ILG (Nasdaq: ILG) today announced results for the second quarter
ended June 30, 2018.
SECOND QUARTER HIGHLIGHTS
- Consolidated revenue increased 5% to
$461 million
- Consolidated revenue excluding cost
reimbursements increased 11% to $396 million
- Net income attributable to common
stockholders was $27 million, higher by 4%
- Adjusted net income* was $39 million,
up 26%
- Diluted EPS and adjusted diluted EPS*
were $0.21 and $0.31, respectively
- Adjusted EBITDA* was $90 million,
higher by 13%
- Excluding the estimated impact of the
hurricanes, our results would have been the following:
- Consolidated revenue of $479 million,
up 9%
- Consolidated revenue excluding cost
reimbursement increased 16% to $414 million
- Consolidated timeshare contract sales
of $140 million, higher by 9%
- Net income attributable to common
stockholders of $31 million, up 19%
- Adjusted net income of $42 million,
higher by 35%
- Adjusted EBITDA of $95 million, up
19%
- Diluted EPS and adjusted diluted EPS of
$0.24 and $0.34, respectively
- Net cash and restricted cash from
operating activities in the six months ended June 30, 2018 was $184
million
- Free cash flow* was $95 million,
compared to $23 million
- ILG paid $43 million in dividends in
the six months ended June 30, 2018
“We are very pleased with our results for the second quarter.
Excluding the estimated impact of the hurricanes, consolidated
revenue excluding cost reimbursements and Adjusted EBITDA would
have increased 16% and 19%, respectively,” said Craig M. Nash,
chairman, president, and CEO of ILG. “Through the hard work of our
dedicated associates we continue to successfully execute on our
strategic plan”.
* “Adjusted net income”, “Adjusted diluted 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.
Hurricane Impact
In September 2017, Hurricanes Irma and Maria affected several
Vistana and HVO resorts and sales centers, as well as nearly 300
properties within the Interval Network or managed by VRI or
Aqua-Aston Hospitality. At June 30, 2018 our Westin St. John Resort
Villas in the U.S. Virgin Islands and Hyatt Residence Club Dorado,
Hacienda del Mar, in Puerto Rico were closed and expected to reopen
early in 2019. Approximately 35 Interval Network properties on the
hardest-hit islands remained closed at quarter end.
The table below summarizes our results for the second quarter of
2018 and provides the estimated impact of the hurricanes in these
periods:
Three Months Ended
June 30, 2018 (Dollars in millions, except per share
data) Reported
Hurricaneimpact
Ex Hurricane Revenues 461 18 479 Net income attributable to
common stockholders 27 4 31 Adjusted net income* 39 3 42 Adjusted
EBITDA* 90 5 95 Diluted EPS 0.21 0.03 0.24 Adjusted diluted EPS*
0.31 0.03 0.34
Second quarter consolidated operating results
Consolidated revenue was $461 million, and excluding the
estimated hurricane impact, it would have been $479 million, up 9%
over the prior year driven by strong performance in our vacation
ownership segment.
Net income attributable to common stockholders was $27 million.
Excluding the estimated impact of the hurricanes it would have been
$31 million, up 19% compared to the prior year. Diluted earnings
per share (EPS) was $0.21, compared to $0.20 in the prior year.
Adjusted net income was $39 million, higher by 26%. Excluding
the estimated impact from the hurricanes, it would have been $42
million, up 35% compared to the prior year. Adjusted diluted EPS
was $0.31. Excluding the impact from the hurricane it would have
been $0.34, higher by 36%.
Adjusted EBITDA increased 13% to $90 million. Excluding the
impact from the hurricane, it would have been $95 million, an
increase of 19% compared to 2017.
Business segment results
Vacation Ownership
Excluding cost reimbursements, Vacation Ownership segment
revenue increased $37 million, to $263 million principally as a
result of the following:
- $28 million increase in management fee
and other revenue predominantly attributable to revenue from the
consolidation of our HOAs starting in the fourth quarter of 2017.
This increase is largely offset by a corresponding decrease in cost
reimbursement revenue.
- $5 million increase in resort
operations revenue primarily driven by higher available and
occupied room nights and average daily rate resulting from the
increase in the number of units which came on-line beginning in the
second quarter of 2017.
- $3 million increase in sales of
vacation ownership products principally attributable to higher
consolidated contract sales
Vacation Ownership segment operating income more than doubled to
$17 million and adjusted EBITDA was higher by $10 million to $41
million. Excluding the impact of the hurricanes, adjusted EBITDA
would have increased $14 million to $45 million, 45% higher than
2017.
Exchange and Rental
Exchange and Rental segment revenue was $153 million dollars,
relatively consistent with 2017. Excluding cost reimbursements,
segment revenue was up 2% to $133 million dollars related to
stronger club rental revenue resulting from the above-mentioned
increase in available and occupied room nights and average daily
rate.
Total Interval Network active members at quarter-end were 1.8
million, consistent with 2017, and average revenue per member was
$48.14, up 2%.
Operating income for the segment was $35 million compared to $37
million in 2017 reflecting the adverse impact from the hurricanes
and higher professional fees largely due to costs associated with
our expected transaction with Marriott Vacations Worldwide.
Adjusted EBITDA for the segment was $49 million, consistent with
2017. Excluding the estimated hurricane impact, adjusted EBITDA
would have increased by 2%.
Capital Resources and Liquidity
As of June 30, 2018, ILG's cash and cash equivalents totaled
$143 million, compared to $122 million on December 31, 2017, and we
had $242 million of eligible unsecuritized receivables.
The principal amount outstanding of long term corporate debt as
of June 30, 2018 was $555 million consisting of $350 million 5 5/8%
Senior Notes and $205 million drawn under our revolving credit
facility.
ILG had $382 million available on its revolving credit facility,
net of outstanding letters of credit as of June 30, 2018.
Net cash and restricted cash provided by operating activities in
the first six months of 2018 was $184 million compared to $82
million. The $102 million increase was principally due to lower
inventory spend of $81 million due to development activities at the
Westin Nanea Ocean Villas in the prior year period, to higher net
cash receipts partly attributable to property insurance proceeds of
$42 million related primarily to the damage caused by the 2017
hurricanes on our Westin St. John resort and to lower taxes paid of
$4 million. The increases were partly offset by $4 million of
higher interest paid (net amounts capitalized).
Net cash used in investing activities was $18 million primarily
related to capex associated with resort operations and sales and
marketing locations, as well as IT initiatives. Capex in the
quarter includes an offsetting $3 million of insurance proceeds for
hurricane property damage.
Net cash and restricted cash used in financing activities was
$153 million, reflecting $86 million repayments on securitized
debt, net payments of $15 million on our revolving credit facility,
dividend payments of $43 million, and $9 million withholding tax on
the vesting of restricted stock units and shares.
Free cash flow for the six months ended June 30, 2018 was $95
million, compared to $23 million in 2017. The change is primarily a
result of the increase in net cash provided by operating
activities, and lower capital expenditures, partially offset by
higher net securitization activities, including higher repayments
on securitizations.
Dividends
During the first six months of 2018, ILG paid $43 million, or
$0.35 cents per share in dividends.
Combination with Marriott Vacations
On April 30, 2018, ILG announced it had entered into an
agreement whereby Marriott Vacations Worldwide, Inc. (Marriott
Vacations) will acquire ILG for a combination of cash and stock
consideration which values the company at approximately $5.1
billion, based on Marriott Vacation’s closing price on April 27,
2018.
ILG shareholders will receive $14.75 per share in cash and the
rest in newly issued shares of Marriott Vacations. The combination
will result in ILG shareholders owning at closing approximately 43%
of the company on a fully-diluted basis, based on a fixed exchange
ratio. Two ILG directors will be appointed to the board of the
combined company.
The transaction, which is subject to shareholder approval and
other customary closing conditions, is expected to close at the end
of August. More information on the transaction can be found on the
ILG website, www.ilg.com.
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, and free cash flow, serves
to enhance the understanding of ILG's performance. These non-GAAP
financial measures should be considered in addition to and not as
substitutes for, or superior to, measures of financial performance
and liquidity 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 ILG's 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 and
liquidity 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.
ABOUT ILG
ILG (Nasdaq: ILG) is a leading provider of professionally
delivered vacation experiences and the exclusive global licensee
for the Hyatt®, Sheraton®, and Westin® brands in vacation
ownership. The company offers its owners, members, and guests
access to an array of benefits and services, as well as world-class
destinations through its international portfolio of resorts and
clubs. ILG’s operating businesses include Aqua-Aston Hospitality,
Hyatt Vacation Ownership, Interval International, Trading Places
International, Vacation Resorts International, VRI Europe, and
Vistana Signature Experiences. 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. In addition, ILG’s Vistana Signature
Experiences, Inc. is the exclusive provider of vacation ownership
for the Sheraton and Westin brands and uses related trademarks
under license from Starwood Hotels & Resorts Worldwide, LLC.
Headquartered in Miami, Florida, ILG has offices in 15 countries
and more than 10,000 associates. For more information, visit
www.ilg.com.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING
STATEMENTS
Information included or incorporated by reference in this
communication, and information which may be contained in other
filings with the Securities and Exchange Commission (the “SEC”) and
press releases or other public statements, contains or may contain
“forward-looking” statements, as that term is defined in the
Private Securities Litigation Reform Act of 1995 or by the SEC in
its rules, regulations and releases. These forward-looking
statements include, among other things, statements of plans,
objectives, expectations (financial or otherwise) or
intentions.
Forward-looking statements are any statements other than
statements of historical fact, including statements regarding
ILG, Inc.’s (the “Company”) and Marriott Vacations Worldwide
Corporation’s (“MVW”) expectations, beliefs, hopes, intentions or
strategies regarding the future. Among other things, these
forward-looking statements may include statements regarding the
proposed combination of the Company and MVW; our beliefs relating
to value creation as a result of a potential combination of the
Company and MVW; the expected timetable for completing the
transactions; benefits and synergies of the transactions; future
opportunities for the combined company; and any other statements
regarding the Company’s and MVW’s future beliefs, expectations,
plans, intentions, financial condition or performance. In some
cases, forward-looking statements can be identified by the use of
words such as “may,” “will,” “expects,” “should,” “believes,”
“plans,” “anticipates,” “estimates,” “predicts,” “potential,”
“continue,” or other words of similar meaning.
Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially
from those discussed in, or implied by, the forward-looking
statements. Factors that might cause such a difference include, but
are not limited to, general economic conditions, our financial and
business prospects, our capital requirements, our financing
prospects, our relationships with associates and labor unions, our
ability to consummate potential acquisitions or dispositions, our
relationships with the holders of licensed marks, and those
additional factors disclosed as risks in other reports filed by us
with the Securities and Exchange Commission, including those
described in Part I of the Company’s most recently filed
Annual Report on Form 10-K and subsequent reports on Forms
10-Q and 8-K as well as in MVW’s most recently filed Annual Report
on Form 10-K and subsequent reports on Forms 10-Q and 8-K and
in the joint proxy statement/prospectus included in the
registration statement on Form S-4 filed by MVW with the SEC,
and any amendments thereto.
Other risks and uncertainties include the timing and likelihood
of completion of the proposed transactions between the Company and
MVW; the possibility that the Company’s stockholders may not
approve the proposed transactions; the possibility that MVW’s
stockholders may not approve the issuance of the MVW shares to be
issued in connection with the proposed transactions; the
possibility that the expected synergies and value creation from the
proposed transactions will not be realized or will not be realized
within the expected time period; the risk that the businesses of
the Company and MVW will not be integrated successfully; the
potential impact of disruption from the proposed transactions
making it more difficult to maintain business and operational
relationships; the risk that unexpected costs will be incurred; the
ability to retain key personnel; the availability of financing; the
possibility that the proposed transactions do not close; as well as
more specific risks and uncertainties. You should carefully
consider these and other relevant factors, including those risk
factors in this communication and other risks and uncertainties
that affect the businesses of the Company and MVW described in
their respective filings with the SEC, when reviewing any
forward-looking statement. These factors are noted for investors as
permitted under the Private Securities Litigation Reform Act of
1995. We caution readers that any such statements are based on
currently available operational, financial and competitive
information, and they should not place undue reliance on these
forward-looking statements, which reflect management’s opinion only
as of the date on which they were made. Except as required by law,
we disclaim any obligation to review or update these
forward-looking statements to reflect events or circumstances as
they occur.
NO OFFER OR SOLICITATION
This communication is for informational purposes only and is not
intended to and does not constitute an offer to buy, nor a
solicitation of an offer to sell, subscribe for or buy any
securities or the solicitation of any vote or approval in any
jurisdiction pursuant to or in connection with the proposed
transactions or otherwise, nor shall there be any sale, issuance or
transfer of securities in any jurisdiction in contravention of
applicable law. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10
of the Securities Act of 1933, as amended, and otherwise in
accordance with applicable law.
IMPORTANT INFORMATION AND WHERE TO FIND IT
The proposed transactions involving the Company and MVW will be
submitted to the Company’s stockholders and MVW’s stockholders for
their consideration. In connection with the proposed transaction,
on July 19, 2018, MVW filed with the Securities and Exchange
Commission (the “SEC”) an amendment to the registration statement
on Form S-4 that included a joint proxy statement/prospectus
for the stockholders of the Company and MVW and was filed with the
SEC on June 6, 2018. The registration statement was declared
effective by the SEC on July 23, 2018. The Company and MVW mailed
the definitive joint proxy statement/prospectus to their respective
stockholders on or about July 25, 2018 and each of the Company and
MVW intend to hold the special meeting of the stockholders of the
Company and MVW on August 28, 2018. This communication is not
intended to be, and is not, a substitute for such filings or for
any other document that the Company or MVW may file with the SEC in
connection with the proposed transaction. SECURITY HOLDERS ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE
SEC, INCLUDING THE REGISTRATION STATEMENT ON FORM S-4 AND
THE JOINT PROXY STATEMENT/PROSPECTUS, CAREFULLY AND IN THEIR
ENTIRETY, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The
registration statement, the joint proxy statement/prospectus and
other relevant materials and any other documents filed or furnished
by the Company or MVW with the SEC may be obtained free of charge
at the SEC’s web site at www.sec.gov. In addition, security holders
will be able to obtain free copies of the registration statement
and the joint proxy statement/prospectus from the Company by going
to its investor relations page on its corporate web site at
www.ilg.com and from MVW by going to its investor relations
page on its corporate web site at
www.marriottvacationsworldwide.com.
PARTICIPANTS IN THE SOLICITATION
The Company, MVW, their respective directors and certain of
their respective executive officers and employees may be deemed to
be participants in the solicitation of proxies in connection with
the proposed transaction. Information about the Company’s directors
and executive officers is set forth in its Annual Report on
Form 10-K for the year ended December 31, 2017, which was
filed with the SEC on March 1, 2018 and in its definitive
proxy statement filed with the SEC on May 7, 2018, and
information about MVW’s directors and executive officers is set
forth in its Annual Report on Form 10-K for the year ended
December 31, 2017, which was filed with the SEC on
February 27, 2018, and in its definitive proxy statement filed
with the SEC on April 3, 2018. These documents are available
free of charge from the sources indicated above, and from the
Company by going to its investor relations page on its
corporate web site at www.ilg.com and from MVW by going to its
investor relations page on its corporate web site at
www.marriottvacationsworldwide.com. Additional information
regarding the interests of participants in the solicitation of
proxies in connection with the proposed transactions is presented
in the definitive joint proxy statement/prospectus included in the
registration statement on Form S-4 filed by MVW with the SEC,
and may be included in other relevant materials that the Company
and MVW file with the SEC.
ILG, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions,
except share and per share data) Three Months
Ended Six Months Ended June 30, June 30,
2018 2017 2018 2017 Revenues:
Service and membership related $ 148 $ 119 $ 300 $ 247 Sales of
vacation ownership products, net 121 118 244 223 Rental and
ancillary services 104 97 222 204 Consumer financing 23 22 47 43
Cost reimbursements 65 85 131
168
Total revenues 461 441 944 885
Operating costs and expenses: Cost of service and membership
related sales 67 33 132 68 Cost of vacation ownership product sales
22 28 61 54 Cost sales of rental and ancillary services 70 78 142
155 Cost of consumer financing 7 7 15 14 Cost reimbursements 65 85
131 168 Royalty fee expense 11 11 22 21 Selling and marketing
expense 81 76 159 145 General and administrative expense 65 58 124
112 Amortization expense of intangibles 5 5 10 10 Depreciation
expense 16 15 31
30
Total operating costs and expenses 409
396 827 777
Operating income 52 45 117 108
Other income
(expense): Interest income 1 - 1 - Interest expense (7 ) (7 )
(15 ) (12 ) Other income expense, net (5 ) (2 ) - 8 Gain on bargain
purchase - 2 - 2 Equity in earnings from unconsolidated entities
- 1 1 3
Total other income (expense), net (11 ) (6 )
(13 ) 1
Earnings before income taxes and
noncontrolling interests 41 39 104 109 Income tax provision
(13 ) (13 ) (33 ) (38 )
Net
income 28 26 71 71 Net income attributable to noncontrolling
interests (1 ) - (2 ) (1 )
Net income attributable to common stockholders $ 27 $
26 $ 69 $ 70
Earnings per share
attributable to common stockholders: Basic $ 0.21 $ 0.21 $ 0.56
$ 0.56 Diluted $ 0.21 $ 0.20 $ 0.55 $ 0.55
Weighted average
number of shares of common stock outstanding: Basic 124,241
124,384 124,033 124,191 Diluted 125,874 126,141 125,813 125,862
Dividends declared per share of common stock $ 0.175 $ 0.15
$ 0.350 $ 0.30
Adjusted net income(1) $ 39 $ 31
$ 85 $ 72
Adjusted earnings per share(1):
Basic $ 0.31 $ 0.25 $ 0.69 $ 0.57 Diluted $ 0.31 $ 0.25 $ 0.68 $
0.57
(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.
ILG, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions)
June 30, 2018 December 31, 2017 ASSETS
Cash and cash equivalents $ 143 $ 122 Restricted cash and cash
equivalents 215 227 Vacation ownership mortgages receivable, net 77
79 Vacation ownership inventory 486 496 Prepaid income taxes 36 58
Other current assets 236 218 Total current assets
1,193 1,200 Restricted cash and cash equivalents 4 3 Vacation
ownership mortgages receivable, net 657 658 Vacation ownership
inventory 72 60 Investments in unconsolidated entities 54 55
Goodwill and intangible assets, net 992 1,004 Property and
equipment, net 606 616 Other non-current assets 83 91
TOTAL ASSETS $ 3,661 $ 3,687
LIABILITIES
AND EQUITY LIABILITIES: Accounts payable, trade $ 46 $
46 Deferred revenue 177 162 Current portion of securitized debt
from VIEs 128 146 Other current liabilities 320 287
Total current liabilities 671 641 Long-term debt 548 562
Securitized debt from VIEs 361 429 Deferred revenue 82 76 Other
long-term liabilities 262 262
TOTAL
LIABILITIES 1,924 1,970 Redeemable noncontrolling
interest 1 1 Total ILG stockholders' equity 1,697 1,679
Noncontrolling interests 39 37
TOTAL EQUITY
1,736 1,716
TOTAL LIABILITIES AND EQUITY $
3,661 $ 3,687
ILG, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In millions) Six Months Ended
June 30, 2018 2017 Cash flows from
operating activities: Net income $ 71 $ 71 Adjustments to
reconcile net income to net cash and restricted cash provided by
operating activities: Amortization expense of intangibles 10 10
Bad debt expense
4
1
Depreciation expense 31 30 Allowance for losses on originated loans
23 15 Allowance for impairment on acquired loans 3 5 Accretion of
mortgages receivable 2 3 Non-cash compensation expense 11 12
Deferred income taxes 10 13 Equity in earnings from unconsolidated
entities (1 ) (3 )
Gain on bargain purchase of Vistana
acquisition
-
(2
)
Changes in operating assets and liabilities and other 20
(73 )
Net cash and restricted cash provided by
operating activities 184 82
Cash
flows from investing activities: Capital expenditures (22 ) (48
) Purchases of trading investments 4 -
Net cash used in investing activities (18 )
(48 )
Cash flows from financing activities: Borrowings on
revolving credit facility, net (15 ) 71 Payments on securitized
debt (86 ) (66 ) Purchases of treasury stock - (3 ) Dividend
payments to stockholders (43 ) (37 ) Withholding taxes on vesting
of restricted stock units (9 ) (5 )
Net cash and
restricted cash used in financing activities (153 )
(40 ) Effect of exchange rate changes on cash, cash
equivalents and restricted cash (3 ) 3
Net
increase (decrease) in cash, cash equivalents and restricted
cash 10 (3 ) Cash, cash equivalents and restricted cash at
beginning of period 352 244
Cash,
cash equivalents and restricted cash at end of period $ 362
$ 241
Supplemental disclosures of
cash flow information: Interest paid, net of amounts
capitalized $ 21 $ 17 Income taxes paid, net of refunds $ 12 $ 16
OPERATING
STATISTICS
Three Months Ended June 30, Six Months Ended June
30, 2018 % Change 2017 2018 %
Change 2017 Vacation Ownership(2)
Consolidated timeshare contract sales (in millions) $ 132 3% $ 128
$ 266 6% $ 250 Volume per guest $ 2,863 (6)% $ 3,036 $ 3,037 (3)% $
3,144 Tour flow 45,391 9% 41,689 86,151 10% 78,465
Exchange and
Rental Total active members at end of period (000's) 1,800 (1)%
1,812 1,800 (1)% 1,812 Average revenue per member $ 48.14 2% $
47.39 $ 101.38 2% $ 99.75 (2) As part of the continued integration
of our VO business, in the fourth quarter of 2017 we harmonized and
clarified the calculation of total timeshare contract sales and
consolidated timeshare contract sales to report all sales gross of
incentives. In order to aid comparability, we have recast prior
periods.
SEGMENT
REVENUES
Three Months Ended June 30, Six Months Ended June
30, 2018 % Change 2017 2018 %
Change 2017 (In millions) (Dollars in
millions) Vacation Ownership Resort operations revenue $
58 9% $ 53 $ 124 13% $ 110 Management fee and other revenue 61 85%
33 116 81% 64 Sale of vacation ownership products, net 121 3% 118
244 9% 223 Consumer financing revenue 23 5% 22 47 9% 43 Cost
reimbursement revenue 45 (24)% 59
90 (23)% 117 Total revenue $ 308
8% $ 285 $ 621 11% $ 557 Vacation Ownership
gross margin 45 % 7% 42 % 44 % 2% 43 %
Vacation Ownership gross margin without
cost reimbursement revenue
53 % (0)% 53 % 51 % (6)% 54 %
Exchange and Rental
Transaction revenue $ 50 2% $ 49 $ 109 1% $ 108 Membership fee
revenue 35 (3)% 36 71 0% 71 Ancillary member revenue 2
0% 2 4 (20)% 5
Total member revenue 87 0% 87 184 0% 184 Club rental revenue 29 7%
27 62 9% 57 Other revenue 6 20% 5 12 20% 10 Rental management
revenue 11 0% 11 24 (8)% 26 Cost reimbursement revenue 20
(23)% 26 41 (20)% 51
Total revenue $ 153 (2)% $ 156 $ 323
(2)% $ 328 Exchange and Rental gross margin 59 % 2% 58 % 59
% 4% 57 %
Exchange and Rental gross margin without
cost reimbursement revenue
68 % (2)% 69 % 68 % (0)% 68 %
RECONCILIATIONS
OF NON-GAAP MEASURES
Six Months Ended June 30, 2018 2017
(In millions) Operating activities before inventory
spend $ 232 $ 233 Inventory spend (39 ) (120 ) Net changes in
operating-related restricted cash (9 ) (31 )
Net
cash and restricted cash provided by operating activities
184 82 Repayments on securitizations
(86 ) (66 ) Net changes in financing-related restricted cash
2 20 Net securitization activities (84
) (46 ) Net changes in operating-related restricted cash 9
31 Capital expenditures (22 ) (48 ) Acquisition-related and
restructuring payments 8 4
Free cash
flow $ 95 $ 23
Three Months
Ended June 30, Six Months Ended June 30, 2018
2017 2018 2017 (In millions, except per
share data) Net income attributable to common
stockholders $ 27 $ 26 $ 69 $ 70 Acquisition related and
restructuring costs 8 4 9 8 Other non-operating foreign currency
remeasurements 5 2 - (8 ) Impact of purchase accounting - 1 - (2 )
Other special items 3 - 9 - Asset impairments 2 2 4 5 Income tax
impact of adjusting items(3) (6 ) (4 ) (6 )
(1 )
Adjusted net income $ 39 $ 31 $ 85
$ 72
Earnings per share attributable to common
stockholders: Basic $ 0.21 $ 0.21 $ 0.56 $ 0.56 Diluted $ 0.21
$ 0.20 $ 0.55 $ 0.55
Adjusted earnings per share: Basic $
0.31 $ 0.25 $ 0.69 $ 0.57 Diluted $ 0.31 $ 0.25 $ 0.68 $ 0.57
Weighted average number of common stock outstanding: Basic
124,241 124,384 124,033 124,191 Diluted 125,874 126,141 125,813
125,862 (3) All adjusting items were tax effected using the
applicable projected annual effective tax rate since none of the
adjustments were discrete to the periods.
Three
Months Ended Six Months Ended
June 30,
June 30,
2018
2017
2018
2017 (In millions) Sales of vacation
ownership products, net $ 121 $ 118 $ 244 $ 223 Provision for
loan losses 14 8 22 15 Other items and adjustments(4) (3 )
2 — 12
Consolidated timeshare contract
sales $ 132 $ 128 $ 266 $ 250 (4) Includes
adjustments for incentives, certain GAAP deferrals, cancelled
sales, trial vacation package sales, fractional sales and other
items.
Three Months
Ended June 30, 2018 2017
VacationOwnership
Exchange andRental
Consolidated
VacationOwnership
Exchange andRental
Consolidated (In millions) Net income attributable
to common stockholders $ 27 $ 26 Net income attributable to
noncontrolling interest 1 —
Net
income 28 26 Income tax provision 13 13 Other special items
(gain on bargain purchase) — (2 ) Equity in earnings from
unconsolidated entities — (1 ) Other non-operating expense, net 5 2
Interest expense 7 7 Interest income (1 ) —
Operating income $ 17 $ 35 52 $ 8 $ 37 45 Other
non-operating income (expense), net (7 ) 2 (5 ) (2 ) — (2 ) Other
special items (gain on bargain purchase) — — — — 2 2 Equity in
earnings from unconsolidated entities — — — 1 — 1 Net income
attributable to noncontrolling interest (1 ) — (1 ) — — —
Depreciation expense 11 5 16 10 5 15 Amortization expense of
intangibles 2 3 5
2 3 5
EBITDA 22 45 67 19
47 66 Other special items 2 1 3 1 (1 ) — Impact of purchase
accounting — — — (1 ) — (1 ) Asset impairments 2 — 2 2 — 2
Acquisition related and restructuring costs 5 3 8 4 — 4 Less: Other
non-operating (income) expense, net 7 (2 ) 5 2 — 2 Non-cash
compensation expense 3 2 5
4 3 7
Adjusted
EBITDA $ 41 $ 49 $ 90 $ 31 $ 49
$ 80
Six Months Ended June 30,
2018 2017
VacationOwnership
Exchange andRental
Consolidated
VacationOwnership
Exchange andRental
Consolidated (Dollars in millions) Net income
attributable to common stockholders $ 69 $ 70 Net income
attributable to noncontrolling interest 2 1
Net income 71 71 Income tax provision 33 38 Other
special items (gain on bargain purchase) — (2 ) Equity in earnings
from unconsolidated entities (1 ) (3 ) Other non-operating expense,
net — (8 ) Interest expense 15 12 Interest income (1 )
—
Operating income $ 35 $ 82 117 $ 23 $ 85 108
Other non-operating income (expense), net — — — 10 (2 ) 8 Other
special items (gain on bargain purchase) — — — — 2 2 Equity in
earnings from unconsolidated entities 1 — 1 3 — 3 Net income
attributable to noncontrolling interest (2 ) — (2 ) (1 ) — (1 )
Depreciation expense 21 10 31 20 10 30 Amortization expense of
intangibles 4 6 10
4 6 10
EBITDA 59 98 157
59 101 160 Other special items 5 2 7 1 (1 ) — Asset impairments 4 —
4 — — — Impact of purchase accounting — — — (5 ) — (5 ) Acquisition
related and restructuring costs 6 3 9 7 — 7 Less: Other
non-operating (income) expense, net — — — (10 ) 2 (8 ) Non-cash
compensation expense 5 6 11
7 5 12
Adjusted
EBITDA $ 79 $ 109 $ 188 $ 64 $ 107
$ 171
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, (5) the impact of the
application of purchase accounting, and (6) other special items.
The Company's 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, (3) the impact of
the application of purchase accounting, (4) goodwill and asset
impairments, and (5) other special items.
Ancillary member revenue - Other Interval Network
member related revenue including insurance and travel related
services.
Average revenue per member - Membership fee revenue,
transaction revenue and ancillary member revenue for the Interval
Network, Vistana Signature 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.
Club rental revenue – Represents rentals generated
by the Vistana Signature Network and Hyatt Residence Club mainly to
monetize inventory to provide exchanges through hotel loyalty
programs.
Consolidated timeshare contract sales – Total
timeshare interests sold at consolidated projects pursuant to
purchase agreements, gross of incentives and 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. For upgrade sales, we include only the
incremental value purchased.
Consumer financing revenue – Includes interest
income on vacation ownership mortgages receivable, as well as loan
servicing fees from unconsolidated entities.
Cost reimbursements - 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. Cost reimbursement revenue of the Vacation
Ownership segment also includes reimbursement, without mark-up, of
sales and marketing expenses, and in some cases certain other
expenses pursuant to contractual arrangements. Management believes
presenting gross margin without these expenses provides management
and investors a relevant period-over-period comparison.
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 – is defined as cash and restricted
cash provided by operating activities less capital expenditures,
plus net changes in financing-related restricted cash and net
borrowing and repayment activity pertaining to securitizations, and
excluding changes in operating-related restricted cash and certain
payments unrelated to our ongoing core business, such as
acquisition-related and restructuring costs.
Impact of the application of purchase accounting –
represents the difference between amounts derived from the fair
value remeasurement of assets and liabilities acquired in a
business combination versus the historical basis. We believe
generally this is most meaningful in the first year subsequent to
an acquisition.
Management fee revenue – Represents vacation
ownership property management revenue earned by our Vacation
Ownership segment exclusive of cost reimbursements.
Membership fee revenue – Represents fees paid for
membership in the Interval Network, Vistana Signature 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. For the
three and six months ended June 30, 2018 and 2017, such items
include (as applicable to the respective period): (i) costs related
to non-ordinary course litigation matters described in the notes to
our financial statements, (ii) impact to our financial statements
related to natural disasters, including Hurricane Irma and other
named storms, and (iii) costs related to our Board of Director’s
strategic review.
Other revenue – includes revenue related primarily
to exchange and rental transaction activity and membership programs
outside of the Interval Network, Vistana Signature Network and
Hyatt Residence Club, sales of marketing materials primarily for
point-of-sale developer use, and certain financial services-related
fee income.
Rental and ancillary services revenue – Includes our
rental activities such as Getaways, club rentals and owned hotel
revenues, as well as associated resort ancillary revenues.
Rental management revenue – Represents rental
management revenue earned by our vacation rental businesses within
our Exchange and Rental segment, exclusive of cost reimbursement
revenue.
Resort operations revenue – Pertains to our revenue
generating activities from rentals of owned vacation ownership
inventory (exclusive of lead-generation) along with ancillary
resort services, in addition to rental and ancillary revenue
generated by owned hotels.
Sales of vacation ownership products, net – Includes
sales of vacation ownership products, net, for HVO and Vistana.
Service and membership revenue – Revenue associated with
providing services including membership-related activities and
exchange transactions, as well vacation ownership and vacation
rental management businesses.
Total active members - Active members of the
Interval Network in good standing as of the end of the period.
All Vistana Signature Network and Hyatt Residence
Club members are also members of the Interval Network.
Tour flow – Represents the number of sales
presentations given at sales centers (other than at unconsolidated
properties) during the period.
Transaction revenue – Interval Network, Vistana
Signature Network and Hyatt Residence Club transactional and
service fees paid primarily for exchanges, Getaways, reservation
servicing and related transactions.
Volume per guest – Consolidated timeshare contract
sales excluding telesales, divided by tour flow during the
period.
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version on businesswire.com: https://www.businesswire.com/news/home/20180803005074/en/
ILG, Inc.Investor ContactLily Arteaga,
305-925-7302Investor RelationsLily.Arteaga@ilg.comorrMedia
ContactChristine Boesch, 305-925-7267Corporate
CommunicationsChris.Boesch@ilg.com
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