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): 11/15/00
EQUIVEST FINANCE, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-29015 59-2346270
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
100 NORTHFIELD STREET
GREENWICH, CONNECTICUT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 618-0065
INFORMATION TO BE INCLUDED IN REPORT
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable.
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Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Press Release
EQUIVEST FINANCE ANNOUNCES
RECORD THIRD QUARTER REVENUES;
NET INCOME RISES 21%;
EARNINGS OF $0.12 PER DILUTED SHARE
Greenwich, Connecticut (Business Wire) - November 15, 2000 - Equivest
Finance, Inc. (NASDAQSC:EQUI) an integrated developer and operator of vacation
ownership resort properties, reported record revenue of $48.4 million for its
third quarter ended September 30, 2000, up 89% from $25.7 million in the
comparable period last year. Net income for the quarter was $3.5 million, up 21%
from $2.9 million in the comparable period of 1999. The Company had net income
of $0.12 per diluted share for the third quarter of 2000, compared with $0.11 in
the comparable quarter in 1999.
Revenues for the first nine months of 2000 rose 106% to $127.0
million, compared with $61.6 million in the comparable 1999 period. For the
nine-month period, net income was $8.7 million, or $0.29 per share diluted, up
19% from $7.3 million, and $0.26 per share, in 1999.
Total assets as of September 30, 2000 were $436.6 million, an
increase of 53% compared with $285.8 million at September 30, 1999. Total
capital at September 30, 2000 was $84.0 million, an increase of 34% from $62.7
million at September 30, 1999.
During the third quarter of 2000, sales of vacation ownership
intervals ("VOIs") increased 166% to $31.6 million, from $11.9 million for the
same period in 1999. Sales of VOIs at resorts that were owned by the Company
during the third quarter of 1999 were up 23% in the third quarter of 2000.
During the third quarter of 2000, the Company sold 1,427 fixed-week VOIs and
1,298 points packages, at a combined average price of approximately $11,600. As
of September 30, 2000, the company held approximately 27,610 unsold VOIs in
inventory, representing more than $320 million in potential gross sales proceeds
at the current sale price as of September 30, 2000.
During the third quarter of 2000, sales and marketing costs rose to
47.2% of VOI sales, compared with 43.8% for the prior year period. The increase
in the Company's sales and marketing expense levels reflects higher costs and
lower efficiencies at its Peppertree
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division. For example, sales and marketing expense for the non-Peppertree sales
centers was 39.2% in the third quarter, while Peppertree's sales and marketing
expense during the same period was 56.1% of VOI revenues. The Company is
continuing the restructuring of the former Peppertree operations to reduce
costs. To date the Company has closed five smaller Peppertree sales centers and
one of its two telemarketing centers. Total employment at Peppertree has been
reduced by more than 20% since it was acquired by the Company in November 1999.
The Company believes that Peppertree's cost levels will continue to be reduced
as a result of cost-cutting measures, but it cannot predict when or if levels
similar to the historic costs at its other sales centers will be achieved.
Net interest income for the third quarter of 2000 was $3.5 million,
an increase of 14% compared to $3.0 million for the third quarter of 1999.
Interest expense as a percent of interest income increased to 65.3% in the third
quarter of 2000 from 52.9% in the comparable period in 1999, reflecting greater
levels of outstanding indebtedness and higher average interest rates payable.
This in large part reflects the assumption of outstanding Peppertree debt
carrying much higher average interest rates than Equivest's own obligations. To
date during 2000 the Company has repaid more than $23 million in high-cost
Peppertree debt, refinancing these liabilities at a significant cost reduction.
The Company anticipates that it will seek to refinance Peppertree's outstanding
liabilities wherever it has the right to do so under the terms of such
indebtedness.
Resort management operations generated $6.7 million in revenue during
the third quarter of 2000, unchanged from the same period in 1999. Pretax profit
from resort operations, exclusive of general corporate overhead, rose
approximately 181% to $1.6 million in the third quarter of 2000 from $0.6
million in the third quarter of 1999. This growth in pretax profit reflected
much improved margins. Resort operations expense as a percent of resort
management revenues fell to 75.7% in the quarter ended September 30, 2000 from
91.4% in the third quarter of 1999. Third quarter 2000 general and
administrative expense was 8.6% of total revenues, up from 7.4% in the third
quarter 1999, reflecting the addition of Peppertree's overhead expenses.
For the nine months ended September 30, 2000, timeshare sales revenue
was $77.8 million, up 175% from $28.2 million for the comparable nine months of
1999. During the nine months of 2000, net interest income was $9.9 million, up
8% from $9.2 million in 1999. Pretax resort operations income for the nine
months in 2000, exclusive of general corporate overhead, was $5.3 million on
revenue of $19.3 million, or 27.5% of resort operations revenue. Pretax resort
operations income in the comparable nine months in 1999, exclusive of general
corporate overhead, was $1.9 million on revenue of $14.0 million, or 13.7% of
resort operations revenue.
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During the third quarter of 2000, the Company increased its rate of
provisioning for doubtful receivables to 8.0% of sales of "VOIs", compared with
4.6% in the prior year. This increase reflects what the Company's "Target
Reserve Methodology," or "TRM," suggests is a more appropriate long-term rate of
provisioning for doubtful receivables. Under the Company's TRM system, the
Company assigns reserve targets of 5%, 10%, 50% and 95% to consumer receivables
relating to purchasers in its own resorts that are current, 30, 60 or over 90
days past due, respectively. In this manner the level of provisioning for
doubtful receivables required to maintain adequate coverage of the actual volume
of consumer notes in different aging categories are monitored on a monthly
basis, with adjustment where necessary to maintain adequate reserve coverage
ratios, or "RCRs". For the fourth quarter of 2000, the Company intends to
increase provisioning to 10% of VOI sales, reflecting an increase in
delinquencies and a potential softening of the overall economy.
The company's loan receivable portfolio grew 49% to $278.0 million as
of September 30, 2000, compared to $186.4 million as of September 30, 1999. Of
this amount $146.8 million represented receivables relating to VOI purchases in
the Company's own resorts, $108.3 million represented receivables relating to
consumer loans at third party developer resorts, and the balance represented
acquisition and development and other loans. At September 30, 2000, the Company
maintained total portfolio reserves and over collateralization of $33.7 million,
or 12.1% of total loans. The allowance for doubtful accounts included in total
reserves was $10.2 million at September 30, 2000, up 49% compared with $6.8
million at September 30, 1999.
Richard C. Breeden, Chairman, President and Chief Executive Officer
of Equivest commented: "Our net income rose approximately 43% compared with the
second quarter of this year, and more than 30% compared with the year earlier
period excluding certain one-time gains in 1999. Sales were strong during the
quarter, and the Company made progress increasing average prices and overall
sales efficiency at most of our locations. During the third quarter Equivest
continued working to reduce expenses in the former Peppertree operations."
The Company is also working to integrate the Company's operations and
products. Mr. Breeden also noted that: "We expect to put several of our existing
resorts into the Equivest Vacation and Travel Club for the first time during the
fourth quarter. We will also begin expanding the number of sales centers selling
points rather than traditional fixed week intervals. Our first conversion to the
points program is currently underway, and we expect to continue the transition
to sales of points at all our locations over the next few quarters."
Equivest provides high quality vacation ownership opportunities to
more than 90,000 owners at 30 resort locations on the eastern and Gulf coasts of
the United States, and in St. Thomas, USVI. Equivest also provides financing for
independent developers of vacation ownership resorts and their customers.
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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.
Contact: Gerald L. Klaben, Jr., Chief Financial Officer (203) 618-0065
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUIVEST FINANCE, INC.
Date: November 15, 2000 By: /s/ Gerald L. Klaben, Jr.
----------------------------
Name: Gerald L. Klaben, Jr.
Title: Senior Vice President
& Chief Financial Officer
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