Filed On 3/29/00 · SEC File 0-22979 · Accession Number 891020-0-640
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
3/30/00 Trendwest Resorts Inc 10-K 12/31/99 3:57 Bowne Northwest/FA
Document/Exhibit Description Pages Size
1: 10-K Form 10-K for Period Ended December 31, 1999 55 240K
2: EX-23.1 Consent of Kpmg Llp 1 4K
3: EX-27 Financial Data Schedule 1 4K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 333-26861
TRENDWEST RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
[Download Table]
OREGON 93-1004403
(STATE OR OTHER JURISDICTION OF ORGANIZATION) (IRS EMPLOYER IDENTIFICATION NO.)
9805 WILLOWS ROAD 98052
REDMOND, WA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(425) 990-2300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
Aggregate market price of shares held by non-affiliates at March 20, 2000
was $50,141,385.25, consisting of 2,145,086 shares.
The number of shares of common stock outstanding on March 20, 2000 was
16,932,378 shares.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company's Proxy Statement for the 2000 Annual Meeting of
shareholders are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
Trendwest Resorts, Inc., (Company) markets, sells and finances timeshare
Vacation Ownership Interests in the form of Vacation Credits and Fractional
Interests. The Company also acquires, develops and manages timeshare resorts.
The Company's timeshare resorts (except Fractional Interests) are owned and
operated through WorldMark, the Club, (WorldMark) a non-profit mutual benefit
corporation organized by Trendwest in 1989 to provide an innovative, flexible
vacation ownership system. The Company presently sells Vacation Ownership
interests in Alaska, Arizona, California, Idaho, Oregon, Utah and Washington
primarily through off-site sales offices. Fractional Interests are sold on-site
at the Depoe Bay resort in Oregon.
Trendwest sells Vacation Ownership Interests in the form of Vacation
Credits, which are created by the transfer to WorldMark of resort units
purchased or developed by the Company, and Fractional Interests. Vacation
Credits can be used by Owners to reserve units at any of the WorldMark resorts,
at any time of the year and in increments as short as one day. The use of
Vacation Credits is not tied to any particular resort unit or time period as is
typical in the timeshare industry. The Company believes that the combination of
multiple WorldMark Resorts and the Company's Vacation Credit system provides
Owners with an attractive range of vacation planning choices and values not
generally available within the timeshare industry. The Company's Vacation Credit
system with multiple WorldMark Resorts facilitates the sale of Vacation Credits
at off-site sales offices located in major metropolitan areas and reduces
dependence on on-site sales centers located at more remote resort locations. The
Company was formed as a pure Vacation Credit system and its operations
infrastructure was designed to facilitate such an operation. Often, other
timeshare operations have overlaid a "points-based" club onto a traditional
fixed week product.
Fractional Vacation Ownership Interests represent deeded fixed intervals in
timeshare condominiums and are not transferred to WorldMark. The Company's first
Fractional program, at the Depoe Bay resort on the Oregon Coast, commenced
pre-selling in October, 1998 and began recognizing revenue from these sales in
April, 1999 when the Company took possession of the property. The 377 Fractional
Interests each representing a 13th share ownership in a condominium were
completely sold out by October, 1999. The Company will continue to develop
Fractional ownership programs at strategic locations with high demand.
The Company sells vacation credits at twenty-four sales offices, fifteen of
which are located off-site in metropolitan areas. The other sales offices are
located on-site at nine of the WorldMark Resorts.
RECENT DEVELOPMENTS
On October 22, 1999, the Company formed Trendwest South Pacific, Pty. Ltd.
(Trendwest South Pacific) as a wholly-owned subsidiary. Trendwest South Pacific
is an Australian corporation formed for the purpose of conducting sales,
marketing and resort development activities in the South Pacific. As of December
31, 1999, Trendwest South Pacific had no activity other than general and
administrative expenses associated with the start-up of operations.
The Company is currently in the process of registering its product with
Australian regulators. The Company anticipates commencing sales operations in
April, 2000 following regulatory approval.
CORPORATE BACKGROUND AND CONSOLIDATION OF FINANCE SUBSIDIARIES
The Company commenced its timeshare business as a wholly-owned subsidiary
of JELD-WEN in 1989 with three condominium units. JELD-WEN is currently the
Company's principal shareholder. JELD-WEN is a privately owned company that was
founded in 1960 and is a major manufacturer of doors, windows and millwork
products. Headquartered in Klamath Falls, Oregon, JELD-WEN has diversified
operations located throughout the United States and in numerous foreign
countries that include manufacturing, hospitality and recreation, retail,
financial services and real estate.
The Company raises capital for property acquisitions and working capital by
selling or securitizing Notes Receivable through four subsidiaries (the "Finance
Subsidiaries"). Prior to June 30, 1997, two of the Finance
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Subsidiaries were owned by JELD-WEN. Effective June 30, 1997, the Company
acquired the two Finance Subsidiaries from JELD-WEN for 5,193,693 shares of the
Company's Common Stock (the "Consolidation Transactions"). On August 15, 1997,
the Company consummated its public offering.
The Company has transactions with other JELD-WEN subsidiaries and related
parties. See note 14 "Related Party Transactions" in the notes to the combined
and consolidated financial statements included herein.
The Company was incorporated in Oregon in 1989. The Company's principal
executive offices are located at 9805 Willows Road, Redmond, Washington 98052,
and its telephone number is (425) 498-2500.
WORLDMARK
WorldMark is a California nonprofit mutual benefit corporation formed by
Trendwest in 1989. WorldMark's articles of incorporation provide that the
specific purpose for which it was formed is to own, operate and manage the real
property conveyed to it by the Company for the benefit of the WorldMark Owners.
There are 87,432 Owners at December 31, 1999. Owners receive the right to use
all WorldMark Resort units and the right to vote to elect WorldMark's board
members and to vote with respect to certain major WorldMark matters. The number
of votes that each Owner has is based on the number of Vacation Credits owned.
The Resorts are owned by WorldMark free and clear of all monetary
encumbrances. WorldMark maintains a replacement reserve for the WorldMark
Resorts which is funded from the annual assessments of the Owners. The
replacement reserve is utilized to refurbish and replace the interiors and
furnishings of the condominium units and to maintain the exteriors and common
areas in WorldMark Resorts in which all units are owned by WorldMark.
Compared to other timeshare arrangements, the WorldMark concept provides
Owners significant flexibility in planning vacations. Depending on how many
Vacation Credits an Owner has purchased, the Owner may use the Vacation Credits
for one or more vacations annually. The number of Vacation Credits that are
required to stay one day at WorldMark's units varies, depending upon the resort
location, the size of the unit, the vacation season and the day of the week. For
example, a Friday or Saturday night stay at a one-bedroom unit may require 825
Vacation Credits per night off-season and 1,450 Vacation Credits per night in
peak season. A midweek stay at the same one-bedroom unit would require less
Vacation Credits. The range of Vacation Credits that is required to stay one day
enables an Owner to receive a varying number of days at the WorldMark Resorts
depending on the vacation choices made by the Owner. Under this system, Owners
can select vacations according to their schedules, space needs and available
Vacation Credits. Vacation Credits are reissued on an anniversary date basis and
any unused Vacation Credits may be carried over for one year. An Owner may also
borrow Vacation Credits from the Owner's succeeding year's allotment.
An Owner may also purchase bonus time ("Bonus Time") from WorldMark for use
when space is available. Bonus Time can only be reserved within fourteen days of
use for drive-to locations and within thirty days of use for exotic locations
(Hawaii, Mexico and Fiji). Bonus Time gives Owners the opportunity to use
available units on short notice at a reduced rate (generally from $20 to $50 per
night, mid-week in the off-season) and to obtain usage beyond their Vacation
Credit allotment.
WorldMark collects maintenance dues from Owners based on the number of
Vacation Credits owned. Currently, the annual dues are $249 for the first 5,000
Vacation Credits owned, plus approximately $76 for each additional increment of
2,500 Vacation Credits owned. These dues are intended to cover WorldMark's
operating costs, including condominium association dues at the WorldMark
Resorts. The Company pays WorldMark the dues on all unsold Vacation Credits.
Such payments totaled $1,376,000, $1,107,000 and $793,000 in 1999, 1998 and
1997, respectively.
WorldMark has a five member board of directors that manages its business
and affairs. Three of the directors and principal executive officers of
WorldMark are also officers of the Company. The Board must obtain the approval
of a majority of the voting power of the Owners represented (excluding
Trendwest) to take certain actions, including (i) incurrence of capital
expenditures exceeding 5% of WorldMark's budgeted gross expenses during any
fiscal year and (ii) selling property of WorldMark during any fiscal year with
an aggregate fair market value in excess of 5% of WorldMark's budgeted gross
expenses for such year.
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THE WORLDMARK RESORTS
The following table sets forth certain information as of December 31, 1999,
regarding each existing WorldMark Resort, planned expansion at existing
WorldMark Resorts through 2001, and planned new WorldMark Resorts through 2001:
[Enlarge/Download Table]
EXISTING
DATE UNITS
CONTRIBUTED IN PLANNED TOTAL UNITS
EXISTING RESORTS LOCATION TO WORLDMARK(a) SERVICE EXPANSION ANTICIPATED RCI RATING(b)
---------------- -------- --------------- -------- --------- ----------- -------------
ARIZONA
Pinetop Pinetop/Lakeside August 1999 60 -- 60 (f)
Vistoso Tucson December 1999 19 85 104 (f)
BRITISH COLUMBIA
Sundance Whistler February 1992 25 -- 25 Gold Crown
Cascade Lodge Whistler September 1999 42 -- 42 (f)
CALIFORNIA
North Shore Estates Bass Lake October 1991 61 -- 61 Gold Crown
Beachcomber Pismo Beach April 1993 20 -- 20 Gold Crown
Palm Springs Palm Springs July 1995 64 -- 64 R.I.D.
Big Bear Big Bear Lake April 1996 58 -- 58 Gold Crown
Clear Lake Nice July 1998 88 -- 88 Gold Crown
Angels Camp Angels Camp September 1998 100 -- 100 Gold Crown
Marina Monterey Bay November 1999 33 -- 33 (f)
FIJI
Denarau Island Denarau Island December 1999 38 38 76(c) (f)
HAWAII
Valley Isle Maui April 1990 14 -- 14 Gold Crown
Kapaa Shores Kauai July 1991 49 -- 49 Gold Crown
Kona Hawaii November 1997 64 -- 64 Gold Crown
MEXICO
Coral Baja San Jose del Cabo November 1994 136 -- 136 Gold Crown
NEVADA
Lake Tahoe Stateline January 1991 50 -- 50 R.I.D
Las Vegas Las Vegas December 1996 42 -- 42 Gold Crown
OREGON
Eagle Crest Redmond September 1989 81 -- 81 Gold Crown
Gleneden Beach Lincoln City March 1996 80 -- 80 Gold Crown
Running Y Ranch Klamath Falls February 1997 81 -- 81 Gold Crown
Schooner Landing Newport September 1997 13(d) -- 13 Gold Crown
Depoe Bay Depoe Bay April 1999 54 60 114 Gold Crown
UTAH
Wolf Creek Eden June 1998 71(e) -- 71 Gold Crown
Harbor Village Bear Lake January 1999 6 20 26 (f)
WASHINGTON
Lake Chelan Shores Chelan August 1990 13 -- 13 Gold Crown
Surfside Long Beach September 1991 25 -- 25 R.I.D.
Discovery Bay Sequim January 1992 41 5 46 Gold Crown
Park Village Leavenworth July 1992 72 -- 72 Gold Crown
Mariner Village Ocean Shores June 1994 32 -- 32 Gold Crown
Birch Bay Blaine January 1995 103 -- 103 Gold Crown
EXPECTED
PLANNED RESORTS COMPLETION
----------------------- --------------
The Canadian Vancouver, BC April 2000 -- 43 43
Lake of the Ozarks Ozarks, MO September 2000 -- 100 100
Branson Branson, MO December 2000 -- 81 81
Kihei Maui, HI April 2001 -- 200 200
Oceanside Oceanside, CA July 2001 -- 140 140
Las Vegas Las Vegas, NV October 2001 -- 200 200
St. George St. George, UT December 2000 -- 60 60
----- ----- -----
Total 1,635 1,032 2,667
===== ===== =====
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(a) The dates in this column indicate, for each resort, the month and year in
which the first completed units at such resort were transferred to
WorldMark. At certain resorts, additional units were transferred to
WorldMark at later dates.
(b) Gold Crown and Resort of International Distinction ("R.I.D.") are resort
ratings awarded annually by RCI. In February 2000, approximately 19% of the
resorts reviewed by RCI received a Gold Crown rating, the highest rating
awarded by RCI, and approximately 14% of the resorts reviewed by RCI
received an R.I.D. rating, the second-highest rating awarded by RCI.
(c) Ten units will be contributed to WorldMark South Pacific (see "Recent
Developments") when completed.
(d) The Company purchased 659 weeks of time per year from Schooner's Landing and
deeded the rights to this time to WorldMark. This is equivalent to 13
condominium units.
(e) The Company purchased 490 weeks of time per year from Wolf Creek and deeded
the rights to this time to WorldMark. This is equivalent to 9 condominium
units. The remaining 62 units were constructed by the Company.
(f) This resort has not yet been rated by RCI.
SALES AND MARKETING
The Company's sales of Vacation Credits primarily occur at fifteen off-site
sales offices located in metropolitan areas in four regions. The remainder of
the Company's sales of Vacation Credits occur at nine on-site sales offices.
Fractional Interest sales occurred on-site at the Depoe Bay resort in Depoe Bay,
Oregon. In 1999, 80% of the Company's Vacation Credit sales were generated by
off-site sales offices.
The Company believes the advantages of using off-site sales offices
compared to sales offices located at more remote resorts include (i) access to
larger numbers of potential customers, (ii) convenience for prospective
customers to attend a sales presentation, (iii) access to a wider group of
qualified sales personnel due to more convenient work locations, (iv) ability to
open new sales offices quickly and without significant capital expenditures and
(v) lower marketing costs to attract prospective customers to visit an off-site
sales office.
The Company's off-site sales offices are approximately 6,000 square feet
and include a theater, sales area and reception area. Each off-site sales center
is staffed by a sales manager, an office administrator, approximately 10 to 25
salespeople, two developer's representatives, and additional staff for guest
registration and clerical assistance. The on-site sales offices are
approximately 3,000 square feet and generally include similar facilities and a
smaller number of staff compared to the off-site sales offices.
The Company uses a variety of marketing programs to attract prospective
Owners, including sponsored promotional contests offering vacation packages or
gifts, targeted mailings and telemarketing efforts, and various other
promotional programs. The Company also co-sponsors sweepstakes, giveaways and
other promotional programs with professional teams at major sporting events
(such as Portland Trail Blazers basketball games and Seattle Mariners baseball
games) and with supermarkets. The Company continually monitors and adjusts its
marketing programs to improve efficiency. Trendwest targets prospective Owners
through an analysis of age, income and travel interests. One of the many
marketing programs used by the Company delivers targeted prospective Owners a
notice related to the specific promotion, inviting the prospective Owner to call
the Company's toll-free voice mail system to leave a return phone number. Those
persons who call the Company and leave their phone number receive a call from
the Company to invite them to visit an off-site sales office and attend a sales
presentation. As an incentive to attend the presentation, the Company offers
gifts, such as an overnight trip or electronic equipment.
Printed information regarding Trendwest and WorldMark's properties, as well
as the rights and obligations of Owners, is provided to each prospective member
before Vacation Ownership Interests are sold. Prior to finalizing a sale, each
new Owner meets with one of the Company's developer's representatives to discuss
the new Owner's reasons for joining and to review the rights and obligations of
Owners. The purpose of
5
this meeting is to allow prospective Owners to review their proposed commitment
in an environment separate from the sales process.
Under the laws of each state where the Company sells Vacation Ownership
Interests, each purchaser has a right to rescind the purchase for a period
ranging from three to fourteen calendar days following the later of the date the
contract was signed or the date the purchaser received the last of the documents
required to be provided by the Company, depending on the state. The Company's
current practice is to allow all purchasers a minimum rescission period of seven
days, even if state law allows a shorter period. During 1999 and 1998, the
Company had a rescission rate of 16.3% and 16.7% respectively, which is
consistent with the Company's historical experience.
Trendwest offers existing Owners cash awards for referrals of potential new
Owners. The Company maintains a staff of marketing individuals who specialize in
promoting referrals by existing Owners. In addition, as part of the Company's
ongoing marketing efforts, it offers existing Owners the opportunity to purchase
additional Vacation Credits (Upgrade Sales) generally at a discount from the
current price. Owners may purchase additional Vacation Credits in increments of
1,000. Trendwest currently employs 36 sales representatives who specialize in
Upgrade Sales. Sales of Vacation Credits from the Company's owner referral
program and Upgrade Sales contributed in the aggregate approximately 27.6% and
26.5% of the Company's net Vacation Credit sales in 1999 and 1998, respectively.
CUSTOMER FINANCING
Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales will continue to be financed by the Company. In 1999, the
average new Owner purchased approximately 6,519 Vacation Credits for a purchase
price of approximately $8,855 and the Company financed approximately 88% of the
aggregate purchase price of Vacation Credits sold to new Owners with an average
new Note Receivable of approximately $7,794. During 1999, the aggregate amount
of Notes Receivable generated in connection with the sale of Vacation Credits to
new Owners was approximately $175.0 million. Both Vacation Credit and Fractional
Interest sales require a down payment of at least 10% of the purchase price.
Notes Receivable relating to Vacation Credit sales have a term of up to seven
years at interest rates of 13.9% or 14.9%. Notes Receivable relating to
Fractional Interest sales have a term of up to ten years at interest rates of up
to 11.9%.
Existing Owners purchasing additional Vacation Credits must either make a
down payment of 10% of the price of the Upgrade Sale or have sufficient equity
in their existing Vacation Credits to provide at least 10% of the value of all
Vacation Credits, including the Upgrade. The amount of the existing receivable
is cancelled and a new seven-year note secured by an interest in all Vacation
Credits owned is issued.
At December 31, 1999, an aggregate of $389.9 million of Notes Receivable
were outstanding, of which approximately $100.9 million with a weighted average
interest rate of 14.1% per annum had been retained by the Company. The balance
of approximately $289.0 million of Notes Receivable had been sold by the Company
prior to that date. The Company retains limited recourse liability for Notes
Receivable sold. The Company may continue to sell a substantial amount of its
Notes Receivable. See "Liquidity and Capital Resources -- Finance Subsidiaries",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Risk Factors -- Risks Associated with Customer Financing."
Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At December 31, 1999, approximately $7.5 million,
or 1.91% of the Company's total receivables portfolio of $389.9 million,
including Notes Receivable previously sold by the Company, were past due 60 days
or more. The Notes Receivable are secured by a security interest in the related
Vacation Credits or Fractional Interest. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible (generally when the receivable becomes 180 days past due), at
which time the Company writes off such Notes Receivable and reverses any
interest that had been accrued, reclaims the related Vacation Credits that
secure such Notes Receivable and returns such Vacation Credits to inventory as
6
available for resale. In the event of default of a Fractional Interest, the
Company would foreclose on the title and re-market the interest.
The Company maintains an allowance for doubtful accounts in respect of the
Notes Receivable owned by the Company and an allowance for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these allowances at December 31, 1999 and 1998 were $29.1
million and $20.9 million, respectively, representing approximately 7.5% and
6.8%, respectively, of the total portfolio of Notes Receivable at those dates,
including the Notes Receivable that had been sold by the Company. The increase
in the provision as a percentage of the total portfolio reflects sales growth in
new regions with anticipated future default rates higher than the Company's
historical average. No assurance can be given that these allowances will be
adequate, and if the amount of the Notes Receivable that is ultimately written
off materially exceeds the related allowances, the Company's business, results
of operations and financial condition could be materially adversely affected.
The Company estimates its allowance for doubtful accounts and recourse
liability by analysis of bad debts by each sales site by year of Note Receivable
origination. The Company uses this historical analysis, in conjunction with
other factors such as local economic conditions and industry trends. The Company
also utilizes experience factors of more mature sales sites in establishing the
allowance for bad debts at new sales offices. The Company generally charges off
all receivables when they become 180 days past due and returns the reclaimed
credits associated with such charge-offs to inventory. At December 31, 1999 and
1998, 1.91% and 1.97%, respectively, of the Company's total receivables
portfolio of $389.9 million and $307.7 million, respectively, were more than 60
days past due (with reservation privileges suspended).
Sage Systems, Inc. ("Sage"), a licensed escrow company, services the
Company's entire portfolio of Notes Receivable under an Escrow Agreement with
the Company. Under the Escrow Agreement, contracts for the sale of Vacation
Credit and Fractional Interest sales by the Company, and the monthly contract
payments from such sales, are placed in escrow with Sage. Sage disburses the
escrowed funds to the Company, in the case of Notes Receivable owned by the
Company, or to the purchasers of the Company's Notes Receivable, in the case of
Notes Receivable sold by the Company (see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Finance Subsidiaries"). The
Company handles billing inquiries and all other personal interaction with the
Owners, including collections on its Notes Receivable.
PROPERTY OWNERSHIP
(i) Vacation Credits
Unlike many "right-to-use" timeshare operations in which a developer sells
timeshare interests in properties it owns, the Company does not own the
properties designated for timeshare use. Rather, when the Company purchases
resort property, it vests in WorldMark title to the property free and clear of
any debt encumbrance. With respect to property developed by the Company, the
Company may initially obtain title in the undeveloped property and then deed the
developed resort property to WorldMark. At the time the Company vests title to
the property in WorldMark, a "Declaration of Vacation Owner Program" is recorded
against the property. This declaration establishes the usage rights of Owners as
a covenant on title, thus protecting those rights against the effect of any
future encumbrance. This ownership structure is designed to protect the
timeshare usage rights of the Owners and comply with statutory regulations.
The Company's only consideration for paying for the properties and for
arranging for the seller of the property to transfer title of the property
directly to WorldMark is the exclusive right to sell Vacation Credits and to add
new properties and additional units at the Company's discretion. The Company's
rights to sell Vacation Credits against the deeded properties are protected by a
security interest in the unsold inventory of Vacation Credits. This lien
prevents WorldMark from revoking such rights or transferring them to another
party.
Vacation Credits are allocated to each unit based on its vacation use value
relative to existing properties. Vacation Credits are assigned for weeks of
peak, shoulder and off-peak use, reserving time for Bonus Time,
7
repairs and maintenance. At non-exotic resorts (exotic resorts are Hawaii,
Mexico and Fiji), only 48 weeks of time of each unit are available for sale to
Owners leaving 4 weeks for Bonus Time and maintenance and upkeep on the units.
At exotic locations, 51 weeks of time of each unit are available for sale to
Owners leaving the remaining time for maintenance and upkeep. The aggregate
Vacation Credits assigned to each unit may not be changed in the future, and the
actual number of Credits assigned are contained in the recorded declaration.
This system of irrevocable allocation and registration with the state protects
the Owners by preventing dilution in the usage value of the Owner's Vacation
Credits.
As of December 31, 1999, WorldMark had a reserve for replacement costs of
approximately $12.2 million for all depreciable assets (e.g., furniture,
appliances, carpeting, roofs and decks) of the WorldMark Resorts. In those
WorldMark Resorts where WorldMark owns only a small percentage of the units in a
complex and belongs to an independent homeowners' association, the dues paid to
such association by WorldMark are partially used to provide adequate reserves
for replacement costs relating to such properties.
(ii) Fractional Interests
Fractional Interests represent deeded intervals in condominium units. The
purchaser of a Fractional Interest owns an equal share of the condominium and
pays maintenance dues to a Homeowner's Association made up of other Fractional
Owners.
Fractional Owners have been deeded specific weeks of time spaced evenly
throughout the year. The current Fractional Project at Depoe Bay in Oregon are
13th shares. Each share represents four one-week intervals thirteen weeks apart.
These intervals rotate forward one week each year allowing a Fractional Owner to
have access to every calendar week over a thirteen year period.
PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORK
The Company believes that the sale of Vacation Credits is made more
attractive by the Company's participation in the vacation interval exchange
network operated by Resort Condominiums International, LLC (RCI). For a
membership fee (currently $84 per year with no commitment beyond one year),
Owners may participate in RCI, which allows Owners to exchange Vacation Credits
for an occupancy right at a participating resort in RCI based upon availability
and the payment of an additional exchange fee (currently $124 for exchanges in
North America and $162 for International exchanges). The Company pays the RCI
annual membership fee for the Owner's first year. An Owner may exchange Vacation
Credits for an occupancy right in a resort participating in the RCI network by
requesting occupancy and specifying the desired unit size and time period. RCI
provides an Owner hotline with direct phone access to representatives who are
knowledgeable about WorldMark and are responsible for assisting Owners with an
exchange. RCI assigns a weekly exchange value for Vacation Credits. This
exchange value is based upon a number of factors. If RCI is unable to meet the
Owner's initial request, it suggests alternative resorts based on availability.
COMPETITION
The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. See "Risk
Factors -- Competition".
EMPLOYEES
As of December 31, 1999, Trendwest had 1,494 full-time employees. The
Company believes that its employee relations are good. None of the Company's
employees are represented by a labor union.
The Company prefers to fill promotional opportunities from within the
existing staff. To support this philosophy, a full array of training curriculums
have been designed and offered. These "in-house" training courses range from
curriculums including management training, product knowledge, recruiting and
interviewing, employee orientation, and job specific training such as Best Sales
Practices, and Customer Service.
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In 1999, the Company introduced as a new benefit, the Employee Stock
Purchase Plan. This program allows employees to purchase company stock through a
payroll deduction, with certain provisions, at a discount.
RISK FACTORS
In addition to the other information contained in this Form 10-K, the
following risk factors should be carefully considered in evaluating the Company
and its business. The Company cautions the reader that this list of risk factors
may not be exhaustive. This document contains forward-looking statements which
involve risks and uncertainties. The Company's actual results and the timing of
certain events could differ materially from those anticipated by such
forward-looking statements as a result of certain factors, including the factors
set forth below and in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as those discussed
elsewhere in the Form 10-K.
DEPENDENCE ON ACQUISITIONS OF ADDITIONAL RESORT UNITS FOR GROWTH; NEED FOR
ADDITIONAL CAPITAL
The Company purchases or develops resort units for WorldMark in exchange
for the exclusive right to sell the Vacation Credits assigned to these units.
When the Company purchases or develops a new resort or additional units at an
existing WorldMark Resort, the Company causes the units to be conveyed directly
to WorldMark free of any monetary encumbrances, and therefore must purchase its
properties without any financing secured by the properties. The Company can only
sell additional Vacation Credits to the extent that it acquires or develops
additional resort units for WorldMark. The Company's future growth and financial
success therefore will depend to a significant degree on the availability of
attractive resort locations and the Company's ability to acquire and develop
additional resort units on favorable terms and to obtain additional debt and
equity capital to fund such acquisitions and development. There can be no
assurance that the Company will be successful in this regard. As of December 31,
1999, the Company had purchase agreements, developments in progress or plans to
obtain 1,032 additional resort units by the end of 2001. No assurance can be
given that all of such units will be acquired or completed on a timely basis or
at all. There are numerous potential buyers of resort real estate competing to
acquire resort properties which the Company may consider attractive resort
acquisition opportunities. There can be no assurance that the Company will be
able to compete against such other buyers successfully.
Since the Company generally finances approximately 88% of the aggregate
purchase price of Vacation Credits sold to new Owners, it does not generate
sufficient cash from sales to provide the necessary capital to purchase
additional resort units. No assurance can be given that the Company will be able
to obtain debt or equity capital through the sale or securitization of its Notes
Receivable, or otherwise, in order to continue to acquire additional properties
or that such future financing can be obtained on terms favorable to the Company.
See "Liquidity and Capital Resources -- Finance Subsidiaries".
RISKS ASSOCIATED WITH DEVELOPMENT AND CONSTRUCTION ACTIVITIES
The Company intends to expand its acquisition, development, construction
and expansion of timeshare resorts. There can be no assurance that the Company
will complete current or future development or expansion projects. Risks
associated with these activities include the risk that (i) acquisition or
development opportunities may be abandoned; (ii) construction costs may exceed
original estimates, possibly making the development or expansion uneconomical or
unprofitable; (iii) financing may not be available on favorable terms or at all;
and (iv) construction may not be completed on schedule, resulting in increased
interest expense and delays in the availability for sale of Vacation Credits.
Development activities are also subject to risks relating to inability to
obtain, or delays in obtaining, all necessary zoning, land-use, building,
occupancy and other required governmental permits and authorizations, the
ability of the Company to coordinate construction activities with the process of
obtaining such permits and authorizations, and the ability of the Company to
obtain the financing necessary to complete the necessary acquisition,
construction and conversion work. In addition, the Company's construction
activities are generally performed by third-party contractors. These third-party
contractors generally control the timing, quality and completion of the
construction
9
activities. Nevertheless, construction claims may be asserted against the
Company for construction defects and such claims may give rise to liabilities.
New development activities, regardless of whether or not they are ultimately
successful, typically require a substantial portion of management's time and
attention. The ability of the Company to expand its business to include new
resorts will in part depend upon the availability of suitable properties at
reasonable prices and the availability of financing for the acquisition and
development of such properties. In the future, the Company may undertake the
development of larger resort complexes. No assurance can be given that any such
larger resort complexes will be developed in a profitable manner, if at all.
FACTORS AFFECTING SALES VOLUME
As the number of potential customers in the geographic area of a sales
office who have attended a sales presentation increases, the Company may have
increasing difficulty in attracting additional potential customers to a sales
presentation at that office and it may become increasingly difficult for the
Company to maintain current sales levels at its existing sales offices.
Accordingly, the Company anticipates that a substantial portion of its future
sales growth will depend on the opening of additional sales offices. No
assurance can be given, however, that sales from existing or new sales offices
will meet management's expectations. If the Company does not open additional
sales offices or if existing or new sales offices do not perform as expected,
the Company's business, results of operations and financial condition could be
materially adversely affected.
The Company's marketing is dependent on outbound telemarketing activity to
contact prospects and invite guests to attend a sales presentation. Any
disruption in the Company's ability to utilize outbound telemarketing, in the
short term, could have a material adverse affect on attendance at sales
presentations and sales volume until suitable substitute programs could be
developed.
GEOGRAPHIC CONCENTRATION IN THE WESTERN UNITED STATES
The Company presently sells Vacation Credits in Alaska, Arizona,
California, Idaho, Oregon, Utah and Washington primarily to residents of those
states and of British Columbia. The Company intends to continue to sell Vacation
Credits and Fractional Interests in these seven states and to increase the
number of its sales offices. Since all of the Company's sales offices are in the
western United States, any economic downturn in this area of the country could
have a material adverse effect on the Company's business, results of operations
and financial condition. In addition, the appeal of becoming an Owner may
decrease if residents of the western United States and British Columbia do not
continue to view the locations of WorldMark's Resorts (which are primarily
located in these areas) as attractive vacation destinations.
GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN TIMESHARE INDUSTRY
Any downturn in economic conditions or significant price increases or
adverse events related to the travel and tourism industry, such as the cost and
availability of fuel, could depress discretionary consumer spending and have a
material adverse effect on the Company's business, results of operations and
financial condition. Any such economic conditions, including recession, may also
adversely affect the future availability of attractive financing rates for the
Company or its customers and may materially impact the Company's business.
Furthermore, adverse changes in general economic conditions may adversely affect
the collectibility of the Notes Receivable. Because the Company's operations are
conducted solely within the timeshare industry, any adverse changes affecting
the timeshare industry could have a material adverse effect on the Company's
business, results of operations and financial condition.
RISKS ASSOCIATED WITH CUSTOMER FINANCING
The Company obtains a security interest in the purchased Vacation Credits
and Fractional Interests and it does not verify a prospective Owner's credit
history for Vacation Credit sales. At December 31, 1999, an aggregate of $389.9
million of Notes Receivable were outstanding, of which approximately $100.9
million had been retained by the Company. The remaining balance of approximately
$289.0 million of Notes Receivable had been sold by the Company prior to that
date. The Company retains limited recourse liability for Notes
10
Receivable sold. This recourse is limited to the retained and residual interest
in Notes Receivable sold. As of December 31, 1999 and 1998, total retained
interest in Notes Receivable sold of $36,782 and $37,063, respectively, was
included in Notes Receivable in the accompanying consolidated balance sheets
relating to Notes Receivable sold of $288,950 and $200,840, respectively.
Although it is not required to do so, the Company's historical practice has been
to repurchase defaulted sold Notes Receivable up to certain limits, generally
10% to 17% of the face amount of the original balance of Notes Receivable sold.
Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At December 31, 1999, approximately $7.5 million,
or 1.91% of the Company's total receivables portfolio of $389.9 million,
including Notes Receivable previously sold by the Company, were past due 60 days
or more. The Notes Receivable are secured by a security interest in the related
Vacation Credits or Fractional Interests. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records an expense for any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits or Fractional Interests to inventory available for sale. However, the
associated marketing costs and sales commissions are not recovered by the
Company and these expenses must be incurred again to resell the Vacation Credits
or Fractional Interests.
The Company maintains an allowance for doubtful accounts in respect of the
Notes Receivable owned by the Company and an allowance for recourse liability
for the Company's limited recourse in Notes Receivable sold. These allowances
are estimates and if the amount of the Notes Receivable that is ultimately
uncollectible materially exceeds the related allowances, the Company's business,
results of operations and financial condition could be materially adversely
affected. See "Business -- Customer Financing."
INTEREST RATE RISK
The Company generally provides financing for a significant portion of the
aggregate purchase price of Vacation Credits and Fractional interests sold at a
fixed interest rate. In order to provide liquidity, the Company through the
Finance Subsidiaries, sells or securitizes its Notes Receivable. Although a
significant portion of the existing financing of the Notes Receivable through
the Finance Subsidiaries is at a fixed rate, if interest rates were to increase
significantly, the Company's future cost of funds would also likely increase
significantly. The Company has the ability to respond to rising interest rates
by increasing the interest rate offered to finance Vacation Credit and
Fractional Interest purchases. However, such an increase could have a material
adverse effect on sales or on the percentage of Owners who finance their
purchases through the Company, which could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business -- Customer Financing" and "Liquidity and Capital Resources -- Finance
Subsidiaries."
The Company may be exposed to credit losses in the event of nonperformance
by the counterparties to its interest rate caps and forward swap agreements used
to hedge interest rate risk in securitization transactions. The Company does not
obtain collateral to support financial instruments but monitors the credit
standing of the counterparties.
FOREIGN EXCHANGE RISK
The Company is subject to foreign currency exchange rate risk when
developing resort properties denominated in a foreign currency and future sales
operations in the South Pacific. While the Company intends to mitigate its
foreign exchange risk through swap agreements and borrowings denominated in
foreign currencies, no assurance can be given that these strategies will be
successful and that changes in foreign currency exchange rates could have a
material adverse effect on the Company's business, results of operations and
financial condition
The Company may be exposed to losses in the event of nonperformance by the
counterparties to its forward swap agreements used to hedge foreign exchange
risks. The Company does not obtain collateral to support financial instruments
but monitors the credit standing of the counterparties.
11
RISKS ASSOCIATED WITH OVERSEAS DEVELOPMENT
The Company is subject to risks arising from developing resort properties
and sales and marketing activities in the South Pacific. The Company is in the
process of registering its product under Australian regulations. Unlike the
United States, Australian law requires a vacation ownership interest to be sold
as a security. No assurance can be given that the Company will be successful in
its efforts to register its product under Australian law.
The Company's Vacation Credit system is not widely known in the South
Pacific. No assurance can be given that consumers in that market will find the
benefits of the Company's Vacation Credit program or the resort locations
desirable.
Many, if not all of the risks described herein, are potential risk factors
for development activities in the South Pacific.
COMPETITION
The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Major companies
that now operate or are developing or planning to develop vacation interval
resorts include Marriott International, Inc., The Walt Disney Company, Hilton
Hotels Corporation and Starwood Hotels and Resorts, Inc. In addition, other
companies in the timeshare industry, such as Sunterra Corp., Westgate Resorts,
Fairfield Communities, Inc. and Silverleaf Resorts, Inc., currently compete or
may in the future compete with the Company.
Resales of Vacation Credits by Owners may compete with sales of Vacation
Credits by the Company and may inhibit the Company's ability to increase the
market price of Vacation Credits it sells.
REGULATION OF MARKETING AND SALES OF VACATION CREDITS; OTHER LAWS
The Company's marketing and sales of Vacation Credits and certain of its
other operations are subject to extensive regulation by the states and foreign
jurisdictions in which the WorldMark Resorts are located and in which Vacation
Credits are marketed and sold and also by the federal government.
State and Provincial Regulations. Most U.S. states and Canadian provinces
have adopted specific laws and regulations regarding the sale of vacation
interval ownership programs. Alaska, Arizona, California, Hawaii, Idaho, Oregon,
Utah, Washington and British Columbia require the company to register WorldMark
Resorts, the Company's vacation program and the number of Vacation Credits
available for sale in such state or province with a designated state or
provincial authority. The Company must amend its registration if it desires to
increase the number of Vacation Credits registered for sale in that state or
province. Either the Company or the state or provincial authority assembles a
detailed offering statement describing the Company and all material aspects of
the project and sale of Vacation Credits. The company is required to deliver the
offering statement to all new purchasers of Vacation Credits, together with
certain additional information concerning the terms of the purchase. Hawaii
imposes particularly stringent and broad regulation requirements for the sale of
interests in interval ownership programs that have resort units located in
Hawaii. The Company has incurred substantial expenditures over an extended
period of time in the registration process in Hawaii and still has not completed
this process. Hawaii has allowed the use of WorldMark units in Hawaii, provided
that the company continues in good faith to pursue registration in Hawaii. Laws
in each state where the Company sells Vacation Credits grant the purchaser from
three to fourteen calendar days following the later of the date the contract was
signed or the date the purchaser received the last of the documents required to
be provided by the Company to rescind the contract. Most states have other laws
which regulate the Company's activities, such as real estate licensure laws,
laws relating to the use of public accommodations, and facilities by disabled
persons, sellers of travel licensure laws, anti-fraud laws, advertising laws and
labor laws.
Federal Regulations. The Federal Trade Commission has taken an active
regulatory role in the interval ownership industry through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or
12
competition in interstate commerce. Other federal legislation to which the
Company is or may be subject includes the Truth-In-Lending Act and Regulation Z,
the Equal Opportunity Credit Act and Regulation B, the Interstate Land Sales
Full Disclosure Act, the Real Estate Standards Practices Act, the Telephone
Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse
Prevention Act, the Civil Rights Act of 1964 and 1968, the Fair Housing Act and
the Americans with Disabilities Act.
Although the Company believes that it is in material compliance with all
federal, state, local and foreign laws and regulations to which it is currently
subject, there can be no assurance that it is in fact, in compliance. Any
failure by the Company to comply with applicable laws or regulations could have
a material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company will continue to incur significant
costs to remain in compliance with applicable laws and regulations, and such
costs could increase substantially in the future.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state, local and foreign laws, ordinances and
regulations, the owner or operator of real property generally is liable for the
costs of removal or remediation of certain hazardous or toxic substances located
on or in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Other federal and state laws
require the removal or encapsulation of asbestos-containing material when such
material is in poor condition or in the event of construction, demolition,
remodeling or renovation. Other statutes may require the removal of underground
storage tanks. Noncompliance with these and other environmental, health or
safety requirements may result in the need to cease or alter operations at the
property. Although the Company conducts an environmental assessment with respect
to the properties it acquires for WorldMark, the Company has not received a
Phase I environmental report for every WorldMark Resort. There can be no
assurance that any environmental assessments undertaken by the Company with
respect to the WorldMark Resorts have revealed all potential environmental
liabilities, or that an environmental condition does not otherwise exist as to
any one or more of the WorldMark Resorts that could have a material adverse
effect on the Company's business, results of operations and financial condition.
NATURAL DISASTERS; UNINSURED LOSS
WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from war
or military action, nuclear hazard or pollution, are generally excluded from
WorldMark's insurance coverage. Should an uninsured loss or loss in excess of
insured limits occur, WorldMark has the option to either (i) remove such units
from the Vacation Credit system, which would result in a proportional dilution
of vacation time available for the Vacation Credits which have been sold, or
(ii) pay the related costs of replacement. Although WorldMark's board of
directors may impose a limited amount of special assessments to pay for capital
improvements or major repairs, there can be no assurance that WorldMark would be
able to increase assessments to provide sufficient funds to pay for all possible
capital improvements and major repairs of the units at the WorldMark Resorts.
In such event, the Company may need to advance funds to WorldMark in order
to maintain the quality of the WorldMark Resorts or WorldMark may be required to
defer certain improvements or repairs. In addition, the Company may advance
funds to WorldMark if WorldMark does not have sufficient funds to pay its
obligations in a timely manner. See "Business -- Insurance; Legal Proceedings."
EFFECTIVE VOTING CONTROL BY MAJORITY SHAREHOLDER
JELD-WEN owns approximately 80% of the outstanding shares of the Company's
common stock. This concentration of ownership gives JELD-WEN control of the
election of directors and the management and affairs of the Company and
sufficient voting power to determine the outcome of all matters submitted to the
13
shareholders for approval, including mergers, consolidations and the sale of
all, or substantially all, of the Company's assets.
ITEM 2. PROPERTIES
The Company owns its corporate headquarters in Redmond, Washington. In the
ordinary course of business, the Company purchases property for development and
deeds said property to WorldMark upon completion of the project. See
"Business -- WorldMark".
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material legal proceedings pending against
it. The Company may be subject to claims and legal proceedings from time to time
in the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
There were no matters submitted to a vote of the Company's equity holders
during the fourth quarter of 1999.
14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock is quoted on the Nasdaq National Market under
the symbol "TWRI". The following table sets forth for the periods indicated, the
high and low sales price for Common Stock, as quoted on the Nasdaq National
Market:
[Download Table]
HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 1999:
First quarter............................................... 19 1/4 11 3/4
Second quarter.............................................. 24 1/4 15
Third quarter............................................... 28 1/2 19 7/8
Fourth quarter.............................................. 26 1/4 17 1/2
YEAR ENDED DECEMBER 31, 1998:
First quarter............................................... 23 3/8 18
Second quarter.............................................. 19 3/4 12 1/8
Third quarter............................................... 14 7 3/4
Fourth quarter.............................................. 15 3/8 4 7/8
On February 28, 2000, there were approximately 47 holders of record of the
Company's common stock and approximately 1,539 beneficial shareholders.
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its Common Stock. The
Company currently intends to retain future earnings to finance its operations
and fund the growth of the business. Any payment of future dividends will be at
the discretion of the Board of Directors of the Company and will depend on,
among other things, the Company's earnings, financial condition, contractual
restrictions in respect of the payment of dividends and other factors the Board
of Directors deems relevant.
15
ITEM 6. SELECTED FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" are derived from the audited financial
statements of Trendwest Resorts, Inc. and subsidiaries. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the combined and
consolidated financial statements for the Company and the notes thereto which
are contained elsewhere herein. The information presented below under the
captions "Operating Data" and "Selected Quarterly Financial Data" is unaudited.
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
STATEMENT OF OPERATIONS DATA:
Revenues:
Vacation Credit and Fractional
Interest sales, net........ $ 234,665 $ 170,817 $ 128,835 $ 100,040 $ 77,783
Finance income................ 15,243 13,790 11,989 7,143 5,368
Gains on sales of notes
receivable................. 16,265 10,959 6,582 5,673 3,222
Resort management services.... 3,710 2,328 2,032 1,501 1,579
Other......................... 4,593 3,063 2,149 2,552 1,226
----------- ----------- ----------- ----------- -----------
Total revenues........ 274,476 200,957 151,587 116,909 89,178
----------- ----------- ----------- ----------- -----------
Costs and operating expenses:
Vacation Credit and Fractional
Interest cost of sales..... 68,611 48,059 34,569 27,400 20,484
Resort management services.... 1,656 1,399 1,108 859 1,283
Sales and marketing........... 104,952 83,347 59,448 47,810 36,374
General and administrative.... 25,234 17,180 13,449 10,904 8,391
Provision for doubtful
accounts and recourse
liability.................. 16,450 11,865 9,077 7,467 6,522
Interest........................ 442 353 1,739 2,445 2,380
----------- ----------- ----------- ----------- -----------
Total costs and
operating
expenses............ 217,345 162,203 119,390 96,885 75,434
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 57,131 38,754 32,197 20,024 13,744
Income tax expense............ 22,258 14,723 11,588 7,348 4,979
----------- ----------- ----------- ----------- -----------
Net income...................... $ 34,873 $ 24,031 $ 20,609 $ 12,676 $ 8,765
=========== =========== =========== =========== ===========
Net income per share of common
stock:
Basic......................... $ 2.04 $ 1.38 $ 1.32 $ 0.88 $ 0.61
Diluted....................... $ 2.03 $ 1.38 $ 1.32 $ 0.88 $ 0.61
Shares used in computing net
income per share of common
stock(1):
Basic......................... 17,129,900 17,412,818 15,596,419 14,417,116 14,387,169
Diluted....................... 17,176,954 17,416,691 15,596,419 14,417,116 14,387,169
OPERATING DATA:
Number of WorldMark Resorts (at
end of period)................ 31 24 22 19 16
Number of units (at end of
period)....................... 1,635 1,272 928 746 499
Number of Vacation Credits sold
(in thousands)................ 165,829 131,058 99,911 82,270 65,308
Average price per Vacation
Credit sold................... $ 1.34 $ 1.28 $ 1.27 $ 1.24 $ 1.21
Average cost per Vacation Credit
sold.......................... $ 0.37 $ 0.37 $ 0.35 $ 0.33 $ 0.31
Number of Owners (at end of
period)....................... 87,432 67,982 51,778 38,997 27,965
Average purchase price for new
Owners........................ $ 8,855 $ 8,477 $ 8,507 $ 8,432 $ 8,325
16
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
BALANCE SHEET DATA:
Cash, including restricted
cash.......................... $ 4,747 $ 2,360 $ 1,289 $ 802 $ 516
Total assets.................... 209,963 198,498 151,750 89,330 71,289
Indebtedness(2)................. 3,900 35,688 1,947 22,371 24,826
Shareholders' equity............ 173,715 141,262 122,125 49,744 36,753
---------------
(1) Includes the 5,193,693 shares issued to JELD-WEN in connection with the
Consolidation Transactions for all periods presented.
(2) Indebtedness is comprised of notes payable to JELD-WEN and others.
SELECTED QUARTERLY FINANCIAL DATA
[Enlarge/Download Table]
1999 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
Total revenue................................. $59,905 $73,295 $71,994 $69,282
Total costs and operating expenses............ 46,408 57,850 57,422 55,665
Net income.................................... 8,144 9,510 8,864 8,355
Net income per common share:
Basic....................................... $ .47 $ .55 $ .52 $ .49
Diluted..................................... $ .47 $ .55 $ .52 $ .49
[Enlarge/Download Table]
1998 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
Total revenue................................. $42,828 $47,993 $53,193 $56,944
Total costs and operating expenses............ 33,645 39,715 43,801 45,043
Net income.................................... 5,864 5,164 5,884 7,119
Net income per Common Share Basic............. $ .33 $ .29 $ .34 $ .41
Diluted..................................... $ .33 $ .29 $ .34 $ .41
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements below and other statements herein contain forward looking
information which include future financing transactions, acquisition of
properties, and the Company's future prospects and other forecasts and
statements of expectations. Actual results may differ materially from those
expressed in any forward-looking statement made by the Company, due among other
things, to the Company's ability to develop or acquire additional resort
properties, find acceptable debt or equity capital to fund such development, as
well as other risk factors as outlined in the "Risk Factors" section of this
Form 10-K.
OVERVIEW
Trendwest markets, sells and finances timeshare ownership interests in the
form of Vacation Credits and Fractional Interests and acquires, develops and
manages the WorldMark Resorts. The Company derives revenue primarily from the
sale of Vacation Credits and Fractional Interests, from the financing of 