Fairfield Communities Reports Record Revenue; Diluted EPS Increases 25% to $0.35; Net VOI Sales Increase 24%; Announces Innovative Marketing Program

Business Wire, July 26, 1999

ORLANDO, Fla.--(BUSINESS WIRE)--July 26, 1999--

Fairfield Communities, Inc. (NYSE:FFD) today 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.