Press Release: Trendwest Resorts, Inc.
February 1, 2002
REDMOND, WA -- Trendwest Resorts, Inc., (Nasdaq:TWRI), one of the nation's leading timeshare companies, today reported
net income of $13.6 million, or $0.35 per diluted share, for the quarter ended December 31, 2001, compared to net
income of $10.7 million, or $0.28 per diluted share for the same period last year. For the year ended December
31, 2001, net income was $55.2 million, or $1.43 per diluted share, 28.7% ahead of last year's $42.9 million, or
$1.12 per diluted share. All per share amounts presented reflect the 3-for-2 stock splits that occurred in March
and December of 2001.
The Company reported total revenues of $110.3 million for the quarter ended December 31, 2001, a 26.1% increase
over the $87.5 million reported in the same quarter last year. For the year ended December 31, 2001, revenues were
$469.2 million, up 39.0% from $337.6 million last year.
``While the 2001 fourth quarter presented many challenges for us, we continued to grow our business. Our sales
and marketing costs were negatively impacted due to the events of September 11. However, our tour flow has since
returned to normal levels, and we continue to work on improving our overall sales and marketing costs. Additionally,
our financial results continue to benefit from the current interest rate environment,'' stated Bill Peare, President
and CEO. ``We are moving into 2002 focused on improving operating efficiencies to move more sales dollars to the
bottom-line.''
Operations
Net Vacation Credit sales, exclusive of upgrade sales, for the December quarter increased 14.4% to $76.2 million,
compared to $66.6 million for last year's fourth quarter. Fractional Interest sales accounted for $1.1 million
of additional sales, completing the Depoe Bay project. There were no sales of Fractional Interests in the comparable
quarter last year. Fourth quarter's Upgrade Sales totaled $13.9 million compared with $10.1 million a year ago,
a 37.6% increase. For the year ended December 31, 2001, Upgrade sales reached $57.6 million, 34.3% ahead of last
year's $42.9 million.
Fourth quarter 2001 cost of sales, as a percentage of Net Vacation Credit and Fractional sales, was 27.2%, consistent
with the same period last year. For the year, cost of sales as a percentage of Net Vacation Credit and Fractional
sales was 27.7%, up from the prior year's 25.5% because of the higher costs associated with sales of fractional
interests in 2001 and the benefit of lower cost WorldMark products in 2000.
For the 2001 fourth quarter, sales and marketing costs, as a percentage of Vacation Credit and Fractional Interest
sales, were 49.9%, compared to 45.6% for the same quarter last year resulting from lower close rates in the wake
of September 11. Year-to-date these costs, as a percentage of sales, were 47.6% in 2001 versus 47.0% in 2000. Quarterly
general and administrative (G&A) expenses were 11.1% of total revenues compared to 9.1% last year as the Company
recognized costs associated with the withdrawn secondary offering and other legal expenses. Year-to-date 2001,
G&A expenses were 9.3% of total revenues, comparable to year 2000 results.
Financing Activities
For the current quarter ended December 31, financing activities, which include finance income and gains on sales
of notes receivable, generated $15.0 million in revenues, compared to $8.4 million in the same quarter last year,
a 78.6% increase. The quarter's gains on sales of notes receivable included $1.1 million due to the sales of Eagle
Crest Vacation Club receivables acquired in the third quarter 2001. Year-to-date, revenues from financing activities
totaled $50.9 million, up 47.5% from last year's $34.5 million. This increase resulted from the increased interest
rate spreads due to the favorable interest rate environment and increases in the sales of notes receivable.
The Company generates cash for resort development activities and general operating purposes from the sale of Notes
Receivable to financial institutions and other investors. This is accomplished through the use of special purpose
finance companies, which are ``off-balance sheet.'' These transactions have been treated as a sale in accordance
with Statement of Accounting Standards 125 and 140 (SFAS No.140) ``Accounting for Transfers and Servicing of Financial
Assets and Extinguishing of Liabilities.'' The Company consults with its attorneys, investment bankers and accountants
to ensure that these transactions are properly presented and accounted for in accordance with generally accepted
accounting principals.
The Company's only recourse in these transactions is its residual interest in securitizations, as presented on
the balance sheet. The Company's residual interest in securitizations is subordinated to the payment requirements
of the investors of these transactions.
The Company reports the components of its securitizations as Residual Interest in Securitizations on the balance
sheet. This is a reclassification from previous years' presentation of the components of its securitization transactions
as Allowance for Recourse Liability and Deferred Gross Profit on Notes Receivable Sold, Retained interest in Notes
Receivable Sold and Residual Interest in Notes Receivable Sold. The Company believes this new presentation provides
investors better information regarding its securitizations.
The provision for doubtful accounts increased to 7.8% of Net Vacation Credit and Fractional Interest sales for
the fourth quarter of 2001 compared to 7.4% for the same quarter last year as a result of changing sales mix and
continuation of current delinquency experience.
As of December 31, 2001, 2.42% of the total Notes Receivable portfolio was more than 60 days past due, up from
2.28% at September 30, 2001 and 2.29% a year ago. At December 31, 2001, the total allowance for doubtful accounts
for Notes Receivable securitized and held by the Company, was $51.9 million, or 7.8% of the total portfolio, comparable
to 7.7% a year ago.
Other Income
Other income increased 50.0% for the 2001 fourth quarter to $2.4 million, versus $1.6 million for the comparable
prior year period. Both the 2001 fourth quarter and year-to-date results benefited from additional servicer fee
income from the Company's securitizations in November 2000 and August 2001.
Resort Management Services
Resort management services increased 88.9% to $1.7 million for the 2001 fourth quarter, from $0.9 million in the
same 2000 period. This increase primarily reflected WorldMark's membership dues increase that was effective October
1, 2001 and a larger owner base. For the year ended December 31, 2001, resort management services decreased 4.2%
to $4.6 million from $4.8 million in 2000, primarily due to higher energy costs in the western United States, which
were only partially offset by the previously mentioned increase in membership dues.
Expansion and Development
During the fourth quarter, Trendwest South Pacific contributed 15 units at a new resort at Coffs Harbour, New South
Wales in Australia and another 11 units at Denarau Island in Fiji. In the US, the final 120 units at the Kihei
Resort on Maui were contributed to WorldMark.
The Company continues to review the overall performance of individual sales offices. As a result, the Scottsdale
sales office was closed at quarter end. There were no new offices opened during the quarter.
Forward Looking Statement
The Company remains on track with the guidance provided in the press release dated December 19, 2001.
Trendwest Resorts, Inc., headquartered in Redmond, Washington, is a leader in the vacation ownership industry.
Through its exclusive relationship with WorldMark, the Club, and WorldMark South Pacific Club, the Company provides
a flexible vacation ownership system, based on the use of Vacation Credits. At December 31, 2001, Trendwest had
45 sales offices, and nearly 149,000 WorldMark and WorldMark South Pacific owners enjoyed 2,789 condominium units
at 48 resort locations in the United States, British Columbia, Mexico, Fiji and Australia. For more information,
visit Trendwest and WorldMark at www.trendwest.com and www.worldmarktheclub.com.
The Company's fourth quarter financial results was discussed in a conference call at 8:00 a.m. (Pacific Time) on
Thursday, January 31, 2002. Participants may listen to a replay of the webcast of the conference call by logging
onto the company website www.trendwest.com, and choosing ``Audio Presentations''
within the Investor Relations section of the website. The replay of the call will be available on the Company's
website through February 28, 2002 or by dialing 800/642-1687 (access code is 2918046) through February 2, 2002.
This press release contains forward looking statements concerning Trendwest's future revenues and expenses, the
addition of new resorts and the results from sales offices and other statements about our plans, objectives, expectations
and intentions, and other statements that are not historical facts. These forward looking statements are based
on current beliefs and expectations of our management and are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward
looking statements are subject to assumptions with respect to future business strategies and decisions that are
subject to change.
Actual results may vary materially from those set forth in the forward looking statements contained in this press
release due to, among other things, the following factors:
Additional factors that may affect the Company's ability to achieve the forward looking statements are set forth
in the ``Risk Factors'' section of the Company's Annual Report on Form 10-K and in subsequent filings with the
Securities and Exchange Commission.
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet Information
(dollars in thousands)
(Unaudited)
December 31, December 31,
2001 2000
------------- ------------
Assets
Cash $ 821 $ 404
Restricted cash 8,838 7,201
Notes Receivable, net 53,802 32,570
Accrued interest and other receivables 8,499 8,171
Residual interest in securitizations, net 95,733 68,824
Inventories 134,745 104,218
MountainStar development 70,382 56,536
Property and equipment, net 43,798 29,948
Refundable income taxes - 5,688
Other assets 6,911 6,599
------------- ------------
Total assets $ 423,529 $ 320,159
============= ============
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and bank overdraft $ 5,582 $ 9,706
Accrued liabilities 30,765 21,538
Accrued construction in progress 7,153 2,855
Due to Parent and Affiliate 11,653 419
Note payable to Parent 13,298 17,731
Borrowing under bank line of credit 74,318 48,441
Current income taxes payable 1,383 -
Mortgage payable 11,616 11,696
Deferred income taxes 2,250 330
------------- ------------
Total liabilities 158,018 112,716
Shareholders' 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 38,094,589
and 37,795,496 shares at
December 31, 2001 and 2000, respectively. 57,917 54,119
Accumulated other comprehensive loss (1,454) (522)
Retained earnings 209,048 153,846
------------- ------------
Total shareholders' equity 265,511 207,443
------------- ------------
Commitments and contingencies
Total liabilities
and shareholders' equity $ 423,529 $ 320,159
============= ============
Note: Certain reclassifications have been made to prior year amounts
to conform to the current presentation.
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Income Information
(dollars in thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2001 2000 2001 2000
-------- --------- -------- ---------
Revenues:
Vacation Credit and
Fractional Interest
sales, net $ 91,187 $ 76,719 $ 406,137 $ 293,130
Finance income 6,502 2,561 20,629 15,562
Gains on sales of
Notes Receivable 8,540 5,807 30,268 18,903
Resort management
services 1,736 882 4,607 4,763
Other 2,367 1,550 7,527 5,280
-------- --------- -------- ---------
Total revenues 110,332 87,519 469,168 337,638
-------- --------- -------- ---------
Costs and operating
expenses:
Vacation Credit and
Fractional Interest
cost of sales 24,790 21,116 112,288 74,714
Resort management
services 405 398 1,588 1,759
Sales and marketing 45,530 35,037 193,531 137,752
General and
administrative 12,191 7,999 43,481 31,686
Provision for doubtful
accounts and recourse
liability 7,088 5,656 30,276 21,148
Interest 381 254 591 479
-------- --------- -------- ---------
Total costs and
operating expenses 90,385 70,460 381,755 267,538
-------- --------- -------- ---------
Income before
income taxes 19,947 17,059 87,413 70,100
Income tax expense 6,365 6,372 32,211 27,241
-------- --------- -------- ---------
Net income $ 13,582 $ 10,687 $ 55,202 $ 42,859
======== ========= ======== =========
Basic net income per
common share $ 0.36 $ 0.28 $ 1.46 $ 1.13
Diluted net income per
common share $ 0.35 $ 0.28 $ 1.43 $ 1.12
Weighted average shares
of common stock and
dilutive potential
common stock
outstanding:
Basic 37,971,999 37,873,644 37,915,714 38,058,093
Diluted 38,819,580 37,983,744 38,558,418 38,181,791
Note: Certain reclassifications have been made to prior year amounts
to conform to the current presentation.
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Cash Flow Information
(dollars in thousands)
(Unaudited)
Twelve months ended
December 31,
----------------------
2001 2000
----------- --------
Cash flows from operating activities:
Net income $ 55,202 $ 42,859
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 3,380 2,743
Amortization of residual interest
in Notes Receivable sold 20,208 14,801
Provision for doubtful accounts
and sales returns 38,886 27,015
Recoveries of Notes Receivable charged off 447 251
Residual interest in Notes
Receivable securitized (41,123) (30,762)
Unrealized loss (gain) on residual
interest in securitizations (552) 337
Contract servicing liability
arising from sale of Notes Receivable 4,129 3,554
Amortization of contract servicer liability (1,943) (869)
Change in deferred gross profit 1,642 1,631
Deferred income tax expense 2,365 290
Stock compensation 117 -
Issuance of Notes Receivable (345,678) (258,452)
Proceeds from sale of Notes Receivable 285,236 211,767
Proceeds from repayment of Notes Receivable
and overcollateralized component
of Notes Receivable securitized 43,500 57,974
Purchase of Notes Receivable from
related parties (14,272) -
Purchase of Notes Receivable (33,542) (22,201)
Changes in certain assets and liabilities:
Restricted cash (1,637) (4,214)
MountainStar Development (13,846) (37,236)
Inventories (29,951) (60,396)
Accounts payable and
accrued liabilities 7,597 12,534
Income taxes payable 2,299 -
Refundable income taxes 5,688 (5,088)
Other (844) (4,403)
----------- --------
Net cash used in operating activities (12,692) (47,865)
----------- --------
Cash flows from investing activities:
Purchase of property and equipment (16,812) (6,621)
----------- --------
Net cash used in investing activities (16,812) (6,621)
----------- --------
Cash flows from financing activities:
Net borrowing under bank line of
credit and other 20,633 48,394
Issuance of mortgage payable - 11,700
Repayments of mortgage payable (80) (4)
Increase (decrease) in Due to Parent 6,710 (1,392)
Proceeds from issuance of common stock 4,983 617
Repurchase of common stock (2,380) (5,926)
----------- --------
Net cash provided by financing activities 29,866 53,389
----------- --------
Net increase (decrease) in cash 362 (1,097)
Effect of foreign currency exchange
rates on cash 55 (259)
Cash at beginning of period 404 1,760
----------- --------
Cash at end of period $ 821 $ 404
=========== ========
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Cash Flow Information (continued)
(dollars in thousands)
(Unaudited)
Twelve months ended
December 31,
---------------------
2001 2000
---------- ---------
Supplemental disclosures of cash flow information -
Cash paid during the period for:
Interest (excluding capitalized amounts of
$7,146 and $2,951, respectively) $ 240 $ 378
Income taxes, net of refunds received 22,789 32,201
Supplemental schedule of non-cash investing
and financing activities:
Issuance of note payable to parent in
connection with the MountainStar
development acquisition - 17,731
Reduction in retained earnings for the excess
of the purchase price of the MountainStar
development over the Parent's historical cost - 3,300
Extinguishment of receivable from Parent
in connection with the MountainStar
development acquisition - 4,869
As of December 31,
---------------------
2001 2000
---------- ---------
Selected Operating Data:
Number of WorldMark(a) Resorts 48 37
Number of Units 2,789 2,093
Total number of WorldMark(a) Owners 148,914 104,545
(a) includes WorldMark, The Club and WorldMark South Pacific
----------------------------------------
Contact:
Trendwest Resorts, Inc.
Pat Peckol, 425/498-2549