UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 2014
Interval Leisure Group, Inc.
(Exact name of registrant as specified in charter)
Delaware |
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001-34062 |
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26-2590997 |
(State or other jurisdiction |
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(Commission |
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(IRS Employer |
of incorporation) |
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File Number) |
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Identification No.) |
6262 Sunset Drive, Miami, FL |
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33143 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (305) 666-1861
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. Results of Operations and Financial Condition.
Financial Results for the Quarter and Year Ended December 31, 2013
Interval Leisure Group, Inc. (ILG) today issued a press release reporting financial results for the quarter and year ended December 31, 2013.
A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. Exhibit 99.1 to this Report is being furnished and is not filed with the Securities and Exchange Commission and is not incorporated by reference into any registration statement under the Securities Act of 1933.
ITEM 8.01. Other Events.
On February 27, 2014, ILG announced that its Board of Directors declared a quarterly dividend of $0.11 per common share. The dividend is payable on March 27, 2014 to shareholders of record as of March 13, 2014. The actual declaration of any future cash dividends, and the establishment of record and payment dates, will be subject to final determination by the Board of Directors each quarter and will depend upon our result of operations, cash requirements and surplus, financial condition, legal requirements, capital requirements related to business initiatives, investments and acquisitions and other factors the Board of Directors may deem relevant.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits to this Form 8-K
Exhibit No. |
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Description |
99.1 |
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Press release of ILG, dated February 27, 2014, reporting financial results for the quarter and year ended December 31, 2013 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Interval Leisure Group, Inc. | |
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By: |
/s/ Victoria J. Kincke |
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Name: |
Victoria J. Kincke |
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Title: |
Senior Vice President, General Counsel |
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and Secretary |
Date: February 27, 2014
Exhibit 99.1
Interval Leisure Group Reports Fourth Quarter and Full Year 2013 Results
MIAMI(BUSINESS WIRE)February 27, 2014 Interval Leisure Group (Nasdaq: IILG) (ILG) today announced results for the three months and full year ended December 31, 2013.
FOURTH QUARTER AND FULL YEAR 2013 HIGHLIGHTS
· ILG consolidated fourth quarter revenue increased by 10.3% from the same period last year, while full year revenue increased by 5.9%.
· The Company generated fourth quarter diluted earnings per share of $0.32, up 18.5% from the prior year period. Full year diluted earnings per share were $1.40.
· Consolidated adjusted EBITDA for 2013 rose by 5.8% year-over-year, driven by a 34.2% full year increase in Management and Rental segment adjusted EBITDA.
· During 2013, ILG paid $18.9 million in shareholder dividends.
· Free cash flow was $95.2 million for 2013, an increase of $29.8 million from 2012.
ILG drove growth in revenue and EPS in 2013 as we began to see the benefits of our strategy to broaden the Companys role in the global non-traditional hospitality market. Additionally, adjusted EBITDA increased by 5.8% for the full year and we generated a 45.5% increase in free cash flow while making significant investments to further our long-term goals, said Craig M. Nash, Chairman, President and Chief Executive Officer of Interval Leisure Group. The continued diversification of our business is being executed on and creating meaningful shareholder value.
Financial Summary & Operating Metrics (USD in millions except per share amounts)
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Three Months |
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Quarter |
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Year Ended |
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Year |
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METRICS |
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2013 |
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2012 |
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Change |
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2013 |
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2012 |
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Change |
| ||||
Revenue |
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122.2 |
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110.7 |
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10.3 |
% |
501.2 |
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473.3 |
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5.9 |
% | ||||
Membership and Exchange revenue |
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80.8 |
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81.0 |
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(0.3 |
)% |
365.0 |
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357.7 |
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2.0 |
% | ||||
Management and Rental revenue |
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41.4 |
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29.7 |
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39.3 |
% |
136.2 |
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115.6 |
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17.8 |
% | ||||
Gross profit |
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74.5 |
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70.3 |
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6.0 |
% |
321.7 |
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305.1 |
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5.4 |
% | ||||
Net income attributable to common stockholders |
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18.5 |
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15.3 |
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21.4 |
% |
81.2 |
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40.7 |
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99.5 |
% | ||||
Non-GAAP net income* |
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18.5 |
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15.3 |
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21.4 |
% |
79.1 |
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52.0 |
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52.2 |
% | ||||
Diluted EPS |
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$ |
0.32 |
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$ |
0.27 |
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18.5 |
% |
$ |
1.40 |
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$ |
0.71 |
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97.2 |
% |
Non-GAAP diluted EPS* |
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$ |
0.32 |
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$ |
0.27 |
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18.5 |
% |
$ |
1.37 |
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$ |
0.91 |
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50.5 |
% |
Adjusted EBITDA* |
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34.8 |
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34.1 |
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2.1 |
% |
166.2 |
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157.1 |
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5.8 |
% |
BALANCE SHEET DATA |
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December 31, 2013 |
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December 31, 2012 |
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Cash and cash equivalents |
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48.5 |
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101.2 |
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Debt |
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253.0 |
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260.0 |
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Year Ended |
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Year |
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CASH FLOW DATA |
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2013 |
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2012 |
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Change |
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Net cash provided by operating activities |
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109.9 |
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80.4 |
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36.6 |
% |
Free cash flow* |
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95.2 |
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65.4 |
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45.5 |
% |
* Non-GAAP net income, Non-GAAP diluted EPS, Adjusted EBITDA, and Free cash flow are non-GAAP measures as defined by the Securities and Exchange Commission (the SEC). Please see Presentation of Financial Information, Glossary of Terms and Reconciliations of Non-GAAP Measures below for an explanation of non-GAAP measures used throughout this release.
DISCUSSION OF RESULTS
Fourth Quarter 2013 Consolidated Operating Results
Consolidated revenue for the quarter ended December 31, 2013 was $122.2 million, an increase of 10.3% compared to the fourth quarter of 2012.
Net income attributable to common stockholders for the three months ended December 31, 2013 was $18.5 million, an increase of $3.3 million from $15.3 million for the same period of 2012. Net income growth for the 2013 period reflects a one-time income tax benefit of $3.5 million in the fourth quarter of 2013 related to a favorable regulatory ruling. Additionally, this ruling reduced current year state income taxes and will continue to positively impact our effective tax rate going forward. Diluted earnings per share (EPS) were $0.32 compared to diluted EPS of $0.27 for the same period of 2012.
Adjusted EBITDA (defined below) for the quarter ended December 31, 2013 of $34.8 million includes the results of our VRI Europe and Aqua Resorts businesses acquired in the fourth quarter and compares to $34.1 million for the same period of 2012.
Full Year 2013 Consolidated Operating Results
Consolidated revenue for the year ended December 31, 2013 was $501.2 million, an increase of 5.9% from $473.3 million for 2012. The increase was largely driven by incremental revenue
contribution from our Management and Rental segment, primarily from the inclusion of acquired companies.
Net income attributable to common stockholders for the year ended December 31, 2013 was $81.2 million or $1.40 of diluted EPS, compared to $40.7 million or $0.71 for the same period of 2012. Full year 2013 non-GAAP net income (defined below) of $79.1 million increased $27.1 million, or 52.2%, over non-GAAP net income for the comparable 2012 period which excludes the impact of an $18.5 million non-cash, pre-tax loss associated with the early extinguishment of debt. This year-over-year increase was primarily attributable to a $19.5 million reduction in interest expense and $14.9 million of lower amortization of intangibles expense.
Adjusted EBITDA was $166.2 million for the year ended December 31, 2013, compared to $157.1 million in 2012.
Business Segment Results
Membership and Exchange
Membership and Exchange segment revenue for the three months and year ended December 31, 2013, was $80.8 million and $365.0 million, respectively. For the full year 2013, Interval Network membership fee and transaction revenue were $135.2 million and $198.9 million, respectively, representing increases of 3.4% and 0.3%, respectively, over the prior year. Average revenue per member in 2013 increased 2.6% to $187.13, year-over-year, while fourth quarter average revenue per member was up 0.8% from the prior year to $41.65.
At December 31, 2013, the Membership and Exchange segment had approximately two million members enrolled in its various membership programs. The Interval Network had approximately 1.82 million active members, consistent with the prior year.
Membership and Exchange adjusted EBITDA was $29.7 million and $146.9 million in the fourth quarter and full year 2013, respectively, representing a decrease of 3.5% and an increase of 3.0% from the segments adjusted EBITDA of $30.8 million and $142.7 million in the fourth quarter and full year 2012, respectively. The improvement in full year segment adjusted EBITDA is primarily driven by revenue growth largely attributable to the positive contributions from our Platinum and Club Interval products and higher transaction revenue and other membership programs outside of the Interval Network. Additionally, segment adjusted EBITDA in the period benefitted from lower compensation and employee-related costs within general and administrative expense.
Throughout 2013, Interval affiliated 106 vacation ownership resorts in domestic and international markets. In 2013, approximately 80% of all new affiliations were located in non-US locations. Membership mix as of December 31, 2013 included 60% traditional and 40% corporate members, compared to 62% and 38%, respectively, as of December 31, 2012.
Management and Rental
Management and Rental segment revenue for the three months and year ended December 31, 2013, was $41.4 million and $136.2 million, respectively, including $23.7 million and $71.6 million of management fee and rental revenue (defined below).
Year-over-year, management fee and rental revenue grew by 72.2% for the fourth quarter and 30.2% for the year ended December 31, 2013. The improvement was primarily driven by the incremental revenue contribution from our acquired businesses. For the year ended December 31, 2013, revenue per available room (RevPAR) (defined below) was $138.90, an increase of 6.6% over RevPAR of $130.28 in 2012. The increase in full year RevPAR was driven primarily by a higher average daily rate. For the quarter ended December 31, 2013, RevPAR was $119.48 compared to RevPAR of $125.58 for the same period in 2012. The drop in RevPAR in the quarter reflects a decrease in occupancy rate on a year-over-year basis and the inclusion of Aqua. Excluding Aqua, RevPAR for the fourth quarter and full year 2013 was $122.10 and $140.55, respectively.
Management and Rental segment adjusted EBITDA was $5.1 million in the fourth quarter of 2013, an increase of 53.8% from the prior year period. Management and Rental segment adjusted EBITDA for the full year 2013 was $19.3 million, an increase of 34.2% from adjusted EBITDA of $14.4 million for the same period in 2012.
CAPITAL RESOURCES AND LIQUIDITY
As of December 31, 2013, ILGs cash and cash equivalents totaled $48.5 million, compared to $101.2 million as of December 31, 2012. As of December 31, 2013, the Companys total debt outstanding was $253 million, compared to $260 million as of December 31, 2012. ILG had $247 million available on its revolving credit facility as of December 31, 2013, which may be increased by an additional $200 million, subject to specified conditions.
For the year ended December 31, 2013, ILGs net cash provided by operating activities was $109.9 million and free cash flow was $95.2 million, an increase over the comparable prior year of $80.4 million and $65.4 million, respectively. The change was primarily due to lower interest paid of $26 million together with higher net cash receipts, partially offset by an increase of $17.1 million in income tax payments as a result of higher taxable income in the period. Lower interest paid in 2013 is primarily due to lower average balance outstanding and interest rate under our revolving credit facility compared to the term loan and senior notes which were extinguished during 2012.
Net cash used in investing activities of $134 million in 2013 primarily related to business acquisitions, net of cash acquired, of $127.3 million, as well as capital expenditures of $14.7 million primarily related to IT initiatives. These cash outflows were partially offset by the early repayment of a loan receivable totaling $9.9 million.
Net cash used in financing activities was $27.5 million for the year ended December 31, 2013. This compares to $131.8 million net cash used in financing activities for 2012 principally resulting from the refinancing of our indebtedness.
Dividend
For the full year 2013, ILG paid $18.9 million, or thirty-three cents per share in dividends, compared to $28.4 million in the prior year. The decline in annual dividends paid in 2013 reflects an accelerated dividend payment of $0.10 per share paid in the fourth quarter of 2012 that otherwise would have been paid in the first quarter of 2013.
In February 2014, our Board of Directors declared a $0.11 per share dividend payable March 27, 2014 to shareholders of record on March 13, 2014.
PRESENTATION OF FINANCIAL INFORMATION
ILG management believes that the presentation of non-generally accepted accounting principles (non-GAAP) financial measures, including, among others, EBITDA, adjusted EBITDA, non-GAAP net income, non-GAAP basic and diluted EPS and free cash flow, serves to enhance the understanding of ILGs performance. These non-GAAP financial measures should be considered in addition to and not as substitutes for, or superior to, measures of financial performance prepared in accordance with generally accepted accounting principles (GAAP). In addition, adjusted EBITDA (with certain additional add-backs) is used to calculate compliance with certain financial covenants in ILGs credit agreement. Management believes that these non-GAAP measures improve the transparency of our disclosures, provide meaningful presentations of our results from our business operations excluding the impact of certain items not related to our core business operations and improve the period to period comparability of results from business operations. These measures may also be useful in comparing our results to those of other companies; however, our calculations may differ from the calculations of these measures used by other companies. More information about the non-GAAP financial measures, including reconciliations of GAAP results to the non-GAAP measures, is available in the financial tables that accompany this press release.
CONFERENCE CALL
ILG will host a conference call today at 4:30 p.m. Eastern Daylight Time to discuss its results for the fourth quarter and full year 2013, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (866) 318-8617 (toll-free domestic) or (617) 399-5136 (international); participant pass code: 24620032. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for fourteen days via telephone starting approximately two hours after the call ends. The replay can be accessed at (888) 286-8010 (toll-free domestic) or (617) 801-6888 (international); pass code: 58296288. The webcast will be archived on Interval Leisure Groups website for 90 days after the call. A transcript of the call will also be available on the website following the call.
ABOUT INTERVAL LEISURE GROUP
Interval Leisure Group (ILG) is a leading global provider of membership and leisure services to the vacation industry. Headquartered in Miami, Florida, ILG has approximately 5,000 employees worldwide. The companys Membership and Exchange segment offers leisure and travel-related products and services to about 2 million member families who are enrolled in various programs. Interval International, the segments principal business, has been a leader in vacation ownership exchange since 1976. With offices in 16 countries, it operates the Interval network of nearly 2,900 resorts in over 80 nations. ILG delivers additional opportunities for vacation ownership exchange through its Trading Places International (TPI) network. ILGs Management and Rental segment includes Aston Hotels & Resorts, Aqua Hospitality, VRI Europe (VRIE), Vacation Resorts International (VRI), and TPI. These businesses provide hotel, condominium resort, timeshare resort, and homeowners association management, as well as rental services, to travelers and owners at more than 250 vacation properties, resorts, and club locations throughout North America and Europe. More information about the company is available at www.iilg.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to: our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward-looking statements are based on managements current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in the forward-looking statements included herein for a variety of reasons, including, among others: adverse trends in economic conditions generally or in the vacation ownership, vacation rental and travel industries; adverse changes to, or interruptions in, relationships with third parties; lack of available financing for, or insolvency of developers; consolidation of developers; decreased demand from prospective purchasers of vacation interests; travel related health concerns; changes in our senior management; regulatory changes; our ability to compete effectively and successfully add new products and services; our ability to successfully manage and integrate acquisitions; impairment of assets; the restrictive covenants in our revolving credit facility; adverse events or trends in key vacation destinations; business interruptions in connection with the rearchitecture of our technology systems; ability of managed homeowners associations to collect sufficient maintenance fees; third parties not repaying advances or extensions of credit; and our ability to expand successfully in international markets and manage risks specific to international operations. Certain of these and other risks and uncertainties are discussed in our filings with the SEC. Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this release may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this press release. Except as required by applicable law, ILG does not undertake to update these forward-looking statements.
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
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Three Months Ended |
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Year Ended |
| ||||||||
|
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December 31, |
|
December 31, |
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|
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2013 |
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2012 |
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2013 |
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2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
|
$ |
122,195 |
|
$ |
110,737 |
|
$ |
501,215 |
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$ |
473,339 |
|
Cost of sales |
|
47,722 |
|
40,466 |
|
179,510 |
|
168,259 |
| ||||
Gross profit |
|
74,473 |
|
70,271 |
|
321,705 |
|
305,080 |
| ||||
Selling and marketing expense |
|
12,764 |
|
12,236 |
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53,722 |
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53,559 |
| ||||
General and administrative expense |
|
30,655 |
|
26,238 |
|
112,574 |
|
105,270 |
| ||||
Amortization expense of intangibles |
|
2,275 |
|
2,040 |
|
8,133 |
|
23,041 |
| ||||
Depreciation expense |
|
3,672 |
|
3,590 |
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14,531 |
|
13,429 |
| ||||
Operating income |
|
25,107 |
|
26,167 |
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132,745 |
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109,781 |
| ||||
Other income (expense): |
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|
|
|
|
|
|
|
| ||||
Interest income |
|
79 |
|
254 |
|
362 |
|
1,792 |
| ||||
Interest expense |
|
(1,613 |
) |
(1,755 |
) |
(6,172 |
) |
(25,629 |
) | ||||
Other income (expense), net |
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(635 |
) |
(48 |
) |
259 |
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(2,456 |
) | ||||
Loss on extinguishment of debt |
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|
|
|
|
|
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(18,527 |
) | ||||
Total other expense, net |
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(2,169 |
) |
(1,549 |
) |
(5,551 |
) |
(44,820 |
) | ||||
Earnings before income taxes and noncontrolling interest |
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22,938 |
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24,618 |
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127,194 |
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64,961 |
| ||||
Income tax provision |
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(3,841 |
) |
(9,341 |
) |
(45,412 |
) |
(24,252 |
) | ||||
Net income |
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19,097 |
|
15,277 |
|
81,782 |
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40,709 |
| ||||
Net income attributable to noncontrolling interest |
|
(555 |
) |
(1 |
) |
(565 |
) |
(7 |
) | ||||
Net income attributable to common stockholders |
|
$ |
18,542 |
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$ |
15,276 |
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$ |
81,217 |
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$ |
40,702 |
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|
|
|
|
|
|
|
|
|
| ||||
Earnings per share attributable to common stockholders: |
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|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.32 |
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$ |
0.27 |
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$ |
1.42 |
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$ |
0.72 |
|
Diluted |
|
$ |
0.32 |
|
$ |
0.27 |
|
$ |
1.40 |
|
$ |
0.71 |
|
Weighted average number of shares of common stock outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
57,377 |
|
56,854 |
|
57,243 |
|
56,549 |
| ||||
Diluted |
|
58,113 |
|
57,632 |
|
57,832 |
|
57,248 |
| ||||
Dividends declared per share of common stock |
|
$ |
0.11 |
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$ |
0.20 |
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$ |
0.33 |
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$ |
0.50 |
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|
|
|
|
|
|
|
| ||||
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|
|
|
|
|
|
|
|
| ||||
Non-GAAP net income(1) |
|
$ |
18,542 |
|
$ |
15,276 |
|
$ |
79,076 |
|
$ |
51,959 |
|
Non-GAAP earnings per share(1): |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.32 |
|
$ |
0.27 |
|
$ |
1.38 |
|
$ |
0.92 |
|
Diluted |
|
$ |
0.32 |
|
$ |
0.27 |
|
$ |
1.37 |
|
$ |
0.91 |
|
(1) Non-GAAP net income and Non-GAAP earnings per share are non-GAAP measures as defined by the SEC. Please see Reconciliations of Non-GAAP Measures for a reconciliation to the comparable GAAP measure.
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
As of December 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
48,462 |
|
$ |
101,162 |
|
Deferred membership costs |
|
9,828 |
|
12,349 |
| ||
Prepaid income taxes |
|
11,211 |
|
12,973 |
| ||
Other current assets |
|
89,061 |
|
83,011 |
| ||
Total current assets |
|
158,562 |
|
209,495 |
| ||
Goodwill and intangible assets, net |
|
766,703 |
|
604,452 |
| ||
Deferred membership costs |
|
10,741 |
|
11,058 |
| ||
Other non-current assets |
|
88,613 |
|
81,915 |
| ||
TOTAL ASSETS |
|
$ |
1,024,619 |
|
$ |
906,920 |
|
|
|
|
|
|
| ||
LIABILITIES AND EQUITY LIABILITIES: |
|
|
|
|
| ||
Accounts payable, trade |
|
$ |
13,793 |
|
$ |
11,086 |
|
Deferred revenue |
|
92,503 |
|
93,367 |
| ||
Other current liabilities |
|
83,262 |
|
70,950 |
| ||
Total current liabilities |
|
189,558 |
|
175,403 |
| ||
Long-term debt |
|
253,000 |
|
260,000 |
| ||
Deferred revenue |
|
100,494 |
|
111,273 |
| ||
Other long-term liabilities |
|
104,608 |
|
87,752 |
| ||
TOTAL LIABILITIES |
|
647,660 |
|
634,428 |
| ||
Redeemable noncontrolling interest |
|
426 |
|
426 |
| ||
Total ILG stockholders equity |
|
343,825 |
|
272,066 |
| ||
Noncontrolling interest |
|
32,708 |
|
|
| ||
TOTAL EQUITY |
|
376,533 |
|
272,066 |
| ||
TOTAL LIABILITIES AND EQUITY |
|
$ |
1,024,619 |
|
$ |
906,920 |
|
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
Year Ended December 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
81,782 |
|
$ |
40,709 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Amortization expense of intangibles |
|
8,133 |
|
23,041 |
| ||
Amortization of debt issuance costs |
|
783 |
|
1,376 |
| ||
Depreciation expense |
|
14,531 |
|
13,429 |
| ||
Accretion of original issue discount |
|
|
|
1,840 |
| ||
Non-cash compensation expense |
|
10,428 |
|
10,931 |
| ||
Non-cash interest expense |
|
342 |
|
433 |
| ||
Non-cash interest income |
|
|
|
(850 |
) | ||
Deferred income taxes |
|
(1,569 |
) |
6,507 |
| ||
Excess tax benefits from stock-based awards |
|
(2,869 |
) |
(3,017 |
) | ||
Loss (gain) on disposal of property and equipment |
|
191 |
|
(256 |
) | ||
Loss on extinguishment of debt |
|
|
|
18,527 |
| ||
Change in fair value of contingent consideration |
|
485 |
|
(544 |
) | ||
Changes in operating assets and liabilities |
|
(2,373 |
) |
(31,688 |
) | ||
Net cash provided by operating activities |
|
109,864 |
|
80,438 |
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Acquisitions, net of cash acquired |
|
(127,266 |
) |
(39,963 |
) | ||
Acquisition of assets |
|
(1,952 |
) |
|
| ||
Capital expenditures |
|
(14,700 |
) |
(15,040 |
) | ||
Proceeds from disposal of property and equipment |
|
10 |
|
230 |
| ||
Investment in financing receivables |
|
|
|
(9,480 |
) | ||
Payments received on financing receivables |
|
9,876 |
|
16,989 |
| ||
Net cash used in investing activities |
|
(134,032 |
) |
(47,264 |
) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Principal payments on term loan |
|
|
|
(56,000 |
) | ||
Redemption of senior notes |
|
|
|
(300,000 |
) | ||
Payments on revolving credit facility |
|
(70,000 |
) |
(30,000 |
) | ||
Borrowings on revolving credit facility |
|
63,000 |
|
290,000 |
| ||
Payments of debt issuance costs |
|
|
|
(3,912 |
) | ||
Dividend payments |
|
(18,934 |
) |
(28,366 |
) | ||
Payments of contingent consideration |
|
|
|
(1,057 |
) | ||
Withholding taxes on vesting of restricted stock units |
|
(5,234 |
) |
(6,182 |
) | ||
Proceeds from the exercise of stock options |
|
835 |
|
659 |
| ||
Excess tax benefits from stock-based awards |
|
2,869 |
|
3,017 |
| ||
Net cash used in financing activities |
|
(27,464 |
) |
(131,841 |
) | ||
Effect of exchange rate changes on cash and cash equivalents |
|
(1,068 |
) |
4,312 |
| ||
Net decrease in cash and cash equivalents |
|
(52,700 |
) |
(94,355 |
) | ||
Cash and cash equivalents at beginning of period |
|
101,162 |
|
195,517 |
| ||
Cash and cash equivalents at end of period |
|
$ |
48,462 |
|
$ |
101,162 |
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
| ||
Non-cash financing activity: |
|
|
|
|
| ||
Issuance of noncontrolling interest in connection with an acquisition |
|
$ |
31,347 |
|
$ |
|
|
Cash paid during the period for: |
|
|
|
|
| ||
Interest, net of amounts capitalized |
|
$ |
5,358 |
|
$ |
31,363 |
|
Income taxes, net of refunds |
|
$ |
42,750 |
|
$ |
25,693 |
|
OPERATING STATISTICS
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
| ||||||||||||
|
|
2013 |
|
% Change |
|
2012 |
|
2013 |
|
% Change |
|
2012 |
| ||||
Membership and Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total active members at end of period (000s) |
|
1,815 |
|
(0.5 |
)% |
1,824 |
|
1,815 |
|
(0.5 |
)% |
1,824 |
| ||||
Average revenue per member |
|
$ |
41.65 |
|
0.8 |
% |
$ |
41.30 |
|
$ |
187.13 |
|
2.6 |
% |
$ |
182.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Management and Rental |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available room nights (000s) |
|
442 |
|
19.1 |
% |
371 |
|
1,537 |
|
2.7 |
% |
1,497 |
| ||||
RevPAR |
|
$ |
119.48 |
|
(4.9 |
)% |
$ |
125.58 |
|
$ |
138.90 |
|
6.6 |
% |
$ |
130.28 |
|
ADDITIONAL DATA
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
| ||||||||||||
|
|
2013 |
|
% Change |
|
2012 |
|
2013 |
|
% Change |
|
2012 |
| ||||
|
|
(Dollars in thousands) |
|
(Dollars in thousands) |
| ||||||||||||
Membership and Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Transaction revenue |
|
$ |
41,572 |
|
(0.1 |
)% |
$ |
41,612 |
|
$ |
198,933 |
|
0.3 |
% |
$ |
198,434 |
|
Membership fee revenue |
|
32,727 |
|
(1.2 |
)% |
33,133 |
|
135,198 |
|
3.4 |
% |
130,784 |
| ||||
Ancillary member revenue |
|
1,365 |
|
(4.8 |
)% |
1,434 |
|
6,852 |
|
(1.8 |
)% |
6,976 |
| ||||
Total member revenue |
|
75,664 |
|
(0.7 |
)% |
76,179 |
|
340,983 |
|
1.4 |
% |
336,194 |
| ||||
Other revenue |
|
5,116 |
|
6.0 |
% |
4,828 |
|
24,024 |
|
11.5 |
% |
21,538 |
| ||||
Total revenue |
|
$ |
80,780 |
|
(0.3 |
)% |
$ |
81,007 |
|
$ |
365,007 |
|
2.0 |
% |
$ |
357,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Management and Rental |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Management fee and rental revenue |
|
$ |
23,725 |
|
72.2 |
% |
$ |
13,781 |
|
$ |
71,550 |
|
30.2 |
% |
$ |
54,946 |
|
Pass-through revenue |
|
17,690 |
|
10.9 |
% |
15,949 |
|
64,658 |
|
6.6 |
% |
60,661 |
| ||||
Total revenue |
|
$ |
41,415 |
|
39.3 |
% |
$ |
29,730 |
|
$ |
136,208 |
|
17.8 |
% |
$ |
115,607 |
|
Management and Rental gross margin |
|
30.8 |
% |
4.7 |
% |
29.4 |
% |
32.6 |
% |
7.1 |
% |
30.5 |
% | ||||
Management and Rental gross margin without Pass-through Revenue |
|
53.8 |
% |
(15.3 |
)% |
63.5 |
% |
62.1 |
% |
(3.1 |
)% |
64.1 |
% |
RECONCILIATIONS OF NON-GAAP MEASURES
|
|
Years Ended December 31, |
| ||||||
|
|
2013 |
|
% Change |
|
2012 |
| ||
|
|
(Dollars in thousands) |
| ||||||
|
|
|
|
|
|
|
| ||
Net cash provided by operating activities |
|
$ |
109,864 |
|
36.6 |
% |
$ |
80,438 |
|
Less: Capital expenditures |
|
(14,700 |
) |
(2.3 |
)% |
(15,040 |
) | ||
Free cash flow |
|
$ |
95,164 |
|
45.5 |
% |
$ |
65,398 |
|
|
|
Three Months Ended |
|
Years Ended December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
(Dollars in thousands, except per share data) |
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Net income attributable to common stockholders |
|
$ |
18,542 |
|
$ |
15,276 |
|
$ |
81,217 |
|
$ |
40,702 |
|
Prior period item(1) |
|
|
|
|
|
(3,496 |
) |
|
| ||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
18,527 |
| ||||
Income tax provision (benefit) of adjusting items(2) |
|
|
|
|
|
1,355 |
|
(7,270 |
) | ||||
Non-GAAP net income |
|
$ |
18,542 |
|
$ |
15,276 |
|
$ |
79,076 |
|
$ |
51,959 |
|
Non-GAAP earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.32 |
|
$ |
0.27 |
|
$ |
1.38 |
|
$ |
0.92 |
|
Diluted |
|
$ |
0.32 |
|
$ |
0.27 |
|
$ |
1.37 |
|
$ |
0.91 |
|
(1) During the second quarter of 2013, we identified an immaterial net understatement of membership revenue, related membership expenses, and income for the period commencing January 1, 2011 through March 31, 2013. In accordance with ASC 250, Accounting Changes and Error Corrections, we assessed the materiality of the misstatement, both quantitatively and qualitatively, and concluded it is not material to any of our previously issued or current year financial statements.
(2) Tax rate utilized is the applicable effective tax rate respective to the period to the extent amounts are deductible.
|
|
Three Months Ended December 31, |
| ||||||||||||||||
|
|
2013 |
|
2012 |
| ||||||||||||||
|
|
Membership |
|
Management |
|
Consolidated |
|
Membership |
|
Management |
|
Consolidated |
| ||||||
|
|
(Dollars in thousands) |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Adjusted EBITDA |
|
$ |
29,714 |
|
$ |
5,133 |
|
$ |
34,847 |
|
$ |
30,776 |
|
$ |
3,337 |
|
$ |
34,113 |
|
Non-cash compensation expense |
|
(2,383 |
) |
(292 |
) |
(2,675 |
) |
(1,949 |
) |
(249 |
) |
(2,198 |
) | ||||||
Other non-operating expense, net |
|
(635 |
) |
|
|
(635 |
) |
(44 |
) |
(4 |
) |
(48 |
) | ||||||
Acquisition related and restructuring costs |
|
(311 |
) |
(1,362 |
) |
(1,673 |
) |
(50 |
) |
(69 |
) |
(119 |
) | ||||||
EBITDA |
|
26,385 |
|
3,479 |
|
29,864 |
|
28,733 |
|
3,015 |
|
31,748 |
| ||||||
Amortization expense of intangibles |
|
(336 |
) |
(1,939 |
) |
(2,275 |
) |
(339 |
) |
(1,701 |
) |
(2,040 |
) | ||||||
Depreciation expense |
|
(3,283 |
) |
(389 |
) |
(3,672 |
) |
(3,269 |
) |
(321 |
) |
(3,590 |
) | ||||||
Less: Net income attributable to noncontrolling interest |
|
|
|
555 |
|
555 |
|
|
|
1 |
|
|
| ||||||
Less: Other non-operating expense, net |
|
635 |
|
|
|
635 |
|
44 |
|
4 |
|
48 |
| ||||||
Operating income |
|
$ |
23,401 |
|
$ |
1,706 |
|
25,107 |
|
$ |
25,169 |
|
$ |
998 |
|
26,167 |
| ||
Interest income |
|
|
|
|
|
79 |
|
|
|
|
|
254 |
| ||||||
Interest expense |
|
|
|
|
|
(1,613 |
) |
|
|
|
|
(1,755 |
) | ||||||
Other non-operating expense, net |
|
|
|
|
|
(635 |
) |
|
|
|
|
(48 |
) | ||||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income tax provision |
|
|
|
|
|
(3,841 |
) |
|
|
|
|
(9,341 |
) | ||||||
Net income |
|
|
|
|
|
19,097 |
|
|
|
|
|
15,277 |
| ||||||
Net income attributable to noncontrolling interest |
|
|
|
|
|
(555 |
) |
|
|
|
|
(1 |
) | ||||||
Net income attributable to common stockholders |
|
|
|
|
|
$ |
18,542 |
|
|
|
|
|
$ |
15,276 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
Year Ended December 31, |
| ||||||||||||||||
|
|
2013 |
|
2012 |
| ||||||||||||||
|
|
Membership |
|
Management |
|
Consolidated |
|
Membership |
|
Management |
|
Consolidated |
| ||||||
|
|
(Dollars in thousands) |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Adjusted EBITDA |
|
$ |
146,899 |
|
$ |
19,344 |
|
$ |
166,243 |
|
$ |
142,652 |
|
$ |
14,416 |
|
$ |
157,068 |
|
Non-cash compensation expense |
|
(9,344 |
) |
(1,084 |
) |
(10,428 |
) |
(9,904 |
) |
(1,027 |
) |
(10,931 |
) | ||||||
Other non-operating income (expense), net |
|
427 |
|
(168 |
) |
259 |
|
(2,303 |
) |
(153 |
) |
(2,456 |
) | ||||||
Prior period item |
|
3,496 |
|
|
|
3,496 |
|
|
|
|
|
|
| ||||||
Acquisition related and restructuring costs |
|
(668 |
) |
(3,799 |
) |
(4,467 |
) |
(62 |
) |
169 |
|
107 |
| ||||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
(18,527 |
) |
|
|
(18,527 |
) | ||||||
EBITDA |
|
140,810 |
|
14,293 |
|
155,103 |
|
111,856 |
|
13,405 |
|
125,261 |
| ||||||
Amortization expense of intangibles |
|
(1,347 |
) |
(6,786 |
) |
(8,133 |
) |
(16,147 |
) |
(6,894 |
) |
(23,041 |
) | ||||||
Depreciation expense |
|
(13,155 |
) |
(1,376 |
) |
(14,531 |
) |
(12,294 |
) |
(1,135 |
) |
(13,429 |
) | ||||||
Less: Net income attributable to noncontrolling interest |
|
|
|
565 |
|
565 |
|
|
|
7 |
|
7 |
| ||||||
Less: Other non-operating income (expense), net |
|
(427 |
) |
168 |
|
(259 |
) |
2,303 |
|
153 |
|
2,456 |
| ||||||
Less: Loss on extinguishment of debt |
|
|
|
|
|
|
|
18,527 |
|
|
|
18,527 |
| ||||||
Operating income |
|
$ |
125,881 |
|
$ |
6,864 |
|
132,745 |
|
$ |
104,245 |
|
$ |
5,536 |
|
109,781 |
| ||
Interest income |
|
|
|
|
|
362 |
|
|
|
|
|
1,792 |
| ||||||
Interest expense |
|
|
|
|
|
(6,172 |
) |
|
|
|
|
(25,629 |
) | ||||||
Other non-operating income (expense), net |
|
|
|
|
|
259 |
|
|
|
|
|
(2,456 |
) | ||||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
(18,527 |
) | ||||||
Income tax provision |
|
|
|
|
|
(45,412 |
) |
|
|
|
|
(24,252 |
) | ||||||
Net income |
|
|
|
|
|
81,782 |
|
|
|
|
|
40,709 |
| ||||||
Net income attributable to noncontrolling interest |
|
|
|
|
|
(565 |
) |
|
|
|
|
(7 |
) | ||||||
Net income attributable to common stockholders |
|
|
|
|
|
$ |
81,217 |
|
|
|
|
|
$ |
40,702 |
|
GLOSSARY OF TERMS
Acquisition related and restructuring costs - Represents transaction fees, costs incurred in connection with performing due diligence, subsequent adjustments to our initial estimate of contingent consideration obligations associated with business acquisitions, and other direct costs related to acquisition activities. Additionally, this item includes certain restructuring charges primarily related to workforce reductions and estimated costs of exiting contractual commitments.
Adjusted EBITDA - EBITDA, excluding, if applicable: (1) non-cash compensation expense, (2) goodwill and asset impairments, (3) acquisition related and restructuring costs, (4) other non-operating income and expense (including loss on extinguishment of debt), and (5) the impact of correcting prior period items. The Companys presentation of adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.
Ancillary Member Revenue - Other Interval Network member related revenue including insurance and travel related services.
Available Room Nights - Number of nights available for rental by Aston and Aqua at managed vacation properties, which excludes all rooms under renovation. Aqua occupied room nights are included only from the acquisition date.
Average Revenue per Member - Membership fee revenue, transaction revenue and ancillary member revenue for the Interval Network for the applicable period, divided by the monthly weighted average number of Interval Network active members during the applicable period.
EBITDA - Net income attributable to common stockholders excluding, if applicable: (1) interest income and interest expense, (2) income taxes, (3) depreciation expense, and (4) amortization expense of intangibles.
Free Cash Flow - Cash provided by operating activities less capital expenditures.
Gross Lodging Revenue - Total room revenue collected from all Aston and Aqua-managed occupied rooms. Aqua occupied room nights are included only from the acquisition date.
Management Fee and Rental Revenue Represents revenue earned by our Management and Rental segment exclusive of pass-through revenue.
Membership Fee Revenue Represents fees paid for membership in the Interval Network.
Non-GAAP Basic EPS Non-GAAP Net Income divided by the weighted average number of shares of common stock outstanding during the period.
Non-GAAP Diluted EPS Non-GAAP Net Income divided by the weighted average number of shares of common stock and dilutive securities outstanding during the period.
Non-GAAP Net Income - Net income attributable to common stockholders excluding the impact of correcting a prior period net understatement in the current year-to-date financials and excluding the prior year non-cash loss on extinguishment of our indebtedness, net of tax.
Pass-through Revenue - Represents the compensation and other employee-related costs directly associated with management of the properties and homeowner associations that are included in both revenue and cost of sales and that are passed on to the property owners and homeowner associations without mark-up. Management believes presenting gross margin without these expenses provides management and investors a relevant period-over-period comparison.
RevPAR - Gross Lodging Revenue divided by Available Room Nights for Aston and Aqua.
Total Active Members - Active members of the Interval Network as of the end of the period. Active members are members in good standing that have paid membership fees and any other applicable charges in full as of the end of the period or are within the allowed grace period.
Transaction Revenue Interval Network transactional and service fees paid primarily for exchanges, Getaways, and reservation servicing.
Interval Leisure Group
Investor Contact:
Jennifer Klein, 305-925-7302
Investor Relations
Jennifer.Klein@iilg.com
Or
Media Contact:
Christine Boesch, 305-925-7267
Corporate Communications
Chris.Boesch@intervalintl.com