Vistana Inc. Reports Significant Increase in Revenues, Income and Diluted EPS for Second Quarter
1999
Business & Travel Editors
August 5, 1999
ORLANDO, FL--Vistana, Inc. (Nasdaq:VSTN), a leading developer and operator of vacation ownership resorts, yesterday
reported significant growth in revenues and net income for the second quarter and six months ended June 30, 1999.
Second Quarter Operating Results
For the second quarter ended June 30, 1999, revenues were $75.7 million, a 31.4% increase over the $57.6 million
recorded in the second quarter 1998. Vacation ownership interest (VOI) sales for the second quarter 1999 increased
31.2% to $55.9 million from $42.6 million in the second quarter 1998. The number of VOI's sold during the second
quarter 1999 increased 16.6% to 5,414 from 4,642 in the second quarter 1998. The average sales price per interval
was $10,331 for the second quarter 1999, an increase from $9,549 during the corresponding period in 1998. Annualizing
alternate year VOI sales, the number of VOI's sold during the second quarter 1999 increased to 4,316 from 3,792,
and the average sales price per interval increased to $12,960 from $11,690, over the second quarter 1998. Interest
income for the second quarter 1999 increased 35.5% to $8.4 million from $6.2 million in the second quarter 1998.
Net income for the second quarter 1999 was $6.9 million compared to net income of $5.2 million for the second quarter
1998, an increase of 32.7%. Net income per diluted share for the second quarter 1999 increased 33.3% to 32 cents
from net income per diluted share of 24 cents in the second quarter 1998.
Weighted average diluted shares outstanding for the second quarter 1999 were 21,516,551 compared to weighted average
diluted shares of 21,630,417 for the second quarter 1998, a decrease of 0.5%.
Results for the second quarter and first six months of 1999 include approximately $1.2 million, or $0.03 per diluted
share (net of taxes), in transaction expenses relating to the proposed acquisition of the Company by Starwood Hotels
& Resorts Worldwide, Inc., and legal fees and settlement costs relating to a lawsuit that was settled in July
1999.
Operating Results for the Six Months Ended June 30, 1999
For the six months ended June 30, 1999, revenues were $143.5 million, a 37.1% increase over the $104.7 million
recorded in the comparable period in 1998. Vacation ownership interest (VOI) sales for the six months ended June
30, 1999 increased 39.3% to $106.0 million from $76.1 million for the six months ended June 30, 1998. The number
of VOI's sold increased 24.4% to 10,084 from 8,105 in the comparable period in 1998. The average sales price per
interval was $10,149 for the six months ended June 30, 1999, an increase from $9,607 during the corresponding period
in 1998. Annualizing alternate year VOI sales, the number of VOI's sold during the six months ended June 30, 1999,
increased to 7,988 from 6,637, and the average sales price per interval increased to $12,812 from $11,732, over
the six months ended June 30, 1998. Interest income for the six months ended June 30, 1999, increased 33.6% to
$16.3 million from $12.2 million during the same period in 1998.
Results for the six months ended June 30, 1999 included a one-time charge of $0.6 million, or $0.03 per diluted
share (net of taxes), in the first quarter of 1999 for the cumulative effect of a change in accounting principle
(the "Accounting Change") resulting from the adoption of Statement of Position 98-5, "Reporting
on the Cost of Start-up Activities" (SOP 98-5), issued by the American Institute of Certified Public Accountants.
Net income before the cumulative effect of the Accounting Change for the six months ended June 30, 1999 was $11.6
million compared to net income of $8.7 million for the comparable period in 1998. Net income per diluted share
before the cumulative effect of the Accounting Change for the six months ended June 30, 1999 increased 35.0% to
54 cents from net income per diluted share of 40 cents for the six months ended June 30, 1998. Net income after
the cumulative effect of the Accounting Change was $11.0 million or 51 cents per diluted share for the six months
ended June 30, 1999, compared to $8.7 million or 40 cents per diluted share in the same period in 1998, an increase
of 26.4% and 27.5%, respectively.
Weighted average diluted shares outstanding for the six months ended June 30, 1999 were 21,406,321 compared to
weighted average diluted shares of 21,568,074 for the six months ended June 30, 1998, a decrease of 0.8%.
Financial results for the six months ended June 30, 1999, include the recognition of VOI sales and related costs
previously deferred under the percentage of completion method for the Company's Embassy Vacation Resort ("EVR")
at Scottsdale. As a result of substantially completing the first phase of the EVR at Scottsdale, approximately
$3.8 million of prior period VOI sales were recognized in the first quarter of 1999, contributing approximately
$0.5 million in net income, or $0.02 per diluted share.
"We are very pleased with Vistana's continued strong performance during the second quarter," said Raymond
L. (Rip) Gellein, Vistana's Chairman and Co-Chief Executive Officer. Jeff Adler, President and Co-Chief Executive
Officer, said "Our employees did an exceptional job of delivering solid growth in revenues, sales and net
income."
Customer Mortgages Receivable
At June 30, 1999, the Company's net customer mortgages receivable were $252.5 million compared to $183.7 million
at June 30, 1998, an increase of 37.5%. The allowance for loss on customer mortgage receivables was $23.7 million
or 8.6% of outstanding receivables at June 30, 1999, compared to $15.4 million or 7.7% at June 30, 1998. The provision
for doubtful accounts was $4.1 million for the quarter ended June 30, 1999, compared to $3.1 million for the same
period in the prior year, reflecting the higher volume of VOI sales. Approximately 2.4% of the Company's customer
mortgages receivable balance was past due by 60 to 120 days at June 30, 1999, compared to 2.7% at December 31,
1998 and 2.0% at June 30, 1998. In addition, approximately 4.3% of such balance was 120 days or more past due at
June 30, 1999, compared to 3.7% at December 31, 1998 and 3.9% at June 30, 1998.
Company Background Information
Headquartered in Orlando, Florida, Vistana, Inc. operates ten vacation ownership resorts, four in Florida, three
in Colorado, one in South Carolina and two in Arizona. Resorts in the planning/development stage include the PGA
Vacation Resort by Vistana in Port St. Lucie, Florida, Harborside at Atlantis on Paradise Island in The Bahamas,
and a successor to Vistana Resort in Orlando. Founded in 1980, the Company has over 2,200 units in operation and
an ownership base of more than 87,000 owners residing in over 100 countries. On July 18, 1999, the Company entered
into a definitive merger agreement to be acquired by Starwood Hotels & Resorts Worldwide, Inc. ¶ The Company's
common stock is traded on the NASDAQ National Market under the symbol VSTN.
Selected Financial Data (Unaudited)
Three months Six months
ended ended
June 30, June 30,
1999 1998 1999 1998
Operating Results
----------------------
(dollars in thousands except share amounts and average sales prices)
VOI sales $ 55,931 $ 42,596 $ 106,015 $ 76,131
Interest
income 8,446 6,154 16,343 12,239
Total
revenues 75,710 57,551 143,457 104,737
VOI cost
of sales 12,895 9,372 24,597 16,420
Sales and
marketing
expense 24,167 20,192 48,155 37,137
Total
interest
expense 4,701 2,525 8,973 5,086
Total costs
and operating
expenses 64,545 49,497 125,394 91,396
Income before
income taxes
and cumulative
effect of
accounting
change $ 11,313 $ 8,371 $ 19,030 $ 13,982
Net income
before cumulative
effect of
accounting change $ 6,901 $ 5,190 $ 11,608 $ 8,669
Net income before
cumulative effect
of accounting
change
per share
- diluted $ .32 $ .24 $ .54 $ .40
Net income $ 6,901 $ 5,190 $ 11,007 $ 8,669
Net income
per share
- diluted $ .32 $ .24 $ .51 $ .40
Weighted average
shares outstanding
- diluted 21,516,551 21,630,417 21,406,321 21,568,074
VOI cost of
sales as a % of
VOI sales 23.1% 22.0% 23.2% 21.6%
Sales and marketing
expense as a % of
VOI sales 43.2% 47.4% 45.4% 48.8%
G&A expense as
a % of total
revenues 6.9% 8.3% 7.5% 8.9%
Number of VOI's sold
- actual (1) 5,414 4,642 10,084 8,105
Average sales price
per VOI - actual (1) $ 10,331 $ 9,549 $ 10,149 $ 9,607
Number of VOI's sold
- annualized (2) 4,316 3,792 7,988 6,637
Average sales price
per VOI
- annualized (2) $ 12,960 $ 11,690 $ 12,812 $ 11,732
Ending balance
inventory of unit
weeks 24,524 17,729 24,524 17,729
Percentage of
alternate year
unit week sales 40.6% 36.7% 41.6% 36.1%
Weighted average
funding cost 7.77% 9.65% 7.86% 9.94%
(1) Reflects sales of annual and alternate year intervals without
adjustment.
(2) Reflects sales of annual intervals plus sales of alternate
year intervals adjusted on an annualized basis.
Vistana, Inc
Consolidated Balance Sheets
(Amounts in Thousands)
June 30, December 31, June 30,
1999 1998 1998
--------- ------------ --------
(UNAUDITED) (UNAUDITED)
Cash and cash equivalents $ 28,350 $ 20,001 $ 15,578
Restricted cash 23,951 29,054 17,772
Customer mortgages
receivable, net 252,533 223,275 183,676
Other receivables, net 10,540 8,053 6,673
Inventory of Vacation
Ownership Interests 66,442 50,019 28,662
Construction in progress 18,815 30,922 47,728
-------- -------- --------
Total Vacation Ownership
Interests 85,257 80,941 76,390
-------- -------- --------
Prepaid expenses and
other assets 27,319 24,408 19,129
Land held for development 21,003 23,874 9,229
Intangible assets, net 20,514 19,743 18,483
Property and equipment,
net 49,429 42,071 27,441
======== ======== ========
Total assets 518,896 471,420 374,371
======== ======== ========
Accounts payable and
accrued liabilities 17,295 17,502 14,170
Income taxes payable 1,048 424 1,445
Accrued compensation
and benefits 11,077 10,883 9,764
Customer deposits 19,010 22,610 16,605
Deferred income taxes 29,098 25,753 20,119
Other liabilities 7,446 5,723 10,497
Notes and mortgages
payable 276,687 242,644 167,842
-------- -------- --------
Total liabilities 361,661 325,539 240,442
Minority interest 736 1,665 3,405
Shareholders' equity:
Common stock 213 212 211
Additional paid in capital 112,777 111,502 109,790
Retained earnings 43,509 32,502 20,523
-------- -------- --------
Total shareholders'
equity 156,499 144,216 130,524
======== ======== ========
Total liabilities and
equity $518,896 $471,420 $374,371
======== ======== ========
Vistana, Inc.
Unaudited Consolidated Statement of Operations
for the Three Months Ended
(Amounts in Thousands Except for Per Share Data)
Three months Three months
ended ended
June 30, 1999 June 30, 1998
------------- -------------
Revenues:
Vacation Ownership Interest sales $ 55,931 $ 42,596
Interest 8,446 6,154
Resort 7,716 5,488
Telecommunications 2,217 2,058
Other 1,400 1,255
----------- -----------
Total revenues 75,710 57,551
Costs and operating expenses:
Vacation Ownership Interest cost of
sales 12,895 9,372
Sales and marketing 24,167 20,192
Loan Portfolio
Interest expense - treasury 2,637 2,083
Provision for doubtful accounts 4,137 3,144
Resort 7,065 4,819
Telecommunications 1,929 1,660
General and administrative 5,233 4,753
Depreciation and amortization 2,282 1,481
Interest expense - other 2,064 442
Other 2,136 1,551
----------- -----------
Total costs and operating expenses 64,545 49,497
----------- -----------
Operating Income 11,165 8,054
Excess value recognized 19 32
Minority interest 129 285
----------- -----------
Income before income taxes 11,313 8,371
Provision for income taxes 4,412 3,181
----------- -----------
Net income $ 6,901 $ 5,190
=========== ===========
Basic earnings per share $ 0.32 $ 0.25
=========== ===========
Diluted earnings per share $ 0.32 $ 0.24
=========== ===========
Weighted average shares outstanding
- basic 21,294,153 21,162,981
=========== ===========
Weighted average shares outstanding
- diluted 21,516,551 21,630,417
=========== ===========
Vistana, Inc.
Unaudited Consolidated Statement of Operations
for the Six Months Ended
(Amounts in Thousands Except for Per Share Data)
Six months Six months
ended ended
June 30, 1999 June 30, 1998
------------- -------------
Revenues:
Vacation Ownership Interest sales $ 106,015 $ 76,131
Interest 16,343 12,239
Resort 14,682 10,080
Telecommunications 3,869 4,101
Other 2,548 2,186
------------ ------------
Total revenues 143,457 104,737
Costs and operating expenses:
Vacation Ownership Interest cost of sales 24,597 16,420
Sales and marketing 48,155 37,137
Loan Portfolio
Interest expense - treasury 5,049 4,271
Provision for doubtful accounts 7,844 5,626
Resort 13,242 8,576
Telecommunications 3,343 3,307
General and administrative 10,813 9,348
Depreciation and amortization 4,588 2,661
Interest expense - other 3,924 815
Other 3,839 3,235
------------ ------------
Total costs and operating expenses 125,394 91,396
------------ ------------
Operating Income 18,063 13,341
Excess value recognized 38 62
Minority interest 929 579
------------ ------------
Income before income taxes and
cumulative effect of change in
accounting 19,030 13,982
Provision for income taxes 7,422 5,313
------------ ------------
Net income before cumulative effect
of change in accounting 11,608 8,669
Cumulative effect of change in
accounting, net of taxes 601 --
============ ============
Net income $ 11,007 $ 8,669
============ ============
Basic earnings per share before
cumulative effect of change in
accounting $ 0.55 $ 0.41
Basic earnings per share - cumulative
effect of change in accounting $ (0.03) $ --
============ ============
Basic earnings per share $ 0.52 $ 0.41
============ ============
Diluted earnings per share before
cumulative effect of change in
accounting $ 0.54 $ 0.40
Diluted earnings per share -
cumulative effect of change in
accounting $ (0.03) $ --
------------ ------------
Diluted earnings per share $ 0.51 $ 0.40
============ ============
Weighted average shares outstanding
- basic 21,258,041 21,062,732
============ ============
Weighted average shares outstanding
- diluted 21,406,321 21,568,074
============ ============
CONTACT: Vistana, Inc., Orlando
Raymond L. "Rip" Gellein, Chairman and Co-CEO
407/239-3009
or
Charles E. Harris, Vice Chairman and CFO
407/239-3153
or
David Matheson, VP - Public Relations
407/239-3155
KEYWORD: FLORIDA
INDUSTRY KEYWORD: TRAVEL/AIRLINES REAL ESTATE EARNINGS