SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 10, 1999
EQUIVEST FINANCE, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-29015 59-2346270
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
100 NORTHFIELD STREET
GREENWICH, CONNECTICUT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 422-9088
INFORMATION TO BE INCLUDED IN REPORT
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable.
<PAGE>
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Press Release
EQUIVEST FINANCE ANNOUNCES
NET INCOME INCREASES
136%; EARNINGS PER SHARE
INCREASE 120% to $.11 from $.05
Greenwich, Connecticut (Business Wire) - November 10, 1999 - Equivest
Finance, Inc. (NASD:EQUI) announced today its financial results for the third
quarter of 1999 and the nine months ended September 30, 1999. Third quarter
diluted earnings per share were $0.11 on 26.2 million weighted average shares
outstanding, an increase of 120% from $0.05 on 23.5 million shares in the
year-earlier period. Diluted earnings per share were $0.26 for the nine months
ended September 30, 1999, an increase of 73% compared with earnings per share of
$0.15 for the previous year. Equivest provides high quality vacation ownership
opportunities at 13 resorts located on the eastern and Gulf coasts of the United
States and in St. Thomas, USVI, as well as financing independent resort
developers.
For the quarter ended September 30, 1999, revenues rose 243% to a record
$27.2 million, compared with $7.9 million in the comparable quarter in 1998.
Pretax net income for the quarter rose 138% to $5.0 million, up from $2.1
million reported in the year earlier period. Net income for the quarter was $2.9
million, an increase of 136% from $1.2 million in 1998. Total assets as of
September 30, 1999 were $285.8 million, an increase of 45% compared with $197.4
million at year-end 1998. Total capital at September 30, 1999 was $62.7 million,
an increase of 17% from $53.5 million at year-end 1998.
For the nine months ended September 30, 1999, revenues were $65.6 million,
an increase of 261% from $18.2 million in the year earlier period. Pretax income
rose 99% to $12.3 million, compared with $6.2 million in the comparable period.
Net income for the nine months rose 86% to $7.3 million compared with $3.9
million for the same period in 1998. Net income in the first nine months of 1998
benefited from the use of net operating loss carry forwards, which were fully
utilized during the first quarter of 1998 and were not available in 1999. Net
income for the nine months ended September 30, 1999 of $7.3 million was equal to
138% of the $5.2 million net income recorded for all of calendar year 1998.
2
<PAGE>
During the third quarter of 1999, Equivest reported $11.9 million in sales
of vacation ownership intervals ("VOI's"), or 44% of total revenues. Resort
management operations generated $8.1 million in revenue, or 30% of total
revenues. Interest income was $6.4 million, or 26% of overall revenues. As a
percent of VOI sales, the company's cost of sales during the quarter was 24%,
and sales and marketing expense was 44%. Resort operations expense was 93% of
resort operations revenue. In the quarter ended September 30, 1999, interest
expense as a percent of interest income was 53%, up from 37% in the year earlier
period. General and administrative expense was 7% of total revenues during the
quarter ended September 30, 1999, down from 15% during the third quarter of
1998.
The company's loan portfolio grew 18% to $186 million during the third
quarter of 1999, compared with $158 million as of September 30, 1998. During the
quarter ended September 30, 1999, the company increased its total portfolio
reserves and over collateralization to $37.4 million, or 20% of the overall loan
portfolio, from $23.0 million or 15% at September 30, 1998. The allowance for
doubtful accounts was $6.8 million at September 30, 1999, up 75% compared with
$3.9 million at September 30, 1998.
During the quarter, the company sold 1,154 VOI's at an average price of
approximately $10,370. As of September 30, 1999, the company held approximately
24,500 unsold VOI's in inventory, representing more than $250 million in
potential gross sales proceeds at the current average sales price as of
September 30, 1999.
The six resorts in St. Thomas, USVI, New Orleans, LA, St. Augustine, FL,
and Ocean City, MD acquired in March, 1999 from the Kosmas Group International
("KGI") had total revenues of approximately $11.0 million during the quarter.
For the same period, ERC, the company's preexisting New England timeshare
development division, had total revenues of $10.7 million. The former KGI
resorts had pretax income during the quarter of approximately $1.0 million,
compared with approximately $1.8 million for the Company's seven ERC resorts.
Richard C. Breeden, Chairman, President and Chief Executive Officer of
Equivest commented: "This is the eleventh straight quarter in which Equivest has
posted a quarterly year-on-year increase in pretax profits exceeding 30%. During
the quarter, the company set new records for revenues, net income and earnings
per share. Cost reductions to date at the former KGI properties enabled those
locations to record solid profitability compared with much weaker performance
prior to their acquisition, though they have not yet achieved profit margins as
high as ERC's. Earnings per share rose significantly to $.11 during the third
quarter of 1999, and $.26 for the nine months ended September 30, 1999. Also
during the quarter we were in active negotiations that led to our agreement in
principle to acquire Peppertree Resorts, Ltd. of Asheville, NC."
3
<PAGE>
As previously announced, Equivest has reached an agreement in principle to
acquire all the outstanding stock of Peppertree Resorts, Ltd. of Asheville, N.C.
and certain related assets. Assuming completion of the proposed transaction,
Equivest will have 28 operating resorts, together with a new resort in
Washington, D.C. where construction is expected to commence in 2000. Equivest
will have a combined owner and existing customer base following the Peppertree
transaction of approximately 100,000 families. Equivest today has more than
45,000 families in its customer base. Including its own 13 resorts, Equivest
finances consumer purchases at nearly 80 resorts in the U.S., Canada and the
Caribbean.
Certain statements in this press release are forward-looking. These may be
identified by the use of forward-looking words or phrases such as "believe,"
"expect," "anticipate," "should," "planned," "estimated," and "potential." These
forward-looking statements are based on the Company's current expectations. The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
such forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause actual results
and experience to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development, and
results of the Company's businesses include a downturn in the real estate cycle,
lack of available qualified prospects to tour the Company's resorts, competition
from other developers, lack of appropriate sites for future developments,
failure to complete construction in a timely and cost-efficient manner, or other
factors which result in lower sales of vacation ownership interests, possible
financial difficulties of one or more of the developers with whom the Company
does business, including the risk of carrying non-performing assets or losses if
defaulted loans prove to have insufficient collateral backing, fluctuations in
interest rates, prepayments by consumers of indebtedness, inability of
developers to honor replacement obligations for defaulted consumer notes, and
competition from organizations with greater financial resources.
For Information Contact:
Gerald L. Klaben, Jr., Chief Financial Officer (203) 618-0065
4
<PAGE>
EQUIVEST FINANCE, INC. AND SUBSIDIARIES
COMPARATIVE CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
September December
--------- --------
30, 1999 31, 1998
-------- --------
ASSETS (Unaudited)
- --------------------------------------------------- -----------
Cash and cash equivalents $ 5,895 $ 3,487
Receivables, net 167,402 142,326
Investment in real estate joint venture 4,202 2,971
Timeshare inventory 60,880 10,361
Deferred financing costs, net 2,453 3,756
Cash - restricted 2,664 1,422
Accrued interest receivable 1,335 971
Property and equipment, net 11,223 3,048
Goodwill, net 26,731 27,247
Stock registration costs 1,596 1,480
Other assets 1,413 315
-------- --------
Total Assets $285,794 $197,384
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------
Liabilities:
Accounts payable $ 4,968 $ 2,213
Accrued expenses and other liabilities 9,648 3,985
Taxes payable 2,976 1,994
Deferred income taxes 5,902 2,569
Notes payable 199,579 133,117
-------- --------
Total Liabilities 223,073 143,878
-------- --------
STOCKHOLDERS' EQUITY
Cumulative Redeemable Preferred Stock--Series 2
Class A, $3 par value; 15,000 shares
authorized, 10,000 shares
Outstanding 30 30
Common Stock, $.01 par value; 50,000,000
shares authorized, 25,688,351 shares
issued and outstanding in 1999, and
25,198,351 shares issued and outstanding in
1998 257 252
Additional paid-in capital 51,071 49,115
Retained earnings 11,363 4,109
-------- --------
Total Stockholder's Equity 62,721 53,506
-------- --------
Total Liabilities and Stockholders' Equity $285,794 $197,384
======== ========
5
<PAGE>
EQUIVEST FINANCE, INC. and SUBSIDIARIES
COMPARATIVE CONDENSED STATEMENT OF INCOME
(Dollars in thousands except per share data)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited) (unaudited)(unaudited)
Revenues:
Interest $ 6,422 $ 5,303 $ 18,009 $ 15,011
Timeshare interval sales 11,890 1,103 28,233 1,103
Resort operations 8,164 1,215 18,042 1,215
Other income 691 297 1,335 868
------- ------- ------- -------
Total revenues 27,167 7,918 65,619 18,197
Expenses:
Interest 3,396 1,947 8,847 5,318
Cost of timeshare intervals
sold 2,854 273 6,747 273
Sales and marketing 5,202 567 12,172 568
Resort management 7,589 990 16,118 990
Depreciation and
amortization 608 692 2,207 1,402
Provision for doubtful
receivables 621 200 1,450 650
General and administrative 1,910 1,155 5,749 2,786
------- ------- ------- -------
Total expenses 22,180 5,824 53,290 11,987
------- ------- ------- -------
Income before provision for
taxes 4,987 2,094 12,329 6,210
Provision for income taxes 2,075 860 5,075 2,300
------- ------- ------- -------
Net income 2,912 $ 1,234 $ 7,254 $ 3,910
======= ======= ======= =======
Basic earnings per common
share $ 0.11 $ 0.05 $ 0.27 $ 0.16
Diluted earnings per common
share $ 0.11 $ 0.05 $ 0.26 $ 0.15
6
<PAGE>
EQUIVEST FINANCE, INC. and SUBSIDIARIES
Selected Financial Data
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
As a percentage of total revenues:
Interest 23.6% 67.0% 27.4% 82.4%
Timeshare interval sales 43.8% 14.0% 43.0% 6.1%
Resort operations 30.1% 15.3% 27.5% 6.7%
Other income 2.5% 3.7% 2.1% 4.8%
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
Expenses:
As a percentage of VOI sales:
Cost of timeshare intervals
sold 24.0% 24.7% 23.9% 24.7%
Sales and marketing 43.8% 51.4% 43.1% 51.4%
Provision for doubtful
receivables (1) 5.2% 5.9% 4.6% 5.9%
As a percentage of interest income:
Interest 52.9% 36.7% 49.1% 35.4%
As a percentage of resort operations:
Resort management 93.0% 81.5% 89.3% 81.5%
As a percentage of total revenues:
Provision for doubtful
receivables (2) 0.0% 1.7% 0.2% 3.2%
Depreciation and
amortization 2.2% 8.7% 3.4% 7.7%
General and administrative 7.0% 14.6% 8.8% 15.3%
----- ----- ----- -----
Total expenses 81.7% 73.5% 81.2% 65.9%
----- ----- ----- -----
Income before taxes 18.3% 26.5% 18.8% 34.1%
Provision for income taxes 7.6% 10.9% 7.7% 12.6%
Net income 10.7% 15.6% 11.1% 21.5%
===== ===== ===== =====
</TABLE>
(1) Based on provision for doubtful receivables recorded on timeshare
development.
(2) Based on provision for doubtful receivables recorded on timeshare
financing.
7
<PAGE>
EQUIVEST FINANCE, INC. and SUBSIDIARIES
Selected Financial Data
(Dollars in thousands)
September 30, September 30,
1999 1998
---- ----
A&D loans $ 29,885 $ 38,258
Purchased receivables 92,581 90,473
Hypothecation loans 15,306 9,581
Consumer loans, owned 45,267 17,744
Other loans 3,405 2,046
--------- ---------
Total loans outstanding $ 186,444 $ 158,102
Specific reserves $ 18,622 $ 17,476
General reserves 6,814 3,881
Overcollateralization 11,958 1,639
--------- ---------
Total reserves and
overcollateralization $ 37,394 $ 22,996
Total reserves and
overcollateralization as % of
total loans 20.1% 14.5%
Chargebacks $ 4,367 $ 4,624
Chargebacks as % of Consumer
Financings (1&2) 4.1% 4.6%
Allowance for doubtful accounts,
beginning of year $ 3,835 $ 2,442
Provision for loan losses 1,450 650
Allowance related to the acquisition
of ERC and Kosmas transaction 2,157 800
Charges to allowance for doubtful
accounts (628) (11)
--------- ---------
Allowance for doubtful accounts, end
of period $ 6,814 $ 3,881
(1) Consumer Financing includes Purchased receivables and Hypothecation loans.
(2) Represents year-to-date amounts.
8
<PAGE>
Item 6. Resignation of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
Not Applicable
Item 8. Change in Fiscal Year
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUIVEST FINANCE, INC.
Date: November 11, 1999 By: /s/
----------------------------
Name: Gerald L. Klaben, Jr.
Title:Senior Vice President &
Chief Financial Officer
9
