Trendwest Reports Third Quarter Earnings Up 36.2% To $.61 Per Diluted Share; Record Third Quarter Net Income Totals $15.8 Million.Business Editors & Travel/Hospitality Writers REDMOND Redmond, city (1990 pop. 35,800), King co., W Wash., a suburb of Seattle, on Lake Sammamish; inc. 1912. Its economy centers around computer software (Microsoft Corp. , Wash.--(BUSINESS WIRE)--Oct. 25, 2001 Trendwest Resorts Inc. (Nasdaq:TWRI TWRI Toronto Western Research Institute TWRI Through-The-Wall Radar Imaging ), one of the nation's leading timeshare A form of shared property ownership, commonly in vacation or recreation condominium property, in which rights vest in several owners to use property for a specified period each year. companies, today reported net income of $15.8 million, or $0.61 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the quarter ended September September: see month. 30, 2001, compared to net income of $11.6 million, or a split-adjusted $.45 per diluted share for the same quarter last year. For the nine months ended September 30, 2001, net income was $41.6 million, or $1.62 per diluted share, 29.2% ahead of last year's $32.2 million, or a split-adjusted $1.26 per diluted share. The Company reported total revenues of $129.2 million for the quarter ended September 30, 2001, a 36.1% increase over the $94.9 million reported in the same quarter last year. For the nine months ended September 30, 2001, revenues reached a record $359.0 million, up 43.5% from $250.1 million reported for the same period last year. "We believe that this quarter's results clearly reflect the strength of the drive-to concept that is core to the Trendwest product offerings," stated Bill Peare, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Clearly, today's consumers value the flexibility that drive-to locations offer, as exemplified by WorldMark's continued strong occupancy rates Noun 1. occupancy rate - the percentage of all rental units (as in hotels) are occupied or rented at a given time pct, per centum, percent, percentage - a proportion in relation to a whole (which is usually the amount per hundred) , and our continued ability to attract qualified guests to our urban sales offices." Operations Net Vacation VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. Credit sales, exclusive of upgrade sales, for the September quarter increased 33.4% to $94.3 million, compared to $70.7 million for last year's third quarter. Fractional fractional size expressed as a relative part of a unit. fractional catabolic rate the percentage of an available pool of body component, e.g. protein, iron, which is replaced, transferred or lost per unit of time. Interest sales accounted for $2.0 million of additional sales substantially completing the second phase of the Depoe Bay fractional program, while there were no sales of Fractional Interests in the like quarter last year. Third quarter's Upgrade Sales totaled $15.7 million compared with $12.1 million a year ago, a 29.8% increase. Third quarter cost of sales, as a percentage of Vacation Credit and Fractional sales, was 27.2%, slightly higher than the 26.9% for the same period last year. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. cost of sales as a percentage of Vacation Credit and Fractional sales was 27.8%, up from last year's 24.8%. Sales and marketing costs as a percentage of Vacation Credit and Fractional Interest sales for the 2001 third quarter were 47.6%, compared to 46.5% for the same quarter last year. Year-to-date these costs, as a percentage of sales, were 47.0% in 2001 versus 47.5% in 2000. Quarterly general and administrative (G&A) expenses were 8.4% of total revenue compared to 9.1% last year reflecting the impact of strong revenue growth. Year-to-date, G&A expenses were 8.7% of total revenue, down from last year's 9.5% level. Financing Activities For the current quarter, financing activities generated $14.4 million in revenues, compared to $9.8 million in the same quarter last year, a 46.9% increase. Year-to-date, revenues from financing activities totaled $35.9 million, up 37.5% from last year's $26.1 million. The provision for doubtful accounts was 7.6% of Vacation Credit and Fractional Interest sales for the third quarter of 2001 compared to 7.3% for the same quarter last year. As of September 30, 2001, 2.32% of the total Notes Receivable portfolio was more than 60 days past due, up slightly from the 2.29% level at December December: see month. 31, 2000. The allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. for Notes Receivable held by the Company plus the recourse The right of an individual who is holding a Commercial Paper, such as a check or promissory note, to receive payment on it from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment. liability for Notes Receivable sold was $49.7 million, or 7.9% of the total portfolio, at September 30, 2001, up from 7.7% at year end. Liquidity During the 2001 third quarter, Trendwest successfully completed the private placement of a $163 million asset-backed securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. , TRI TRI Toxics Release Inventory (US EPA) TRI Touch Research Institute TRI Taux de Rentabilité Interne (French: internal rate of return) TRI Taux de Rentabilité Interne TRI Tile Roofing Institute Funding V, Inc., at a weighted average interest cost of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 5.69%. Most of the assets transferred to TRI Funding V had previously been sold to the Company's warehouse facility, TW Holdings III, Inc. This private placement also included a $30 million pre-funding account. In addition, Trendwest recently increased the capacity of TW Holdings III from $150 million to $175 million and extended the maturity by 364 days. The combination of the pre-funding account and the additional funding capacity created at TW Holdings III through the recent private placement provides substantial liquidity to fund receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed sales going forward. Expansion and Development In its ongoing efforts to expand its owner base and product offerings, WorldMark absorbed Absorbed 1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices. 2. In underwriting, when an issue has been completely sold to the public. 3. the Eagle Crest Vacation Club (ECVC) in September along with its 3,000-member base. As part of this agreement, Trendwest acquired $11.5 million of selected ECVC Notes Receivable at face value. These receivables are expected to be sold to the Trendwest warehouse facility during the upcoming fourth quarter. In addition two related parties, Eagle Crest, Inc. and Running Y Ranch ranch, large farm devoted chiefly to raising and breeding cattle, horses, sheep, and goats. The cattle ranch was introduced from Latin America to Texas and the plains of the W United States and Canada. Resort, have entered into a contractual agreement with Trendwest to sell WorldMark vacation credits. The future revenue impact from sales activity at Eagle Crest and Running Y will be nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. . During the third quarter, Trendwest contributed a total of 292 condominium condominium In modern property law, individual ownership of one dwelling unit within a multidwelling building. Unit owners have undivided ownership interest in the land and those portions of the building shared in common. units to WorldMark. This expansion included 12 more units at Branson Branson, city (1990 pop. 3,706), Taney co., SW Mo.; inc. 1904. The primarily residential city's economy is based on tourism, especially to theaters offering live, often lavish country-music shows. and 79 units at the recently opened Kihei Resort in Maui Maui (mou`ē), island (1990 est. pop. 82,500), 728 sq mi (1,886 sq km), second largest island in the state of Hawaii, separated from the island of Hawaii by the Alenuihaha Channel and from Molokai by the Pailolo Channel. and 138 units at the recently completed Oceanside Oceanside. 1 City (1990 pop. 128,398), San Diego co., S Calif., on the Gulf of Santa Catalina; inc. 1888. It is a commercial and trading center for an inland farm area and for nearby Camp Pendleton, a huge U.S. marine corps amphibious base. Resort near San Diego, California “San Diego” redirects here. For other uses, see San Diego (disambiguation). San Diego is a coastal Southern California city located in the southwestern corner of the continental United States. As of 2006, the city has a population of 1,256,951. . In addition, as part of the previously mentioned ECVC agreement, 30 additional units at Eagle Crest, 13 units at Running Y, and 20 units at the McCall, Idaho McCall is a resort city located in Valley County, Idaho, United States. Named after its founder, Tom McCall, it is situated on the southern shore of Payette Lake and near the center of the Payette National Forest. resort were contributed to WorldMark. Trendwest acquired 36 entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: lots for future expansion of the McCall property. The McCall resort further expands the drive-to product offering available to the growing Boise, Idaho “Boise” redirects here. For other uses, see Boise (disambiguation). Boise is the capital and most populous city of the U.S. state of Idaho. It is the county seat of Ada County and the principal city of the Boise metropolitan area. market. During the 2001 third quarter, the Company opened two new sales offices in Broomfield, Colorado The City and County of Broomfield lies in the northwestern tier of the Denver metropolitan area in the State of Colorado of the United States. Broomfield has a consolidated city and county government. and Seaside, Oregon Seaside is a city in Clatsop County, Oregon, United States. The name Seaside came from a summer resort built by the railroad magnate Ben Holladay in the 1870s, Seaside House, located a mile south of the business center. The population was 5,900 at the 2000 census. . As part of its normal process to optimize optimize - optimisation operating results, the Company monitors the productivity of its various sales offices. As a result of this review and the current Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. market the St. Louis Louis, titular duke of BurgundyLouis, 1682–1712, titular duke of Burgundy; grandson of King Louis XIV of France. He became heir to the throne on the death (1711) of his father, Louis the Great Dauphin. sales office was closed at quarter end. Forward Looking Statements -- Through Mid-October we have observed a decline in weekly U.S. sales volume of approximately 10% from the period prior to the terrorist attacks of September 11th, due to lower tour volumes and closing rates. Even with the recent decline in weekly sales volume, we anticipate vacation credit revenue and overall profitability to compare favorably with last year's 4th quarter. -- Due primarily to travel disruptions, system-wide September occupancy at WorldMark the Club was 83%, down from 86% last year. -- The portion of the notes receivable portfolio more than 60 days past due increased to 2.39% at September 30th from 2.04% at June 30, 2001. The October month-to-date results are showing some improvements over September levels. -- Product cost as a percentage of vacation credit sales is expected to be slightly lower than last year's levels in the fourth quarter. -- Sales and Marketing costs for the fourth quarter are expected to remain within their historical range. Other Items WorldMark, The Club recently instituted a 5% dues increase to its member base to cover increased energy and labor costs. The dues increase is effective as of October October: see month. 1, 2001. "Recently, Trendwest Resorts, Inc. was ranked thirty-third on Forbes Forbes , B(ertie) C(harles) 1880-1954. American publisher and businessman who founded and edited (1916-1954) Forbes magazine. His son Malcolm Stevenson Forbes 200 Best Small Companies in America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. . We are pleased to be part of this group again and it is always nice to see our hard work rewarded with such a distinction," Peare concluded. Trendwest Resorts, Inc., headquartered in Redmond, Washington Redmond is a city in King County, Washington, USA. It is situated on the eastern edge of the Seattle urban area, in what is known as the Eastside. In 2003 the Census Bureau estimated the city population was 46,391. , 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 September 30, 2001, Trendwest had 46 sales offices, and nearly 141,000 WorldMark and WorldMark South Pacific owners enjoyed over 2,640 condominium units at 47 resort locations in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography , Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , Fiji and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. . For more information, visit Trendwest and WorldMark at www.trendwestresorts.com and www.worldmarktheclub.com. The Company's third quarter financial results will be discussed in a conference call at 8:00 a.m. (Pacific Time) on Thursday Thursday: see week. , October 25, 2001. Participants may listen to the webcast of the conference call by logging onto the company website http://www.trendwestresorts.com, and choosing "Audio Presentations" within the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the website. A replay of the call will be available on the Company's website through November November: see month. 25, 2001 or by dialing 800-428-6051 (access code is 212211) through October 27, 2001. This press release contains forward looking statements concerning the Company's future revenues and expenses, the addition of new resorts and the results from sales offices. 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: -- the Company's ability to achieve planned sales levels; -- the Company's ability to maintain its resort development and sales and marketing costs within budgeted ranges; -- the Company's ability to develop or acquire additional resort properties; -- the Company's ability to obtain equity or debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay to fund development and to finance its receivables; and general economic conditions in the United States. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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)
September 30, December 31,
Assets 2001 2000
-------------- --------------
Cash $ 653 $ 404
Restricted cash 10,341 7,201
Notes Receivable, net of
allowance for doubtful accounts,
sales returns and deferred
gross profit 114,635 76,197
Accrued interest and
other receivables 8,922 8,171
Residual interest in Notes
Receivable sold 70,901 52,043
Inventories 124,240 104,218
MountainStar development 66,397 56,536
Property and equipment, net 36,878 29,948
Refundable income taxes - 5,688
Other assets 7,211 6,599
-------------- --------------
Total assets $ 440,178 $ 347,005
============== ==============
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and bank overdraft $ 4,990 $ 9,706
Accrued liabilities 34,573 21,538
Accrued construction in progress 3,394 2,855
Due to Parent and Affiliate 7,483 419
Note payable to Parent 15,515 17,731
Borrowing under bank line of credit 77,497 48,441
Mortgage payable 11,635 11,696
Allowance for recourse liability and
deferred gross profit
on Notes Receivable sold 35,457 26,846
Current income taxes payable 1,027 -
Deferred income taxes 538 330
-------------- --------------
Total liabilities 192,109 139,562
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 25,257,234
and 25,196,997 shares at
September 30, 2001 and
December 31, 2000, respectively. 54,324 54,119
Accumulated other comprehensive loss (1,722) (522)
Retained earnings 195,467 153,846
-------------- --------------
Total shareholders' equity 248,069 207,443
Commitments and contingencies
-------------- --------------
Total liabilities and
shareholders' equity $ 440,178 $ 347,005
============== ==============
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Income Information
(dollars in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ----------------
2001 2000 2001 2000
-------- -------- ------- -------
Revenues:
Vacation Credit and
Fractional Interest
sales, net $ 111,955 $ 82,808 $ 314,950 $ 216,410
Finance income 5,467 4,725 14,126 13,001
Gains on sales of
Notes Receivable 8,896 5,040 21,729 13,096
Resort management services 919 1,081 2,871 3,881
Other 1,924 1,223 5,368 3,730
-------- -------- -------- -------
Total revenues 129,161 94,877 359,044 250,118
-------- -------- -------- -------
Costs and operating expenses:
Vacation Credit and
Fractional Interest
cost of sales $ 30,471 $ 22,253 $ 87,498 $ 53,598
Resort management services 379 424 1,183 1,361
Sales and marketing 53,236 38,529 148,000 102,715
General and administrative 10,817 8,633 31,290 23,687
Provision for
doubtful accounts
and recourse liability 8,504 6,060 23,188 15,491
Interest 195 128 418 225
-------- -------- -------- -------
Total costs and
operating expenses 103,602 76,027 291,577 197,077
-------- -------- -------- -------
Income before income taxes 25,559 18,850 67,467 53,041
Income tax expense 9,760 7,300 25,846 20,869
-------- -------- -------- -------
Net income $ 15,799 $ 11,550 $ 41,621 $ 32,172
======== ======== ======== =======
Basic net income
per common share $ 0.62 $ 0.46 $ 1.65 $ 1.27
Diluted net income
per common share $ 0.61 $ 0.45 $ 1.62 $ 1.26
Weighted average shares of
common stock and dilutive
potential common
stock outstanding:
Basic 25,301,955 25,375,349 25,196,997 25,413,344
Diluted 25,730,595 25,436,480 25,647,436 25,490,169
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)
Nine months ended
September 30,
--------------------------------
2001 2000
--------- -------
Cash flows from operating activities:
Net income $ 41,621 $ 32,172
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 3,281 2,005
Amortization of residual interest
in Notes Receivable sold 13,639 10,283
Provision for doubtful accounts,
sales returns and
recourse liability 29,397 19,685
Recoveries of Notes
Receivable charged off 281 215
Residual interest in Notes Receivable sold (30,608) (15,395)
Unrealized loss (gain) on residual
interest in Notes Receivable sold 1,709 (573)
Contract servicing liability arising from
sale of Notes Receivable 3,350 -
Amortization of servicer liability (1,340) (536)
Change in deferred gross profit 2,139 631
Deferred income tax expense (benefit) 454 (2,348)
Issuance of Notes Receivable (276,490) (189,663)
Proceeds from sale of Notes Receivable 190,064 152,224
Proceeds from repayment of Notes Receivable 47,816 44,789
Purchase of Notes Receivable (15,970) (13,002)
Purchase of Notes Receivable from Affiliate (8,625) -
Changes in certain assets and liabilities:
Restricted cash (3,140) (3,130)
MountainStar Development (9,861) (29,773)
Inventories (21,941) (48,382)
Accounts payable and accrued liabilities 6,927 14,428
Income taxes payable 1,084 -
Refundable income taxes 5,688 -
Other (1,612) (7,832)
--------- ---------
Net cash used in operating activities (22,137) (34,202)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (7,631) (4,596)
--------- ---------
Net cash used in investing activities (7,631) (4,596)
Cash flows from financing activities:
Net borrowing under bank line of
credit and other 28,927 42,056
Repayments of note payable to Parent (2,216) -
Repayments of mortgage payable (61) -
Increase (decrease) in due to Parent
and Affiliate 2,823 (1,330)
Issuance of common stock 2,585 476
Repurchase of common stock (2,380) (3,948)
----------- ----------
Net cash provided by financing activities 29,678 37,254
----------- ----------
Net decrease in cash (90) (1,544)
Effect of foreign currency
exchange rates on cash 339 (93)
Cash at beginning of period 404 1,760
----------- ----------
Cash at end of period $ 653 $ 123
=========== ==========
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Cash Flow Information (continued)
(dollars in thousands)
(Unaudited)
Nine months ended September 30,
-------------------------------
2001 2000
----------- ----------
Supplemental disclosures of cash
flow information -
Cash paid during the period for:
Interest (excluding
capitalized amounts of
$5,463 and $1,485,
respectively) $ 53 $ -
Income taxes, net of
refunds received 21,203 23,787
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
Issuance of note payable to
affiliate in connection with
the acquisition of certain
notes receivable and inventory 4,241 -
As of September 30,
------------------------------
2001 2000
----------- ----------
Selected Operating Data:
Number of WorldMark(1) Resorts 47 37
Number of Units 2,643 1,927
Total number of WorldMark(1)
Owners 140,991 104,545
(1) includes WorldMark, The Club and WorldMark South Pacific
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