ILG, LLC - FORM 10-Q - August 4, 2011

Attached files

file	filename
EX-31.2 - EX-31.2 - ILG, LLC	a2205071zex-31_2.htm
EX-31.1 - EX-31.1 - ILG, LLC	a2205071zex-31_1.htm
EX-32.3 - EX-32.3 - ILG, LLC	a2205071zex-32_3.htm
EX-32.1 - EX-32.1 - ILG, LLC	a2205071zex-32_1.htm
EX-32.2 - EX-32.2 - ILG, LLC	a2205071zex-32_2.htm
EX-31.3 - EX-31.3 - ILG, LLC	a2205071zex-31_3.htm
EXCEL - IDEA: XBRL DOCUMENT - ILG, LLC	Financial_Report.xls

QuickLinks -- Click here to rapidly navigate through this document

As filed with the Securities and Exchange Commission on August 5, 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 June 30, 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 ý 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 August 1, 2011, 57,608,447 shares of the registrant's common stock were outstanding.

PART 1—FINANCIAL STATEMENTS

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 June 30,						Six Months Ended June 30,

		2011			2010			2011			2010
Revenue		$	105,554		$	101,602		$	222,537		$	215,440
Cost of sales			35,333			31,522			72,856			65,703

	Gross profit		70,221			70,080			149,681			149,737
Selling and marketing expense			14,042			13,125			27,874			26,656
General and administrative expense			24,160			20,931			48,475			43,221
Amortization expense of intangibles			6,805			6,575			13,618			13,150
Depreciation expense			3,397			2,601			6,687			5,049

	Operating income		21,817			26,848			53,027			61,661
Other income (expense):
	Interest income		266			125			387			203
	Interest expense		(9,140	)		(9,170	)		(18,106	)		(18,184	)
	Other income (expense), net		(570	)		441			(1,730	)		(293	)

Total other expense, net			(9,444	)		(8,604	)		(19,449	)		(18,274	)

Earnings before income taxes and noncontrolling interest			12,373			18,244			33,578			43,387
Income tax provision			(4,875	)		(6,927	)		(12,882	)		(16,657	)

Net income			7,498			11,317			20,696			26,730
Net loss attributable to noncontrolling interest			4			3			1			3

Net income attributable to common stockholders		$	7,502		$	11,320		$	20,697		$	26,733

Earnings per share attributable to common stockholders:
	Basic	$	0.13		$	0.20		$	0.36		$	0.47
	Diluted	$	0.13		$	0.20		$	0.36		$	0.46
Weighted average number of common stock outstanding:
	Basic		57,472			56,886			57,330			56,756
	Diluted		58,311			57,735			58,198			57,585

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

		June 30, 2011			December 31, 2010

		(Unaudited)
ASSETS
Cash and cash equivalents		$	210,139		$	180,502
Restricted cash and cash equivalents			3,003			4,118
Accounts receivable, net of allowance of $351 and $213, respectively			31,698			24,420
Deferred income taxes			19,170			19,865
Deferred membership costs			12,672			11,775
Prepaid income taxes			7,381			8,539
Prepaid expenses and other current assets			23,835			23,527

	Total current assets		307,898			272,746
Property and equipment, net			50,307			50,900
Goodwill			488,027			488,027
Intangible assets, net			106,852			120,470
Deferred membership costs			14,777			16,108
Deferred income taxes			6,002			5,767
Other non-current assets			35,133			24,366

TOTAL ASSETS		$	1,008,996		$	978,384

LIABILITIES AND EQUITY
LIABILITIES:
Accounts payable, trade		$	11,543		$	11,302
Deferred revenue			102,101			94,651
Interest payable			9,744			9,745
Accrued compensation and benefits			12,002			14,941
Member deposits			9,251			9,692
Accrued expenses and other current liabilities			45,382			38,787
Current portion of long-term debt			—			—

	Total current liabilities		190,023			179,118
Long-term debt, net of current portion			348,796			357,576
Other long-term liabilities			10,900			11,697
Deferred revenue			126,165			124,928
Deferred income taxes			83,247			83,434

	Total liabilities		759,131			756,753

Redeemable noncontrolling interest			418			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, 57,542,762 and 57,099,615 issued and outstanding shares, respectively			575			571
Additional paid-in capital			169,059			164,162
Retained earnings			89,257			68,560
Accumulated other comprehensive loss			(9,444	)		(12,081	)

	Total stockholders' equity		249,447			221,212

TOTAL LIABILITIES AND EQUITY		$	1,008,996		$	978,384

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)

														Accumulated Other Comprehensive Income (Loss)

					Common Stock
		Total Stockholders' Equity			Common Stock				Additional Paid-in Capital			Retained Earnings
		Total Stockholders' Equity			Amount		Shares		Additional Paid-in Capital			Retained Earnings
		(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		20,697			—		—		—			20,697		—
	Foreign currency translation gains, net		2,637			—		—		—			—		2,637

Comprehensive income			23,334
Non-cash compensation expense			5,906			—		—		5,906			—		—
Issuance of common stock upon exercise of stock options			424			—		44,736		424			—		—
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes			(2,393	)		4		398,411		(2,397	)		—		—
Change in excess tax benefits from stock-based awards			1,010			—		—		1,010			—		—
Deferred stock compensation expense			(46	)		—		—		(46	)		—		—

Balance as of June 30, 2011		$	249,447		$	575		57,542,762	$	169,059		$	89,257	$	(9,444	)

The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Six Months Ended June 30,

		2011			2010
		(In thousands)
Cash flows from operating activities:
Net income		$	20,696		$	26,730
Adjustments to reconcile net income to net cash provided by operating activities:
	Amortization expense of intangibles		13,618			13,150
	Amortization of debt issuance costs		925			1,332
	Depreciation expense		6,687			5,049
	Accretion of original issue discount		1,220			1,099
	Non-cash compensation expense		5,906			5,045
	Deferred income taxes		504			796
	Excess tax benefits from stock-based awards		(1,272	)		(965	)
Changes in operating assets and liabilities:
	Accounts receivable		(7,202	)		(4,348	)
	Prepaid expenses and other current assets		(146	)		1,235
	Accounts payable and other current liabilities		3,481			(1,647	)
	Prepaid income taxes and income taxes payable		1,948			(115	)
	Deferred revenue		8,001			8,736
	Other, net		2,400			3,187

Net cash provided by operating activities			56,766			59,284

Cash flows from investing activities:
	Changes in restricted cash		—			372
	Capital expenditures		(6,040	)		(8,231	)
	Investment in loans receivable		(14,500	)		—

Net cash used in investing activities			(20,540	)		(7,859	)

Cash flows from financing activities:
	Principal payments on term loan		(10,000	)		(20,000	)
	Proceeds from the exercise of stock options		424			263
	Proceeds from the exercise of warrants		—			249
	Vesting of restricted stock units, net of withholding taxes		(2,349	)		(1,817	)
	Excess tax benefits from stock-based awards		1,272			965

Net cash used in financing activities			(10,653	)		(20,340	)

Effect of exchange rate changes on cash and cash equivalents			4,064			(2,994	)

Net increase in cash and cash equivalents			29,637			28,091
Cash and cash equivalents at beginning of period			180,502			160,014

Cash and cash equivalents at end of period		$	210,139		$	188,105

Supplemental disclosures of cash flow information:
Cash paid during the period for:
	Interest, net of amounts capitalized	$	15,388		$	15,475
	Income taxes, net of refunds	$	10,430		$	15,975

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2011

(Unaudited)

NOTE 1—ORGANIZATION 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 1—ORGANIZATION 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 June 30, 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 1—ORGANIZATION 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 June 30, 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 2—SIGNIFICANT 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 six months ended June 30, 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 2—SIGNIFICANT 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 1.6 million stock options and RSUs for the three and six months ended June 30, 2011 and 1.4 million stock options and RSUs for the three and six months ended June 30, 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 June 30,				Six Months Ended June 30,

	2011		2010		2011		2010
Basic weighted average shares of common stock outstanding		57,472		56,886		57,330		56,756
Net effect of common stock equivalents assumed to be vested related to RSUs		818		797		838		773
Net effect of common stock equivalents assumed to be exercised related to stock options held by non-employees		21		52		30		56

Diluted weighted average shares of common stock outstanding		58,311		57,735		58,198		57,585

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 June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-05, "Presentation of Comprehensive Income" ("ASU 2011-05"). This new guidance requires entities to report components of comprehensive income in either a continuous statement of other comprehensive income ("OCI") or two separate but consecutive statements. The ASU does not change the items that must be reported in OCI and does not require any incremental disclosures. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2011 and must be applied retrospectively for all periods presented in the financial statements. Early adoption is permitted. While the guidance will impact the presentation within our financial statements, we do not anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued)

In May 2011, the FASB issued Accounting Standards Update ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS)." ASU 2011-04 provides a consistent definition of fair value to ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS and provides clarification about the application of existing fair value measurement and disclosure requirements. The ASU also expands certain other disclosure requirements, particularly pertaining to Level 3 fair value measurements. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2011 and will be applied prospectively. Early application is not permitted. We are currently assessing the future impact, if any, of this new accounting update to our consolidated financial statements.

In April 2011, the FASB issued 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 currently do not anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.

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 of ASU 2010-29 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 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 guidance modifies the criteria for recognizing revenue in multiple element arrangements and expands the disclosure requirements for revenue recognition. ASU 2009-13 is 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 of ASU 2009-13 as of January 1, 2011 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 3—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Pursuant to FASB guidance as codified within ASC 350, "Intangibles—Goodwill 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 3—GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

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 June 30, 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.

The balance of goodwill and other intangible assets, net is as follows (in thousands):

		June 30, 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			69,236		82,854

	Total goodwill and other intangible assets, net	$	594,879	$	608,497

There were no changes in the carrying amount of goodwill for the six months ended June 30, 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 as of June 30, 2011 and December 31, 2010, respectively.

Other Intangible Assets

Intangible assets with indefinite lives relate principally to tradenames and trademarks. At June 30, 2011, intangible assets with definite lives relate to the following (in thousands):

		Cost		Accumulated Amortization			Net

Customer relationships		$	129,500	$	(113,594	)	$	15,906
Purchase agreements			75,879		(64,750	)		11,129
Resort management contracts			48,166		(13,617	)		34,549
Technology			24,726		(24,649	)		77
Other			17,427		(9,852	)		7,575

	Total	$	295,698	$	(226,462	)	$	69,236

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 3—GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

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 the three months ended June 30, 2011 and 2010, respectively, and $13.6 million and $13.2 million for the six months ended June 30, 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 4—PROPERTY AND EQUIPMENT

Property and equipment, net is as follows (in thousands):

		June 30, 2011			December 31, 2010

Computer equipment		$	18,693		$	18,189
Capitalized software			70,173			67,054
Buildings and leasehold improvements			21,253			21,222
Furniture and other equipment			11,247			11,088
Projects in progress			2,424			1,128

			123,790			118,681
Less: accumulated depreciation and amortization			(73,483	)		(67,781	)

	Total property and equipment, net	$	50,307		$	50,900

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 5—LONG-TERM DEBT

Long-term debt is as follows (in thousands):

		June 30, 2011		December 31, 2010

9.5% Interval Senior Notes, net of unamortized discount of $17,204 and $18,424, respectively		$	282,796	$	281,576
Term loan (interest rate of 2.69% at June 30, 2011 and 2.76% at December 31, 2010)			66,000		76,000
Revolving credit facility			—		—

Total debt			348,796		357,576
Less: current maturities			—		—

	Total long-term debt, net of current maturities	$	348,796	$	357,576

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.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 5—LONG-TERM DEBT (Continued)

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 $66.0 million is outstanding at June 30, 2011, and a $50.0 million revolving credit facility.

As of June 30, 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 and second quarter 2012 which has been voluntarily pre-paid, and approximately $19.1 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 and second quarter of 2011, we paid a total of $10.0 million of principal payments on the term loan which included a voluntary prepayment of the March 31, 2012 and June 30, 2012 scheduled principal payments and $1.3 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 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 June 30, 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% per annum.

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 June 30, 2011, leaving $50.0 million of borrowing capacity at June 30, 2011. There have been no borrowings under the revolving credit facility through June 30, 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 5—LONG-TERM DEBT (Continued)

("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 June 30, 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 2.49 and 4.44, respectively.

Debt Issuance Costs

At June 30, 2011 and December 31, 2010, total unamortized debt issue costs were $6.3 million, net of $7.1 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 6—FAIR 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 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable 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.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 6—FAIR VALUE MEASUREMENTS (Continued)

Other than the accretion of interest of approximately $53,000 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 June 30, 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 June 30, 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 instruments during the three and six months ended June 30, 2011.

	June 30, 2011						December 31, 2010

	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(In thousands)
Cash and cash equivalents	$	210,139		$	210,139		$	180,502		$	180,502
Restricted cash and cash equivalents		3,003			3,003			4,118			4,118
Loans receivable		14,500			14,500			—			—
Total debt		(348,796	)		(385,125	)		(357,576	)		(403,000	)
Guarantees, surety bonds and letters of credit		N/A			(18,657	)		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.

The loans receivable pertains to secured loans issued in the second quarter of 2011 to third parties. These loans mature in 2014, with interest payable monthly at a rate comparable to market rate. These receivables are recorded at the time of origination for the principal amount financed and are carried at amortized cost, net of any allowance for credit losses, which approximates fair value using inputs such as interest rates and credit risk as of June 30, 2011 which in part are unobservable. The loans receivable balances are grouped and presented within other non-current assets in our consolidated balance sheet as of June 30, 2011. Interest income associated with the loans is recognized in the interest income line item in our consolidated statements of income.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 6—FAIR VALUE MEASUREMENTS (Continued)

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 our Interval Senior Notes was estimated at June 30, 2011 and December 31, 2010 using an input of quoted prices from an inactive market due to the infrequency at which trades occur on our Interval Senior Notes. The fair value of our term loan was estimated at June 30, 2011 and December 31, 2010 using inputs such as interest rates and credit risk.

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. These commitments are in place to facilitate our commercial operations.

NOTE 7—STOCKHOLDERS' EQUITY

ILG has 300 million authorized shares of common stock, par value of $.01 per share. At June 30, 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 June 30, 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. 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 8—BENEFIT 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 $0.3 million and $0.4 million for the three

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 8—BENEFIT PLANS (Continued)

and six months ended June 30, 2011, respectively. 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 26,375 share units were outstanding at June 30, 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 9—STOCK-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 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 June 30, 2011, ILG has 2.0 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,

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 9—STOCK-BASED COMPENSATION (Continued)

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 June 30, 2011 and 2010 was $2.9 million and $2.6 million, respectively. For the six months ended June 30, 2011 and 2010, non-cash compensation expense related to RSUs was $5.9 million and $5.0 million, respectively. At June 30, 2011 there was approximately $19.1 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 1.7 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 and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,

	2011		2010		2011		2010
Cost of sales	$	135	$	115	$	295	$	226
Selling and marketing expense		211		163		451		308
General and administrative expense		2,514		2,273		5,160		4,511

Non-cash compensation expense	$	2,860	$	2,551	$	5,906	$	5,045

The following table summarizes RSU activity during the six months ended June 30, 2011:

	Shares			Weighted- Average Grant Date Fair Value

	(In thousands)
Non-vested RSUs at January 1		2,510		$	12.04
Granted		431			16.22
Vested		(561	)		11.98
Forfeited		(18	)		13.99

Non-vested RSUs at June 30		2,362		$	12.80

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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 9—STOCK-BASED COMPENSATION (Continued)

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 approximately $45,000 and $0.1 million at June 30, 2011 and December 31, 2010, respectively.

NOTE 10—INCOME 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 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 and six months ended June 30, 2011, ILG recorded an income tax provision for continuing operations of $4.9 million and $12.9 million, respectively, which represents effective tax rates of 39.4% and 38.4% for the respective periods. These tax rates are higher than the federal statutory

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 10—INCOME TAXES (Continued)

rate of 35% due principally to state and local income taxes partially offset by foreign income taxed at lower rates. During the six months ended June 30, 2011, the effective tax rate increased due to income taxes associated with the effect of changes in tax laws in certain states that were enacted during the second quarter of 2011. However, this increase was counteracted by a decrease of other income tax items during the first quarter of 2011, which includes the decrease in unrecognized tax benefits associated with the expiration of the statute of limitations related to foreign taxes.

For the three and six months ended June 30, 2010, ILG recorded an income tax provision for continuing operations of $6.9 million and $16.7 million, respectively, which represents effective tax rates of 38.0% and 38.4% for the respective periods. These tax rates are 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 June 30, 2011 and December 31, 2010, ILG had unrecognized tax benefits of $0.9 million and $1.0 million, respectively. There were no material increases or decreases in unrecognized tax benefits for the three months ended June 30, 2011. During the six months ended June 30, 2011, the unrecognized tax benefits decreased by approximately $0.1 million during the first quarter of 2011 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. There were no material accruals for interest for the three and six months ended June 30, 2011. During the six months ended June 30, 2011, interest and penalties decreased by approximately $0.1 million during the first quarter of 2011 as a result of the expiration of the statute of limitations related to foreign taxes. As of June 30, 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.

The Internal Revenue Service ("IRS") has completed its review of IAC's consolidated tax returns for the years ended December 31, 2001 through 2006, which includes our operations from September 24, 2002, our date of acquisition by IAC. The settlement has not yet been submitted to the Joint Committee of Taxation for approval. In July 2011, the IRS began its review of IAC's consolidated tax returns for the years ended December 31, 2007 through 2009, which also includes our operations until the time of the spin-off in August 2008. The statute of limitations for the years 2001 through 2007

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 10—INCOME TAXES (Continued)

have 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, 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. The Florida statute of limitations for the short period following the spin-off and ended December 31, 2008 and for the tax year ended December 31, 2009 has been extended to 2013 and 2014, respectively.

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 11—SEGMENT 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.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 11—SEGMENT INFORMATION (Continued)

Information on reportable segments and reconciliation to consolidated operating income is as follows (in thousands):

			Three Months Ended June 30,						Six Months Ended June 30,

			2011			2010			2011			2010
Membership and Exchange
	Revenue		$	87,351		$	87,182		$	183,779		$	184,723
	Cost of sales			20,816			19,430			43,462			40,934

	Gross profit			66,535			67,752			140,317			143,789
	Selling and marketing expense			13,189			12,375			26,159			25,097
	General and administrative expense			21,701			19,415			43,868			40,517
	Amortization expense of intangibles			5,425			5,257			10,849			10,514
	Depreciation expense			3,162			2,383			6,189			4,643

		Segment operating income	$	23,058		$	28,322		$	53,252		$	63,018

Management and Rental
	Management fee revenue		$	6,818		$	4,334		$	15,746		$	10,318
	Pass-through revenue			11,385			10,086			23,012			20,399

		Total revenue		18,203			14,420			38,758			30,717
	Cost of sales			14,517			12,092			29,394			24,769

	Gross profit			3,686			2,328			9,364			5,948
	Selling and marketing expense			853			750			1,715			1,559
	General and administrative expense			2,459			1,516			4,607			2,704
	Amortization expense of intangibles			1,380			1,318			2,769			2,636
	Depreciation expense			235			218			498			406

		Segment operating loss	$	(1,241	)	$	(1,474	)	$	(225	)	$	(1,357	)

Consolidated
	Revenue		$	105,554		$	101,602		$	222,537		$	215,440
	Cost of sales			35,333			31,522			72,856			65,703

	Gross profit			70,221			70,080			149,681			149,737
	Direct segment operating expenses			48,404			43,232			96,654			88,076

	Operating income		$	21,817		$	26,848		$	53,027		$	61,661

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 11—SEGMENT 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 June 30,				Six Months Ended June 30,

		2011		2010		2011		2010
Revenue:
	United States	$	88,235	$	85,480	$	187,114	$	181,216
	All other countries		17,319		16,122		35,423		34,224

	Total	$	105,554	$	101,602	$	222,537	$	215,440

		June 30, 2011		December 31, 2010

Long-lived assets (excluding goodwill and other intangible assets):
	United States	$	48,517	$	49,663
	All other countries		1,790		1,237

	Total	$	50,307	$	50,900

NOTE 12—COMPREHENSIVE INCOME

Comprehensive income is comprised of the following (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,

	2011		2010			2011		2010
Net income attributable to common stockholders	$	7,502	$	11,320		$	20,697	$	26,733
Foreign currency translation		697		(496	)		2,637		(802	)

Comprehensive income	$	8,199	$	10,824		$	23,334	$	25,931

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 13—COMMITMENTS 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

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 13—COMMITMENTS 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 June 30, 2011, guarantees, surety bonds and letters of credit totaled $18.7 million, with the highest annual amount of $7.8 million occurring in year one. Guarantees represent $15.9 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 June 30, 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 June 30, 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 June 30, 2011 and December 31, 2010, ILG had accrued $6.4 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 $6.4 million up to approximately $10.0 million based on quarter-end exchange rates. ILG believes that the $6.4 million accrual at June 30, 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.

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 14—SUPPLEMENTAL 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 June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 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 June 30, 2011		ILG			Interval Acquisition Corp.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Total Eliminations			ILG Consolidated

Current assets		$	507		$	8	$	212,565		$	94,818	$	—		$	307,898
Property and equipment, net			680			—		47,838			1,789		—			50,307
Goodwill and intangible assets, net			—			295,398		299,481			—		—			594,879
Investment in subsidiaries			243,084			898,270		54,267			—		(1,195,621	)		—
Other assets			—			3,509		43,922			8,481		—			55,912

	Total assets	$	244,271		$	1,197,185	$	658,073		$	105,088	$	(1,195,621	)	$	1,008,996

Current liabilities		$	606		$	9,744	$	147,293		$	32,380	$	—		$	190,023
Other liabilities			—			347,113		205,366			16,629		—			569,108
Intercompany liabilities (receivables)/equity			(5,782	)		597,244		(593,274	)		1,812		—			—
Redeemable noncontrolling interest			—			—		418			—		—			418
Stockholders' equity			249,447			243,084		898,270			54,267		(1,195,621	)		249,447

	Total liabilities and equity	$	244,271		$	1,197,185	$	658,073		$	105,088	$	(1,195,621	)	$	1,008,996

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 14—SUPPLEMENTAL 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 June 30, 2011	ILG			Interval Acquisition Corp.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Total Eliminations			ILG Consolidated

Revenue	$	—		$	—		$	92,959		$	12,595		$	—		$	105,554
Operating expenses		(748	)		(5,240	)		(67,751	)		(9,998	)		—			(83,737	)
Interest income (expense), net		—			(8,767	)		126			(233	)		—			(8,874	)
Other income (loss)		7,963			16,564			1,109			(581	)		(25,625	)		(570	)
Income tax benefit (provision)		287			5,403			(9,884	)		(681	)		—			(4,875	)

Net income		7,502			7,960			16,559			1,102			(25,625	)		7,498
Net loss attributable to noncontrolling interest		—			—			4			—			—			4

Net income attributable to common stockholders	$	7,502		$	7,960		$	16,563		$	1,102		$	(25,625	)	$	7,502

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 14—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)

Statement of Income for the Three Months Ended June 30, 2010	ILG			Interval Acquisition Corp.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Total Eliminations			ILG Consolidated

Revenue	$	—		$	—		$	89,846		$	11,756		$	—		$	101,602
Operating expenses		(730	)		(5,240	)		(60,681	)		(8,103	)		—			(74,754	)
Interest income (expense), net		—			(9,153	)		250			(142	)		—			(9,045	)
Other income, net		11,768			20,610			2,433			494			(34,864	)		441
Income tax benefit (provision)		282			5,551			(11,241	)		(1,519	)		—			(6,927	)

Net income		11,320			11,768			20,607			2,486			(34,864	)		11,317
Net loss attributable to noncontrolling interest		—			—			3			—			—			3

Net income attributable to common stockholders	$	11,320		$	11,768		$	20,610		$	2,486		$	(34,864	)	$	11,320

Statement of Income for the Six Months Ended June 30, 2011	ILG			Interval Acquisition Corp.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Total Eliminations			ILG Consolidated

Revenue	$	—		$	—		$	196,573		$	25,964		$	—		$	222,537
Operating expenses		(1,484	)		(10,480	)		(138,006	)		(19,540	)		—			(169,510	)
Interest income (expense), net		—			(17,582	)		134			(271	)		—			(17,719	)
Other income (expense), net		21,610			38,844			2,634			(1,466	)		(63,352	)		(1,730	)
Income tax benefit (provision)		571			10,825			(22,493	)		(1,785	)		—			(12,882	)

Net income		20,697			21,607			38,842			2,902			(63,352	)		20,696
Net loss attributable to noncontrolling interest		—			—			1			—			—			1

Net income attributable to common stockholders	$	20,697		$	21,607		$	38,843		$	2,902		$	(63,352	)	$	20,697

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2011

(Unaudited)

NOTE 14—SUPPLEMENTAL GUARANTOR INFORMATION (Continued)

		Three Months Ended June 30,

		2011		% Change			2010
		(Dollars in thousands)
Membership and Exchange
Transaction revenue		$	47,652		(1.3	)%	$	48,271
Membership fee revenue			32,521		0.3	%		32,434
Ancillary member revenue			1,803		(15.9	)%		2,145

Total member revenue			81,976		(1.1	)%		82,850
Other revenue			5,375		24.1	%		4,332

	Total Membership and Exchange revenue		87,351		0.2	%		87,182

Management and Rental
Management fee and rental revenue			6,818		57.3	%		4,334
Pass-through revenue			11,385		12.9	%		10,086

	Total Management and Rental revenue		18,203		26.2	%		14,420

Total revenue		$	105,554		3.9	%	$	101,602

		Six Months Ended June 30,

		2011		% Change			2010
		(Dollars in thousands)
Membership and Exchange
Transaction revenue		$	104,029		(3.0	)%	$	107,279
Membership fee revenue			65,111		0.3	%		64,909
Ancillary member revenue			3,781		(13.6	)%		4,377

Total member revenue			172,921		(2.1	)%		176,565
Other revenue			10,858		33.1	%		8,158

	Total Membership and Exchange revenue		183,779		(0.5	)%		184,723

Management and Rental
Management fee and rental revenue			15,746		52.6	%		10,318
Pass-through revenue			23,012		12.8	%		20,399

	Total Management and Rental revenue		38,758		26.2	%		30,717

Total revenue		$	222,537		3.3	%	$	215,440

		Three Months Ended June 30,

		2011			% Change			2010
		(Dollars in thousands)
Membership and Exchange		$	20,816			7.1	%	$	19,430
Management and Rental
Management fee and rental expenses			3,132			56.1	%		2,006
Pass-through expenses			11,385			12.9	%		10,086

	Total Management and Rental cost of sales		14,517			20.1	%		12,092

Total cost of sales		$	35,333			12.1	%	$	31,522

As a percentage of total revenue			33.5	%		7.9	%		31.0	%
Gross margin			66.5	%		(3.6	)%		69.0	%
Gross margin without pass-through revenue/expenses			74.6	%		(2.6	)%		76.6	%

		Six Months Ended June 30,

		2011			% Change			2010
		(Dollars in thousands)
Membership and Exchange		$	43,462			6.2	%	$	40,934
Management and Rental
Management fee and rental expenses			6,382			46.0	%		4,370
Pass-through expenses			23,012			12.8	%		20,399

	Total Management and Rental cost of sales	$	29,394			18.7	%	$	24,769

Total cost of sales		$	72,856			10.9	%	$	65,703

As a percentage of total revenue			32.7	%		7.4	%		30.5	%
Gross margin			67.3	%		(3.2	)%		69.5	%
Gross margin without pass-through revenue/expenses			75.0	%		(2.3	)%		76.8	%

	Six Months Ended June 30,

	2011			% Change			2010
	(Dollars in thousands)
Selling and marketing expense	$	27,874			4.6	%	$	26,656
As a percentage of total revenue		12.5	%		1.2	%		12.4	%

Statement of Income for the Six Months Ended June 30, 2010	ILG			Interval Acquisition Corp.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Total Eliminations			ILG Consolidated

Revenue	$	—		$	—		$	189,998		$	25,442		$	—		$	215,440
Operating expenses		(1,386	)		(10,480	)		(124,420	)		(17,493	)		—			(153,779	)
Interest income (expense), net		—			(18,359	)		467			(89	)		—			(17,981	)
Other income (expense), net		27,584			45,299			4,697			(289	)		(77,584	)		(293	)
Income tax benefit (provision)		535			11,124			(25,446	)		(2,870	)		—			(16,657	)

Net income		26,733			27,584			45,296			4,701			(77,584	)		26,730
Net loss attributable to noncontrolling interest		—			—			3			—			—			3

Net income attributable to common stockholders	$	26,733		$	27,584		$	45,299		$	4,701		$	(77,584	)	$	26,733

Statement of Cash Flows for the Six Months Ended June 30, 2011		ILG			Interval Acquisition Corp.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			ILG Consolidated

Cash flows provided by (used in) operating activities		$	(1,792	)	$	(4,527	)	$	57,571		$	5,514		$	56,766
Cash flows provided by (used in) investing activities			2,869			14,103			(35,367	)		(2,145	)		(20,540	)
Cash flows used in financing activities			(1,077	)		(9,576	)		—			—			(10,653	)
Effect of exchange rate changes on cash and cash equivalents			—			—			—			4,064			4,064
Cash and cash equivalents at beginning of period			—			—			101,339			79,163			180,502

	Cash and cash equivalents at end of period	$	—		$	—		$	123,543		$	86,596		$	210,139

Statement of Cash Flows for the Six Months Ended June 30, 2010		ILG			Interval Acquisition Corp.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			ILG Consolidated

Cash flows provided by (used in) operating activities		$	(1,203	)	$	(4,806	)	$	56,210		$	9,083		$	59,284
Cash flows provided by (used in) investing activities			695			24,543			(34,263	)		1,166			(7,859	)
Cash flows provided by (used in) financing activities			508			(19,737	)		(1,111	)		—			(20,340	)
Effect of exchange rate changes on cash and cash equivalents			—			—			—			(2,994	)		(2,994	)
Cash and cash equivalents at beginning of period			—			—			92,265			67,749			160,014

	Cash and cash equivalents at end of period	$	—		$	—		$	113,101		$	75,004		$	188,105

		Payments Due by Period

Contractual Obligations		Total		Up to 1 year		1-3 years		3-5 years		More than 5 years
		(Dollars in thousands)
Debt principal(a)		$	366,000	$	—	$	66,000	$	—	$	300,000
Debt interest(a)			151,216		30,600		58,866		57,000		4,750
Purchase obligations(b)			24,911		8,962		7,401		8,488		60
Unused commitment on a loan receivable			2,500		2,500		—		—		—
Operating leases			60,999		10,602		16,708		12,958		20,731

	Total contractual obligations	$	605,626	$	52,664	$	148,975	$	78,446	$	325,541

	Amount of Commitment Expiration Per Period

Other Commercial Commitments(c)	Total Amounts Committed		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(In thousands)
Guarantees, surety bonds and letters of credit	$	18,657	$	7,757	$	4,149	$	3,220	$	3,531

	For the Three Months Ended June 30, 2011

	EBITDA		Non-Cash Compensation Expense			Depreciation Expense			Amortization Expense of Intangibles			Operating Income
Membership and Exchange	$	34,267	$	(2,622	)	$	(3,162	)	$	(5,425	)	$	23,058
Management and Rental		612		(238	)		(235	)		(1,380	)		(1,241	)

Total	$	34,879	$	(2,860	)	$	(3,397	)	$	(6,805	)		21,817

Interest expense, net													(8,874	)
Other expense, net													(570	)

Earnings before income taxes and noncontrolling interest													12,373
Income tax provision													(4,875	)

Net income													7,498
Net loss attributable to noncontrolling interest													4

Net income attributable to common stockholders												$	7,502

Exhibit Number	Description	Location

3.1	Amended and Restated Certificate of Incorporation of Interval Leisure Group, Inc.	Exhibit 3.1 to ILG's Current Report on Form 8-K, filed on August 25, 2008.
3.2	Certificate of Designations, Preferences and Rights to Series A Junior Participating Preferred Stock	Exhibit 3.2 to ILG's Quarterly Report on Form 10-Q, filed on August 11, 2009.

Exhibit Number	Description	Location

3.3	Amended and Restated By-Laws of Interval Leisure Group, Inc.	Exhibit 3.2 to ILG's Current Report on Form 8-K, filed on September 27, 2010.
31.1†	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
31.2†	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
31.3†	Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
32.1††	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
32.2††	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
32.3††	Certification of the Chief Accounting Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Label Linkbase Document
101.PRE*	XBRL Taxonomy Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document


		INTERVAL LEISURE GROUP, INC.
		By:		/s/ WILLIAM L. HARVEY William L. Harvey Chief Financial Officer
		By:		/s/ JOHN A. GALEA John A. Galea Chief Accounting Officer

ILG, LLC - FORM 10-Q - August 4, 2011

Attached files

ILG, LLC Reports