LAS VEGAS--(BUSINESS WIRE)--Diamond Resorts Corporation, together with Diamond Resorts Parent, LLC and its subsidiaries (“Diamond” or the “Corporation”) today announced results for the quarter and year ended December 31, 2011. “While reported results for the quarter include the previously disclosed water intrusion assessment and severance expense, we are pleased with the year over year improvement in our operating performance and continue to remain focused on the growth of our core management and member services business and our sales and marketing platform,” said David F. Palmer, President and Chief Financial Officer.
Quarter Ended December 31, 2011 Financial Results
Adjusted EBITDA for Diamond Resorts Parent, LLC and restricted subsidiaries1, inclusive of the $9.7 million charge related to the previously disclosed water intrusion assessment and $2.1 million of severance expense, decreased $10.6 million to $7.3 million for the quarter ended December 31, 2011 from $17.9 million for the quarter ended December 31, 2010.
After including the impact of the unrestricted subsidiaries, Adjusted EBITDA for the consolidated operations of Diamond, inclusive of the $9.7 million charge related to the previously disclosed water intrusion assessment and $2.1 million of severance expense, decreased $9.9 million to $4.1 million for the quarter ended December 31, 2011 from $14.0 million for the quarter ended December 31, 2010.
In addition to the water intrusion assessment and severance expense, Adjusted EBITDA for the quarter ended December 31, 2011 was negatively impacted by $4.4 million as compared to the quarter ended December 31, 2010 due to year-end adjustments required by ASC 978, the accounting literature governing Real Estate-Time-Sharing Activities.
Vacation Interest Sales Results for the Quarter Ended December 31, 2011
Vacation Interest sales for Diamond increased $0.8 million, or 1.4%, to $56.7 million for the quarter ended December 31, 2011 from $55.9 million for the quarter ended December 31, 2010. Vacation Interest sales for the quarter ended December 31, 2011 were unfavorably impacted due to the ASC 978 year-end adjustments by $6.3 million as compared to the quarter ended December 31, 2010. After adjusting for this impact, the increase in Vacation Interest sales was primarily due to a higher average sale price per transaction partially offset by a decline in the number of Vacation Interest transactions and closing percentage. Vacation Interest sales was also boosted by the revenue contribution from our ILX sales center operations, which commenced in March 2011, and our Tempus sales center operations, which commenced in July 2011.
Diamond’s advertising, sales and marketing expense as a percentage of Vacation Interest sales was 57.5% for the quarter ended December 31, 2011 compared to 54.4% for the quarter ended December 31, 2010. After excluding the impact of the ASC 978 year-end adjustments, sales and marketing expense as a percentage of Vacation Interest sales was 53.9% for the quarter ended December 31, 2011 compared to 55.0% for the quarter ended December 31, 2010. This improvement reflects our continued focus on direct selling expense as well as the absorption of fixed costs through increased sales.
Management and Member Services Results for the Quarter Ended December 31, 2011
Revenue from management and member services segment for Diamond increased $3.4 million, or 15.1%, to $25.8 million for the quarter ended December 31, 2011 from $22.4 million for the quarter ended December 31, 2011. The revenue growth was due to higher management fees earned under our cost-plus management agreements, as a result of increased resort-level operating costs, as well as the addition of managed properties from the ILX and Tempus Resorts acquisitions. In addition, we entered into a sales and marketing fee-for-service arrangement with a third party, which began to generate commission revenue during the quarter ended June 30, 2011.
The contribution margin from management and member services for Diamond increased $0.6 million, or 3.8%, to $17.2 million for the quarter ended December 31, 2011 from $16.6 million for the quarter ended December 31, 2010.
1 – Financial data for Diamond Resorts Parent, LLC and restricted subsidiaries excludes results of Diamond’s unrestricted subsidiaries. As of December 31, 2011, the unrestricted subsidiaries were FLRX, Inc and its subsidiaries, ILX Acquisition, Inc. and its subsidiaries, and Tempus Acquisition, LLC and its subsidiaries. As of December 31, 2010, the only such Unrestricted Subsidiaries were FLRX, Inc. and its subsidiaries, and ILX Acquisition, Inc. and its subsidiaries. For purposes of the 2010 Note Indenture, the financial position, result of operations and statement of cash flows of unrestricted subsidiaries are excluded from the Company’s financial results to determine whether the Company is in compliance with the financial covenants governing the Senior Secured Notes.
Non-GAAP Financial Measures
Presentation of Certain Financial Metrics
We define Adjusted EBITDA as income (loss) before provision (benefit) for income taxes, plus: (i) corporate interest expense; (ii) depreciation and amortization; (iii) Vacation Interest cost of sales; (iv) loss on extinguishment of debt; (v) impairments and other non-cash write-offs; (vi) loss on the disposal of assets; (vii) amortization of loan origination costs; and (viii) amortization of portfolio premium; less (ix) non-cash revenue outside the ordinary course of business; (x) gain on the disposal of assets; (xi) gain on bargain purchase from business combinations; and (xii) amortization of portfolio discount. Adjusted EBITDA is a non-U.S. GAAP financial measure and should not be considered as an alternative to net income (loss), operating income (loss) or any other measure of financial performance calculated and presented in accordance with U.S. GAAP.
We believe Adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:
- it and similar non-U.S. GAAP measures are widely used by investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired;
- by comparing Adjusted EBITDA in different historical periods, we can evaluate our operating results without the additional variations of interest income (expense), income tax provision (benefit), depreciation and amortization expense and the Vacation Interest cost of sales expense; and
- several of the financial covenants governing the Senior Secured Notes and 2008 conduit facility, including the limitation on our ability to incur additional indebtedness, are determined by reference to our EBITDA as defined in the Senior Secured Notes, which definition approximates Adjusted EBITDA as presented here.
Our management uses Adjusted EBITDA: (i) as a measure of our operating performance, because it does not include the impact of items that we do not consider indicative of our core operating performance; (ii) for planning purposes, including the preparation of our annual operating budget; (iii) to allocate resources to enhance the financial performance of our business; and (iv) to evaluate the effectiveness of our business strategies.
The following table presents a reconciliation of net income (loss) before provision (benefit) for income taxes to Adjusted EBITDA*:
| Quarter Ended December 31 | Year Ended December 31 | |||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
| ($ in thousands) | ($ in thousands) | |||||||||||||||||||||
| Net income (loss) before provision (benefit) for income taxes | $ | (32,571 | ) | $ | (11,444 | ) | $ | 786 | $ | (20,433 | ) | |||||||||||
| Plus: Corporate interest expense(a) | 17,086 | 13,999 | 63,386 | 48,959 | ||||||||||||||||||
| Depreciation and amortization(b) | 3,801 | 3,040 | 13,966 | 11,939 | ||||||||||||||||||
| Vacation Interest cost of sales(c) | 5,935 | 6,100 | (9,695 | ) | 39,730 | |||||||||||||||||
| Loss on extinguishment of debt(b) | — | — | — | 1,081 | ||||||||||||||||||
| Impairments and other non-cash write-offs(b) | 556 | 2,341 | 1,572 | 3,330 | ||||||||||||||||||
| Gain on the disposal of assets(b) | (260 | ) | (874 | ) | (708 | ) | (1,923 | ) | ||||||||||||||
| Gain on bargain purchase from business combination(b) | 19,854 | — | (14,329 | ) | — | |||||||||||||||||
| Amortization of loan origination costs(b) | 736 | 439 | 2,762 | 3,436 | ||||||||||||||||||
| Amortization of portfolio premium (discounts) (b) | 825 | 355 | 800 | (430 | ) | |||||||||||||||||
| Adjusted EBITDA—Consolidated(d) | $ | 4,092 | 13,956 | $ | 58,540 | 85,689 | ||||||||||||||||
| Adjusted EBITDA—Diamond Resorts Parent, LLC and Restricted Subsidiaries(d) | 7,305 | 17,895 | 74,092 | 92,223 | ||||||||||||||||||
| Adjusted EBITDA—Unrestricted Subsidiaries(d) | (1,549 | ) | (3,939 | ) | (12,349 | ) | (6,534 | ) | ||||||||||||||
| Adjusted EBITDA—intercompany elimination(d) | (1,664 | ) | — | (3,203 | ) | — | ||||||||||||||||
*During the quarter ended December 31, 2011, a water intrusion assessment was levied at a resort that we manage to cover the costs required to repair water intrusion damage. Adjusted EBITDA for the quarter ended December 31, 2011 includes $9.7 million of expenses related to the intervals and points equivalent that we own at that resort. During the quarter ended December 31, 2010 there were no such charges levied. Adjusted EBITDA for the quarter ended December 31, 2011 also includes $2.1 million related to severance expense.
| (a) | Excludes interest expense related to non-recourse indebtedness incurred by our special purpose vehicles that is secured by our VOI consumer loans. | ||||
| (b) | These items represent non-cash charges/gains. | ||||
| (c) | We record Vacation Interest cost of sales using the relative sales value method in accordance with ASC 978, which requires us to make significant estimates which are subject to significant uncertainty. In determining the appropriate amount of costs using the relative sales value method, we rely on complex, multi-year financial models that incorporate a variety of estimated inputs. These models are reviewed on a regular basis, and the relevant estimates used in the models are revised based upon historical results and management’s new estimates. Small changes in any of the numerous assumptions in the model can have a significant financial statement impact as ASC 978 requires a retroactive adjustment back to the time of the Sunterra Corporation acquisition in the current period. Much like depreciation or amortization, for us, Vacation Interest cost of sales is essentially a non-cash expense item. | ||||
| (d) | For purposes of certain covenants governing the Senior Secured Notes, our financial performance, including Adjusted EBITDA, is measured with reference to us and our Restricted Subsidiaries, and the performance of Unrestricted Subsidiaries is not considered. Therefore, we believe that this presentation of Adjusted EBITDA provides helpful information to readers of our annual report. |
We understand that, although measures similar to Adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, it has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under U.S. GAAP. Some of these limitations are:
- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or VOI inventory;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not reflect cash requirements for income taxes;
- Adjusted EBITDA does not reflect interest expense for our corporate indebtedness;
- Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements;
- Although Vacation Interest cost of sales is also a non-cash item, we may in the future be required to develop or acquire new resort properties to replenish VOI inventory, and Adjusted EBITDA does not reflect any cash requirements for these expenditures; and
- Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
To properly and prudently evaluate our business, we encourage you to review our U.S. GAAP financial statements included in our Form 10-K, and not to rely on any single financial measure to evaluate our business.
See the following tables for the determination of the operating results of the Company:
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the quarters ended December 31, 2011 and 2010 (In thousands) |
|||||||||||||||||||||||||||||||||||||
|
Quarter Ended
December 31, 2011 |
Quarter Ended
December 31, 2010 |
||||||||||||||||||||||||||||||||||||
|
Diamond
Resorts Parent, LLC and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
Resorts Parent, LLC and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||
| Vacation Interest sales | $ | 53,852 | $ | 2,838 | $ | - | $ | 56,690 | $ | 55,931 | $ | - | $ | - | $ | 55,931 | |||||||||||||||||||||
|
Provision for uncollectible Vacation
Interest sales revenue |
(5,212 | ) | (91 | ) | - | (5,303 | ) | (9,736 | ) | - | - | (9,736 | ) | ||||||||||||||||||||||||
| Vacation Interest, net | 48,640 | 2,747 | - | 51,387 | 46,195 | - | - | 46,195 | |||||||||||||||||||||||||||||
| Management and member services | 25,989 | 1,653 | (1,831 | ) | 25,811 | 22,422 | 869 | (869 | ) | 22,422 | |||||||||||||||||||||||||||
| Consolidated resort operations | 6,256 | 1,242 | 606 | 8,104 | 6,215 | 275 | - | 6,490 | |||||||||||||||||||||||||||||
| Interest | 9,699 | 3,306 | - | 13,005 | 9,691 | 273 | - | 9,964 | |||||||||||||||||||||||||||||
| Other | 5,134 | 2,394 | (3,583 | ) | 3,945 | 4,244 | 16 | - | 4,260 | ||||||||||||||||||||||||||||
| Total revenues | 95,718 | 11,342 | (4,808 | ) | 102,252 | 88,767 | 1,433 | (869 | ) | 89,331 | |||||||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||||||
| Vacation Interest cost of sales | (6,043 | ) | 108 | - | (5,935 | ) | 6,100 | - | - | 6,100 | |||||||||||||||||||||||||||
| Advertising, sales and marketing | 31,394 | 1,369 | (167 | ) | 32,596 | 29,966 | 478 | - | 30,444 | ||||||||||||||||||||||||||||
| Vacation Interest carrying cost, net | 18,483 | 3,426 | (641 | ) | 21,268 | 9,176 | (230 | ) | - | 8,946 | |||||||||||||||||||||||||||
| Management and member services | 8,118 | 1,417 | (944 | ) | 8,591 | 5,530 | 1,176 | (869 | ) | 5,837 | |||||||||||||||||||||||||||
| Consolidated resort operations | 6,425 | 1,464 | - | 7,889 | 5,584 | 343 | - | 5,927 | |||||||||||||||||||||||||||||
| Loan portfolio | 2,826 | 364 | (343 | ) | 2,847 | 2,120 | 598 | - | 2,718 | ||||||||||||||||||||||||||||
| Other operating | 739 | 581 | (947 | ) | 373 | 313 | - | - | 313 | ||||||||||||||||||||||||||||
| General and administrative | 18,219 | 3,498 | (102 | ) | 21,615 | 14,958 | 2,729 | - | 17,687 | ||||||||||||||||||||||||||||
| Depreciation and amortization | 2,155 | 1,646 | - | 3,801 | 2,524 | 516 | - | 3,040 | |||||||||||||||||||||||||||||
| Interest | 16,251 | 5,377 | - | 21,628 | 17,280 | 1,016 | - | 18,296 | |||||||||||||||||||||||||||||
| Loss on extinguishment of debt | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Impairments and other write-offs | 545 | 11 | - | 556 | 2,341 | - | - | 2,341 | |||||||||||||||||||||||||||||
| Gain on disposal of assets | (232 | ) | (28 | ) | - | (260 | ) | (874 | ) | - | - | (874 | ) | ||||||||||||||||||||||||
|
Adjustment to gain on bargain purchase
from business combination |
- | 19,854 | - | 19,854 | - | - | - | - | |||||||||||||||||||||||||||||
| Total costs and expenses | 98,880 | 39,087 | (3,144 | ) | 134,823 | 95,018 | 6,626 | (869 | ) | 100,775 | |||||||||||||||||||||||||||
|
Loss before provision
for income taxes |
(3,162 | ) | (27,745 | ) | (1,664 | ) | (32,571 | ) | (6,251 | ) | (5,193 | ) | - | (11,444 | ) | ||||||||||||||||||||||
| Benefit for income taxes | (1,242 | ) | (8,211 | ) | - | (9,453 | ) | (705 | ) | - | - | (705 | ) | ||||||||||||||||||||||||
| Net loss | $ | (1,920 | ) | $ | (19,534 | ) | $ | (1,664 | ) | $ | (23,118 | ) | $ | (5,546 | ) | $ | (5,193 | ) | $ | - | $ | (10,739 | ) | ||||||||||||||
|
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2011 and 2010 (In thousands) |
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|
Year Ended
December 31, 2011 |
Year Ended
December 31, 2010 |
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|
Diamond
Resorts Parent, LLC and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
Resorts Parent, LLC and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||
| Vacation Interest sales | $ | 203,348 | $ | 7,972 | $ | 1 | $ | 211,321 | $ | 214,764 | $ | - | $ | - | $ | 214,764 | |||||||||||||||||||||
|
Provision for uncollectible Vacation
Interest sales revenue |
(16,300 | ) | (262 | ) | - | (16,562 | ) | (12,655 | ) | - | - | (12,655 | ) | ||||||||||||||||||||||||
| Vacation Interest, net | 187,048 | 7,710 | 1 | 194,759 | 202,109 | - | - | 202,109 | |||||||||||||||||||||||||||||
| Management and member services | 99,854 | 5,052 | (5,600 | ) | 99,306 | 86,206 | 1,152 | (1,152 | ) | 86,206 | |||||||||||||||||||||||||||
| Consolidated resort operations | 27,280 | 2,613 | - | 29,893 | 26,163 | 384 | - | 26,547 | |||||||||||||||||||||||||||||
| Interest | 38,993 | 8,292 | - | 47,285 | 38,720 | 607 | - | 39,327 | |||||||||||||||||||||||||||||
| Other | 22,352 | 4,702 | (7,276 | ) | 19,778 | 16,615 | 21 | - | 16,636 | ||||||||||||||||||||||||||||
| Total revenues | 375,527 | 28,369 | (12,875 | ) | 391,021 | 369,813 | 2,164 | (1,152 | ) | 370,825 | |||||||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||||||
| Vacation Interest cost of sales | (10,038 | ) | 343 | - | (9,695 | ) | 39,730 | - | - | 39,730 | |||||||||||||||||||||||||||
| Advertising, sales and marketing | 124,840 | 4,401 | (524 | ) | 128,717 | 113,520 | 509 | - | 114,029 | ||||||||||||||||||||||||||||
| Vacation Interest carrying cost, net | 35,728 | 6,788 | (1,185 | ) | 41,331 | 30,226 | (405 | ) | - | 29,821 | |||||||||||||||||||||||||||
| Management and member services | 24,764 | 7,437 | (5,076 | ) | 27,125 | 22,137 | 1,459 | (1,152 | ) | 22,444 | |||||||||||||||||||||||||||
| Consolidated resort operations | 24,865 | 2,918 | - | 27,783 | 23,547 | 425 | - | 23,972 | |||||||||||||||||||||||||||||
| Loan portfolio | 10,334 | 1,107 | (688 | ) | 10,753 | 9,918 | 648 | - | 10,566 | ||||||||||||||||||||||||||||
| Other operating | 2,476 | 1,021 | (2,199 | ) | 1,298 | 1,202 | - | - | 1,202 | ||||||||||||||||||||||||||||
| General and administrative | 66,497 | 13,915 | - | 80,412 | 62,218 | 5,687 | - | 67,905 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 9,818 | 4,148 | - | 13,966 | 11,249 | 690 | - | 11,939 | |||||||||||||||||||||||||||||
| Interest | 69,169 | 12,841 | - | 82,010 | 65,394 | 1,768 | - | 67,162 | |||||||||||||||||||||||||||||
| Loss on extinguishment of debt | - | - | - | - | 1,081 | - | - | 1,081 | |||||||||||||||||||||||||||||
| Impairments and other write-offs | 1,539 | 33 | - | 1,572 | 3,330 | - | - | 3,330 | |||||||||||||||||||||||||||||
| (Gain) loss on disposal of assets | (964 | ) | 256 | - | (708 | ) | (1,923 | ) | - | - | (1,923 | ) | |||||||||||||||||||||||||
|
Gain on bargain purchase from business
combination |
- | (14,329 | ) | - | (14,329 | ) | - | - | - | - | |||||||||||||||||||||||||||
| Total costs and expenses | 359,028 | 40,879 | (9,672 | ) | 390,235 | 381,629 | 10,781 | (1,152 | ) | 391,258 | |||||||||||||||||||||||||||
|
Income (loss) before benefit
for income taxes |
16,499 | (12,510 | ) | (3,203 | ) | 786 | (11,816 | ) | (8,617 | ) | - | (20,433 | ) | ||||||||||||||||||||||||
| Benefit for income taxes | (950 | ) | (8,567 | ) | - | (9,517 | ) | (1,274 | ) | - | - | (1,274 | ) | ||||||||||||||||||||||||
| Net income (loss) | $ | 17,449 | $ | (3,943 | ) | $ | (3,203 | ) | $ | 10,303 | $ | (10,542 | ) | $ | (8,617 | ) | $ | - | $ | (19,159 | ) | ||||||||||||||||
|
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2011 and 2010 (In thousands, except share data) |
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|
December 31, 2011
(Audited) |
December 31, 2010
(Audited) |
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|
Diamond
Resorts Parent, LLC and Restricted Subsidiaries |
Unrestricted |
Elimination | Total |
Diamond
Resorts Parent, LLC and Restricted Subsidiaries |
Unrestricted |
Elimination | Total | ||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 19,648 | $ | 249 | $ | - | $ | 19,897 | $ | 27,163 | $ | 166 | $ | - | $ | 27,329 | |||||||||||||||||||||
| Cash in escrow and restricted cash | 33,370 | 618 | - | 33,988 | 29,868 | 180 | - | 30,048 | |||||||||||||||||||||||||||||
|
Mortgages and contracts receivable, net of
allowance of $50,518, $43,960, $0, $94,478, $51,551, $3,600, $0 and $55,151 respectively |
227,835 | 55,473 | (6 | ) | 283,302 | 236,846 | 8,454 | (13 | ) | 245,287 | |||||||||||||||||||||||||||
| Due from related parties, net | 31,678 | (2,420 | ) | - | 29,258 | 20,789 | 223 | (54 | ) | 20,958 | |||||||||||||||||||||||||||
| Other receivables, net | 34,579 | 2,455 | (1,981 | ) | 35,053 | 31,650 | 4,330 | - | 35,980 | ||||||||||||||||||||||||||||
| Income tax receivable | 629 | - | - | 629 | 10 | - | - | 10 | |||||||||||||||||||||||||||||
| Prepaid expenses and other assets, net | 45,402 | 9,221 | (1,146 | ) | 53,477 | 45,260 | 2,662 | (1,674 | ) | 46,248 | |||||||||||||||||||||||||||
| Unsold Vacation Interests, net | 225,375 | 34,634 | (3,204 | ) | 256,805 | 180,464 | 10,100 | - | 190,564 | ||||||||||||||||||||||||||||
| Property and equipment, net | 25,943 | 22,234 | - | 48,177 | 23,468 | 5,629 | - | 29,097 | |||||||||||||||||||||||||||||
| Assets held for sale | 5,517 | - | - | 5,517 | 9,517 | - | - | 9,517 | |||||||||||||||||||||||||||||
| Intangible assets, net | 34,050 | 34,059 | - | 68,109 | 37,411 | 8,302 | - | 45,713 | |||||||||||||||||||||||||||||
| Total assets | $ | 684,026 | $ | 156,523 | $ | (6,337 | ) | $ | 834,212 | $ | 642,446 | $ | 40,046 | $ | (1,741 | ) | $ | 680,751 | |||||||||||||||||||
|
LIABILITIES AND MEMBER
CAPITAL (DEFICIT) |
|||||||||||||||||||||||||||||||||||||
| Accounts payable | $ | 11,662 | $ | 691 | $ | - | $ | 12,353 | $ | 7,409 | $ | 246 | $ | - | $ | 7,655 | |||||||||||||||||||||
| Due to related parties, net | 28,684 | 35,434 | (7,603 | ) | 56,515 | 29,197 | 13,724 | (6,670 | ) | 36,251 | |||||||||||||||||||||||||||
| Accrued liabilities | 68,308 | 3,161 | (1,143 | ) | 70,326 | 62,367 | 6,853 | (1,687 | ) | 67,533 | |||||||||||||||||||||||||||
| Income taxes payable | 3,491 | - | - | 3,491 | 3,936 | - | - | 3,936 | |||||||||||||||||||||||||||||
| Deferred revenues | 70,743 | 31 | - | 70,774 | 67,706 | - | - | 67,706 | |||||||||||||||||||||||||||||
|
Senior secured notes, net of original issue
discount of $9,454, $0, $0, $9,454, $10,278, $0, $0 and $10,278, respectively |
415,546 | - | - | 415,546 | 414,722 | - | - | 414,722 | |||||||||||||||||||||||||||||
| Securitization notes and conduit facility, net | 188,165 | 62,730 | - | 250,895 | 176,551 | 10,292 | - | 186,843 | |||||||||||||||||||||||||||||
| Derivative liabilities | - | - | - | - | 79 | - | - | 79 | |||||||||||||||||||||||||||||
| Notes payable | 1,871 | 71,643 | (2,000 | ) | 71,514 | 1,432 | 21,841 | - | 23,273 | ||||||||||||||||||||||||||||
| Total liabilities | 788,470 | 173,690 | (10,746 | ) | 951,414 | 763,399 | 52,956 | (8,357 | ) | 807,998 | |||||||||||||||||||||||||||
| Redeemable preferred units | - | - | - | - | 84,502 | - | - | 84,502 | |||||||||||||||||||||||||||||
| Member capital | 152,247 | 9,675 | (9,675 | ) | 152,247 | 7,335 | 9,675 | (9,675 | ) | 7,335 | |||||||||||||||||||||||||||
| Accumulated deficit | (238,345 | ) | (26,140 | ) | 13,408 | (251,077 | ) | (195,044 | ) | (22,197 | ) | 15,903 | (201,338 | ) | |||||||||||||||||||||||
| Accumulated other comprehensive loss | (18,346 | ) | (702 | ) | 676 | (18,372 | ) | (17,746 | ) | (388 | ) | 388 | (17,746 | ) | |||||||||||||||||||||||
| Total member capital (deficit) | (104,444 | ) | (17,167 | ) | 4,409 | (117,202 | ) | (205,455 | ) | (12,910 | ) | 6,616 | (211,749 | ) | |||||||||||||||||||||||
|
Total liabilities and member capital
(deficit) |
$ | 684,026 | $ | 156,523 | $ | (6,337 | ) | $ | 834,212 | $ | 642,446 | $ | 40,046 | $ | (1,741 | ) | $ | 680,751 | |||||||||||||||||||
|
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2011 and 2010 (In thousands) |
||||||||||
| Year ended | ||||||||||
|
December 31,
2011 |
December 31,
2010 |
|||||||||
| Operating Activities: | ||||||||||
| Net income (loss) | $ | 10,303 | $ | (19,159 | ) | |||||
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
||||||||||
| Provision for uncollectible Vacation Interest sales revenue | 16,562 | 12,655 | ||||||||
|
Amortization of capitalized financing costs and original
issue discounts |
6,138 | 2,521 | ||||||||
|
Amortization of capitalized loan origination costs and
portfolio discount |
3,562 | 3,007 | ||||||||
| Depreciation and amortization | 13,966 | 11,939 | ||||||||
| Loss on extinguishment of debt | - | 1,081 | ||||||||
| Impairments and other write-offs | 1,572 | 3,330 | ||||||||
| Gain on disposal of assets | (708 | ) | (1,923 | ) | ||||||
| Gain on bargain purchase from business combination, net of tax | (14,329 | ) | - | |||||||
| Deferred income taxes | (8,567 | ) | (377 | ) | ||||||
| Loss on foreign currency exchange | (72 | ) | 42 | |||||||
| Gain on mortgage repurchase | (196 | ) | (191 | ) | ||||||
| Unrealized gain on derivative instruments | (79 | ) | (314 | ) | ||||||
| Gain on insurance settlement | (3,535 | ) | - | |||||||
| Changes in operating assets and liabilities excluding acquisitions: | ||||||||||
| Mortgages and contracts receivable | (10 | ) | 12,190 | |||||||
| Due from related parties, net | (7,260 | ) | (5,776 | ) | ||||||
| Other receivables, net | 5,522 | 3,041 | ||||||||
| Prepaid expenses and other assets, net | (6,271 | ) | (115 | ) | ||||||
| Unsold Vacation Interests, net | (39,329 | ) | 10,308 | |||||||
| Accounts payable | 4,187 | (3,224 | ) | |||||||
| Due to related parties, net | 24,958 | 5,255 | ||||||||
| Accrued liabilities | 2,588 | 18,447 | ||||||||
| Income taxes payable | (1,082 | ) | 4,632 | |||||||
| Deferred revenues | 1,372 | 8,632 | ||||||||
| Net cash provided by operating activities | 9,292 | 66,001 | ||||||||
| Investing activities: | ||||||||||
| Property and equipment capital expenditures | (6,276 | ) | (5,553 | ) | ||||||
| Purchase of assets from ILX Resorts, Inc. | - | (30,722 | ) | |||||||
|
Purchase of assets from Tempus Resorts International,
net of $2,515 and $0 cash acquired, respectively |
(102,400 | ) | - | |||||||
| Disbursement of Tempus Acquisition note receivable | (3,493 | ) | (3,005 | ) | ||||||
| Proceeds from sale of assets | 2,369 | 1,881 | ||||||||
| Net cash used in investing activities | $ | (109,800 | ) | $ | (37,399 | ) | ||||
|
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS —Continued For the years ended December 31, 2011 and 2010 (In thousands) |
||||||||||
| Year ended | ||||||||||
|
December 31,
2011 |
December 31,
2010 |
|||||||||
| Financing activities: | ||||||||||
| Changes in cash in escrow and restricted cash | $ | (1,024 | ) | $ | 10,526 | |||||
|
Proceeds from issuance of senior secured notes, net of original
issue discount of $0 and $10,570, respectively |
- | 414,430 | ||||||||
| Proceeds from issuance of securitization notes and conduit facility | 206,817 | 54,100 | ||||||||
| Proceeds from issuance of notes payable | 48,178 | 20,813 | ||||||||
| Payments on securitization notes and conduit facility | (138,910 | ) | (90,226 | ) | ||||||
| Payments on line of credit agreements | - | (397,609 | ) | |||||||
| Payments on notes payable | (16,861 | ) | (8,221 | ) | ||||||
| Payments of debt issuance costs | (5,533 | ) | (19,125 | ) | ||||||
| Proceeds from issuance of common and preferred units | 146,651 | 75,000 | ||||||||
| Repurchase of a portion of outstanding warrants | (16,598 | ) | - | |||||||
| Repurchase of a portion of outstanding common units | (16,352 | ) | - | |||||||
| Repurchase of redeemable preferred units | (108,701 | ) | - | |||||||
|
Repurchase of equity previously held by another minority
institutional investor |
- | (75,000 | ) | |||||||
|
Payments of costs related to issuance of common and
preferred units |
(4,632 | ) | (2,888 | ) | ||||||
| Payments for derivative instrument | - | (71 | ) | |||||||
| Net cash provided by (used in) financing activities | 93,035 | (18,271 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents | (7,473 | ) | 10,331 | |||||||
|
Effect of changes in exchange rates on cash and cash
equivalents |
41 | (188 | ) | |||||||
| Cash and cash equivalents, beginning of period | 27,329 | 17,186 | ||||||||
| Cash and cash equivalents, end of period | $ | 19,897 | $ | 27,329 | ||||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION: |
||||||||||
| Cash paid for interest | $ | 74,138 | $ | 44,634 | ||||||
| Cash paid for taxes, net of cash refunds | $ | 161 | $ | (5,514 | ) | |||||
|
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES: |
||||||||||
| Priority returns and redemption premiums (adjustments) on preferred units | $ | 8,412 | $ | 17,654 | ||||||
| Insurance premiums financed through issuance of note payable | $ | 8,500 | $ | 7,897 | ||||||
| Assets held for sale reclassified to unsold Vacation Interests | $ | 2,983 | $ | - | ||||||
| Unsold Vacation Interests reclassified to assets held for sale | $ | - | $ | 10,064 | ||||||
| Property and equipment reclassified to assets to be disposed but not actively marketed (prepaid expenses and other assets) | $ | - | $ | 588 | ||||||
| Management contracts reclassified to assets held for sale | $ | - | $ | 587 | ||||||
| Proceeds from issuance of ILXA Inventory Loan in transit | $ | - | $ | 1,028 | ||||||
| Purchase of assets from Tempus Resorts International and ILX Resorts, Inc., respectively: | ||||||||||
| Fair value of assets acquired | $ | 136,314 | $ | 34,876 | ||||||
| Gain from bargain purchase recognized | (14,329 | ) | - | |||||||
| Cash paid | (104,915 | ) | (30,722 | ) | ||||||
| Deferred tax liability | (8,567 | ) | - | |||||||
| Liabilities assumed | $ | 8,503 | $ | 4,154 | ||||||
About Diamond Resorts Corporation
Diamond Resorts Corporation and its subsidiaries develop, own, operate and manage vacation ownership resorts and, through resort and partner affiliation agreements, provide owners and members with access to 71 managed resorts and 144 affiliated resorts and four cruise itineraries through THE Club® at Diamond Resorts International®. To learn more, visit DiamondResorts.com.