Press Release: Mego Financial Corporation
November 17, 2000
LAS VEGAS, NV -- Mego Financial Corp. (Nasdaq: MEGO) announced yesterday improved results for the year ended August
31, 2000, posting revenues of $90.5 million, ahead of its previously published internal forecast of $85.0 million.
Financial Summary Table
(in 000's, except per share data)
Twelve Months Ended Three Months Ended
8/31/00 8/31/99 8/31/00 8/31/99
Total Revenues $ 90,495 $74,502 $24,045 $21,424
Income Before Income Taxes 3,419 220 363 989
Income Taxes (Benefit) (530) (830) (530) (180)
Net Income Applicable to
Common Stock 3,949 1,050 893 1,169
Net Income Per Common Share
(basic and diluted) 1.13 0.30 0.26 0.33
Number of Common Shares and
Common Share Equivalents
Outstanding (basic and
diluted) 3,500,557 3,500,557 3,500,557 3,500,557
Highlights
* Company Achieves Sixth Consecutive Quarter of Profitability
* Management Targets 12%-15% 'same store sales' Growth for Off-Site
Offices in Fiscal 2001
* Additional Timeshare Inventory Helps Drive Growth
* New Ramadavacationsuites.com Website Starts Bringing in Leads
Commenting on the Company's progress, Jerome J. Cohen, President of Mego Financial, said, ``We are, again, delighted
to report such strong improvements in financial results -- solely the result of internal growth -- and leading
to the sixth consecutive quarter of profitability for our Company since our turnaround began in early 1999.''
``A number of important initiatives are helping to drive our expansion. First, we have successfully utilized both
our new and mature off-site offices to supplement timeshare sales. For example, our Dallas location, which opened
its doors in the summer of 1996, processed over $10.5 million of sales for our Florida and Colorado resorts in
fiscal 2000. Our Houston office, which just opened in March and sells primarily our Orlando resort, processed approximately
$2.4 million in sales in its first 5 months through fiscal year-end. The initial success of this newest office
leads us to believe that it will generate the same level of sales as our Dallas office. To help ensure our success,
in fiscal 2001, we plan to expand the hours and days of operation at our off-site offices, increase prospect flow
and improve sales efficiencies in all of them with the goal of increasing sales in the off-site offices, 'same
store sales', by 12% to 15% next year.'' Mr. Cohen noted that during fiscal 2000, the Company's off-site offices
generated about 55% of total sales, and that management may seek to open another off-site location by the end of
the third quarter of fiscal 2001.
Mr. Cohen went on to say that inventory additions have helped generate increasing timeshare sales as well, and
will continue to do so. ``Our ability to continue to attract timeshare owners with a selection of nine strategically
located Ramada Vacation Suites resorts, plus our long-time exchange program with the nation's largest timeshare
operator, Resort Condominiums International (RCI) has led to a strong demand for our properties. As a result during
fiscal 2000 we purchased 18 two-bedroom units for our Ramada Vacation Suites Orlando resort and just recently contracted
to purchase 3 more buildings containing 42 more units at the Orlando resort. When renovated and registered they
will produce approximately $33 million in revenues. We are also in negotiations to add another 20 two-bedroom units
for our Las Vegas resort. Our plan is to also increase inventory at Steamboat Springs and we are looking at two
new locations to expand our list of resorts.''
On the land sales side, Mr. Cohen said that the Company is currently in negotiations for the addition of inventory
at its Hartsel Springs Ranch property (located about 70 miles west of Colorado Springs, Colorado), and for new
land parcels in northern Arizona.
A $3.6 million capital improvement program for the Company's resorts is also underway. ``We have begun a major
campaign for the improvement of each Ramada Vacation Suites resort in cooperation with the Homeowners Associations
that we manage for each resort,'' said Mr. Cohen. ``For example, presently, we are in the midst of a $1.1 million
upgrade program at the 95 unit Ramada Vacation Suites Reno location, which is expected to be completed in early
2001. To further enhance sales of the resorts, management has also instituted a new intensive training program
with the goal of further improving service levels at each location.
On the technology front, we have been working in partnership with a software company for the past eight months,
management of Mego Financial stated that it has established a timeshare resort management system that is currently
being beta-tested in four of its resorts. The Company expects the system to be up and running in the Las Vegas
resort within four weeks. Thereafter, following intensive training of the staff, we anticipate installing it in
all of the resorts over the following five months. ``The implementation of this new system, which will handle timeshare
owner and other reservations, unit inventory for sales, check in and checkouts, housekeeping and maintenance, among
other things, should bring significant efficiencies to our business, and thus greater occupancy and income from
resort properties going forward,'' said Mr. Cohen.
Finally, management noted that the Company's new website, Ramadavacationsuites.com, which was launched early this
year has been producing more and more prospects, while servicing existing owners more quickly and conveniently.
Enhancements are being made to the site on an ongoing basis.
Recap of Year End and Fourth Quarter Results
For the twelve months ended August 31, 2000, Mego Financial reported a 21% increase in total revenues, to $90,495,000
compared to $74,502,000 last year. The increase was primarily generated by an increase in net timeshare and land
sales at the Company's wholly-owned subsidiary Preferred Equities Corporation. Income before income taxes for the
twelve months ended August 31, 2000 improved substantially, to $3,419,000. This compares to income before income
taxes of $220,000 in fiscal 1999.
For the year ended August 31, 2000, Mego Financial reported net income applicable to common stock of $3,949,000
(inclusive of an income tax benefit of $530,000), or $1.13 per common share based on 3,500,557 common shares and
common share equivalents outstanding. For the twelve months ended August 31, 1999, Mego Financial reported net
income applicable to common stock of $1,050,000 (inclusive of an income tax benefit of $830,000), or net income
of $0.30 per common share based on 3,500,557 common shares and common share equivalents outstanding.
For the fourth quarter ended August 31, 2000, Mego Financial reported revenues of $24,045,000, up 12 % from $21,424,000
in the same per period of fiscal 1999. The increase in revenues was primarily generated by an increase in net timeshare
and land sales. The Company reported net income applicable to common stock of $893,000, or $0.26 per common share
based on 3,500,557 common shares and common share equivalents outstanding for the quarter ended August 31, 2000.
In the same period of fiscal 1999, Mego Financial reported net income applicable to common stock of $1,169,000
or $0.33 per common share based on 3,500,557 common shares and common share equivalents outstanding. Fourth quarter
earnings this year were reduced by certain accounting charges and costs as compared to earnings in the same period
last year which earnings included accounting credits.
Herbert Hirsch, the Company's Chief Financial Officer said, ``I am pleased to announce that certain working capital
loans arranged for in 1998 and totaling approximately $12.3 million at the end of calendar 1998 have been reduced
to approximately $4 million. This was accomplished out of cash flow from operations and the sale of certain non-core
assets during the periods.''
Mego Financial is a premier developer and operator of timeshare properties and a provider of consumer financing
to purchasers of timeshare interests and land parcels through its wholly owned subsidiary, Preferred Equities Corporation,
established in 1970. Mego Financial is headquartered in Las Vegas, Nevada and has properties it operates under
the banner of Ramada Vacation Suites in Nevada, New Jersey, Colorado, Florida, Hawaii and Louisiana. Mego Financial
also owns Central Nevada Utilities, serving a large portion of the fast-growing Palrump Valley, near Las Vegas.
To receive Mego Financial's latest news and other corporate documents via FAX-no cost-please dial 800-PRO-INFO.
Use Mego Financial's ticker symbol, MEGO.
Or view our pages on FRB's website www.frbinc.com .
This press release contains ``forward-looking statements'' within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties or other factors
which may cause actual results, performance or achievements of Mego Financial to be materially different from any
future results, performance or achievements express or implied by such forward-looking statements. Factors that
might cause such a difference, include, but are not limited to those discussed in the Management's Discussion and
Analysis of Financial Condition and Results of Operations in Mego Financial's Annual Report on Form 10-K for the
year ended August 31, 1999, and in documents subsequently filed by Mego Financial Corp. with the Securities and
Exchange Commission.
MEGO FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(thousands of dollars, except per share amount)
For the Years Ended August 31,
2000 1999 1998
REVENUES
Timeshare interest sales, net $49,062 $41,262 $37,713
Land sales, net 19,624 15,979 13,812
Gain on sale of notes receivable 635 - 656
Gain on sale of investments and
other assets 1,857 513 -
Interest income 12,430 9,310 7,161
Financial income 1,153 1,184 3,304
Incidental operations 2,033 2,597 2,831
Other 3,701 3,657 3,113
Total revenues 90,495 74,502 68,590
COSTS AND EXPENSES
Direct cost of:
Timeshare interest sales 10,518 8,527 7,375
Land sales 3,050 2,709 1,770
Incidental operations 1,698 2,274 2,644
Marketing and sales 39,769 35,291 34,167
Depreciation 1,827 1,878 2,245
Interest expense 12,468 9,270 7,850
General and administrative 17,746 14,333 17,736
Total costs and expenses of
continuing operations 87,076 74,282 73,787
INCOME (LOSS) BEFORE INCOME TAXES 3,419 220 (5,197)
INCOME TAXES (BENEFIT) (530) (830) (1,968)
NET INCOME (LOSS) APPLICABLE TO COMMON
STOCK $3,949 $1,050 $(3,229)
INCOME (LOSS) PER COMMON SHARE
Basic:
Net income applicable to common
stock $1.13 $0.30 $(0.92)
Weighted-average number of common
shares and common share
equivalents outstanding 3,500,557 3,500,557 3,500,557
Diluted:
Net income applicable to common
stock $1.13 $0.30 $(0.92)
Weighted-average number of
common shares and common share
equivalents outstanding 3,500,557 3,500,557 3,500,557
MEGO FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands of dollars, except per share amounts)
August 31,
2000 1999
ASSETS
Cash and cash equivalents $1,069 $1,821
Restricted cash 1,255 1,676
Notes receivable, net of allowance for
cancellations and discounts of $13,234 and
$14,340 at August 31, 2000 and 1999,
respectively 83,156 69,300
Interest only receivables, at fair value 2,701 2,566
Timeshare interests held for sale 23,307 29,529
Land and improvements inventory 4,113 6,649
Other investments 4,492 5,111
Property and equipment, net of accumulated
depreciation of $17,632 and $16,252 at
August 31, 2000 and 1999, respectively 23,167 23,560
Deferred selling costs 5,231 4,285
Prepaid debt expenses 2,060 1,757
Other assets 18,041 12,707
TOTAL ASSETS $168,592 $158,961
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and contracts payable $109,131 $104,555
Accounts payable and accrued liabilities 19,544 18,141
Reserve for notes receivable sold with
recourse 4,033 4,162
Deposits 2,841 2,287
Accrued income taxes 2,975 3,505
Total liabilities before
subordinated debt 138,524 132,650
Subordinated debt 4,286 4,478
Stockholders' equity:
Preferred stock, $.01 par value
(authorized_5,000,000 shares, none
outstanding) - -
Common stock, $.01 par value
(authorized_50,000,000 shares;
3,500,557 shares issued and outstanding
at August 31, 2000 and 1999) 35 35
Additional paid-in capital 13,068 13,068
Retained earnings 12,679 8,730
Total stockholders' equity 25,782 21,833
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $168,592 $158,961
SOURCE: Mego Financial Corporation