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EX-32.1 - EX-32.1 - ILG, LLC | a2203971zex-32_1.htm |
EX-32.3 - EX-32.3 - ILG, LLC | a2203971zex-32_3.htm |
EX-32.2 - EX-32.2 - ILG, LLC | a2203971zex-32_2.htm |
EX-31.3 - EX-31.3 - ILG, LLC | a2203971zex-31_3.htm |
EX-31.2 - EX-31.2 - ILG, LLC | a2203971zex-31_2.htm |
EX-31.1 - EX-31.1 - ILG, LLC | a2203971zex-31_1.htm |
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As filed with the Securities and Exchange Commission on May 10, 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | ||
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended March 31, 2011 |
||
or |
||
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from to |
Commission File No. 1-34062
INTERVAL LEISURE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
26-2590997 (I.R.S. Employer Identification No.) |
|
6262 Sunset Drive, Miami, FL (Address of Registrant's principal executive offices) |
33143 (Zip Code) |
(305) 666-1861
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer ý | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
As of May 5, 2011, 57,461,327 shares of the registrant's common stock were outstanding.
Item 1. Consolidated Financial Statements
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
|
Three Months Ended March 31, |
|||||||
---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | ||||||
Revenue |
$ | 116,983 | $ | 113,838 | ||||
Cost of sales |
37,523 | 34,181 | ||||||
Gross profit |
79,460 | 79,657 | ||||||
Selling and marketing expense |
13,832 | 13,531 | ||||||
General and administrative expense |
24,315 | 22,290 | ||||||
Amortization expense of intangibles |
6,813 | 6,575 | ||||||
Depreciation expense |
3,290 | 2,448 | ||||||
Operating income |
31,210 | 34,813 | ||||||
Other income (expense): |
||||||||
Interest income |
121 | 78 | ||||||
Interest expense |
(8,966 | ) | (9,014 | ) | ||||
Other expense, net |
(1,160 | ) | (734 | ) | ||||
Total other expense, net |
(10,005 | ) | (9,670 | ) | ||||
Earnings before income taxes and noncontrolling interest |
21,205 | 25,143 | ||||||
Income tax provision |
(8,007 | ) | (9,730 | ) | ||||
Net income |
13,198 | 15,413 | ||||||
Net income attributable to noncontrolling interest |
(3 | ) | | |||||
Net income attributable to common stockholders |
$ | 13,195 | $ | 15,413 | ||||
Earnings per share attributable to common stockholders: |
||||||||
Basic |
$ | 0.23 | $ | 0.27 | ||||
Diluted |
$ | 0.23 | $ | 0.27 | ||||
Weighted average number of common stock outstanding: |
||||||||
Basic |
57,188 | 56,627 | ||||||
Diluted |
58,084 | 57,436 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
1
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
|
March 31, 2011 |
December 31, 2010 |
||||||
---|---|---|---|---|---|---|---|---|
|
(Unaudited) |
|
||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 204,328 | $ | 180,502 | ||||
Restricted cash and cash equivalents |
4,034 | 4,118 | ||||||
Accounts receivable, net of allowance of $271 and $213, respectively |
36,852 | 24,420 | ||||||
Deferred income taxes |
19,580 | 19,865 | ||||||
Deferred membership costs |
12,717 | 11,775 | ||||||
Prepaid income taxes |
1,916 | 8,539 | ||||||
Prepaid expenses and other current assets |
23,974 | 23,527 | ||||||
Total current assets |
303,401 | 272,746 | ||||||
Property and equipment, net |
50,567 | 50,900 | ||||||
Goodwill |
488,027 | 488,027 | ||||||
Intangible assets, net |
113,657 | 120,470 | ||||||
Deferred membership costs |
15,630 | 16,108 | ||||||
Deferred income taxes |
6,007 | 5,767 | ||||||
Other non-current assets |
22,017 | 24,366 | ||||||
TOTAL ASSETS |
$ | 999,306 | $ | 978,384 | ||||
LIABILITIES AND EQUITY |
||||||||
LIABILITIES: |
||||||||
Accounts payable, trade |
$ | 12,577 | $ | 11,302 | ||||
Deferred revenue |
107,306 | 94,651 | ||||||
Interest payable |
2,620 | 9,745 | ||||||
Accrued compensation and benefits |
11,289 | 14,941 | ||||||
Member deposits |
10,433 | 9,692 | ||||||
Accrued expenses and other current liabilities |
42,225 | 38,787 | ||||||
Current portion of long-term debt |
| | ||||||
Total current liabilities |
186,450 | 179,118 | ||||||
Long-term debt, net of current portion |
353,186 | 357,576 | ||||||
Other long-term liabilities |
10,983 | 11,697 | ||||||
Deferred revenue |
126,838 | 124,928 | ||||||
Deferred income taxes |
83,259 | 83,434 | ||||||
Total liabilities |
760,716 | 756,753 | ||||||
Redeemable noncontrolling interest |
422 | 419 | ||||||
Commitments and contingencies |
||||||||
STOCKHOLDERS' EQUITY: |
||||||||
Preferred stock $.01 par value; authorized 25,000,000 shares, of which 100,000 shares are designated Series A Junior Participating Preferred Stock, none issued and outstanding |
| | ||||||
Common stock $.01 par value; authorized 300,000,000 shares, 57,454,573 and 57,099,615 issued and outstanding shares, respectively |
575 | 571 | ||||||
Additional paid-in capital |
165,979 | 164,162 | ||||||
Retained earnings |
81,755 | 68,560 | ||||||
Accumulated other comprehensive loss |
(10,141 | ) | (12,081 | ) | ||||
Total stockholders' equity |
238,168 | 221,212 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 999,306 | $ | 978,384 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
2
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss) |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Common Stock | |
|
||||||||||||||||
|
Total Stockholders' Equity |
Additional Paid-in Capital |
Retained Earnings |
|||||||||||||||||
|
Amount | Shares | ||||||||||||||||||
|
(In thousands, except share data) |
|||||||||||||||||||
Balance as of December 31, 2010 |
$ | 221,212 | $ | 571 | 57,099,615 | $ | 164,162 | $ | 68,560 | $ | (12,081 | ) | ||||||||
Comprehensive income: |
||||||||||||||||||||
Net income attributable to common stockholders |
13,195 | | | | 13,195 | | ||||||||||||||
Foreign currency translation gains, net |
1,940 | | | | | 1,940 | ||||||||||||||
Comprehensive income |
15,135 | |||||||||||||||||||
Non-cash compensation expense |
3,046 | | | 3,046 | | | ||||||||||||||
Issuance of common stock upon exercise of stock options |
225 | | 29,638 | 225 | | | ||||||||||||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes |
(2,316 | ) | 4 | 325,320 | (2,320 | ) | | | ||||||||||||
Change in excess tax benefits from stock-based awards |
975 | | | 975 | | | ||||||||||||||
Deferred stock compensation expense |
(109 | ) | | | (109 | ) | | | ||||||||||||
Balance as of March 31, 2011 |
$ | 238,168 | $ | 575 | 57,454,573 | $ | 165,979 | $ | 81,755 | $ | (10,141 | ) | ||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
3
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Three Months Ended March 31, | |||||||
---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | ||||||
|
(In thousands) |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 13,198 | $ | 15,413 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Amortization expense of intangibles |
6,813 | 6,575 | ||||||
Amortization of debt issuance costs |
472 | 666 | ||||||
Depreciation expense |
3,290 | 2,448 | ||||||
Accretion of original issue discount |
610 | 550 | ||||||
Non-cash compensation expense |
3,046 | 2,494 | ||||||
Deferred income taxes |
108 | 448 | ||||||
Excess tax benefits from stock-based awards |
(1,218 | ) | (921 | ) | ||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(12,228 | ) | (13,319 | ) | ||||
Prepaid expenses and other current assets |
(235 | ) | (676 | ) | ||||
Accounts payable and other current liabilities |
(6,335 | ) | (4,883 | ) | ||||
Prepaid income taxes and income taxes payable |
7,363 | 7,954 | ||||||
Deferred revenue |
13,024 | 13,662 | ||||||
Other, net |
1,506 | 2,125 | ||||||
Net cash provided by operating activities |
29,414 | 32,536 | ||||||
Cash flows from investing activities: |
||||||||
Changes in restricted cash |
| 204 | ||||||
Capital expenditures |
(2,910 | ) | (3,616 | ) | ||||
Net cash used in investing activities |
(2,910 | ) | (3,412 | ) | ||||
Cash flows from financing activities: |
||||||||
Principal payments on term loan |
(5,000 | ) | (10,000 | ) | ||||
Proceeds from the exercise of stock options |
218 | 173 | ||||||
Proceeds from the exercise of warrants |
| 249 | ||||||
Vesting of restricted stock units, net of withholding taxes |
(2,253 | ) | (1,723 | ) | ||||
Excess tax benefits from stock-based awards |
1,218 | 921 | ||||||
Net cash used in financing activities |
(5,817 | ) | (10,380 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
3,139 | (1,673 | ) | |||||
Net increase in cash and cash equivalents |
23,826 | 17,071 | ||||||
Cash and cash equivalents at beginning of period |
180,502 | 160,014 | ||||||
Cash and cash equivalents at end of period |
$ | 204,328 | $ | 177,085 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest, net of amounts capitalized |
$ | 14,823 | $ | 15,116 | ||||
Income taxes, net of refunds |
$ | 536 | $ | 1,328 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
(Unaudited)
NOTE 1ORGANIZATION AND BASIS OF PRESENTATION
Company Overview
Interval Leisure Group, Inc., or ILG, is a leading global provider of membership and leisure services to the vacation industry. ILG consists of two operating segments. Membership and Exchange, our principal business segment, offers travel and leisure related products and services to owners of vacation interests and others primarily through various membership programs, as well as related services to resort developer clients. Management and Rental, our other business segment, provides hotel, condominium resort, timeshare resort and homeowners association management, and vacation rental services to both vacationers and vacation property owners.
The Membership and Exchange segment consists of Interval International Inc.'s businesses, referred to as Interval, and Trading Places International's, or TPI's, membership and exchange related line of business. The Management and Rental segment consists of Aston Hotels & Resorts, LLC and Maui Condo and Home, LLC, referred to as Aston, and TPI's management and rental related line of business. TPI offers exchange and leisure services to vacation owners, including management services to 20 resorts located throughout the mainland United States, Hawaii, and Mexico.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of ILG's management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not indicative of the results that may be expected for a full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in ILG's Annual Report on Form 10-K for the year ended December 31, 2010.
Restatement of Prior Financial Statements
While implementing the accounting for certain new costs associated with our Interval Platinum membership product following the launch in March 2011, we discovered errors in our accounting for certain deferred membership costs. These errors primarily related to the period of time over which certain deferred membership costs were amortized into our consolidated statements of income. The impact of these prior period misstatements to our consolidated financial statements resulted in the understatement of cost of sales and sales and marketing expense with a corresponding overstatement of deferred membership costs over multiple fiscal years through December 31, 2010.
In accordance with applicable accounting guidance, an adjustment to the financial statements for each individual prior period presented is required to reflect the correction of the period-specific effects of the error, if material. Based on our evaluation of relevant quantitative and qualitative factors, we determined the identified misstatements are immaterial to ILG's individual prior period consolidated financial statements, however, the cumulative correction of the prior period errors would be material to our current year consolidated financial statements. Consequently, we have restated the accompanying
5
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 1ORGANIZATION AND BASIS OF PRESENTATION (Continued)
consolidated balance sheet as of December 31, 2010 and the opening December 31, 2010 balances presented in our consolidated statement of stockholders' equity as of March 31, 2011, appearing herein, from amounts previously reported to correct the prior period misstatements by the write-off of the related deferred membership costs with a corresponding reduction to retained earnings.
The impact of these misstatements to our 2010 annual and interim consolidated statements of income and cash flows is inconsequential for restatement and, accordingly, such amounts have not been restated and have instead been corrected in the three months ended March 31, 2011. Additionally, the impact of these misstatements is inconsequential to our 2009 statement of cash flows as the impact to individual line items within operating activities is not material and there was no impact to net cash provided by (used in) operating, investing or financing activities. However, we will restate the 2009 statement of cash flows as it appears in our 2011 Annual Report on Form 10-K to reflect changes to individual line items within operating activities.
The tables below summarize the effect of the restatement of previously reported consolidated financial statements for the periods that will be presented in our 2011 Annual Report on Form 10-K (in thousands, except per share data).
|
As of December 31, 2010 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
As Previously Reported |
Adjustment | As Restated | |||||||
Consolidated Balance Sheet |
||||||||||
Deferred income taxes (current) |
$ |
19,219 |
$ |
646 |
$ |
19,865 |
||||
Deferred income taxes (non-current) |
5,487 | 280 | 5,767 | |||||||
Deferred membership costs (current) |
13,874 | (2,099 | ) | 11,775 | ||||||
Deferred membership costs (non-current) |
19,599 | (3,491 | ) | 16,108 | ||||||
Total assets |
983,048 | (4,664 | ) | 978,384 | ||||||
Deferred income taxes (non-current) |
84,575 |
(1,141 |
) |
83,434 |
||||||
Retained earnings |
72,205 | (3,645 | ) | 68,560 | ||||||
Accumulated other comprehensive income (loss) |
(12,203 | ) | 122 | (12,081 | ) | |||||
Total stockholders' equity |
224,735 | (3,523 | ) | 221,212 | ||||||
Total liabilities and equity |
983,048 | (4,664 | ) | 978,384 |
|
Year Ended December 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
As Previously Reported |
Adjustment | As Restated | |||||||
Consolidated Statement of Income |
||||||||||
Cost of sales |
$ |
127,406 |
$ |
507 |
$ |
127,913 |
||||
Gross profit |
277,580 | (507 | ) | 277,073 | ||||||
Sales and marketing expense |
52,029 | 122 | 52,151 | |||||||
Earnings before income taxes and noncontrolling interest |
64,267 | (629 | ) | 63,638 | ||||||
Income tax benefit (provision) |
(26,058 | ) | 240 | (25,818 | ) | |||||
Net income attributable to common stockholders |
38,213 | (389 | ) | 37,824 | ||||||
Earnings per share attributable to common stockholders: |
||||||||||
Basic |
0.68 | (0.01 | ) | 0.67 | ||||||
Diluted |
0.67 | (0.01 | ) | 0.66 |
6
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 1ORGANIZATION AND BASIS OF PRESENTATION (Continued)
The cumulative after-tax effect of the prior period misstatements of approximately $3.6 million (net of tax of $2.1 million) was recorded as a reduction to retained earnings in our accompanying consolidated balance sheet as of December 31, 2010 and the opening December 31, 2010 balances presented in our consolidated statement of stockholders' equity as of March 31, 2011. The cumulative after-tax effect of the prior period misstatements of approximately $3.2 million (net of tax of $1.9 million) will be presented in our 2011 Annual Report on Form 10-K as a reduction to retained earnings as of January 1, 2009. In accordance with ASC 740, "Income Taxes" ("ASC 740"), the tax effect of these adjustments were recorded directly to retained earnings and to the related deferred income tax accounts for deferred membership costs.
Seasonality
Revenue at ILG is influenced by the seasonal nature of travel. The Membership and Exchange businesses recognize exchange and Getaway revenue based on confirmation of the vacation, with the first quarter generally experiencing higher revenue and the fourth quarter generally experiencing lower revenue. The Management and Rental businesses recognize revenue based on occupancy, with the first and third quarters generally generating higher revenue and the second and fourth quarters generally generating lower revenue.
NOTE 2SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies were described in Note 2 to our audited consolidated financial statements included in our 2010 Annual Report on Form 10-K. There have been no significant changes in our significant accounting policies for the three months ended March 31, 2011.
Accounting Estimates
ILG's management is required to make certain estimates and assumptions during the preparation of its consolidated financial statements in accordance with U.S. GAAP. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.
Significant estimates underlying the accompanying consolidated financial statements include: the recovery of goodwill and long-lived and other intangible assets; purchase price allocations; the determination of deferred income taxes including related valuation allowances; the determination of deferred revenue and membership costs; and the determination of stock-based compensation.
Earnings per Share
Basic earnings per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share attributable to common stockholders is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive securities are common stock equivalents that are freely
7
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 2SIGNIFICANT ACCOUNTING POLICIES (Continued)
exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the assumed exercise of common stock options and the vesting of restricted stock units ("RSUs") using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is antidilutive. The computations of diluted earnings per share available to common stockholders do not include approximately 1.2 million stock options and RSUs for the three months ended March 31, 2011 and 1.4 million stock options and RSUs for the three months ended March 31, 2010, as the effect of their inclusion would have been antidilutive to earnings per share.
The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows (in thousands):
|
Three Months Ended March 31, |
||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Basic weighted average shares of common stock outstanding |
57,188 | 56,627 | |||||
Net effect of common stock equivalents assumed to be vested related to RSUs |
858 | 749 | |||||
Net effect of common stock equivalents assumed to be exercised related to stock options held by non-employees |
38 | 60 | |||||
Diluted weighted average shares of common stock outstanding |
58,084 | 57,436 | |||||
Recent Accounting Pronouncements
With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements since the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 that are of significance, or potential significance, to ILG based on our current operations. The following summary of recent accounting pronouncements is not intended to be an exhaustive description of the respective pronouncement.
In April 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") 2011-02, "A Creditor's Determination of Whether Restructuring Is a Troubled Debt Restructuring," ("ASU 2011-02"). ASU 2011-02 provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring. Specifically, creditors will be required to consider whether the debtor is experiencing financial difficulties or whether the creditor has granted a concession. This guidance will be effective for us on September 1, 2011, the first interim period beginning on or after June 15, 2011. We will be required to apply this ASU retrospectively for all modifications and restructuring activities that have occurred from January 1, 2011. We are currently assessing the future impact of this new accounting update to our consolidated financial statements.
8
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 2SIGNIFICANT ACCOUNTING POLICIES (Continued)
Adopted Accounting Pronouncements
In December 2010, the FASB issued ASU 2010-29, "Disclosure of Supplementary Pro Forma Information for Business Combinations" ("ASU 2010-29"). ASU 2010-29 requires public entities that present comparative financial statements to disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred as of the beginning of the comparable prior annual reporting period only. The ASU also expands the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The ASU is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. We adopted this guidance as of January 1, 2011. The adoption did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.
In July 2010, the FASB issued ASU 2010-20, "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses" ("ASU 2010-20"). ASU 2010-20 requires enhanced disclosures about the credit quality of financing receivables and the allowance for credit losses. These enhanced disclosures include, but are not limited to, a greater level of disaggregated and qualitative information about the credit quality of their financing receivables and their allowances for credit losses. As of December 31, 2010, we adopted the required disclosures, which was effective for interim and annual reporting periods ending on or after December 15, 2010. As of January 1, 2011, we adopted the required disclosures about activity that occurs during a reporting period, which is effective for interim and annual reporting periods beginning on or after December 15, 2010. The full adoption of ASU 2010-20 as of January 1, 2011 did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.
In January 2010, the FASB issued ASU 2010-06, "Improving Disclosures About Fair Value Measurements," (amendments to ASC Topic 820, "Fair Value Measurements and Disclosures") which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The ASU also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. As of January 1, 2010, we adopted the requisite disclosures regarding significant transfers between Level 1 and 2 fair value measurements, which was effective for annual reporting periods beginning after December 15, 2009. As of January 1, 2011, we adopted the required Level 3 reconciliation disclosures which were effective for annual periods beginning after December 15, 2010. The full adoption of ASU 2010-06 as of January 1, 2011 did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.
In October 2009, the FASB issued ASU 2009-13, "Multiple-Deliverable Revenue Arrangements," (amendments to ASC Topic 605, "Revenue Recognition") ("ASU 2009-13"). ASU 2009-13 updates the existing multiple-element revenue arrangements guidance included under ASC 605-25. The revised
9
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 2SIGNIFICANT ACCOUNTING POLICIES (Continued)
guidance modifies the criteria for recognizing revenue in multiple element arrangements and expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. We prospectively adopted this guidance as of January 1, 2011. The adoption did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures and is not expected to have a material effect in future periods based on multiple-element arrangements in effect at adoption. Additionally, as of January 1, 2011, the prospective adoption of this guidance did not result in any change in the units of accounting, the allocation of consideration to those units of accounting, or the pattern and timing of revenue recognition of our current multiple-element arrangements.
NOTE 3GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Pursuant to FASB guidance as codified within ASC 350, "IntangiblesGoodwill and Other," goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. ILG considers our Membership and Exchange and Management and Rental segments to be individual reporting units which are also individual operating segments of ILG. ILG tests goodwill and other indefinite-lived intangible assets for impairment annually as of October 1, or more frequently if events or changes in circumstances indicate that the assets might be impaired. If the carrying amount of a reporting unit's goodwill exceeds its implied fair value, an impairment loss equal to the excess is recorded. If the carrying amount of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss equal to the excess is recorded.
As of October 1, 2010, we reviewed the carrying value of goodwill and other intangible assets of each of our reporting units. As of October 1, 2010, the Membership and Exchange and Management and Rental reporting units' goodwill was $474.7 million and $5.2 million, respectively. We performed the first step of the impairment test on both our reporting units and concluded that each reporting unit's fair value exceeded its carrying value and, therefore, the second step of the impairment test was not necessary.
From the date of our last impairment test, October 1, 2010, through March 31, 2011, we did not identify any triggering events that would more likely than not reduce the fair value of either of our reporting units below its carrying value which would have required an interim impairment test.
10
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 3GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)
The balance of goodwill and other intangible assets, net is as follows (in thousands):
|
March 31, 2011 | December 31, 2010 | ||||||
---|---|---|---|---|---|---|---|---|
Goodwill |
$ | 488,027 | $ | 488,027 | ||||
Other intangible assets with indefinite lives |
37,616 | 37,616 | ||||||
Intangible assets with definite lives, net |
76,041 | 82,854 | ||||||
Total goodwill and other intangible assets, net |
$ | 601,684 | $ | 608,497 | ||||
There were no changes in the carrying amount of goodwill for the three months ended March 31, 2011. Goodwill related to the Membership and Exchange and Management and Rental segments (each a reporting unit) was $480.6 million and $7.4 million, respectively, as of March 31, 2011 and December 31, 2010.
Other Intangible Assets
Intangible assets with indefinite lives relate principally to tradenames and trademarks. At March 31, 2011, intangible assets with definite lives relate to the following (in thousands):
|
Cost | Accumulated Amortization | Net | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Customer relationships |
$ | 129,500 | $ | (110,355 | ) | $ | 19,145 | ||||
Purchase agreements |
75,879 | (62,793 | ) | 13,086 | |||||||
Resort management contracts |
48,166 | (12,677 | ) | 35,489 | |||||||
Technology |
24,726 | (24,641 | ) | 85 | |||||||
Other |
17,427 | (9,191 | ) | 8,236 | |||||||
Total |
$ | 295,698 | $ | (219,657 | ) | $ | 76,041 | ||||
At December 31, 2010, intangible assets with definite lives relate to the following (in thousands):
|
Cost | Accumulated Amortization | Net | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Customer relationships |
$ | 129,500 | $ | (107,116 | ) | $ | 22,384 | ||||
Purchase agreements |
75,879 | (60,835 | ) | 15,044 | |||||||
Resort management contracts |
48,166 | (11,738 | ) | 36,428 | |||||||
Technology |
24,726 | (24,633 | ) | 93 | |||||||
Other |
17,427 | (8,522 | ) | 8,905 | |||||||
Total |
$ | 295,698 | $ | (212,844 | ) | $ | 82,854 | ||||
Amortization of intangible assets with definite lives is computed primarily on a straight-line basis. Total amortization expense for intangible assets with definite lives was $6.8 million and $6.6 million for
11
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 3GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)
the three months ended March 31, 2011 and 2010, respectively. Based on December 31, 2010 balances, such amortization for the next five years and thereafter is estimated to be as follows (in thousands):
Years Ending December 31,
|
|
|||
---|---|---|---|---|
2011 |
$ | 27,184 | ||
2012 |
20,828 | |||
2013 |
5,447 | |||
2014 |
5,291 | |||
2015 |
5,183 | |||
2016 and thereafter |
18,921 | |||
|
$ | 82,854 | ||
NOTE 4PROPERTY AND EQUIPMENT
Property and equipment, net is as follows (in thousands):
|
March 31, 2011 | December 31, 2010 | ||||||
---|---|---|---|---|---|---|---|---|
Computer equipment |
$ | 19,014 | $ | 18,189 | ||||
Capitalized software |
69,166 | 67,054 | ||||||
Buildings and leasehold improvements |
21,307 | 21,222 | ||||||
Furniture and other equipment |
11,213 | 11,088 | ||||||
Projects in progress |
1,067 | 1,128 | ||||||
|
121,767 | 118,681 | ||||||
Less: accumulated depreciation and amortization |
(71,200 | ) | (67,781 | ) | ||||
Total property and equipment, net |
$ | 50,567 | $ | 50,900 | ||||
NOTE 5LONG-TERM DEBT
Long-term debt is as follows (in thousands):
|
March 31, 2011 | December 31, 2010 | ||||||
---|---|---|---|---|---|---|---|---|
9.5% Interval Senior Notes, net of unamortized discount of $17,814 and $18,424, respectively |
$ | 282,186 | $ | 281,576 | ||||
Term loan (interest rate of 2.75% at March 31, 2011 and 2.76% at December 31, 2010) |
71,000 | 76,000 | ||||||
Revolving credit facility |
| | ||||||
Total debt |
353,186 | 357,576 | ||||||
Less: current maturities |
| | ||||||
Total long-term debt, net of current maturities |
$ | 353,186 | $ | 357,576 | ||||
12
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 5LONG-TERM DEBT (Continued)
9.5% Interval Senior Notes
In connection with the spin-off of ILG from IAC/InterActiveCorp ("IAC"), on July 17, 2008, Interval Acquisition Corp., a subsidiary of ILG, ("Issuer") agreed to issue $300.0 million of aggregate principal amount of 9.5% Senior Notes due 2016 ("Interval Senior Notes") to IAC, and IAC agreed to exchange such Interval Senior Notes for certain of IAC's 7% senior unsecured notes due 2013 pursuant to a notes exchange and consent agreement. The issuance occurred on August 19, 2008 with original issue discount of $23.5 million, based on the difference between the interest rate on the notes and the effective interest rate that would have been payable on the notes if issued in a market transaction based on market conditions existing on July 17, 2008, the date of pricing, estimated to be 11%. The exchange occurred on August 20, 2008. Interest on the Interval Senior Notes is payable semi-annually in cash in arrears on September 1 and March 1 of each year. The Interval Senior Notes are guaranteed by all entities that are domestic subsidiaries of the Issuer and by ILG. The Interval Senior Notes are redeemable by the Issuer in whole or in part, on or after September 1, 2012, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest. In addition, in the event of a change of control (as defined in the indenture), the Issuer is obligated to make an offer to all holders to purchase the Interval Senior Notes at a price equal to 101% of the face amount. The change of control put option is a derivative that, upon adoption of ASU 2010-08, is not required to be bifurcated from the host instrument. Prior to the adoption of ASU 2010-08, this derivative was not bifurcated as the value of the derivative was not material to our financial position and results of operations. Subject to specified exceptions, the Issuer is required to make an offer to purchase Interval Senior Notes at a price equal to 100% of the face amount, in the event the Issuer or its restricted subsidiaries complete one or more asset sales and more than $25.0 million of the aggregate net proceeds are not invested (or committed to be invested) in the business or used to repay senior debt within one year after receipt of such proceeds. The original issue discount is being amortized to "Interest expense" using the effective interest method through maturity.
Senior Secured Credit Facility
In connection with the spin-off of ILG, on July 25, 2008, the Issuer entered into a senior secured credit facility with a maturity of five years, which consists of a $150.0 million term loan (the "Term Loan"), of which $71.0 million is outstanding at March 31, 2011, and a $50.0 million revolving credit facility.
As of March 31, 2011, the remaining principal amount of the Term Loan is payable quarterly through July 25, 2013 ($4.3 million quarterly for fiscal year 2012, excluding the first quarter 2012 which has been voluntarily pre-paid, and approximately $19.3 million quarterly thereafter). During 2010, we paid $40.0 million of principal payments on the Term Loan, which included voluntary prepayments of scheduled principal payments through December 31, 2011 and $18.3 million applied pro rata to the remaining scheduled principal payments. During the first quarter 2011, we paid $5.0 million of principal payments on the term loan which included a voluntary prepayment of the March 31, 2012 scheduled principal payment and $0.6 million which was applied pro rata to the remaining scheduled principal payments. Any principal amounts outstanding under the revolving credit facility are due at maturity. The interest rates per annum applicable to loans under the senior secured credit facility are, at the
13
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 5LONG-TERM DEBT (Continued)
Issuer's option, equal to either a base rate or a LIBOR rate plus an applicable margin, which varies with the total leverage ratio of the Issuer. As of March 31, 2011, the applicable margin was 2.50% per annum for LIBOR term loans, 2.00% per annum for LIBOR revolving loans, 1.50% per annum for base rate term loans and 1.00% per annum for base rate revolving loans. The revolving credit facility has a facility fee of 0.50%
We have a letter of credit sublimit as part of our revolving credit facility. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which totaled $20,000 at March 31, 2011, leaving $50.0 million of borrowing capacity at March 31, 2011. There have been no borrowings under the revolving credit facility through March 31, 2011.
All obligations under the senior secured credit facilities are unconditionally guaranteed by ILG and each of the Issuer's existing and future direct and indirect domestic subsidiaries, subject to certain exceptions, and are secured by substantially all their assets. The secured credit facility ranks prior to the Interval Senior Notes to the extent of the value of the assets that secure it.
Restrictions and Covenants
The Interval Senior Notes and senior secured credit facility have various financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness, to incur additional liens, issue redeemable stock and preferred stock, pay dividends or distributions or redeem or repurchase capital stock, prepay, redeem or repurchase debt, make loans and investments, enter into agreements that restrict distributions from our subsidiaries, sell assets and capital stock of our subsidiaries, enter into certain transactions with affiliates and consolidate or merge with or into or sell substantially all of our assets to another person. The senior secured credit facility requires us to meet certain financial covenants requiring the maintenance of a maximum consolidated leverage ratio of consolidated debt over consolidated Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined in the credit agreement (3.65 from January 1, 2010 through December 31, 2010 and 3.40 thereafter), and a minimum consolidated interest coverage ratio of consolidated EBITDA over consolidated interest expense, as defined in the credit agreement (3.00 from January 1, 2010 and thereafter). In addition, we may be required to use a portion of our consolidated excess cash flow (as defined in the credit agreement) to prepay the senior secured credit facility based on our consolidated leverage ratio at the end of each fiscal year. If our consolidated leverage ratio equals or exceeds 3.5, we must prepay 50% of consolidated excess cash flow, if our consolidated leverage ratio equals or exceeds 2.85 but is less than 3.5, we must prepay 25% of consolidated excess cash flow, and if our consolidated leverage ratio is less than 2.85, then no prepayment is required. As of March 31, 2011, ILG was in compliance in all material respects with the requirements of all applicable financial and operating covenants and our consolidated leverage ratio and consolidated interest coverage ratio under the credit agreement were 2.48 and 4.53, respectively.
14
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 5LONG-TERM DEBT (Continued)
Debt Issuance Costs
At March 31, 2011 and December 31, 2010, total unamortized debt issue costs were $6.8 million, net of $6.6 million of accumulated amortization and $7.3 million, net of $6.2 million of accumulated amortization, respectively, which was included in "Other non-current assets." Debt issuance costs are amortized to "Interest expense" through maturity of the related debt using the effective interest method.
NOTE 6FAIR VALUE MEASUREMENTS
In accordance with ASC Topic 820, "Fair Value Measurements and Disclosures," ("ASC 820") the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1Observable inputs that reflect quoted prices in active markets
Level 2Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3Unobservable inputs in which little or no market data exists, therefore requiring the company to develop its own assumptions
As part of the acquisition of TPI in November 2010, we may be obligated to pay contingent consideration in an amount ranging from zero up to a total of $5.0 million to TPI's former owners during the three year period subsequent to the acquisition should TPI meet certain earnings targets. We calculated the fair value of the contingent consideration as of November 30, 2010, the acquisition date, to be $2.7 million using a probability-weighted income approach and based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. Other than the accretion of interest of approximately $30,000 on the discounted fair value of the contingent consideration, there have been no subsequent changes in the fair value of this contingent consideration of which $0.9 million is included in other short-term liabilities and $1.9 million is included in other long-term liabilities in our consolidated balance sheet as of March 31, 2011. Changes in the fair value of the contingent consideration resulting from events after the acquisition date will be recognized in earnings in our consolidated statements of income, and may result from changes in discount periods and rates and changes in the timing and amount of financial estimates.
As of March 31, 2011, there have been no transfers of inputs used in measuring fair value between the three-tier fair value hierarchy since December 31, 2010.
Fair Value of Financial Instruments
The estimated fair value of financial instruments below has been determined using available market information and appropriate valuation methodologies, as applicable. There have been no changes in the methods and significant assumptions used to estimate the fair value of financial
15
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 6FAIR VALUE MEASUREMENTS (Continued)
instruments during the three months ended March 31, 2011. Our financial instruments include guarantees, letters of credit and surety bonds. These commitments are in place to facilitate our commercial operations.
|
March 31, 2011 | December 31, 2010 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
|||||||||
|
(In thousands) |
||||||||||||
Cash and cash equivalents |
$ | 204,328 | $ | 204,328 | $ | 180,502 | $ | 180,502 | |||||
Restricted cash and cash equivalents |
4,034 | 4,034 | 4,118 | 4,118 | |||||||||
Total debt |
(353,186 | ) | (398,000 | ) | (357,576 | ) | (403,000 | ) | |||||
Guarantees, surety bonds and letters of credit |
N/A | (20,085 | ) | N/A | (21,238 | ) |
The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reflected in the accompanying consolidated balance sheets approximate fair value as they are redeemable at par upon notice or maintained with various high-quality financial institutions and have original maturities of three months or less. Under the fair value hierarchy established in ASC 820, cash and cash equivalents and restricted cash and cash equivalents are stated at fair value based on quoted prices in active markets for identical assets or liabilities.
Borrowings under our Interval Senior Notes and term loan are carried at historical cost and adjusted for amortization of the discount on our Interval Senior Notes and principal payments. The fair value of these borrowings was estimated using quoted prices for our Interval Senior Notes as of March 31, 2011 and December 31, 2010 and inputs other than quoted prices that are observable for the term loan as of March 31, 2011 and December 31, 2010, either directly or indirectly, which are intrinsic to the terms of the related agreement, such as interest rates and credit risk. Due to the infrequency at which trades occur on our Interval Senior Notes, the quoted prices used to arrive at the fair value of our Interval Senior Notes are from an inactive market and thus represent a Level 2 input pursuant to ASC 820.
The guarantees, surety bonds, and letters of credit represent liabilities that are carried on our balance sheet only when a future related contingent event becomes probable and reasonably estimable.
NOTE 7STOCKHOLDERS' EQUITY
ILG has 300 million authorized shares of common stock, par value of $.01 per share. At March 31, 2011, there were 57.5 million shares of ILG common stock issued and outstanding.
ILG has 25 million authorized shares of preferred stock, par value $.01 per share, none of which are issued or outstanding as of March 31, 2011. The Board of Directors has the authority to issue the preferred stock in one or more series and to establish the rights, preferences, and dividends.
Stockholder Rights Plan
In June 2009, ILG's Board of Directors approved the creation of a Series A Junior Participating Preferred Stock, adopted a stockholders rights plan and declared a dividend of one right for each outstanding share of common stock held by our stockholders of record as of the close of business on June 22, 2009. The rights attach to any additional shares of common stock issued after June 22, 2009.
16
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 7STOCKHOLDERS' EQUITY (Continued)
These rights, which trade with the shares of our common stock, currently are not exercisable. Under the rights plan, these rights will be exercisable if a person or group acquires or commences a tender or exchange offer for 15% or more of our common stock. The rights plan provides certain exceptions for acquisitions by Liberty Media Corporation in accordance with an agreement entered into with ILG in connection with its spin-off from IAC. If the rights become exercisable, each right will permit its holder, other than the "acquiring person," to purchase from us shares of common stock at a 50% discount to the then prevailing market price. As a result, the rights will cause substantial dilution to a person or group that becomes an "acquiring person" on terms not approved by our Board of Directors.
NOTE 8BENEFIT PLANS
Under a retirement savings plan sponsored by ILG, qualified under Section 401(k) of the Internal Revenue Code, participating employees may contribute up to 50.0% of their pre-tax earnings, but not more than statutory limits. ILG provides a discretionary match under the ILG plan of fifty cents for each dollar a participant contributed into the plan with a maximum contribution of 3% of a participant's eligible earnings, subject to IRS restrictions. On March 1, 2011, we reinstated the matching contributions under the 401(k) plan which had been suspended since March 1, 2009. Matching contributions for the ILG plan were approximately $0.2 million for the three months ended March 31, 2011. Matching contributions were invested in the same manner as each participant's voluntary contributions in the investment options provided under the plan.
Effective August 20, 2008, a deferred compensation plan (the "Director Plan") was established to provide non-employee directors of ILG an option to defer director fees on a tax-deferred basis. Participants in the Director Plan are allowed to defer a portion or all of their compensation and are 100% vested in their respective deferrals and earnings. With respect to director fees earned for services performed after the date of such election, participants may choose from receiving cash or stock at the end of the deferral period. ILG has reserved 100,000 shares of common stock for issuance pursuant to this plan, of which 23,819 share units were outstanding at March 31, 2011. ILG does not provide matching or discretionary contributions to participants in the Director Plan. Any deferred compensation elected to be received in stock is included in diluted earnings per share.
NOTE 9STOCK-BASED COMPENSATION
RSUs are awards in the form of phantom shares or units, denominated in a hypothetical equivalent number of shares of ILG common stock and with the value of each award equal to the fair value of ILG common stock at the date of grant. All outstanding award agreements provide for settlement, upon vesting, in stock for U.S. employees. For non-U.S. employees, all grants issued prior to the spin-off provide for settlement upon vesting in cash, while grants since the spin-off provide for settlement upon vesting in stock. Each RSU is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. Certain RSUs, in addition, are subject to attaining specific performance criteria. ILG recognizes non-cash compensation expense for all RSUs held by ILG's employees (including RSUs for stock of IAC or the other spun-off companies held by ILG employees) for which vesting is considered probable. For RSUs to be settled in stock, the accounting charge is measured at the grant date as the fair value of ILG common stock and expensed on a straight-line basis as non-cash compensation over the vesting term. The expense associated with
17
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 9STOCK-BASED COMPENSATION (Continued)
RSU awards (including RSUs for stock of IAC or the other spun-off companies) to be settled in cash is initially measured at fair value at the grant date and expensed ratably over the vesting term, recording a liability subject to mark-to-market adjustments for changes in the price of the respective common stock, as compensation expense within general and administrative expense.
On August 20, 2008, ILG established the ILG 2008 Stock and Annual Incentive Plan (the "2008 Incentive Plan") which provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. In connection with the spin-off, certain prior awards under IAC's plans were adjusted to convert, in whole or in part, to awards under the 2008 Incentive Plan under which RSUs and options relating to 2.9 million shares of common stock were issued. At the time of the spin-off, an additional 5.0 million shares of common stock were reserved for issuance under the 2008 Incentive Plan. As of March 31, 2011, ILG has 2.1 million remaining shares available for future issuance under this plan.
On March 2, 2011 and 2010, the Compensation Committee granted approximately 378,000 and 460,000 RSUs, respectively, vesting over three to four years, to certain officers and employees of ILG and its subsidiaries. Of these RSUs granted in 2011 and 2010, approximately 50,000 and 64,000, respectively, vest in three years and are subject to performance criteria that could result between 0% and 200% of these awards being earned based on EBITDA targets.
Non-cash compensation expense related to RSUs for the three months ended March 31, 2011 and 2010 was $3.0 million and $2.5 million, respectively. At March 31, 2011, there was approximately $21.4 million of unrecognized compensation cost, net of estimated forfeitures, related to RSUs, which is currently expected to be recognized over a weighted average period of approximately 1.9 years.
The amount of stock-based compensation expense recognized in the consolidated statements of income is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods for any changes to the estimated forfeiture rate from that previously estimated. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is equal to the portion of the grant-date value of the award tranche that is actually vested at that date.
Non-cash stock-based compensation expense related to equity awards is included in the following line items in the accompanying consolidated statements of income for the three months ended March 31, 2011 and 2010 (in thousands):
|
Three Months Ended March 31, |
||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Cost of sales |
$ | 161 | $ | 110 | |||
Selling and marketing expense |
240 | 145 | |||||
General and administrative expense |
2,645 | 2,239 | |||||
Non-cash compensation expense |
$ | 3,046 | $ | 2,494 | |||
18
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 9STOCK-BASED COMPENSATION (Continued)
The following table summarizes RSU activity during the three months ended March 31, 2011:
|
Shares | Weighted- Average Grant Date Fair Value |
|||||
---|---|---|---|---|---|---|---|
|
(In thousands) |
|
|||||
Non-vested RSUs at January 1 |
2,510 | $ | 12.04 | ||||
Granted |
378 | 16.63 | |||||
Vested |
(482 | ) | 11.90 | ||||
Non-vested RSUs at March 31 |
2,406 | $ | 12.79 | ||||
In connection with the acquisition of Aston by ILG in 2007, a member of Aston's management was granted non-voting restricted common equity in Aston. This award was granted on May 31, 2007 and was initially measured at fair value, which is being amortized over the vesting period. This award vests ratably over four and a half years, or earlier based upon the occurrence of certain prescribed events. These shares are subject to a put right by the holder and a call right by ILG, which are not exercisable until the first quarter of 2013 and annually thereafter. The value of these shares upon exercise of the put or call is equal to their fair market value, determined by negotiation or arbitration, reduced by the accreted value of the preferred interest that was taken by ILG upon the purchase of Aston. The initial value of the preferred interest was equal to the acquisition price of Aston. The preferred interest accretes at a 10% annual rate. Upon exercise of the put or call, the consideration payable can be denominated in ILG shares, cash or a combination thereof at ILG's option. An additional put right by the holder and call right by ILG would require, upon exercise, the purchase of these non-voting common shares by ILG immediately prior to a registered public offering by Aston, at the public offering price. The unrecognized compensation cost related to this equity award was $0.1 million at March 31, 2011 and December 31, 2010.
NOTE 10INCOME TAXES
ILG calculates its interim income tax provision in accordance with ASC 740. At the end of each interim period, ILG makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur. In addition, the effect of a change in enacted tax laws or rates, tax status, or judgment on the realizability of a beginning-of-the-year deferred tax asset in future years is recognized in the interim period in which the change occurs.
The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, additional information is obtained or ILG's tax environment
19
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 10INCOME TAXES (Continued)
changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on prior quarters is included in tax expense for the current quarter.
A valuation allowance for deferred tax assets is provided when it is more likely than not that certain deferred tax assets will not be realized. Realization is dependent upon the generation of future taxable income or the reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. We consider the history of taxable income in recent years, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies to make this assessment.
For the three months ended March 31, 2011, ILG recorded an income tax provision for continuing operations of $8.0 million, which represents an effective tax rate of 37.8%. This tax rate is higher than the federal statutory rate of 35% due principally to state and local income taxes partially offset by foreign income taxed at lower rates. During the three months ended March 31, 2011, the effective tax rate decreased due to other income tax items, which includes the decrease in unrecognized tax benefits associated with the expiration of the statute of limitations related to foreign taxes.
For the three months ended March 31, 2010, ILG recorded an income tax provision for continuing operations of $9.7 million, which represents an effective tax rate of 38.7%. This tax rate is higher than the federal statutory rate of 35% due principally to state and local income taxes partially offset by foreign income taxed at lower rates.
As of March 31, 2011 and December 31, 2010, ILG had unrecognized tax benefits of $0.9 million and $1.0 million, respectively. During the three months ended March 31, 2011, the unrecognized tax benefits decreased by approximately $0.1 million as a result of the expiration of the statute of limitations related to foreign taxes. ILG recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. During the three months ended March 31, 2011, interest and penalties decreased by approximately $0.1 million as a result of the expiration of the statute of limitations related to foreign taxes. There were no material accruals for interest or penalties for the three months ended March 31, 2011. As of March 31, 2011, ILG had accrued $0.8 million for interest and penalties.
ILG believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $0.1 million within twelve months of the current reporting date due primarily to the expiration of the statute of limitations related to foreign taxes. An estimate of other changes in unrecognized tax benefits cannot be made, but is not expected to be significant.
By virtue of previously filed separate company and consolidated tax returns with IAC, ILG is routinely under audit by federal, state, local and foreign taxing authorities. These audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay assessments that may result from examination of prior year returns; however, the amount paid upon resolution of issues raised may differ from the amount provided. Differences between the reserves for tax contingencies and the amounts owed by ILG are recorded in the period they become known. Under the Tax Sharing Agreement, IAC indemnifies ILG for all consolidated tax liabilities and related interest and penalties for the pre-spin period.
20
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 10INCOME TAXES (Continued)
The Internal Revenue Service ("IRS") has completed its review of IAC's consolidated tax returns for the years ended December 31, 2001 through 2003, which includes our operations from September 24, 2002, our date of acquisition by IAC, and the proposed settlement, has been submitted to the Joint Committee of Taxation for approval. The IRS is currently examining IAC's consolidated tax returns for the years ended December 31, 2004 through 2006, which also includes our operations. The statute of limitations for the years 2001 through 2006 has currently been extended to December 31, 2012. Various IAC consolidated tax returns that include our operations, filed with state and local jurisdictions, are currently under examination, the most significant of which are California, New York and New York City for various tax years beginning with December 31, 2003. The IRS is also currently examining ILG's Federal consolidated tax return for the short period following the spin-off and ended December 31, 2008. This examination is expected to be completed prior to the expiration of the statute of limitations in 2012. Additionally, subsequent to March 31, 2011, ILG received a notice from the State of Florida that the consolidated state tax return for the short period following the spin-off and ended December 31, 2008 as well as for the tax year ended December 31, 2009, will be examined.
During 2010, the U.K. Finance Act of 2010 was enacted, which reduced the U.K. corporate income tax rate from 28% to 27%, effective April 1, 2011. The impact of the U.K. rate reduction, which was not significant to ILG's effective tax rate was reflected in the reporting period when the law was enacted. It reduced our U.K. net deferred tax asset and increased income tax expense. The change in the corporate tax rate initially negatively impacted income tax expense as the future benefit expected to be realized from our U.K. net deferred tax assets decreases; however, going forward, the lower corporate tax rate will decrease income tax expense and favorably impact our effective tax rate.
Tax Sharing Agreement
In connection with the spin-off, we entered into a Tax Sharing Agreement with members of the IAC group that were spun-off. As of September 21, 2010, various restrictions under the Tax Sharing Agreement lapsed.
NOTE 11SEGMENT INFORMATION
The overall concept that ILG employs in determining its operating segments and related financial information is to present them in a manner consistent with how the chief operating decision maker views the businesses, how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of products or services offered or the target market. ILG consists of two operating segments which are also reportable segments. Membership and Exchange, our principal business segment, offers travel and leisure related products and services to owners of vacation interests and others primarily through various membership programs, as well as related services to resort developer clients. Management and Rental, our other business segment, provides hotel, condominium resort, timeshare resort and homeowners association management, and vacation rental services to both vacationers and vacation property owners.
21
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 11SEGMENT INFORMATION (Continued)
Information on reportable segments and reconciliation to consolidated operating income is as follows (in thousands):
|
Three Months Ended March 31, |
||||||||
---|---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||||
Membership and Exchange |
|||||||||
Revenue |
$ | 96,428 | $ | 97,541 | |||||
Cost of sales |
22,646 | 21,504 | |||||||
Gross profit |
73,782 | 76,037 | |||||||
Selling and marketing expense |
12,970 | 12,722 | |||||||
General and administrative expense |
22,167 | 21,102 | |||||||
Amortization expense of intangibles |
5,424 | 5,257 | |||||||
Depreciation expense |
3,027 | 2,260 | |||||||
Segment operating income |
$ | 30,194 | $ | 34,696 | |||||
Management and Rental |
|||||||||
Management fee revenue |
$ | 8,927 | $ | 5,984 | |||||
Pass-through revenue |
11,628 | 10,313 | |||||||
Total revenue |
20,555 | 16,297 | |||||||
Cost of sales |
14,877 | 12,677 | |||||||
Gross profit |
5,678 | 3,620 | |||||||
Selling and marketing expense |
862 | 809 | |||||||
General and administrative expense |
2,148 | 1,188 | |||||||
Amortization expense of intangibles |
1,389 | 1,318 | |||||||
Depreciation expense |
263 | 188 | |||||||
Segment operating income |
$ | 1,016 | $ | 117 | |||||
Consolidated |
|||||||||
Revenue |
$ | 116,983 | $ | 113,838 | |||||
Cost of sales |
37,523 | 34,181 | |||||||
Gross profit |
79,460 | 79,657 | |||||||
Direct segment operating expenses |
48,250 | 44,844 | |||||||
Operating income |
$ | 31,210 | $ | 34,813 | |||||
22
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 11SEGMENT INFORMATION (Continued)
ILG maintains operations in the United States and other international territories, primarily the United Kingdom. Geographic information on revenue, which is based on sourcing, and long-lived assets, which are based on physical location, is presented below (in thousands):
|
Three Months Ended March 31, |
|||||||
---|---|---|---|---|---|---|---|---|
|
2011 | 2010 | ||||||
Revenue: |
||||||||
United States |
$ | 98,879 | $ | 95,736 | ||||
All other countries |
18,104 | 18,102 | ||||||
Total |
$ | 116,983 | $ | 113,838 | ||||
|
March 31, 2011 |
December 31, 2010 |
||||||
---|---|---|---|---|---|---|---|---|
Long-lived assets (excluding goodwill and other intangible assets): |
||||||||
United States |
$ | 49,355 | $ | 49,663 | ||||
All other countries |
1,212 | 1,237 | ||||||
Total |
$ | 50,567 | $ | 50,900 | ||||
NOTE 12COMPREHENSIVE INCOME
Comprehensive income is comprised of the following (in thousands):
|
Three Months Ended March 31, |
||||||
---|---|---|---|---|---|---|---|
|
2011 | 2010 | |||||
Net income attributable to common stockholders |
$ | 13,195 | $ | 15,413 | |||
Foreign currency translation |
1,940 | (306 | ) | ||||
Comprehensive income |
$ | 15,135 | $ | 15,107 | |||
Accumulated other comprehensive income (loss) is solely related to foreign currency translation. Only the accumulated other comprehensive income (loss) exchange rate adjustment related to Venezuela is tax effected, as required by FASB guidance codified in ASC Topic 740, since the earnings in Venezuela are not indefinitely reinvested in that jurisdiction.
NOTE 13COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, ILG is a party to various legal proceedings. ILG establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. ILG does not establish reserves for identified legal matters when ILG believes that the likelihood of an unfavorable outcome is not probable. Although
23
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 13COMMITMENTS AND CONTINGENCIES (Continued)
management currently believes that an unfavorable resolution of claims against ILG, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of ILG, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. ILG also evaluates other contingent matters, including tax contingencies, to assess the probability and estimated extent of potential loss. See Note 10 for a discussion of income tax contingencies.
ILG has funding commitments that could potentially require its performance in the event of demands by third parties or contingent events. At March 31, 2011, guarantees, surety bonds and letters of credit totaled $20.1 million, with the highest annual amount of $8.4 million occurring in year one. Guarantees represent $17.4 million of this total and primarily relate to the Management and Rental segment's hotel and resort management agreements of Aston, including those with guaranteed dollar amounts, and accommodation leases supporting the management activities of Aston, entered into on behalf of the property owners for which either party may terminate such leases upon 60 days prior written notice to the other. In addition, certain of the Management and Rental segment's hotel and resort management agreements of Aston provide that owners receive specified percentages of the revenue generated under its management. In these cases, the operating expenses for the rental operations are paid from the revenue generated by the rentals, the owners are then paid their contractual percentages, and the Management and Rental segment either retains the balance (if any) as its management fee or makes up the deficit. Although such deficits are reasonably possible in a few of these agreements, as of March 31, 2011, amounts are not expected to be significant, individually or in the aggregate.
The purchase obligations primarily relate to future guaranteed purchases of rental inventory, operational support services and membership fulfillment benefits. Aston also enters into agreements, as principal, for services purchased on behalf of property owners for which it is subsequently reimbursed. As such, Aston is the primary obligor and may be liable for unreimbursed costs. As of March 31, 2011, amounts pending reimbursements are not significant.
European Union Value Added Tax Matter
In 2009, the European Court of Justice issued a judgment related to Value Added Tax ("VAT") in Europe against an unrelated party. The judgment affects companies who transact within the European Union ("EU"), specifically providers of vacation interest exchange services, and altered the manner in which the Membership and Exchange segment accounts for VAT on its revenues as well as to which EU country VAT is owed. As of March 31, 2011 and December 31, 2010, ILG had accrued $6.1 million and $5.4 million, respectively, related to this matter. The change in accrual primarily relates to the effect of foreign currency remeasurements. Because of the uncertainty surrounding the ultimate outcome and settlement of these VAT liabilities, it is reasonably possible that future costs to settle these VAT liabilities may range from $6.1 million up to approximately $9.6 million based on quarter-end exchange rates. ILG believes that the $6.1 million accrual at March 31, 2011 is our best estimate of probable future obligations for the settlement of these VAT liabilities. The difference between the probable and reasonably possible amounts is primarily attributable to the assessment of certain potential penalties.
24
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 14SUPPLEMENTAL GUARANTOR INFORMATION
The Interval Senior Notes are guaranteed by ILG and the domestic subsidiaries of the Issuer. These guarantees are full and unconditional and joint and several.
The following tables present condensed consolidating financial information as of March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010 for ILG on a stand-alone basis, the Issuer on a stand-alone basis, the combined guarantor subsidiaries of ILG (collectively, the "Guarantor Subsidiaries"), the combined non-guarantor subsidiaries of ILG (collectively, the "Non-Guarantor Subsidiaries") and ILG on a consolidated basis (in thousands).
Balance Sheet as of March 31, 2011 |
ILG | Interval Acquisition Corp. |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Total Eliminations |
ILG Consolidated |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current assets |
$ | 585 | $ | 40 | $ | 208,008 | $ | 94,768 | $ | | $ | 303,401 | ||||||||
Property and equipment, net |
710 | | 48,645 | 1,212 | | 50,567 | ||||||||||||||
Goodwill and intangible assets, net |
| 300,639 | 301,045 | | | 601,684 | ||||||||||||||
Investment in subsidiaries |
234,164 | 881,007 | 51,853 | | (1,167,024 | ) | | |||||||||||||
Other assets |
| 3,966 | 31,158 | 8,530 | | 43,654 | ||||||||||||||
Total assets |
$ | 235,459 | $ | 1,185,652 | $ | 640,709 | $ | 104,510 | $ | (1,167,024 | ) | $ | 999,306 | |||||||
Current liabilities |
$ | 618 | $ | 2,620 | $ | 150,134 | $ | 33,078 | $ | | $ | 186,450 | ||||||||
Other liabilities |
| 351,503 | 205,605 | 17,158 | | 574,266 | ||||||||||||||
Intercompany liabilities (receivables) / equity |
(3,327 | ) | 597,365 | (596,459 | ) | 2,421 | | | ||||||||||||
Redeemable noncontrolling interest |
| | 422 | | | 422 | ||||||||||||||
Stockholders' equity |
238,168 | 234,164 | 881,007 | 51,853 | (1,167,024 | ) | 238,168 | |||||||||||||
Total liabilities and equity |
$ | 235,459 | $ | 1,185,652 | $ | 640,709 | $ | 104,510 | $ | (1,167,024 | ) | $ | 999,306 | |||||||
25
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 14SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
Balance Sheet as of December 31, 2010 |
ILG | Interval Acquisition Corp. |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Total Eliminations |
ILG Consolidated |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current assets |
$ | 321 | $ | 59 | $ | 187,817 | $ | 84,549 | $ | | $ | 272,746 | ||||||||
Property and equipment, net |
740 | | 48,923 | 1,237 | | 50,900 | ||||||||||||||
Goodwill and intangible assets, net |
| 305,878 | 302,619 | | | 608,497 | ||||||||||||||
Investment in subsidiaries |
216,310 | 832,671 | 46,987 | | (1,095,968 | ) | | |||||||||||||
Other assets |
| 4,435 | 33,404 | 8,402 | | 46,241 | ||||||||||||||
Total assets |
$ | 217,371 | $ | 1,143,043 | $ | 619,750 | $ | 94,188 | $ | (1,095,968 | ) | $ | 978,384 | |||||||
Current liabilities |
$ | 365 | $ | 9,745 | $ | 141,807 | $ | 27,201 | $ | | $ | 179,118 | ||||||||
Other liabilities |
| 355,893 | 204,973 | 16,769 | | 577,635 | ||||||||||||||
Intercompany liabilities (receivables) / equity |
(4,206 | ) | 561,095 | (560,120 | ) | 3,231 | | | ||||||||||||
Redeemable noncontrolling interest |
419 | 419 | ||||||||||||||||||
Stockholders' equity |
221,212 | 216,310 | 832,671 | 46,987 | (1,095,968 | ) | 221,212 | |||||||||||||
Total liabilities and equity |
$ | 217,371 | $ | 1,143,043 | $ | 619,750 | $ | 94,188 | $ | (1,095,968 | ) | $ | 978,384 | |||||||
Statement of Income for the Three Months Ended March 31, 2011 |
ILG | Interval Acquisition Corp. |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Total Eliminations |
ILG Consolidated |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue |
$ | | $ | | $ | 103,614 | $ | 13,369 | $ | | $ | 116,983 | |||||||
Operating expenses |
(736 | ) | (5,240 | ) | (70,255 | ) | (9,542 | ) | | (85,773 | ) | ||||||||
Interest income (expense), net |
| (8,815 | ) | 8 | (38 | ) | | (8,845 | ) | ||||||||||
Other income (loss) |
13,647 | 22,280 | 1,525 | (885 | ) | (37,727 | ) | (1,160 | ) | ||||||||||
Income tax benefit (provision) |
284 | 5,422 | (12,609 | ) | (1,104 | ) | | (8,007 | ) | ||||||||||
Net income |
13,195 | 13,647 | 22,283 | 1,800 | (37,727 | ) | 13,198 | ||||||||||||
Net loss attributable to noncontrolling interest |
| | (3 | ) | | | (3 | ) | |||||||||||
Net income attributable to common stockholders |
$ | 13,195 | $ | 13,647 | $ | 22,280 | $ | 1,800 | $ | (37,727 | ) | $ | 13,195 | ||||||
26
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 14SUPPLEMENTAL GUARANTOR INFORMATION (Continued)
Statement of Income for the Three Months Ended March 31, 2010 |
ILG | Interval Acquisition Corp. |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Total Eliminations |
ILG Consolidated |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue |
$ | | $ | | $ | 100,152 | $ | 13,686 | $ | | $ | 113,838 | |||||||
Operating expenses |
(656 | ) | (5,240 | ) | (63,739 | ) | (9,390 | ) | | (79,025 | ) | ||||||||
Interest income (expense), net |
| (9,206 | ) | 217 | 53 | | (8,936 | ) | |||||||||||
Other income (expense), net |
15,816 | 24,689 | 2,264 | (783 | ) | (42,720 | ) | (734 | ) | ||||||||||
Income tax benefit (provision) |
253 | 5,573 | (14,205 | ) | (1,351 | ) | | (9,730 | ) | ||||||||||
Net income |
15,413 | 15,816 | 24,689 | 2,215 | (42,720 | ) | 15,413 | ||||||||||||
Net income attributable to noncontrolling interest |
| | | | | | |||||||||||||
Net income attributable to common stockholders |
$ | 15,413 | $ | 15,816 | $ | 24,689 | $ | 2,215 | $ | (42,720 | ) | $ | 15,413 | ||||||
Statement of Cash Flows for the Three Months Ended March 31, 2011 |
ILG | Interval Acquisition Corp. |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
ILG Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows provided by (used in) operating activities |
$ | (1,648 | ) | $ | (9,442 | ) | $ | 37,134 | $ | 3,370 | $ | 29,414 | |||||
Cash flows provided by (used in) investing activities |
2,683 | 14,224 | (18,972 | ) | (845 | ) | (2,910 | ) | |||||||||
Cash flows used in financing activities |
(1,035 | ) | (4,782 | ) | | | (5,817 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents |
| | | 3,139 | 3,139 | ||||||||||||
Cash and cash equivalents at beginning of period |
| | 101,339 | 79,163 | 180,502 | ||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | | $ | 119,501 | $ | 84,827 | $ | 204,328 | |||||||
Statement of Cash Flows for the Three Months Ended March 31, 2010 |
ILG | Interval Acquisition Corp. |
Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
ILG Consolidated |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows provided by (used in) operating activities |
$ | (9,501 | ) | $ | (931 | ) | $ | 38,858 | $ | 4,110 | $ | 32,536 | |||||
Cash flows provided by (used in) investing activities |
19,328 | 352 | (23,605 | ) | 513 | (3,412 | ) | ||||||||||
Cash flows provided by (used in) financing activities |
(9,827 | ) | 579 | (1,132 | ) | | (10,380 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents |
| | | (1,673 | ) | (1,673 | ) | ||||||||||
Cash and cash equivalents at beginning of period |
| | 92,265 | 67,749 | 160,014 | ||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | | $ | 106,386 | $ | 70,699 | $ | 177,085 | |||||||
27
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2011
(Unaudited)
NOTE 14SUPPLEMENTAL GUARANTOR INFORMATION (Continued)