Delaware | 001-35967 | 46-1750895 |
(State or other jurisdiction | (Commission | (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
10600 West Charleston Boulevard, Las Vegas, Nevada | 89135 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 702-684-8000 | ||
Exhibit No. | Description | |
99.1 | Press Release dated October 28, 2015, announcing financial results for the quarter ended September 30, 2015 (furnished herewith) |
Diamond Resorts International, Inc. | |
October 28, 2015 | By: ____/s/ David F. Palmer_________________ |
Name: David F. Palmer | |
Title: President and Chief Executive Officer |
• | Total revenue increased $29.4 million, or 13.3%, to $251.4 million. |
• | Net income increased $10.6 million, or 40.3%, to $36.9 million. |
• | Pre-tax income, excluding non-cash stock based compensation, increased $17.0 million, or 34.2%, to $66.8 million. |
• | We generated $111.7 million in free cash flow prior to spending $7.9 million on share repurchases, $5.0 million on the expansion of our Cabo Azul resort and $3.3 million for repayments of notes payable. |
• | Cash and Cash Equivalents at September 30, 2015 were $326.6 million. Through September 30th of this year, we repurchased $98.1 million of our shares since inception. |
• | Adjusted EBITDA increased $18.4 million, or 21.7%, to $103.0 million for the third quarter of 2015 from $84.6 million for the third quarter of 2014. |
• | On October 16, 2015, we completed the acquisition of the vacation ownership business of Gold Key Resorts for $167.5 million. This added five vacation ownership resorts in Virginia Beach, VA and one in the Outer Banks, NC, bringing the Company’s global portfolio to a total of 99 managed resorts. |
Adjusted Guidance | Year Ending December 31, 2015 | |||||||
($ in thousands) | Low | High | ||||||
Pre-tax income | $ | 202,000 | $ | 229,000 | ||||
Corporate interest expense | $ | 28,000 | $ | 26,000 | ||||
Vacation interest cost of sales(a) | $ | 50,000 | $ | 40,000 | ||||
Depreciation and amortization | $ | 38,000 | $ | 36,000 | ||||
Other non-cash items(b) | $ | 32,000 | $ | 29,000 |
Previous Guidance | Year Ending December 31, 2015 | |||||||
($ in thousands) | Low | High | ||||||
Pre-tax income | $ | 159,000 | $ | 191,000 | ||||
Corporate interest expense | $ | 28,000 | $ | 26,000 | ||||
Vacation interest cost of sales(a) | $ | 73,000 | $ | 63,000 | ||||
Depreciation and amortization | $ | 38,000 | $ | 36,000 | ||||
Other non-cash items(b) | $ | 47,000 | $ | 44,000 |
(a) | In accordance with ASC 978, the Company records Vacation Interest Cost of Sales using the relative sales value method (see Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014). This method requires the Company to make a number of projections and estimates, which are subject to significant uncertainty and retroactive adjustment in future periods. These "true-up" adjustments may result, and for the Company have resulted in prior periods, in major swings (both positive and negative) in the Company's pre-tax income computed in accordance with U.S. GAAP that do not have a direct correlation to the operating performance for the periods in which the "true-ups" are made. It is difficult to predict with any degree of precision what the projections and estimates used in connection with the relative sales value method will be and what impact those projections and estimates will have on the amount recorded in future periods as Vacation Interest Cost of Sales. As a result, guidance for Vacation Interest Cost of Sales (and as a result, pre-tax income) covers a wide range of outcomes and does not impact Adjusted EBITDA. |
(b) | Other non-cash items include: stock based compensation, amortization of loan origination costs, and amortization of net portfolio discounts and premiums. |
(c) | Principally for IT infrastructure and sales center expansion/refurbishment. This does not include expenditures for the acquisition of inventory, or resort-level capital improvements which are paid by the homeowners associations. |
• | Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures; |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect cash requirements for income taxes; |
• | Adjusted EBITDA does not reflect interest expense for our corporate indebtedness; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often |
• | we make expenditures to replenish Vacation Interests inventory (principally pursuant to our inventory recovery agreements and in connection with our strategic acquisitions), and Adjusted EBITDA does not reflect our cash requirements for these expenditures or certain costs of carrying such inventory (which are capitalized); and |
• | other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as |
($ in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net cash provided by operating activities | $ | 49,870 | $ | 23,597 | $ | 141,265 | $ | 76,502 | |||||||
Provision for income taxes | 25,410 | 20,156 | 72,394 | 32,860 | |||||||||||
Provision for uncollectible Vacation Interest sales revenue(a) | (21,100 | ) | (15,847 | ) | (56,007 | ) | (40,123 | ) | |||||||
Amortization of capitalized financing costs and original issue discounts(a) | (1,660 | ) | (1,125 | ) | (4,461 | ) | (4,079 | ) | |||||||
Deferred income taxes(b) | (9,125 | ) | (19,679 | ) | (32,391 | ) | (30,461 | ) | |||||||
Loss on foreign currency(c) | (458 | ) | (14 | ) | (656 | ) | (98 | ) | |||||||
Gain on mortgage purchase(a) | 133 | 136 | 412 | 519 | |||||||||||
Unrealized (loss) gain on derivative instruments(d) | (495 | ) | 15 | (600 | ) | (181 | ) | ||||||||
Unrealized gain (loss) on post-retirement benefit plan(e) | 86 | (43 | ) | — | (128 | ) | |||||||||
Corporate interest expense(f) | 7,935 | 7,429 | 22,937 | 34,502 | |||||||||||
Change in operating assets and liabilities excluding acquisitions(g) | 35,474 | 53,543 | 99,033 | 125,917 | |||||||||||
Vacation Interest cost of sales(h) | 16,946 | 16,476 | 25,535 | 44,840 | |||||||||||
Adjusted EBITDA - Consolidated | 103,016 | 84,644 | 267,461 | 240,070 | |||||||||||
One-time charge related to the contract termination(i) | — | — | 7,830 | — | |||||||||||
One-time benefit related to the contract renegotiation(j) | — | — | — | (1,780 | ) | ||||||||||
Adjusted EBITDA excluding the one-time charge related to the contract termination and one-time benefit related to the contract renegotiation | 103,016 | 84,644 | 275,291 | 238,290 | |||||||||||
Less: One-time charge related to the contract termination(i) | — | — | (7,830 | ) | — | ||||||||||
Add: One-time benefit related to the contract renegotiation(j) | — | — | — | 1,780 | |||||||||||
Cash interest paid on corporate indebtedness(k) | (6,072 | ) | (6,318 | ) | (18,235 | ) | (48,877 | ) | |||||||
Impact of receivables financing(l) | 25,417 | 799 | 19,985 | 20,397 | |||||||||||
Cash spent on inventory purchases(m) | (16,723 | ) | (16,102 | ) | (44,466 | ) | (39,216 | ) | |||||||
Cash spent on corporate capital expenditures(n) | (7,566 | ) | (3,999 | ) | (18,483 | ) | (13,902 | ) | |||||||
Other changes in working capital, net(o) | 13,581 | 7,665 | 19,039 | 371 | |||||||||||
Free Cash Flow | $ | 111,653 | $ | 66,689 | $ | 225,301 | $ | 158,843 |
(a) | Represents non-cash charge or gain. |
(b) | Represents the deferred income tax liability as a result of the provision for income taxes recorded for the quarter and nine months ended September 30, 2015 and 2014. |
(c) | Represents net realized loss on foreign exchange transactions settled at unfavorable exchange rates and unrealized net loss resulting from the devaluation of foreign currency-denominated assets and liabilities. |
(d) | Represents the effects of the changes in mark-to-market valuations of derivative assets and liabilities. |
(e) | Represents unrealized gain (loss) on our post-retirement benefit plan related to a collective labor agreement entered into with the employees of our two resorts in St. Maarten; this plan was deconsolidated during the quarter ended September 30, 2015. |
(f) | Represents corporate interest expense; does not include interest expense related to non-recourse indebtedness incurred by our special-purpose subsidiaries that is secured by our VOI consumer loans and is included in Adjusted EBITDA. |
(g) | Represents the net change in operating assets and liabilities excluding acquisitions, as computed directly from the statements of cash flows. Vacation Interest cost of sales is included in the net changes in unsold Vacation Interests, net, as presented in the statements of cash flows. |
(h) | We record Vacation Interest cost of sales using the relative sales value method in accordance with ASC 978, "Real-estate Time-Sharing Activities," which requires us to make significant estimates which are subject to significant uncertainty. In determining the appropriate amount of costs using the relative sales value method, we rely on complex, multi-year financial models that incorporate a variety of estimated inputs. These models are reviewed on a regular basis, and the relevant estimates used in the models are revised based upon historical results and management's new estimates. |
(i) | Represents a one-time cash charge related to the termination of certain contractual relationships with our Chairman, Stephen J. Cloobeck. |
(j) | Represents a one-time benefit related to the contract renegotiation with Interval International in April 2014. |
(k) | Represents cash interest paid on corporate indebtedness. |
(l) | Represents the net impact of all receivables-backed financing activities, including securitization and funding facilities collection and reserve cash, mortgages and contracts receivable, provision for uncollectible Vacation Interests sales revenue and proceeds from issuance of securitization notes and funding facilities, net of payments made on securitization notes and funding facilities. |
(m) | Represents cash spent on (i) acquisitions of VOI inventory pursuant to inventory recovery agreements and in open market and bulk VOI inventory purchases; and (ii) capitalized legal, title and trust fees. |
(n) | Represents cash spent on property and equipment capital expenditure, primarily related to information technology related projects and equipment and renovation projects at certain sales centers. |
(o) | Represents net changes in other working capital items not specifically mentioned above. |
($ in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income | $ | 36,897 | $ | 26,304 | $ | 99,742 | $ | 37,583 | |||||||
Plus: Corporate interest expense(a) | 7,935 | 7,429 | 22,937 | 34,502 | |||||||||||
Provision for income taxes | 25,410 | 20,156 | 72,394 | 32,860 | |||||||||||
Depreciation and amortization(b) | 8,030 | 8,271 | 25,127 | 24,601 | |||||||||||
Vacation Interest cost of sales(c) | 16,946 | 16,476 | 25,535 | 44,840 | |||||||||||
Loss on extinguishment of debt(d) | — | — | — | 46,807 | |||||||||||
Impairments and other non-cash write-offs(b) | — | 11 | 12 | 53 | |||||||||||
(Gain) loss on disposal of assets(b) | (95 | ) | 224 | (57 | ) | 71 | |||||||||
Amortization of loan origination costs(b) | 3,332 | 2,380 | 9,461 | 6,591 | |||||||||||
Amortization of net portfolio premiums (discount)(b) | 24 | 57 | 56 | (36 | ) | ||||||||||
Stock-based compensation(e) | 4,537 | 3,336 | 12,254 | 12,198 | |||||||||||
Adjusted EBITDA - Consolidated | 103,016 | 84,644 | 267,461 | 240,070 | |||||||||||
One-time charge related to the contract termination(f) | — | — | 7,830 | — | |||||||||||
One-time benefit related to the contract renegotiation (g) | — | — | — | (1,780 | ) | ||||||||||
Adjusted EBITDA excluding the one-time charge related to the contract termination and the one-time benefit related to the contract renegotiation | 103,016 | 84,644 | 275,291 | 238,290 | |||||||||||
Less: One-time charge related to the contract termination(f) | — | — | (7,830 | ) | — | ||||||||||
Add: One-time benefit related to the contract renegotiation (g) | — | — | — | 1,780 | |||||||||||
Cash interest paid on corporate indebtedness(h) | (6,072 | ) | (6,318 | ) | (18,235 | ) | (48,877 | ) | |||||||
Impact of receivables financing(i) | 25,417 | 799 | 19,985 | 20,397 | |||||||||||
Cash spent on inventory purchases(j) | (16,723 | ) | (16,102 | ) | (44,466 | ) | (39,216 | ) | |||||||
Cash spent on corporate capital expenditures(k) | (7,566 | ) | (3,999 | ) | (18,483 | ) | (13,902 | ) | |||||||
Other changes in working capital, net(l) | 13,581 | 7,665 | 19,039 | 371 | |||||||||||
Free Cash Flow | $ | 111,653 | $ | 66,689 | $ | 225,301 | $ | 158,843 |
(a) | Corporate interest expense does not include interest expense related to non-recourse indebtedness incurred by our special-purpose vehicles that is secured by our VOI consumer loans. |
(b) | These items represent non-cash charges/gains. |
(c) | We record Vacation Interest cost of sales using the relative sales value method in accordance with ASC 978, which requires us to make significant estimates which are subject to significant uncertainty. In determining the appropriate amount of costs using the relative sales value method, we rely on complex, multi-year financial models that incorporate a variety of estimated inputs. These models are reviewed on a regular basis, and the relevant estimates used in the models are revised based upon historical results and management's new estimates. |
(d) | For the nine months ended September 30, 2014, represents (i) $30.2 million of redemption premium paid on June 9, 2014 in connection with the redemption of the outstanding Senior Secured Notes using proceeds from the term loan portion of the Senior Credit Facility and (ii) $16.6 million of unamortized debt issuance costs and debt discount written off upon the extinguishment of the Senior Secured Notes and certain other indebtedness. |
(e) | Represents the non-cash charge related to stock-based compensation expense. |
(f) | Represents a one-time cash charge related to the termination of certain contractual relationships with our Chairman, Stephen J. Cloobeck. |
(g) | Represents a one-time benefit related to the contract renegotiation with Interval International in April 2014. |
(h) | Represents cash interest paid on corporate indebtedness. |
(i) | Represents the net impact of all receivables-backed financing activities, including securitization and funding facilities collection and reserve cash, mortgages and contracts receivable, provision for uncollectible Vacation Interests sales revenue and proceeds from issuance of securitization notes and funding facilities, net of payments made on securitization notes and funding facilities. |
(j) | Represents cash spent on (i) acquisitions of VOI inventory pursuant to inventory recovery agreements and in open market and bulk VOI inventory purchases; and (ii) capitalized legal, title and trust fees. |
(k) | Represents cash spent on property and equipment capital expenditure, primarily related to information technology related projects and equipment and renovation projects at certain sales centers. |
(l) | Represents net changes in other working capital items not specifically mentioned above. |
($ in thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Management and member services expenses | $ | 8,913 | $ | 8,549 | $ | 25,310 | $ | 23,377 | ||||||||
Less: Stock-based compensation | (326 | ) | (350 | ) | (951 | ) | (1,314 | ) | ||||||||
Plus: One-time benefit related to the contract renegotiation | — | — | — | 1,780 | ||||||||||||
Management and member services expenses after excluding stock-based compensation and one-time benefit related to the contract renegotiation | $ | 8,587 | $ | 8,199 | $ | 24,359 | $ | 23,843 |
($ in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Advertising, sales and marketing expense | $ | 94,876 | $ | 82,308 | $ | 248,267 | $ | 214,190 | |||||||
Stock-based compensation | (829 | ) | (537 | ) | (1,745 | ) | (1,804 | ) | |||||||
Advertising, sales and marketing expense after excluding stock-based compensation | $ | 94,047 | $ | 81,771 | $ | 246,522 | $ | 212,386 |
($ in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
General and administrative expense | $ | 28,372 | $ | 26,747 | $ | 84,159 | $ | 74,203 | |||||||
Stock-based compensation | (3,243 | ) | (2,282 | ) | (9,123 | ) | (8,530 | ) | |||||||
One-time cash charge related to the contract termination | — | — | (7,830 | ) | — | ||||||||||
General and administrative expense after excluding stock-based compensation and one-time cash charge related to the contract termination | $ | 25,129 | $ | 24,465 | $ | 67,206 | $ | 65,673 |
($ in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Income before provision for income taxes | $ | 62,307 | $ | 46,460 | $ | 172,136 | $ | 70,443 | |||||||
Stock-based compensation | 4,537 | 3,336 | 12,254 | 12,198 | |||||||||||
Non-cash charge related to early extinguishment of debt | — | — | — | 16,564 | |||||||||||
One-time cash charge related to early extinguishment of debt | — | — | — | 30,243 | |||||||||||
One-time cash charge related to the contract termination | — | — | 7,830 | — | |||||||||||
One-time benefit related to the contract renegotiation | — | — | — | (1,780 | ) | ||||||||||
Income before provision for income taxes after excluding stock-based compensation, non-cash and one-time cash charges related to early extinguishment of debt, one-time cash charge related to the contract termination and a one-time non-cash benefit related to the Interval International contract renegotiation | $ | 66,844 | $ | 49,796 | $ | 192,220 | $ | 127,668 |
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF INCOME BY BUSINESS SEGMENT | |||||||||||||||||||||||||||||||
For the Quarters Ended September 30, 2015 and 2014 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Quarter Ended September 30, 2015 | Quarter Ended September 30, 2014 | ||||||||||||||||||||||||||||||
Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Management and member services | $ | 41,647 | $ | — | $ | — | $ | 41,647 | $ | 37,795 | $ | — | $ | — | $ | 37,795 | |||||||||||||||
Consolidated resort operations | 4,004 | — | — | 4,004 | 10,481 | — | — | 10,481 | |||||||||||||||||||||||
Vacation Interest sales, net of provision of $0, $21,100, $0, $21,100, $0, $15,847, $0 and $15,847, respectively | — | 165,208 | — | 165,208 | — | 143,180 | — | 143,180 | |||||||||||||||||||||||
Interest | — | 19,858 | 262 | 20,120 | — | 16,783 | 347 | 17,130 | |||||||||||||||||||||||
Other | 1,804 | 18,606 | — | 20,410 | 2,018 | 11,361 | — | 13,379 | |||||||||||||||||||||||
Total revenues | 47,455 | 203,672 | 262 | 251,389 | 50,294 | 171,324 | 347 | 221,965 | |||||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||||
Management and member services | 8,913 | — | — | 8,913 | 8,549 | — | — | 8,549 | |||||||||||||||||||||||
Consolidated resort operations | 3,365 | — | — | 3,365 | 9,216 | — | — | 9,216 | |||||||||||||||||||||||
Vacation Interest cost of sales | — | 16,946 | — | 16,946 | — | 16,476 | — | 16,476 | |||||||||||||||||||||||
Advertising, sales and marketing | — | 94,876 | — | 94,876 | — | 82,308 | — | 82,308 | |||||||||||||||||||||||
Vacation Interest carrying cost, net | — | 7,430 | — | 7,430 | — | 5,162 | — | 5,162 | |||||||||||||||||||||||
Loan portfolio | 371 | 953 | — | 1,324 | 385 | 1,015 | — | 1,400 | |||||||||||||||||||||||
Other operating | — | 7,849 | — | 7,849 | — | 5,847 | — | 5,847 | |||||||||||||||||||||||
General and administrative | — | — | 28,372 | 28,372 | — | — | 26,747 | 26,747 | |||||||||||||||||||||||
Depreciation and amortization | — | — | 8,030 | 8,030 | — | — | 8,271 | 8,271 | |||||||||||||||||||||||
Interest expense | — | 4,137 | 7,935 | 12,072 | — | 3,866 | 7,428 | 11,294 | |||||||||||||||||||||||
Impairments and other write-offs | — | — | — | — | — | — | 11 | 11 | |||||||||||||||||||||||
(Gain) loss on disposal of assets | — | — | (95 | ) | (95 | ) | — | — | 224 | 224 | |||||||||||||||||||||
Total costs and expenses | 12,649 | 132,191 | 44,242 | 189,082 | 18,150 | 114,674 | 42,681 | 175,505 | |||||||||||||||||||||||
Income (loss) before provision for income taxes | 34,806 | 71,481 | (43,980 | ) | 62,307 | 32,144 | 56,650 | (42,334 | ) | 46,460 | |||||||||||||||||||||
Provision for income taxes | — | — | 25,410 | 25,410 | — | — | 20,156 | 20,156 | |||||||||||||||||||||||
Net income (loss) | $ | 34,806 | $ | 71,481 | $ | (69,390 | ) | $ | 36,897 | $ | 32,144 | $ | 56,650 | $ | (62,490 | ) | $ | 26,304 |
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF INCOME BY BUSINESS SEGMENT | |||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2015 and 2014 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2015 | Nine Months Ended September 30, 2014 | ||||||||||||||||||||||||||||||
Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Management and member services | $ | 124,325 | $ | — | $ | — | $ | 124,325 | $ | 115,238 | $ | — | $ | — | $ | 115,238 | |||||||||||||||
Consolidated resort operations | 11,338 | — | — | 11,338 | 28,825 | — | — | 28,825 | |||||||||||||||||||||||
Vacation Interest sales, net of provision of $0, $56,007 $0, $56,007, $0, $40,123, $0 and $40,123, respectively | — | 438,055 | — | 438,055 | — | 379,082 | — | 379,082 | |||||||||||||||||||||||
Interest | — | 56,694 | 1,027 | 57,721 | — | 47,798 | 1,212 | 49,010 | |||||||||||||||||||||||
Other | 6,109 | 42,863 | — | 48,972 | 7,352 | 32,697 | — | 40,049 | |||||||||||||||||||||||
Total revenues | 141,772 | 537,612 | 1,027 | 680,411 | 151,415 | 459,577 | 1,212 | 612,204 | |||||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||||
Management and member services | 25,310 | — | — | 25,310 | 23,377 | — | — | 23,377 | |||||||||||||||||||||||
Consolidated resort operations | 11,114 | — | — | 11,114 | 25,662 | — | — | 25,662 | |||||||||||||||||||||||
Vacation Interest cost of sales | — | 25,535 | — | 25,535 | — | 44,840 | — | 44,840 | |||||||||||||||||||||||
Advertising, sales and marketing | — | 248,267 | — | 248,267 | — | 214,190 | — | 214,190 | |||||||||||||||||||||||
Vacation Interest carrying cost, net | — | 27,171 | — | 27,171 | — | 19,766 | — | 19,766 | |||||||||||||||||||||||
Loan portfolio | 1,031 | 5,211 | — | 6,242 | 895 | 5,354 | — | 6,249 | |||||||||||||||||||||||
Other operating | — | 20,198 | — | 20,198 | — | 16,650 | — | 16,650 | |||||||||||||||||||||||
General and administrative | — | — | 84,159 | 84,159 | — | — | 74,203 | 74,203 | |||||||||||||||||||||||
Depreciation and amortization | — | — | 25,127 | 25,127 | — | — | 24,601 | 24,601 | |||||||||||||||||||||||
Interest expense | — | 12,260 | 22,937 | 35,197 | — | 10,790 | 34,502 | 45,292 | |||||||||||||||||||||||
Loss on extinguishment of debt | — | — | — | — | — | — | 46,807 | 46,807 | |||||||||||||||||||||||
Impairments and other write-offs | — | — | 12 | 12 | — | — | 53 | 53 | |||||||||||||||||||||||
(Gain) loss on disposal of assets | — | — | (57 | ) | (57 | ) | — | — | 71 | 71 | |||||||||||||||||||||
Total costs and expenses | 37,455 | 338,642 | 132,178 | 508,275 | 49,934 | 311,590 | 180,237 | 541,761 | |||||||||||||||||||||||
Income (loss) before provision for income taxes | 104,317 | 198,970 | (131,151 | ) | 172,136 | 101,481 | 147,987 | (179,025 | ) | 70,443 | |||||||||||||||||||||
Provision for income taxes | — | — | 72,394 | 72,394 | — | — | 32,860 | 32,860 | |||||||||||||||||||||||
Net income (loss) | $ | 104,317 | $ | 198,970 | $ | (203,545 | ) | $ | 99,742 | $ | 101,481 | $ | 147,987 | $ | (211,885 | ) | $ | 37,583 |
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
As of September 30, 2015 and December 31, 2014 | ||||||||
(In thousands, except share data) | ||||||||
September 30, 2015 (Unaudited) | December 31, 2014 (Audited) | |||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 326,589 | $ | 242,486 | ||||
Cash in escrow and restricted cash | 87,775 | 80,914 | ||||||
Mortgages and contracts receivable, net of allowance of $153,373 and $130,639, respectively | 571,267 | 498,662 | ||||||
Due from related parties, net | 25,155 | 51,651 | ||||||
Other receivables, net | 29,671 | 59,821 | ||||||
Income tax receivable | 1,033 | 467 | ||||||
Deferred tax asset | 354 | 423 | ||||||
Prepaid expenses and other assets, net | 116,100 | 86,439 | ||||||
Unsold Vacation Interests, net | 323,150 | 262,172 | ||||||
Property and equipment, net | 76,908 | 70,871 | ||||||
Assets held for sale | 1,271 | 14,452 | ||||||
Goodwill | 30,642 | 30,632 | ||||||
Intangible assets, net | 174,210 | 178,786 | ||||||
Total assets | $ | 1,764,125 | $ | 1,577,776 | ||||
Liabilities and Stockholder's Equity: | ||||||||
Accounts payable | $ | 22,248 | $ | 14,084 | ||||
Due to related parties, net | 68,804 | 34,768 | ||||||
Accrued liabilities | 175,671 | 134,680 | ||||||
Income taxes payable | 29 | 108 | ||||||
Deferred income taxes | 79,755 | 47,250 | ||||||
Deferred revenues | 83,733 | 124,997 | ||||||
Senior Credit Facility, net of unamortized original issue discount of $1,839 and $2,055, respectively | 422,826 | 440,720 | ||||||
Securitization notes and Funding Facilities, net of unamortized original issue discount of $115 and $156, respectively | 601,127 | 509,208 | ||||||
Derivative liabilities | 284 | — | ||||||
Notes payable | 3,004 | 4,612 | ||||||
Total liabilities | 1,457,481 | 1,310,427 | ||||||
Stockholders' equity: | ||||||||
Common stock $0.01 par value per share; authorized - 250,000,000 shares, issued - 73,108,856 and 75,732,088 shares, respectively | 731 | 757 | ||||||
Preferred stock $0.01 par value per share; authorized 5,000,000 shares | — | — | ||||||
Additional paid in capital | 414,148 | 482,732 | ||||||
Accumulated deficit | (80,760 | ) | (180,502 | ) | ||||
Accumulated other comprehensive loss | (19,555 | ) | (19,561 | ) | ||||
Subtotal | 314,564 | 283,426 | ||||||
Less: Treasury stock at cost; 313,763 and 642,900 shares, respectively | (7,920 | ) | (16,077 | ) | ||||
Total stockholders' equity | 306,644 | 267,349 | ||||||
Total liabilities and stockholders' equity | $ | 1,764,125 | $ | 1,577,776 |
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
For the Quarters and Nine Months ended September 30, 2015 and 2014 | ||||||||||||||||
(In thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Operating Activities: | ||||||||||||||||
Net income | $ | 36,897 | $ | 26,304 | $ | 99,742 | $ | 37,583 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Provision for uncollectible Vacation Interest sales revenue | 21,100 | 15,847 | 56,007 | 40,123 | ||||||||||||
Amortization of capitalized financing costs and original issue discounts | 1,660 | 1,125 | 4,461 | 4,079 | ||||||||||||
Amortization of capitalized loan origination costs and net portfolio discount | 3,356 | 2,437 | 9,517 | 6,555 | ||||||||||||
Depreciation and amortization | 8,030 | 8,271 | 25,127 | 24,601 | ||||||||||||
Stock-based compensation | 4,537 | 3,336 | 12,254 | 12,198 | ||||||||||||
Loss on extinguishment of debt | — | — | — | 46,807 | ||||||||||||
Impairments and other write-offs | — | 11 | 12 | 53 | ||||||||||||
(Gain) loss on disposal of assets | (95 | ) | 224 | (57 | ) | 71 | ||||||||||
Deferred income taxes | 9,125 | 19,679 | 32,391 | 30,461 | ||||||||||||
Loss on foreign currency exchange | 458 | 14 | 656 | 98 | ||||||||||||
Gain on mortgage repurchase | (133 | ) | (136 | ) | (412 | ) | (519 | ) | ||||||||
Unrealized loss (gain) on derivative instrument | 495 | (15 | ) | 600 | 181 | |||||||||||
Unrealized (gain) loss on post-retirement benefit plan | (86 | ) | 43 | — | 128 | |||||||||||
Changes in operating assets and liabilities excluding acquisitions: | ||||||||||||||||
Mortgages and contracts receivable | (60,294 | ) | (53,801 | ) | (137,721 | ) | (105,139 | ) | ||||||||
Due from related parties, net | 14,337 | (5,362 | ) | 33,898 | 5,661 | |||||||||||
Other receivables, net | (1,509 | ) | 2,362 | 30,222 | 20,678 | |||||||||||
Prepaid expenses and other assets, net | 33,609 | 27,966 | (19,994 | ) | (41,763 | ) | ||||||||||
Unsold Vacation Interests, net | (6,756 | ) | 8,066 | (49,285 | ) | 9,842 | ||||||||||
Accounts payable | (1,412 | ) | 685 | 8,312 | 1,184 | |||||||||||
Due to related parties, net | (26,210 | ) | (28,101 | ) | 35,491 | 14,623 | ||||||||||
Accrued liabilities | 22,237 | 12,455 | 41,367 | (11,144 | ) | |||||||||||
Income taxes receivable/payable | (254 | ) | (349 | ) | (645 | ) | 136 | |||||||||
Deferred revenues | (9,222 | ) | (17,464 | ) | (40,678 | ) | (19,995 | ) | ||||||||
Net cash provided by operating activities | 49,870 | 23,597 | 141,265 | 76,502 | ||||||||||||
Investing activities: | ||||||||||||||||
Property and equipment capital expenditures | (7,566 | ) | (3,999 | ) | (18,483 | ) | (13,902 | ) | ||||||||
Purchase of intangible assets | — | — | (8,993 | ) | — | |||||||||||
Investment in joint venture in Asia | — | — | (1,500 | ) | — | |||||||||||
Proceeds from sale of assets | 1 | (5 | ) | 239 | 264 | |||||||||||
Net cash used in investing activities | $ | (7,565 | ) | $ | (4,004 | ) | $ | (28,737 | ) | $ | (13,638 | ) | ||||
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued | ||||||||||||||||
For the Quarters and Nine Months ended September 30, 2015 and 2014 | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Financing activities: | ||||||||||||||||
Changes in cash in escrow and restricted cash | $ | 2,590 | $ | 7,839 | $ | (6,915 | ) | $ | 22,461 | |||||||
Proceeds from issuance of Senior Credit Facility | — | — | — | 442,775 | ||||||||||||
Proceeds from issuance of securitization notes and Funding Facilities | 277,711 | 91,227 | 431,201 | 206,325 | ||||||||||||
Proceeds from issuance of notes payable | — | — | — | 1,113 | ||||||||||||
Payments on Senior Credit Facility | — | (1,112 | ) | (18,109 | ) | (1,112 | ) | |||||||||
Payments on senior secured notes, including redemption premium | — | — | — | (404,683 | ) | |||||||||||
Payments on securitization notes and Funding Facilities | (213,066 | ) | (51,733 | ) | (339,342 | ) | (146,206 | ) | ||||||||
Payments on notes payable | (3,251 | ) | (2,659 | ) | (10,100 | ) | (28,492 | ) | ||||||||
Payments of debt issuance costs | (2,979 | ) | (379 | ) | (5,329 | ) | (11,048 | ) | ||||||||
Excess tax benefits from stock-based compensation | — | — | 375 | — | ||||||||||||
Common stock repurchases under the share repurchase program | (7,920 | ) | — | (82,046 | ) | — | ||||||||||
Proceeds from exercise of stock options | 316 | 2,010 | 2,521 | 2,309 | ||||||||||||
Payments for derivative instrument | — | — | (316 | ) | — | |||||||||||
Net cash provided by (used in) financing activities | 53,401 | 45,193 | (28,060 | ) | 83,442 | |||||||||||
Net increase in cash and cash equivalents | 95,706 | 64,786 | 84,468 | 146,306 | ||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | (363 | ) | (745 | ) | (365 | ) | (328 | ) | ||||||||
Cash and cash equivalents, beginning of period | 231,246 | 117,882 | 242,486 | 35,945 | ||||||||||||
Cash and cash equivalents, end of period | $ | 326,589 | $ | 181,923 | $ | 326,589 | $ | 181,923 | ||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||||||
Cash interest paid on corporate indebtedness | $ | 6,072 | $ | 6,318 | $ | 18,235 | $ | 48,877 | ||||||||
Cash interest paid on securitization notes and Funding Facilities | $ | 3,865 | $ | 3,815 | $ | 11,957 | $ | 10,814 | ||||||||
Cash paid for taxes, net of cash tax refunds | $ | 783 | $ | 772 | $ | 1,269 | $ | 2,012 | ||||||||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
Insurance premiums financed through issuance of notes payable | $ | — | $ | — | $ | 8,492 | $ | 6,173 | ||||||||
Unsold Vacation Interests, net reclassified to property and equipment | $ | — | $ | 478 | $ | — | $ | 6,094 | ||||||||
Assets held for sale reclassified to unsold Vacation Interests | $ | — | $ | — | $ | 12,978 | $ | — | ||||||||
Unsold Vacation Interests reclassified to assets held for sale | $ | 4 | $ | 4,257 | $ | — | $ | 4,257 | ||||||||
Assets to be disposed but not actively marketed (prepaid expenses and other assets) reclassified to property and equipment | $ | — | $ | 272 | $ | — | $ | 272 | ||||||||
Information technology software and support financed through issuance of notes payable | $ | — | $ | — | $ | — | $ | 472 |