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): May 9, 2016
Interval Leisure Group, Inc.
(Exact name of registrant as specified in charter)
Delaware |
|
001-34062 |
|
26-2590997 |
(State or other jurisdiction |
|
(Commission |
|
(IRS Employer |
of incorporation) |
|
File Number) |
|
Identification No.) |
6262 Sunset Drive, Miami, FL |
|
33143 |
(Address of principal executive offices) |
|
(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:
x 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 Ended March 31, 2016
Interval Leisure Group, Inc. (ILG) today issued a press release reporting financial results for the quarter ended March 31, 2016.
A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K (this Report). 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 May 9, 2016, ILG announced that its Board of Directors declared a quarterly dividend of $0.12 per common share. The dividend is payable on June 21, 2016 to shareholders of record as of June 7, 2016. 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.
The 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. The forward-looking statements are subject to the limitations and qualifications set forth in the press release as well as in ILGs other documents filed with the SEC, including, without limitation, that actual events and/or results may differ materially from those projected in such forward-looking statements..
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits to this Form 8-K
Exhibit No. |
|
Description |
99.1 |
|
Press release of ILG, dated May 9, 2016, reporting financial results for the quarter ended March 31, 2016 |
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.
|
Interval Leisure Group, Inc. | |
|
| |
|
| |
|
By: |
/s/ Victoria J. Kincke |
|
Name: |
Victoria J. Kincke |
|
Title: |
Senior Vice President, General Counsel |
|
|
and Secretary |
Date: May 9, 2016
Exhibit 99.1
INTERVAL LEISURE GROUP REPORTS FIRST QUARTER 2016 RESULTS
Miami, FL, May 9, 2016 Interval Leisure Group (Nasdaq: IILG) (ILG) today announced results for the three months ended March 31, 2016.
FIRST QUARTER 2016 HIGHLIGHTS
· Consolidated revenue increased to $185.9 million, and excluding pass-through revenue increased to $147.6 million.
· Adjusted EBITDA was $54.8 million, 3% higher compared to 2015
· Diluted EPS was $0.38 and Adjusted diluted EPS was $0.41
· Free cash flow was $33.5 million
· On April 20, 2016 ILG stockholders voted to approve the share issuance in connection with the acquisition of Vistana Signature Experiences, Starwood Hotels and Resorts vacation ownership business.
ILG began the year slightly ahead of 2015 and in-line with our expectations. Our results reflect increased transaction volume and fees in the exchange business and higher sales at the HVO consolidated properties, as well as investments in the sales and marketing infrastructure at HVO, said Craig M. Nash, chairman, president, and CEO of Interval Leisure Group. For the remainder of 2016, we will continue to execute on our organic initiatives, as well as the integration of Vistana into our portfolio upon closing. With a strong balance sheet, enhanced long term growth, and robust free cash flow profile, the new ILG will be uniquely positioned to capitalize on emerging trends in the industry and create significant shareholder value.
Financial Summary & Operating Metrics (USD in millions except per share amounts)
|
|
Three Months Ended |
|
|
| ||||
METRICS |
|
2016 |
|
2015 |
|
Year Over |
| ||
|
|
|
|
|
|
|
| ||
Exchange and Rental revenue |
|
133.9 |
|
135.6 |
|
(1.2 |
)% | ||
Vacation Ownership revenue |
|
52.0 |
|
48.9 |
|
6.3 |
% | ||
Total revenue |
|
185.9 |
|
184.6 |
|
0.7 |
% | ||
Revenue excluding pass-throughs |
|
147.6 |
|
146.6 |
|
0.7 |
% | ||
Gross profit |
|
103.2 |
|
102.2 |
|
1.0 |
% | ||
Net income attributable to common stockholders |
|
22.2 |
|
25.3 |
|
(12.2 |
)% | ||
Adjusted net income* |
|
23.7 |
|
25.0 |
|
(5.1 |
)% | ||
Diluted EPS |
|
$ |
0.38 |
|
$ |
0.44 |
|
(13.6 |
)% |
Adjusted diluted EPS* |
|
$ |
0.41 |
|
$ |
0.43 |
|
(4.7 |
)% |
Adjusted EBITDA* |
|
54.8 |
|
53.2 |
|
3.0 |
% |
BALANCE SHEET DATA |
|
March 31, |
|
December 31, |
|
Cash and cash equivalents |
|
96.9 |
|
93.1 |
|
Debt |
|
403.0 |
|
415.7 |
|
|
|
Three Months Ended |
|
Year |
| ||
CASH FLOW DATA |
|
2016 |
|
2015 |
|
% Change |
|
Net cash provided by operating activities |
|
40.1 |
|
64.7 |
|
(38.0 |
)% |
Free cash flow* |
|
33.5 |
|
59.9 |
|
(44.0 |
)% |
* Adjusted net income, Adjusted EPS, Adjusted EBITDA and Free cash flow are non-GAAP measures as defined by the U.S. 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.
First Quarter 2016 Consolidated Operating Results
Consolidated revenue for the quarter ended March 31, 2016 was $185.9 million, an increase of 0.7% compared to the first quarter of 2015.
Net income attributable to common stockholders for the three months ended March 31, 2016 was $22.2 million, lower by $3.1 million compared to 2015. Diluted earnings per share (EPS) was $0.38 compared to $0.44 in 2015. Impacting these results are $1.7 million of incremental after-tax interest expense due to the higher interest rate on the senior notes compared to the revolver, and an after-tax increase of $1.7 million associated with acquisition-related expenses. Also affecting the comparison is $0.9 million related to the estimated accrual for a European Union value added tax matter which positively impacted results in the first quarter of 2015.
Adjusted net income (defined below) for the quarter ended March 31, 2016 was $23.7 million. The incremental after-tax interest expense related to the refinancing of the revolver with the senior notes
impacted diluted EPS by $0.03. Excluding this incremental expense, adjusted net income attributable to common shareholders would have been $25.4 million and adjusted diluted EPS would have been $0.43.
Business Segment Results
Exchange and Rental
Exchange and Rental segment revenue for the three months ended March 31, 2016 was $133.9 million, slightly lower than 2015 primarily due to lower rental management revenue and a decline in membership fee revenue, partly offset by higher transaction revenue in the quarter.
For the first quarter of 2016, transaction revenue (defined below) was $57.8 million, 2.6% higher than in the same period in 2015 driven by higher revenue from exchanges and getaways from a combination of increased volume and higher average transaction fee. Membership fee revenue was $30.6 million, a decrease of 5.1% partly attributable to the continued shift in the percentage mix of our membership base from traditional to corporate members and related fee compression from corporate accounts. Membership mix as of March 31, 2016 included 57% traditional and 43% corporate members, compared to 58% and 42% in the prior year.
Total active members at March 31, 2016 increased slightly compared to 2015 primarily driven by the bulk enrollment from a multi-site club. Average revenue per member for the first quarter of 2016 was $49.36, slightly lower than the comparable period in 2015.
During the quarter, the Interval Network affiliated 21 vacation ownership resorts in domestic and international markets.
Year-over-year, rental management revenue decreased by $1.7 million to $12.5 million driven primarily by lower available room nights, partly offset by increases in ADR. The decrease in available room nights and the ADR and RevPar increases are partly attributable to the exit of certain lower ADR mainland properties from the system.
Exchange and Rental segment adjusted EBITDA was $47.5 million in the first quarter, an increase of nearly 4% from the prior year driven by higher operating income in the period largely as a result of sales and marketing cost savings and lower employee related costs.
Vacation Ownership
Vacation Ownership segment revenue for the three months ended March 31, 2016 was $52.0 million, including $24.7 million of management fee revenue (defined below). The increase over the prior year of $3.1 million, or 6.3%, in segment revenue primarily reflects an increase of $3.2 million in vacation ownership sales and financing revenue resulting from higher sales of vacation ownership intervals at the HVO consolidated properties. This increase was partly offset by a 1.4% decrease in management fee revenue reflecting the negative currency impact in consolidating our VRI Europe business. In constant currency management fee revenue would have been essentially flat compared to 2015.
Vacation Ownership segment adjusted EBITDA was $7.2 million in the first quarter, a decrease of 1.1% compared to 2015. Impacting these results are investments in the sales and marketing infrastructure at the consolidated properties and lower equity in earnings from unconsolidated entities reflecting the
grand opening of the Hyatt Kaanapali Beach, and corresponding higher level of sales, in the first quarter of 2015.
CAPITAL RESOURCES AND LIQUIDITY
As of March 31, 2016, ILGs cash and cash equivalents totaled $96.9 million, compared to $93.1 million as of December 31, 2015.
The principal amount outstanding of long term debt as of March 31, 2016 was $412 million consisting of our $350 million 5 5/8% Senior Notes and $62 million drawn under our revolving credit facility.
For the first quarter of 2016, net cash provided by operating activities was $40.1 million from $64.7 million in 2015. The decrease of $24.6 million was principally due to the timing of certain cash receipts, most of which were collected after quarter-end, as well as the timing of certain cash disbursements. Capital expenditures, primarily related to IT, totaled $6.6 million, or 3.5% of revenue. Free cash flow (defined below) was $33.5 million.
Dividend
During the first quarter 2016, ILG paid $7 million, or $0.12 cents per share in dividends.
In May 2016, our Board of Directors declared a $0.12 per share dividend payable June 21, 2016 to shareholders of record on June 7, 2016.
VISTANA ACQUISITION
On October 28, 2015, ILG announced it had entered into an agreement to acquire Vistana Signature Experiences, Inc. (Vistana), the vacation ownership business of Starwood Hotels and Resorts Worldwide, Inc. (Starwood). The acquisition will be effected through a Reverse Morris Trust transaction pursuant to which Vistana, a wholly-owned subsidiary of Starwood, will be distributed to Starwood shareholders and immediately thereafter merge with a wholly-owned subsidiary of ILG, with Vistana surviving as a wholly-owned subsidiary of ILG. The combination will result in Starwood shareholders owning at closing approximately 55% of the combined company on a fully diluted basis, with existing shareholders of ILG owning approximately 45% of the combined company on a fully diluted basis, based on a fixed exchange ratio.
On April 29, 2016 ILG and Starwood announced a brief delay in the planned closing while both companies work to avoid unnecessary tax withholding under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Today we announced that ILG and Starwood have concluded that no withholding of tax under FIRPTA is required with respect to ILG common stock received by any person in ILGs upcoming acquisition of Vistana. In addition, the parties are working with the Internal Revenue Service to confirm that any gain realized by a non-U.S. holder that is treated for tax purposes as owning 5% or less of the stock of Starwood and Vistana between and including the record date and the closing date will not be subject to FIRPTA tax on the disposition of Vistana stock in the transaction. Shareholders should consult their tax advisors as to the particular tax consequences to them of the transactions.
The transaction, which has received all necessary regulatory and shareholder approvals, is now expected to close by the end of this week, subject to satisfaction or waiver of customary closing conditions.
BUSINESS OUTLOOK AND GUIDANCE
While the closing date of the Vistana acquisition is expected by the end of this week, we are reaffirming our fiscal year 2016 guidance for ILG plus a full eight months of Vistana. This guidance assumes a $350 million securitization of mortgages receivables in the second half of 2016 and reflects the estimated impact of purchase accounting on revenue.
|
|
ILG plus 8 months of |
| ||||
(in millions) |
|
Low |
|
High |
| ||
Consolidated revenues* |
|
$ |
1,350 |
|
$ |
1,450 |
|
Adjusted EBITDA |
|
$ |
265 |
|
$ |
285 |
|
Adjusted free cash flow |
|
$ |
155 |
|
$ |
185 |
|
* Includes an estimated $300 million of pass-throughs
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, adjusted net income, adjusted basic and diluted EPS, free cash flow and constant currency, 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 different adjustments) is used to calculate compliance with certain financial covenants in ILGs credit agreement and indenture. 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 historical 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 first quarter 2016, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (844) 826-0618 (toll-free domestic) or (973) 638-3062 (international); Conference ID: 95946234. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for 7 days via telephone starting approximately two hours after the call ends. The replay can be accessed at (855) 859-2056 (toll-free domestic) or (404) 537-3406 (international); Conference ID: 95946234. 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.
ABOUT INTERVAL LEISURE GROUP
Interval Leisure Group (ILG) is a leading global provider of non-traditional lodging, encompassing a portfolio of leisure businesses from vacation exchange and rental to vacation ownership. In its exchange and rental segment, Interval International and Trading Places International (TPI) offer vacation exchange and travel-related products to more than 2 million member families worldwide, while Hyatt Residence Club provides exchanges among its branded resorts in addition to its participation in the Interval Network. Aston Hotels & Resorts and Aqua Hospitality provide hotel and condominium rentals and resort management. In its vacation ownership segment, Vacation Resorts International, VRI Europe, Hyatt Vacation Ownership (HVO), and TPI provide management services to timeshare resorts and clubs, as well as homeowners associations. HVO also sells, markets, and finances vacation ownership interests. Through its subsidiaries, ILG independently owns and manages the Hyatt Residence Club program and uses the Hyatt Vacation Ownership name and other Hyatt marks under license from affiliates of Hyatt Hotels Corporation. Headquartered in Miami, Florida, ILG has offices in 16 countries and more than 5,000 employees. For more information, visit www.iilg.com.
CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Information set forth in this communication, including statements regarding our future financial performance, our business prospects and strategy, anticipated financial position, liquidity, capital needs and other similar matters, as well as financial estimates and statements as to the expected timing, completion and effects of the proposed merger between a wholly-owned subsidiary of Interval Leisure Group, Inc. (ILG) and Vistana Signature Experiences, Inc. (Vistana), which will immediately follow the proposed spin-off of Vistana from Starwood Hotels & Resorts Worldwide, Inc. (Starwood), constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These estimates and statements are subject to risks and uncertainties, and actual results might differ materially. Such estimates and statements include, but are not limited to, statements about the benefits of the proposed merger, including future financial and operating results, the combined companys plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of ILG and are subject to significant risks and uncertainties outside of ILGs control.
Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (2) risks that any of the closing conditions to the proposed merger, including Starwoods spin-off of Vistana, may not be satisfied in a timely manner, (3) risks related to disruption of management time from ongoing business operations due to the proposed merger, (4) failure to realize the benefits expected from the proposed merger, (5) the effect of the announcement of the proposed merger on the ability of ILG and Starwood to retain and hire key personnel and maintain relationships with their key business partners, and on their operating results and businesses generally, (6) adverse trends in economic conditions generally or in the vacation ownership, vacation rental and travel industries, or adverse events or trends in key vacation destinations, (7) adverse changes to, or interruptions
in, relationships with third parties unrelated to the announcement, (8) lack of available financing for, or insolvency or consolidation of developers, (9) decreased demand from prospective purchasers of vacation interests, (10) travel related health concerns, (11) ILGs ability to compete effectively and successfully and to add new products and services, (12) ILGs ability to successfully manage and integrate acquisitions, (13) the occurrence of a termination event under the master license agreement with Hyatt, (14) ILGs ability to market vacation ownership interests successfully and efficiently, (15) impairment of ILGs assets, (16) the restrictive covenants in ILGs revolving credit facility and indenture; (17) business interruptions in connection with ILGs technology systems, (18) the ability of managed homeowners associations to collect sufficient maintenance fees, (19) third parties not repaying advances or extensions of credit, (20) fluctuations in currency exchange rates and (21) ILGs ability to expand successfully in international markets and manage risks specific to international operations. Discussions of additional risks and uncertainties are contained in ILGs filings with the U.S. Securities and Exchange Commission. ILG is not under any obligation, and each expressly disclaim any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this announcement are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|
|
Three Months Ended |
| ||||
|
|
March 31, |
| ||||
|
|
2016 |
|
2015 |
| ||
|
|
|
|
|
| ||
Revenue |
|
$ |
185,922 |
|
$ |
184,552 |
|
Cost of sales |
|
82,688 |
|
82,357 |
| ||
Gross profit |
|
103,234 |
|
102,195 |
| ||
Selling and marketing expense |
|
17,991 |
|
18,208 |
| ||
General and administrative expense |
|
37,829 |
|
35,895 |
| ||
Amortization expense of intangibles |
|
3,201 |
|
3,501 |
| ||
Depreciation expense |
|
4,668 |
|
4,269 |
| ||
Operating income |
|
39,545 |
|
40,322 |
| ||
Other income (expense): |
|
|
|
|
| ||
Interest income |
|
284 |
|
267 |
| ||
Interest expense |
|
(6,233 |
) |
(2,753 |
) | ||
Other income, net |
|
556 |
|
921 |
| ||
Equity in earnings from unconsolidated entities |
|
1,242 |
|
1,524 |
| ||
Total other expense, net |
|
(4,151 |
) |
(41 |
) | ||
Earnings before income taxes and noncontrolling interests |
|
35,394 |
|
40,281 |
| ||
Income tax provision |
|
(12,639 |
) |
(14,492 |
) | ||
Net income |
|
22,755 |
|
25,789 |
| ||
Net income attributable to noncontrolling interests |
|
(573 |
) |
(527 |
) | ||
Net income attributable to common stockholders |
|
$ |
22,182 |
|
$ |
25,262 |
|
|
|
|
|
|
| ||
Earnings per share attributable to common stockholders: |
|
|
|
|
| ||
Basic |
|
$ |
0.38 |
|
$ |
0.44 |
|
Diluted |
|
$ |
0.38 |
|
$ |
0.44 |
|
Weighted average number of shares of common stock outstanding: |
|
|
|
|
| ||
Basic |
|
57,619 |
|
57,179 |
| ||
Diluted |
|
57,954 |
|
57,747 |
| ||
Dividends declared per share of common stock |
|
$ |
0.12 |
|
$ |
0.12 |
|
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Adjusted net income(1) |
|
$ |
23,678 |
|
$ |
24,961 |
|
Adjusted earnings per share(1): |
|
|
|
|
| ||
Basic |
|
$ |
0.41 |
|
$ |
0.44 |
|
Diluted |
|
$ |
0.41 |
|
$ |
0.43 |
|
(1) Adjusted net income and Adjusted 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 |
| ||||
|
|
March 31, 2016 |
|
December 31, 2015 |
| ||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
96,850 |
|
$ |
93,088 |
|
Vacation ownership mortgages receivable, net |
|
5,741 |
|
5,913 |
| ||
Vacation ownership inventory |
|
44,979 |
|
47,006 |
| ||
Deferred membership costs |
|
8,109 |
|
8,126 |
| ||
Prepaid income taxes |
|
190 |
|
12,656 |
| ||
Other current assets |
|
126,635 |
|
90,590 |
| ||
Total current assets |
|
282,504 |
|
257,379 |
| ||
Vacation ownership mortgages receivable, net |
|
27,074 |
|
26,325 |
| ||
Investments in unconsolidated entities |
|
44,193 |
|
38,319 |
| ||
Goodwill and intangible assets, net |
|
805,317 |
|
811,780 |
| ||
Deferred membership costs |
|
9,650 |
|
9,830 |
| ||
Other non-current assets |
|
137,495 |
|
135,474 |
| ||
TOTAL ASSETS |
|
$ |
1,306,233 |
|
$ |
1,279,107 |
|
|
|
|
|
|
| ||
LIABILITIES AND EQUITY LIABILITIES: |
|
|
|
|
| ||
Accounts payable, trade |
|
$ |
22,490 |
|
$ |
35,998 |
|
Deferred revenue |
|
108,010 |
|
85,684 |
| ||
Other current liabilities |
|
106,284 |
|
90,303 |
| ||
Total current liabilities |
|
236,784 |
|
211,985 |
| ||
Long-term debt |
|
402,988 |
|
415,700 |
| ||
Deferred revenue |
|
87,424 |
|
87,061 |
| ||
Other long-term liabilities |
|
101,532 |
|
98,242 |
| ||
TOTAL LIABILITIES |
|
828,728 |
|
812,988 |
| ||
Redeemable noncontrolling interest |
|
713 |
|
708 |
| ||
Total ILG stockholders equity |
|
443,718 |
|
431,993 |
| ||
Noncontrolling interests |
|
33,074 |
|
33,418 |
| ||
TOTAL EQUITY |
|
476,792 |
|
465,411 |
| ||
TOTAL LIABILITIES AND EQUITY |
|
$ |
1,306,233 |
|
$ |
1,279,107 |
|
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
Three Months Ended March 31, |
| ||||
|
|
2016 |
|
2015 |
| ||
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
22,755 |
|
$ |
25,789 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Amortization expense of intangibles |
|
3,201 |
|
3,501 |
| ||
Amortization of debt issuance costs |
|
444 |
|
223 |
| ||
Depreciation expense |
|
4,668 |
|
4,269 |
| ||
Provision for loan losses |
|
489 |
|
|
| ||
Non-cash compensation expense |
|
3,608 |
|
3,522 |
| ||
Deferred income taxes |
|
727 |
|
(737 |
) | ||
Equity in earnings from unconsolidated entities |
|
(1,242 |
) |
(1,524 |
) | ||
Excess tax benefits from stock-based awards |
|
(197 |
) |
(1,817 |
) | ||
Gain/ (loss) on disposal of property and equipment |
|
(1 |
) |
218 |
| ||
Changes in operating assets and liabilities |
|
5,655 |
|
31,261 |
| ||
Net cash provided by operating activities |
|
40,107 |
|
64,705 |
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Investment in unconsolidated entitiy |
|
(4,650 |
) |
|
| ||
Capital expenditures |
|
(6,576 |
) |
(4,804 |
) | ||
Investment in financing receivables |
|
(2,250 |
) |
|
| ||
Other |
|
(2 |
) |
(6 |
) | ||
Net cash used in investing activities |
|
(13,478 |
) |
(4,810 |
) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Payments on revolving credit facility, net |
|
(13,000 |
) |
(30,000 |
) | ||
Payments of debt issuance costs |
|
(11 |
) |
(180 |
) | ||
Dividend payments to stockholders |
|
(6,959 |
) |
(6,892 |
) | ||
Withholding taxes on vesting of restricted stock units |
|
(1,557 |
) |
(4,333 |
) | ||
Proceeds from the exercise of stock options |
|
|
|
63 |
| ||
Excess tax benefits from stock-based awards |
|
197 |
|
1,817 |
| ||
Net cash provided by (used in) financing activities |
|
(21,330 |
) |
(39,525 |
) | ||
Effect of exchange rate changes on cash and cash equivalents |
|
(1,537 |
) |
(3,771 |
) | ||
Net increase in cash and cash equivalents |
|
3,762 |
|
16,599 |
| ||
Cash and cash equivalents at beginning of period |
|
93,088 |
|
80,493 |
| ||
Cash and cash equivalents at end of period |
|
$ |
96,850 |
|
$ |
97,092 |
|
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
| ||
Interest, net of amounts capitalized |
|
$ |
897 |
|
$ |
2,443 |
|
Income taxes, net of refunds |
|
$ |
(429 |
) |
$ |
1,279 |
|
|
|
|
|
|
|
OPERATING STATISTICS
|
|
Three Months Ended March 31, |
| ||||||
|
|
2016 |
|
% Change |
|
2015 |
| ||
Exchange and Rental |
|
|
|
|
|
|
| ||
Total active members at end of period (000s) |
|
1,824 |
|
0.7 |
% |
1,811 |
| ||
Average revenue per member |
|
$ |
49.36 |
|
(1.0 |
)% |
$ |
49.87 |
|
Available room nights (000s) |
|
682 |
|
(11.9 |
)% |
774 |
| ||
RevPAR(1) |
|
$ |
136.00 |
|
6.3 |
% |
$ |
127.98 |
|
|
|
|
|
|
|
|
| ||
Vacation Ownership |
|
|
|
|
|
|
| ||
Contract sales (000s) |
|
$ |
25,885 |
|
(7.7 |
)% |
$ |
28,052 |
|
Average transaction price |
|
$ |
35,314 |
|
(13.8 |
)% |
$ |
40,951 |
|
Volume per guest |
|
$ |
4,094 |
|
(5.8 |
)% |
$ |
4,348 |
|
(1) Due to a change in industry reporting standards (effective January 1, 2015) and certain revisions resulting from a refinement in our calculation of RevPAR pursuant to industry reporting standards, RevPAR for the three months ended March 31, 2015 has been recast from $130.39.
ADDITIONAL DATA
|
|
Three Months Ended March 31, |
| ||||||
|
|
2016 |
|
% Change |
|
2015 |
| ||
|
|
(Dollars in thousands) |
| ||||||
Exchange and Rental |
|
|
|
|
|
|
| ||
Transaction revenue |
|
$ |
57,780 |
|
2.6 |
% |
$ |
56,337 |
|
Membership fee revenue |
|
30,645 |
|
(5.1 |
)% |
32,275 |
| ||
Ancillary member revenue |
|
1,241 |
|
(11.3 |
)% |
1,399 |
| ||
Total member revenue |
|
89,666 |
|
(0.4 |
)% |
90,011 |
| ||
Other revenue |
|
8,840 |
|
1.6 |
% |
8,705 |
| ||
Rental management revenue |
|
12,495 |
|
(12.0 |
)% |
14,199 |
| ||
Pass-through revenue |
|
22,941 |
|
1.0 |
% |
22,721 |
| ||
Total revenue |
|
$ |
133,942 |
|
(1.2 |
)% |
$ |
135,636 |
|
Exchange and Rental gross margin |
|
61.9 |
% |
(0.5 |
)% |
62.2 |
% | ||
Exchange and Rental gross margin without Pass- through Revenue |
|
74.7 |
% |
(0.1 |
)% |
74.8 |
% | ||
|
|
|
|
|
|
|
| ||
Vacation Ownership |
|
|
|
|
|
|
| ||
Management fee revenue |
|
$ |
24,567 |
|
(2.0 |
)% |
$ |
25,058 |
|
Sales and financing revenue |
|
11,985 |
|
39.4 |
% |
8,596 |
| ||
Pass-through revenue |
|
15,428 |
|
1.1 |
% |
15,262 |
| ||
Total revenue |
|
$ |
51,980 |
|
6.3 |
% |
$ |
48,916 |
|
Vacation Ownership gross margin |
|
39.2 |
% |
7.7 |
% |
36.4 |
% | ||
Vacation Ownership gross margin without Pass- through Revenue |
|
55.7 |
% |
5.5 |
% |
52.8 |
% |
RECONCILIATIONS OF NON-GAAP MEASURES
|
|
Three Months Ended March 31, |
| ||||||
|
|
2016 |
|
% Change |
|
2015 |
| ||
|
|
(Dollars in thousands) |
| ||||||
|
|
|
|
|
|
|
| ||
Net cash provided by operating activities |
|
$ |
40,107 |
|
(38.0 |
)% |
$ |
64,705 |
|
Less: Capital expenditures |
|
(6,576 |
) |
36.9 |
% |
(4,804 |
) | ||
Free cash flow |
|
$ |
33,531 |
|
(44.0 |
)% |
$ |
59,901 |
|
|
|
Three Months Ended March |
| ||||
|
|
2016 |
|
2015 |
| ||
|
|
(Dollars in thousands, except per share |
| ||||
|
|
|
|
|
| ||
Net income attributable to common stockholders |
|
$ |
22,182 |
|
$ |
25,262 |
|
Acquisition related and restructuring costs |
|
2,927 |
|
207 |
| ||
Other non-operating foreign currency remeasurements |
|
(620 |
) |
(1,076 |
) | ||
Impact of purchase accounting |
|
160 |
|
376 |
| ||
Income tax impact of adjusting items(1) |
|
(971 |
) |
192 |
| ||
Adjusted net income |
|
$ |
23,678 |
|
$ |
24,961 |
|
Adjusted earnings per share: |
|
|
|
|
| ||
Basic |
|
$ |
0.41 |
|
$ |
0.44 |
|
Diluted |
|
$ |
0.41 |
|
$ |
0.43 |
|
(1) Tax rate utilized is the applicable effective tax rate respective to the period to the extent amounts are deductible.
|
|
Three Months Ended March 31, |
| ||||||||||||||||
|
|
2016 |
|
2015 |
| ||||||||||||||
|
|
Exchange and |
|
Vacation |
|
Consolidated |
|
Exchange and |
|
Vacation |
|
Consolidated |
| ||||||
|
|
(Dollars in thousands) |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Adjusted EBITDA |
|
$ |
47,533 |
|
$ |
7,245 |
|
$ |
54,778 |
|
$ |
45,872 |
|
$ |
7,322 |
|
$ |
53,194 |
|
Non-cash compensation expense |
|
(2,830 |
) |
(778 |
) |
(3,608 |
) |
(2,748 |
) |
(774 |
) |
(3,522 |
) | ||||||
Other non-operating income (expense), net |
|
525 |
|
31 |
|
556 |
|
926 |
|
(5 |
) |
921 |
| ||||||
Acquisition related and restructuring costs |
|
(323 |
) |
(2,604 |
) |
(2,927 |
) |
(102 |
) |
(105 |
) |
(207 |
) | ||||||
Impact of purchase accounting |
|
|
|
(160 |
) |
(160 |
) |
|
|
(376 |
) |
(376 |
) | ||||||
EBITDA |
|
44,905 |
|
3,734 |
|
48,639 |
|
43,948 |
|
6,062 |
|
50,010 |
| ||||||
Amortization expense of intangibles |
|
(2,001 |
) |
(1,200 |
) |
(3,201 |
) |
(2,155 |
) |
(1,346 |
) |
(3,501 |
) | ||||||
Depreciation expense |
|
(4,207 |
) |
(461 |
) |
(4,668 |
) |
(3,826 |
) |
(443 |
) |
(4,269 |
) | ||||||
Less: Net income attributable to noncontrolling interests |
|
5 |
|
568 |
|
573 |
|
9 |
|
518 |
|
527 |
| ||||||
Less: Other non-operating income (expense), net |
|
(525 |
) |
(31 |
) |
(556 |
) |
(926 |
) |
5 |
|
(921 |
) | ||||||
Equity in earnings in unconsolidated entities |
|
11 |
|
(1,253 |
) |
(1,242 |
) |
(15 |
) |
(1,509 |
) |
(1,524 |
) | ||||||
Operating income |
|
$ |
38,188 |
|
$ |
1,357 |
|
39,545 |
|
$ |
37,035 |
|
$ |
3,287 |
|
40,322 |
| ||
Interest income |
|
|
|
|
|
284 |
|
|
|
|
|
267 |
| ||||||
Interest expense |
|
|
|
|
|
(6,233 |
) |
|
|
|
|
(2,753 |
) | ||||||
Other non-operating income, net |
|
|
|
|
|
556 |
|
|
|
|
|
921 |
| ||||||
Equity in earnings in unconsolidated entities |
|
|
|
|
|
1,242 |
|
|
|
|
|
1,524 |
| ||||||
Income tax provision |
|
|
|
|
|
(12,639 |
) |
|
|
|
|
(14,492 |
) | ||||||
Net income |
|
|
|
|
|
22,755 |
|
|
|
|
|
25,789 |
| ||||||
Net income attributable to noncontrolling interests |
|
|
|
|
|
(573 |
) |
|
|
|
|
(527 |
) | ||||||
Net income attributable to common stockholders |
|
|
|
|
|
$ |
22,182 |
|
|
|
|
|
$ |
25,262 |
|
RECONCILIATIONS OF NON-GAAP MEASURES
2016 OUTLOOK
ILG plus 8 months of Vistana
|
|
Current Guidance |
| ||||
|
|
Low |
|
High |
| ||
|
|
(In millions) |
| ||||
Adjusted EBITDA |
|
$ |
265 |
|
$ |
285 |
|
Non-cash compensation expense |
|
(17 |
) |
(17 |
) | ||
Other non-operating income, net |
|
|
|
|
| ||
Acquisition related and restructuring costs |
|
(8 |
) |
(8 |
) | ||
Percentage of completion accounting |
|
17 |
|
17 |
| ||
Depreciation and amortization |
|
(64 |
) |
(64 |
) | ||
Interest, net |
|
(24 |
) |
(24 |
) | ||
Income tax provision |
|
(64 |
) |
(71 |
) | ||
Net income attributable to common stockholders |
|
$ |
105 |
|
$ |
118 |
|
|
|
Current Guidance |
| ||||
|
|
Low |
|
High |
| ||
|
|
(In millions) |
| ||||
Net cash provided by operating activities |
|
$ |
138 |
|
$ |
153 |
|
Securitization proceeds net of debt issuance costs and repayments of securitized debt |
|
170 |
|
170 |
| ||
Changes in restricted cash |
|
(14 |
) |
(14 |
) | ||
Transaction related expenses |
|
18 |
|
18 |
| ||
Less: Capital expenditures |
|
(157 |
) |
(142 |
) | ||
Adjusted free cash flow |
|
$ |
155 |
|
$ |
185 |
|
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, costs associated with integrating acquired businesses and estimated costs of exiting contractual commitments.
Adjusted earnings per share (EPS) is defined as adjusted net income divided by the weighted average number of shares of common stock outstanding during the period for basic EPS and, additionally, inclusive of dilutive securities for diluted EPS.
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, (6) the impact of the application of purchase accounting, (7) the deferral adjustment associated with percentage of completion accounting guidelines reflecting its impact on GAAP revenues and expenses, and (8) other special items. The Companys presentation of adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.
Adjusted net income is defined as net income attributable to common stockholders, excluding the impact of (1) acquisition related and restructuring costs, (2) other non-operating foreign currency remeasurements, and (3) other special items.
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.
Average revenue per member - Membership fee revenue, transaction revenue and ancillary member revenue for the Interval Network and Hyatt Residence Club for the applicable period, divided by the monthly weighted average number of Interval Network active members during the applicable period. Hyatt Residence Club revenue is included herein only since its date of acquisition.
Average transaction price Contract Sales divided by the net number of transactions during the period.
Constant currency Represents current period results of operations determined by translating the functional currency results into dollars (the reporting currency) using the actual blended rate of translation from the comparable prior period. Management believes that the presentation of results of operations excluding the effect of foreign currency translations serves to enhance the understanding of ILGs performance and improves period to period comparability of results from business operations.
Contract sales Total vacation ownership interests sold at consolidated and unconsolidated projects pursuant to purchase agreements, net of actual cancellations and rescissions, where we have met a minimum threshold amounting to a 10% down payment of the contract purchase price during the period.
EBITDA - Net income attributable to common stockholders excluding, if applicable: (1) non-operating 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.
Management fee revenue Represents vacation ownership property management revenue earned by our Vacation Ownership segment exclusive of pass-through revenue.
Membership fee revenue Represents fees paid for membership in the Interval Network and Hyatt Residence Club.
Net leverage Long term debt (excluding issuance costs) minus cash and cash equivalents divided by Adjusted EBITDA.
Other special items consist of other items that we believe are not related to our core business operations.
Other revenue includes revenue related primarily to exchange and rental transaction activity and membership programs outside of the Interval Network and Hyatt Residence Club, sales of marketing materials primarily for point-of-sale developer use, and certain financial services-related fee income.
Pass-through revenue - Represents the compensation and other employee-related costs directly associated with managing properties that are included in both revenue and cost of sales and that are passed on to the property owners or homeowner associations without mark-up. Pass-through revenue of the Vacation Ownership segment also includes reimbursement of sales and marketing expenses, without mark-up, pursuant to contractual arrangements. Management believes presenting gross margin without these expenses provides management and investors a relevant period-over-period comparison
Rental management revenue Represents rental management revenue earned by our vacation rental businesses within our Exchange and Rental segment, exclusive of pass-through revenue.
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. All Hyatt Residence Club members are also members of the Interval Network.
Transaction revenue Interval Network and Hyatt Residence Club transactional and service fees paid primarily for exchanges, Getaways, reservation servicing and related transactions.
Volume per guest Contract sales divided by the total number of tours during the period.