts, which include Branson, Missouri; Orlando,
Florida; Myrtle Beach, South Carolina; Nashville, Tennessee and Williamsburg,
Virginia continue to be the largest dollar contributor to total VOI sales.
Gross VOI sales for the six months ended June 30, 1997 increased 35.1% at the
Company's five destination resorts, 47.2% at the Company's ten regional resorts
and 35.0% at the Company's four offsite sales offices.
Selling expenses, including commissions, for both VOI and lot sales, as a
percentage of related net revenues, were 48.3% and 50.9%, for the six months
ended June 30, 1997 and 1996, respectively. The Company continues to benefit
from sales efficiencies experienced at its destination resorts, including its
destination resorts located in Orlando, Florida and Nashville, Tennessee.
Management continues to work to improve sales efficiencies at its newer
locations and future efficiencies are expected as these projects mature and
expand their base of property owners.
Interest
--------
Interest income increased to $11.0 million for the six months ended June 30,
1997 as compared to $9.5 million for the six months ended June 30, 1996. This
increase is primarily attributable to an increase in the average balance of
outstanding contracts receivable ($158.8 million for the six months ended
June 30, 1997 versus $137.0 million for the six months ended June 30, 1996).
Interest income is expected to increase in tandem with the net increase in
contracts receivable.
Interest expense, net of amounts capitalized, totaled $2.5 million and $3.6
million for the six months ended June 30, 1997 and 1996, respectively. This
decrease is primarily attributable to the reduction in the average outstanding
balance of interest-bearing debt ($59.3 million for the six months ended June
30, 1997 as compared to $80.2 million for the six months ended June 30, 1996).
The weighted average interest rate for the Company's financing arrangements
collateralized by contracts receivable, including certain fees and expenses, was
8.8% and 8.5% for the six months ended June 30, 1997 and 1996, respectively.
Financing arrangements are expected to increase as sales volumes increase and
the Company finances the timing differences between incurring the costs
to develop and market its real estate products and receiving the proceeds
from the sale of such products.
General and Administrative
--------------------------
Increases in general and administrative expenses during the six months ended
June 30, 1997 resulted primarily from the additional expenses incurred related
to the increased VOI sales volumes as previously discussed. However, as a
percentage of total revenues, general and administrative expenses decreased
from 9.1% for the six months ended June 30, 1996 to 8.0% for the six months
ended June 30, 1997.
Other
-----
Other revenues for the six months ended June 30, 1997 and 1996 include home
sales totaling $5.3 million and $4.5 million, respectively. Other expenses for
the six months ended June 30, 1997 and
10
1996 include costs of home sales, including selling expenses, totaling $4.6
million and $4.1 million, respectively.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Revenue and expense trends for the three months ended June 30, 1997 were
generally consistent with those of the related six month period as described
above with (i) an increase in gross and net VOI sales, (ii) an increase in
interest income, (iii) a decrease in selling expenses as a percentage of
related revenues, and (iv) a decrease in interest expense.
Other revenues and expenses for the three months ended June 30, 1997 include
home sales totaling $2.7 million and related costs of sales, including selling
expenses, totaling $2.4 million. For the three months ended June 30, 1996,
home sales and related costs of sales, including selling expenses, totaled
$3.2 million and $3.0 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company's cash and cash equivalents totaled $3.1
million, a decrease of $3.9 million from December 31, 1996 to June 30, 1997.
This decrease was related to $31.7 million used in investing activities, which
was partially offset by $22.4 million provided from operating activities and
$5.4 million provided by financing activities.
Cash provided by operating activities totaled $22.4 million and $14.4 million
for the six months ended June 30, 1997 and 1996, respectively. During the six
months ended June 30, 1997, net deferred tax assets decreased by $7.0 million
resulting from the deferred tax provision recorded for the six months ended
June 30, 1997. In March 1997, the Company exercised its option, for $3.4
million, to acquire additional land located near Orlando, Florida.
Cash used in investing activities totaled $31.7 million and $6.3 million for
the six months ended June 30, 1997 and 1996, respectively. During the six
months ended June 30, 1997, the Company repaid $7.9 million of outstanding
indebtedness under the FCI Notes (see Note 9 of "Notes to Consolidated
Financial Statements"). Due to increased VOI sales volumes, originations of
loans receivable exceeded principal collections by $21.2 million for the six
months ended June 30, 1997 as compared to $3.9 million for the six months
ended June 30, 1996.
Cash provided by financing activities totaled $5.4 million for the six months
ended June 30, 1997 as compared to the usage of cash of $7.3 million for the
six months ended June 30, 1996. During the six months ended June 30, 1997,
proceeds from financing arrangements exceeded repayments by $3.0 million as
compared to repayments of financing arrangements exceeding proceeds therefrom
of $7.4 million during the six months ended June 30, 1996. As previously
discussed, the Company borrowed $7.9 million under its revolving credit
agreements in the first quarter 1997, to repay, in part, the outstanding
indebtedness under the FCI Notes. The Company's revolving credit agreements
had been temporarily paid down as a result of the utilization of the proceeds
from the Company's common stock offering in November 1996. Increases in
financing arrangements are expected to continue as sales volumes increase and
the Company finances the timing differences between incurring the costs to
develop and market its real estate products and receiving the proceeds from
the sale of such products.
At June 30, 1997, Fairfield Capital Corporation ("FCC"), a wholly-owned
subsidiary of FAC, had borrowings outstanding of $24.7 million under its
Amended Credit Agreement (the "FCC Agreement"), which provides for the
purchases of contracts receivable from FAC. The FCC Agreement provides for
two additional fundings of up to a total of $55.0 million prior to October
1997.
11
At June 30, 1997, FAC had borrowings outstanding of $17.2 million under its
Third Amended and Restated Revolving Credit Agreement (the "FAC Agreement").
The FAC Agreement provides for revolving loans of up to $35.0 million,
including up to $1.0 million for letters of credit. The revolving loans
mature on January 1, 1999, if not extended in accordance with the terms of the
FAC Agreement, with Fairfield being a guarantor pursuant to the FAC Agreement.
At June 30, 1997, FAC had borrowing availability of $10.5 million under the
FAC Agreement.
At June 30, 1997, Fairfield had no borrowings outstanding under its Amended
and Restated Revolving Credit Agreement (the "FCI Agreement"). The FCI
Agreement provides for revolving loans of up to $25.0 million, including up to
$7.0 million for letters of credit. The revolving loans mature on January 1,
1999, if not extended in accordance with the terms of the FCI Agreement. At
June 30, 1997, Fairfield had borrowing availability under the FCI Agreement of
$23.6 million, net of outstanding letters of credit totaling $1.4 million.
The Company is currently evaluating the acquisition and/or development of
certain resort properties. In addition, the Company is currently evaluating
several timeshare asset and management company acquisitions to integrate into
or to expand the operations of the Company. The Company expects to finance
its short- and long-term cash needs, including the potential acquisitions
noted above, from (i) contract payments generated from its contracts receivable
portfolio, (ii) operating cash flows, (iii) borrowings under its credit
facilities, and (iv) future financings, including additional securitizations
of contracts receivable.
FORWARD-LOOKING INFORMATION
- ---------------------------
This Quarterly Report includes certain forward-looking statements, including
(without limitation) statements with respect to anticipated future operating
and financial performance, growth and acquisition opportunities and other
similar forecasts and statements of expectation. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. Forward-looking statments made
by the Company and its management are based on estimates, projections, beliefs
and assumptions of management at the the time of such statements and are not
guarantees of future performance. The Company disclaims any obligation to
update or revise any forward-looking statement based on the occurrence of
future events, the receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management as a result of a number of risks, uncertainties and assumptions.
Representative examples of these factors include (without limitation) general
industry and economic conditions; interest rate trends; cost of capital and
capital requirements; availability of real estate properties; competition
from national hospitality companies; shifts in customer demands; changes
in operating expenses, including employee wages, benefits and training;
economic cycles; the continued availability of financing in the amounts
and at the terms necessary to support the Company's future business and the
success achieved or problems encountered in integrating the operations of
VBUSA into the Company.
12
PART II - OTHER INFORMATION
- ------- -----------------
Item 1 - Legal Proceedings
Incorporated by reference. (See Note 11 of "Notes to Consolidated
Financial Statements.")
Item 4 - Submission of Matters to a Vote of Security Holders
The 1997 Annual Meeting of Stockholders of the Registrant was
held on May 22, 1997. The following items of business was
presented to the stockholders:
Election of Directors
---------------------
The seven directors were elected as proposed in the Proxy
Statement dated April 17, 1997 under the caption titled
"Election of Directors".
Total Vote For Total Vote Withheld
Each Director From Each Director
-------------- -------------------
Les R. Baledge 9,136,209 163,489
Ernest D. Bennett, III 9,134,158 165,540
Philip L. Herrington 8,887,012 412,686
Bryan D. Langton 8,534,809 764,889
John W. McConnell 8,868,458 431,240
Charles D. Morgan 9,143,404 156,294
William C. Scott 9,147,425 152,273
Approval of the 1997 Stock Option Plan
--------------------------------------
The 1997 Stock Option Plan as proposed in the Proxy Statement
dated April 17, 1997 under the caption titled "Approval of
the 1997 Stock Option Plan" was approved (For - 7,727,008;
Against - 1,542,428; Abstain - 30,262).
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Reference is made to the Exhibit Index.
(b) Reports on Form 8-K
-------------------
None
13
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.
FAIRFIELD COMMUNITIES, INC.
Date: August 13, 1997 /s/ Robert W. Howeth
---------------------- ---------------------------------------------
Robert W. Howeth, Senior Vice President and
Chief Financial Officer
Date: August 13, 1997 /s/ William G. Sell
---------------------- --------------------------------------------
William G. Sell, Vice President and Controller
(Chief Accounting Officer)
14
FAIRFIELD COMMUNITIES, INC.
EXHIBIT INDEX
Exhibit
Number
- ------
3(a) Second Amended and Restated Certificate of Incorporation of the
Registrant, effective September 1, 1992 (previously filed with
the Registrant's Current Report on Form 8-K dated September 1,
1992 and incorporated herein by reference)
3(b) Fifth Amended and Restated Bylaws of the Registrant, dated May 9,
1996 (previously filed with the Registrant's Current Report on
Form 8-K dated May 22, 1996 and incorporated herein by reference)
4.1 Certificate of Designation, Preferences, and Rights of Series A
Junior Participating Preferred Stock, dated September 1, 1992
(previously filed with the Registrant's Current Report on Form 8-K
dated September 1, 1992 and incorporated herein by reference)
11 Computation of earnings per share (attached)
27 Financial Data Schedule (attached)
15
EXHIBIT 11
----------
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Three Months Ended
June 30,
-----------------------------
1997 1996
---- ----
<S> <C> <C>
Weighted average shares:
Shares issued 18,978,078 17,315,125
Estimated increase in shares outstanding due
to allowed claims exceeding $85 million (1) 280,500 313,339
Less treasury stock (2,318,068) (2,395,295)
Net effect of dilutive warrants based on the
treasury stock method 1,006,419 995,022
---------- ----------
Total weighted average shares outstanding 17,946,929 16,228,191
========== ==========
Net earnings $7,537,000 $4,939,000
========== ==========
Net earnings per share $0.42 $0.30
===== =====
Six Months Ended
June 30,
--------------------------
1997 1996
---- ----
<C> <C>
18,944,833 17,303,125
280,500 313,339
(2,324,558) (2,395,295)
1,027,189 883,497
---------- ----------
17,927,964 16,104,666
========== ==========
$11,302,000 $6,832,000
=========== ==========
$0.63 $0.42
===== =====
</TABLE>
(1) On June 30, 1997, the bankruptcy court approved a settlement agreement
between the Company and the county and property owners' association for
its Pagosa Springs, Colorado resort location. Based on the terms of the
settlement, the Company subsequently issued 280,500 shares of its common
stock. The Company previously estimated the total number of shares which
would be issued in connection with this claim at approximately 1,020,000
shares. As a result, the number of contingent shares included in the
computation of earnings per share for prior periods was reduced by
approximately 740,000 shares, resulting in earnings per share for
the three and six months periods ended June 30, 1996 increasing by
$.01 per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's June 30, 1997 10Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3090
<SECURITIES> 0
<RECEIVABLES> 184425
<ALLOWANCES> 14264
<INVENTORY> 47113
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 265003
<CURRENT-LIABILITIES> 0
<BONDS> 61124
0
0
<COMMON> 134
<OTHER-SE> 147325
<TOTAL-LIABILITY-AND-EQUITY> 265003
<SALES> 82881
<TOTAL-REVENUES> 90154
<CGS> 26014
<TOTAL-COSTS> 32311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3150
<INTEREST-EXPENSE> 2476
<INCOME-PRETAX> 18790
<INCOME-TAX> 7488
<INCOME-CONTINUING> 11302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11302
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0
</TABLE>
