FAIRFIELD COMMUNITIES REPORTS RECORD REVENUE
Diluted EPS Increases 25% to $0.35
Net VOI Sales Increase 24%
Announces Innovative Marketing Program
Press Release: Fairfield Communities
July 27, 1999
ORLANDO, FL-- Fairfield Communities, Inc. (NYSE:FFD) yesterday reported financial results for the second quarter
and six months ended June 30, 1999.
Diluted earnings per share for the second quarter increased 25% to $0.35 from $0.28 in the second quarter of 1998.
Net earnings for the quarter ended June 30, 1999 increased 21% to $15.9 million from $13.1 million in the prior
year period. Earnings per share grew at a faster pace than net earnings as a result of the Company's repurchase
of approximately two million shares throughout the second half of 1998.
Net sales of vacation ownership interests (VOI), the largest component of revenue, increased 24% during the second
quarter of 1999 to $99.2 million from $80.2 million in the prior year quarter. Gross VOI sales increased 18% to
$97.2 million in the second quarter of 1999, compared to $82.6 million in the second quarter of 1998. Gross VOI
sales were slightly below net sales as a result of new sales operations commencing later in the quarter then anticipated.
Total revenue for the second quarter of 1999 increased 21% to $130.5 million, up from $108.0 million in the second
quarter of 1998.
``With record revenue of $130.5 million, this was one of Fairfield's most successful quarters to date,'' said John
McConnell, Fairfield's President and Chief Executive Officer. ``To further improve our performance, we took several
new steps to meet our strategic objectives of expanding our funding capabilities, creating innovative marketing
programs, opening new sales centers, and increasing consumer awareness of the Fairfield brand.''
For the six months ended June 30, 1999, the Company reported diluted earnings per share of $0.57, a 24% increase
from $0.46 for the same period in 1998. Net earnings for the first six months of 1999 were $25.9 million, a 20%
increase over the $21.5 million reported in the first half of 1998.
Net VOI sales for the six months ended June 30, 1999, increased 23% to $172.0 million from $140.4 million in the
prior year period. Gross VOI sales were $169.3 million for the period, an 18% increase from $142.9 million in the
comparable period of 1998. Total revenue for the six months ended June 30, 1999 was $229.6 million, an increase
of 18% from $193.9 million in the prior year period.
Marketing and Sales Initiatives
Continuing Fairfield's tradition of innovative marketing programs, the Company completed marketing agreements with
the Atlanta Braves, Baltimore Orioles, Cincinnati Reds, Texas Rangers and Charlotte Knights professional baseball
teams.
In connection with each of the agreements, Fairfield is sponsoring signage within the ballpark and marketing a
vacation sweepstakes. Fans who enter the sweepstakes will be added to the Company's database of prospects. The
Company is targeting families and others who attend professional baseball games as their demographics are very
similar to those of vacation interval owners. Fairfield is actively exploring expanding this initiative to additional
sports and leisure venues.
``This innovative program is helping to create awareness of our products in our Urban sales center markets as well
as enhancing access to other marketing channels,'' said Franz Hanning, Fairfield's Executive Vice President and
Chief Operating Officer. ``As the Fairfield universe continues to expand, we expect more and more people to see
our name in a multitude of places and associate it with the top quality vacation experiences we provide.''
``One great advantage of our FairsharePlus system is that it enables us to sell existing points-based inventory
through sales offices at resorts under development even before we have completed construction,'' said John McConnell.
``In fact, Daytona, Durango, Gatlinburg, Sedona and Las Vegas, all commenced sales during the second quarter. As
construction at these resorts moves toward completion and we can offer a wider array of vacation experiences, the
value proposition of the Fairfield brand becomes even greater. We expect these five sites to contribute to the
strength of our pipeline for future revenue growth.''
Discovery vacation packages continued to be a popular choice among prospective buyers this quarter. This program
offers a trial membership in FairsharePlus in addition to having the highest close rate of any of the Company's
marketing programs. For the quarter, Discovery sales increased 20% to 5,014, as compared to 4,187 in the prior
year period.
Funding Capacity Expanded
Net interest income increased to $10.6 million in the second quarter of 1999 from $8.6 million in the second quarter
of 1998, a 23% increase. This is a result of the continued growth of the Company's contracts receivable portfolio
coupled with a decrease in the weighted average cost of funds to 7% for the second quarter of 1999 from 7.5% for
the prior year period. Contracts receivable, inclusive of the Company's unconsolidated qualifying special purpose
entities, increased 21% from June 30, 1998 to $401.1 million at June 30, 1999.
Fairfield has obtained two additional sources of available capital. First, Fairfield entered into an agreement
with CIBC Oppenheimer to securitize up to an additional $100 million of Fairfield's contracts receivable. CIBC
has joined Eagle Funding to increase the total securitization commitment, rated A1, to $250 million. As of June
30, 1999, Fairfield had $116 million outstanding under its Eagle Funding agreement. During the quarter, Fairfield
also increased its existing warehouse facility with BankBoston from $60 million to $100 million.
``The improvements to our funding facilities provide Fairfield with additional reliable sources of low cost capital
and financial flexibility to purchase and develop new properties,'' said Robert W. Howeth, Executive Vice President
and Chief Financial Officer. ``The high quality of our customer base and the consistently strong performance of
our portfolio have continued to enable us to attract institutional buyers of our contracts receivable such as Eagle
and CIBC at favorable rates.''
Live Internet Broadcast
Fairfield will be hosting a conference call on the Internet to discuss earnings on Monday, July 26, 1999 at 10:00
a.m. EDT. To participate in this call please visit the Financial & Investor Information section of our Web
site at www.FFCI.com approximately 15 minutes before the call. The replay of the call will be made available on
the Web site after the call.
Fairfield Communities, Inc., incorporated in 1969, is one of the nation's largest vacation ownership companies.
Fairfield provides quality recreational experiences at twenty-six locations in 11 states and the Bahamas to more
than 240,000 Fairfield property owners. Currently, the Company has an additional 5 resorts under development.
Except for historical information contained herein, this press release contains forward-looking statements that
involve risks and uncertainties, including, but not limited to, general industry and economic conditions; interest
rate trends; regulatory changes; availability of real estate properties; competition from national hospitality
companies and other competitive factors and pricing pressures; shifts in customer demands; the continued availability
of financing in the amounts and at the terms necessary to support the Company's future business as well as other
risks detailed from time to time in the Company's reports filed with the Securities and Exchange Commission, including
the Annual Report and report on Form 10-K for the year ended December 31, 1998.
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF EARNINGS
(In thousands, except per share amount
(Unaudited)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
1999
|
1998
|
1999
|
1998
|
| Revenues: |
|
|
|
|
Vacation ownership
interests, net |
$ 99,206
|
$ 80,155
|
$171,964
|
$140,360
|
| Resort management |
12,517
|
9,947
|
24,033
|
19,547
|
| Interest |
7,040
|
8,080
|
13,964
|
18,379
|
Net interest income and
fees from qualifying
special purpose entities |
4,925
|
2,378
|
9,359
|
2,776
|
| Other |
6,798
|
7,424
|
10,231
|
12,861
|
|
130,486
|
107,984
|
229,551
|
193,923
|
| Expenses: |
|
|
|
|
Vacation ownership interests -
costs of units sold |
25,611
|
22,945
|
45,058
|
39,620
|
| Sales and marketing |
47,609
|
37,083
|
83,064
|
65,675
|
| Provision for loan losses |
5,132
|
3,993
|
8,754
|
6,910
|
| Resort management |
9,828
|
8,387
|
19,132
|
16,089
|
| General and administrative |
8,191
|
6,141
|
16,057
|
13,283
|
| Interest, net |
1,344
|
1,828
|
2,956
|
5,452
|
Depreciation and
amortization |
1,940
|
1,677
|
3,947
|
3,329
|
| Other |
6,111
|
4,593
|
10,062
|
8,576
|
|
105,766
|
86,647
|
189,030
|
158,934
|
Earnings before provision
for income taxes |
24,720
|
21,337
|
40,521
|
34,989
|
| Provision for income taxes |
8,780
|
8,199
|
14,647
|
13,446
|
| Net earnings |
$ 15,940
|
$ 13,138
|
$ 25,874
|
$ 21,543
|
|
|
|
|
|
| Basic earnings per share |
$ 0.36
|
$ 0.29
|
$ 0.59
|
$ 0.48
|
| Diluted earnings per share |
$ 0.35
|
$ 0.28
|
$ 0.57
|
$ 0.46
|
Weighted average shares
outstanding: |
|
|
|
|
| Basic |
44,028
|
44,940
|
43,954
|
44,608
|
| Diluted |
45,677
|
47,416
|
45,470
|
47,264
|
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except par value)
(Unaudited)
|
June 30,1999
|
December 31,1998
|
| Assets: |
|
|
| Cash and cash equivalents |
$ 7,952
|
$ 5,017
|
| Receivables, net |
205,338
|
202,849
|
| Real estate inventories |
133,547
|
128,397
|
Investments in and net amounts due from
qualifying special purpose entities |
38,284
|
31,917
|
| Property and equipment, net |
32,346
|
30,062
|
| Restricted cash |
11,012
|
11,154
|
| Other assets |
22,778
|
21,697
|
|
$ 451,257
|
$ 431,093
|
|
Liabilities and Stockholders' Equity
|
|
|
| Liabilities: |
|
|
| Financing arrangements |
$ 67,724
|
$ 79,441
|
| Deferred revenue |
23,473
|
27,085
|
| Accrued income taxes |
30,371
|
28,157
|
| Accounts payable |
27,734
|
26,550
|
| Other liabilities |
51,832
|
47,230
|
|
201,134
|
208,463
|
| Stockholders' Equity: |
|
|
Common stock, $.01 par value, 100,000,000 shares authorized,
50,768,849 and 50,663,851 shares issued as of June 30, 1999
and December 31, 1998, respectively |
508
|
507
|
| Paid-in capital |
122,021
|
120,403
|
| Retained earnings |
148,585
|
122,711
|
Treasury stock, at cost, 6,286,205 and 6,496,959 shares
as of June 30, 1999 and December 31, 1998, respectively |
(20,991)
|
(20,991)
|
|
250,123
|
222,630
|
|
$ 451,257
|
$ 431,093
|
FAIRFIELD COMMUNITIES, INC.
SCHEDULE OF SELECTED FINANCIAL DATA (1)
(Dollars in thousands)
(Unaudited)
|
Quarters Ended
|
|
6/30/99
|
3/31/99
|
12/31/98
|
9/30/98
|
6/30/98
|
| Contracts receivable |
$ 401,069
|
$ 374,701
|
$ 369,992
|
$ 357,957
|
$ 331,459
|
Weighted average
coupon rate |
15.1%
|
14.9%
|
14.6%
|
14.7%
|
14.7%
|
Delinquency
(60-day basis) |
1.3%
|
2.0%
|
2.3%
|
1.8%
|
2.2%
|
Allowance for contracts
receivable |
$ 24,806
|
$ 22,012
|
$ 22,343
|
$ 22,660
|
$ 20,736
|
Write-offs of contracts
receivable, net |
$ 2,338
|
$ 3,953
|
$ 4,029
|
$ 1,724
|
$ 1,099
|
Total financing
arrangements |
$ 233,303
|
$ 233,905
|
$ 222,304
|
$ 217,114
|
$ 177,485
|
Weighted average
funding cost |
7.0%
|
7.2%
|
7.5%
|
7.6%
|
7.5%
|
| Number of Discovery sales |
5,014
|
3,447
|
3,235
|
5,781
|
4,187
|
| Gross VOI revenue |
$ 97,173
|
$ 72,148
|
$ 74,687
|
$ 86,501
|
$ 82,572
|
Net VOI revenue
recognition (deferral) |
$ 2,013
|
$ 610
|
$ (200)
|
$ (229)
|
$ (2,417)
|
VOI deferred revenue at
quarter end |
$ 5,206
|
$ 7,615
|
$ 8,225
|
$ 8,025
|
$ 7,796
|
|
Condensed statements of earnings of unconsolidated
subsidiaries:
|
| Interest income |
$ 7,568
|
$ 6,925
|
$ 6,181
|
$ 5,041
|
$ 3,775
|
| Interest expense: |
|
|
|
|
|
| Financing arrangements |
2,613
|
2,463
|
2,270
|
1,936
|
1,450
|
| Subordinated note to parent |
528
|
461
|
385
|
482
|
423
|
General and
administrative |
472
|
442
|
384
|
408
|
218
|
| Total expenses |
3,613
|
3,366
|
3,039
|
2,826
|
2,091
|
| Pretax earnings |
3,955
|
3,559
|
3,142
|
2,215
|
1,684
|
Provision for
income taxes |
1,425
|
1,342
|
1,157
|
816
|
620
|
| Net earnings |
$ 2,530
|
$ 2,217
|
$ 1,985
|
$ 1,399
|
$ 1,064
|
(1) The Schedule of Selected Financial Data includes the related
financial information of FRC and FFC II, wholly owned,
unconsolidated qualifying special purpose entities of Fairfield
Acceptance Corporation-Nevada.
--------------------------------------------------------------------------------
Contact:
Fairfield Communities, Inc.
Robert W. Howeth
Chief Financial Officer
501/312-3856
or
Morgen-Walke Associates
Michele Katz/Connie Bienfait/
Ian Hirsch
Press: Eileen King
212/850-5600