Press Release: Sunterra Corporation
May 13, 2002
ORLANDO, FL -- Sunterra Corporation announced that its revenues for the years ended December 31, 2001 and 2000
were $272 million and $288 million, respectively, and that its loss from operations (after reorganization expenses)
and net loss were $(52 million) and $(72 million), respectively, for 2001 and $(304 million) and $(376 million),
respectively, for 2000. Reorganization expenses were $50 million for 2001 and $78 million for 2000. The net loss
for 2000 also reflects, among other writedowns, reductions for asset impairments and abandonment of $68 million.
The company's results for the two years, which are unaudited, are included in a revised proposed Plan of Reorganization
and Disclosure Statement which is being filed with the United States Bankruptcy Court for the District of Maryland
(Baltimore Division) and in a filing on Form 8-K being made with the Securities and Exchange Commission. Sunterra
and certain of its subsidiaries continue to operate their businesses as debtors-in-possession under Chapter 11
of the Bankruptcy Code.
Sunterra also announced that, in connection with the preparation of its financial statements for the year ended
December 31, 2000, Sunterra had identified certain items contained in its prior period audited consolidated financial
statements which require a reduction to the previously reported 1999 retained earnings balance. The principal items
so identified relate to corrections of errors and corrections of the application of generally accepted accounting
principles to certain transactions. Sunterra will complete the review process prior to the issuance of its audited
financial statements for its 2000 fiscal year. Sunterra reported that the adjustments to all of the items so identified
to date will total approximately $113 million. The impact of the $113 million adjustment is presented in Sunterra's
unaudited 2000 financial statements described above as a reduction in the previously reported December 31, 1999
retained earnings balance.
Sunterra has also made certain changes to its accounting policies that have a cumulative effect on the financial
statements for the period ended December 31, 2000 that total approximately $19 million and has recognized certain
asset impairment charges and other adjustments to the fiscal year 2000 financial statements, as previously included
in monthly operating reports filed with the Bankruptcy Court, that total approximately $189 million. The total
adjustments, inclusive of the prior period adjustments to the 1999 retained earnings balance, resulted in a decrease
of approximately $321 million in retained earnings from that previously reported as of December 31, 2000.
Arthur Andersen LLP audited Sunterra's financial statements for the 1993 through 1999 fiscal years. In March 2001,
Sunterra terminated Arthur Andersen as Sunterra's auditor and retained Deloitte & Touche LLP as its auditor.
On April 25, 2002, Arthur Andersen delivered a letter to the Audit Committee of Sunterra's Board of Directors indicating
that Arthur Andersen saw no need for a reduction of Sunterra's 1999 retained earnings balance as referred to above
and that Arthur Andersen believed that any such reduction would be inappropriate and contrary to generally accepted
accounting principles. Sunterra expects that the Audit Committee will meet with Arthur Andersen regarding the matters
set forth in Arthur Andersen's letter.
As previously announced, as a result of these matters Sunterra's audited financial statements for 1999 and prior
periods, as well as its unaudited financial statements for periods in 2001 and 2000 that were included in monthly
operating reports previously filed with the Bankruptcy Court, should not be used or relied upon. Sunterra will
not reissue any of its financial statements for 1999 or prior periods. Sunterra's management believes that the
accounting treatment relating to the adjustments described above is correct and anticipates that Sunterra will
issue audited financial statements for the 2000 and 2001 fiscal years in the near future.
Sunterra Corporation is one of the world's largest vacation ownership companies, with owner families and resorts
in North America, Europe, the Pacific and the Caribbean.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS. Certain statements in this release constitute forward-looking
statements subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include those regarding changes to Sunterra's financial statements. Actual
results or developments may differ from those provided for in any of the forward-looking statements.
SOURCE: Sunterra Corporation