LAS VEGAS--(BUSINESS WIRE)--Diamond Resorts International, Inc. (NYSE:DRII) (“Diamond” or the “Company”), today announced results for the fourth quarter and full year ended December 31, 2013.
David F. Palmer, President and Chief Executive Officer, stated, “Our business performed strongly this period, as we delivered a record fourth quarter, concluding a record year. Our results clearly reinforce the advantages of our differentiated business model, which combined with solid execution by our team, led to growth across nearly all the key metrics that define our business. As we look to 2014, we expect to continue to benefit from the recurring and predictable contractual cash flows and revenue growth associated with our hospitality and management services business and that we will capitalize on the flexibility of our vacation interest business to continue the positive momentum we have seen to date. We believe we have a unique business model in a highly fragmented and under-penetrated industry and are confident in our ability to continue to deliver strong results in the quarters and years ahead.”
Full Year 2013 Highlights
- Total revenue increased $206.1 million, or 39.4%, to $729.8 million for 2013 from $523.7 million for 2012.
- Hospitality and Management Services revenue grew by $22.1 million, or 14.4%, for 2013 compared to 2012. This growth was driven by the full year ownership of Pacific Monarch Resorts (acquired in May 2012), the inclusion of the PMR Services Companies and Island One (both acquired in July 2013), increases in operating costs at the resort level which generated higher same-store management fee revenue, and increases in revenue from our club operations.
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Vacation Interest sales, net grew by $171.5 million, or 58.5%, for
2013 compared to 2012. This growth was driven by a:
- 14.4% increase in tours to 207,075 from 180,981
- 12.0% increase in transactions to 29,955 from 26,734 (reflecting closing percentages of 14.5% for 2013 and 14.8% for 2012)
- 34.1% increase in average transaction price to $16,771 from $12,510
- Advertising, sales and marketing expense for 2013 included a non-cash charge of $2.1 million related to stock based compensation. Excluding this charge, advertising, sales and marketing as a percentage of Vacation Interest sales revenue decreased 5.7 percentage points to 50.3%, from 56.0% in 2012. Including this non-cash charge, advertising, sales and marketing as a percentage of Vacation Interest sales revenue was 50.7%. This improvement was primarily due to improved leverage of fixed costs through increased sales efficiencies.
- Pre-tax income for 2013 and 2012 included non-cash and one-time charges and adjustments of $63.8 million and $12.3 million, respectively. The non-cash items were charges related to stock-based compensation of $40.5 million in 2013 and $3.3 million in 2012, a one-time charge of $5.5 million related to the final settlement of the FLRX Alter Ego suit (“FLRX litigation”) in 2013 (representing the carrying value of our interest in certain Mexican land transferred to the plaintiff), a charge of $6.6 million related to the early extinguishment of debt which was repaid with proceeds from our IPO in July 2013, and a gain on bargain purchase from business combinations of $2.9 million in 2013 and $20.6 million in 2012. In addition, 2013 included a cash charge of $9.0 million related to the early extinguishment of debt and a one-time cash charge of $5.0 million related to the final settlement of the FLRX litigation. In 2012, there was a one-time cash charge of $5.0 million related to the termination of consultants who had been executives of an acquired company (“Executive Termination”). Excluding these items, pre-tax income in 2013 would have been $67.0 million, an increase of $80.0 million from a pre-tax loss of $13.0 million in 2012. Including these items, pre-tax income in 2013 was $3.2 million and the pre-tax loss in 2012 was $0.7 million.
- Net cash used by operations in 2013 was $5.4 million. This includes a $128.8 million net working capital use from the buildup of receivables, net of repayments. Our receivables are generally monetized through a securitization transaction, or by pledging them under one of our funding facilities. This monetization is shown under “financing activities” on our statement of cash flows. During 2013 we generated $125.2 million of net cash related to the monetization of our receivables portfolio which included $38.5 million as of December 31, 2013 in receivables activity related to the DROT 2013-2 securitization.
- Adjusted EBITDA for the Company and its Restricted Subsidiaries was $219.0 million for 2013. Adjusted EBITDA for the Company on a consolidated basis was $220.2 million for 2013. Adjusted EBITDA for 2013 included a one-time charge of $10.5 million ($5.0 million of which was cash) related to the final settlement of the FLRX litigation. Adjusted EBITDA for the Company and its Restricted Subsidiaries was $123.3 million for 2012. On a consolidated basis, Adjusted EBITDA was $113.2 million for 2012. Adjusted EBITDA for 2012 included a $5.0 million charge related to the Executive Termination.
- In 2013 we completed three securitization transactions issuing notes with an aggregate face value of $349.6 million.
Fourth Quarter 2013 Highlights
- Total revenue increased $60.3 million, or 40.0%, to $210.9 million for 2013 from $150.6 million for 2012.
- Hospitality and Management Services revenue grew by $6.8 million, or 17.6%, for 2013 compared to 2012. This growth was driven mainly by increased management fees as a result of the inclusion of the managed properties from the Island One and PMR Service Companies acquisitions (completed in July 2013) and increased revenues from our club operations.
- Vacation Interest sales, net grew by $48.5 million, or 53.6%, in 2013 compared to the same period in 2012. This growth was driven primarily by a 40.8% increase in average transaction price to $18,313 from $13,007.
- Advertising, sales and marketing as a percentage of Vacation Interest sales revenue decreased 4.0 percentage points to 49.9%, from 53.9% in 2012. This improvement was primarily due to improved leverage of fixed costs through increased sales efficiencies.
- Pre-tax income for 2013 and 2012 included non-cash and one-time charges of $14.6 million and $5.3 million, respectively. The non-cash items were charges related to stock-based compensation of $2.0 million in 2013 and $3.3 million in 2012, a one-time charge of $5.5 million related to the final settlement of the FLRX litigation in 2013, a charge of $2.2 million related to the early extinguishment of debt, a gain on bargain purchase from business combinations of $0.2 million in 2013 and an adjustment to bargain purchase from business combinations of $2.0 million in 2012. In addition, 2013 included a one-time cash charge of $5.0 million related to the final settlement of the FLRX litigation. Excluding these items, pre-tax income in 2013 would have been $30.7 million, an increase of $38.1 million from pre-tax loss of $7.4 million in 2012. Including these items, pre-tax income in 2013 was $16.1 million and the pre-tax loss in 2012 was $12.7 million.
- Net cash used in 2013 was $0.4 million. This includes a $44.4 million net working capital use from the buildup of receivables, net of repayments while we generated $60.9 million in cash related to the monetization of our receivables portfolio.
- Adjusted EBITDA for the Company and its Restricted Subsidiaries was $53.5 million for 2013. Adjusted EBITDA for the Company on a consolidated basis was $55.5 million for 2013. Adjusted EBITDA for 2013 included a one-time charge of $10.5 million ($5.0 million of which was cash) related to the final settlement of the FLRX litigation. Adjusted EBITDA for the Company and its Restricted Subsidiaries was $35.6 million for 2012. On a consolidated basis, Adjusted EBITDA was $35.8 million for 2012.
- On November 20, 2013, we completed a securitization transaction and issued DROT 2013-2 Class A and B Notes with a face value of $225.0 million.
Full Year Earnings Summary
Hospitality and Management Services
Total management and member services revenue in our Hospitality and Management Services segment increased $16.3 million, or 14.2%, to $131.2 million for the twelve months ended December 31, 2013 from $114.9 million for the twelve months ended December 31, 2012. Management fees increased as a result of full year ownership of Pacific Monarch Resorts, the inclusion of the managed properties from our acquisitions of Island One and the PMR Service Companies (both completed in July 2013) in 2013. We also experienced higher revenue from our club operations due to increased membership dues, higher collection rate and higher club member count in 2013 compared to 2012. We had a total of approximately 200,000 and 170,000 club members as of December 31, 2013 and 2012, respectively. These increases were partially offset by the reduction in commissions earned on fee-for-service management agreements with Island One which were terminated in conjunction with the Island One acquisition on July 24, 2013.
Management and member services expense increased $2.6 million, or 7.3%, to $37.9 million for the twelve months ended December 31, 2013 from $35.3 million for the twelve months ended December 31, 2012. The increase was primarily attributable to higher operating expense associated with higher club member count and higher operating costs at the resorts for which we act as the HOA. The above increases were partially offset by a reduction in the costs incurred under the fee-for-service agreements with Island One that terminated in conjunction with the Island One acquisition and an increase in the absorption of certain expenses by the HOAs that we manage. Management and member services expense as a percentage of management and member services revenue decreased to 28.9% in 2013 from 30.7% in 2012.
Vacation Interest Sales and Financing
Vacation Interest sales, net, increased $171.5 million, or 58.5%, to $464.6 million for the twelve months ended December 31, 2013 from $293.1 million for the twelve months ended December 31, 2012. The increase in Vacation Interest sales, net, was attributable to a $190.7 million increase in Vacation Interest sales revenue, partially offset by a $19.2 million increase in our provision for uncollectible Vacation Interest sales revenue. The $190.7 million increase in Vacation Interest sales revenue in 2013 compared to 2012 was generated by an increase in the number of transactions and a higher average sales price per transaction. During the third and fourth quarter, the Company closed three low performing off-site sales centers, which will enable us to increase sales efficiencies. Our total number of tours increased to 207,075 in 2013 from 180,981 in 2012, primarily due to an increase in the number of tours resulting from the expansion of our lead-generation and marketing programs. We closed a total of 29,955 Vacation Interest sales transactions in 2013, compared to 26,734 transactions in 2012. Our closing percentage (which represents the percentage of Vacation Interest sales transactions closed relative to the total number of tours at our sales centers during the period presented) decreased slightly to 14.5% in 2013 from 14.8% in 2012 as a result of an increase in focus on sales to new customers. Vacation Interest sales price per transaction increased to $16,771 in 2013 from $12,510 in 2012 due principally to a change in our selling strategy which focused on selling larger point packages and the success of the sales and marketing initiatives implemented in furtherance of this strategy.
Sales incentives increased $1.8 million, or 18.8% to $11.1 million for the twelve months ended December 31, 2013 from $9.4 million for the twelve months ended December 31, 2012. The amount we record as sales incentives is reduced by an estimated breakage amount and, accordingly, the estimated amount of such breakage increases our Vacation Interest sales revenue, net. In 2013, we adjusted sales incentives by $3.2 million relating to the expiration, and expected future expiration, of sales incentives we provided to customers prior to June 30, 2013 as we had more historical data to compute the estimated breakage. Excluding the $3.2 million reduction, sales incentives as a percentage of gross Vacation Interest sales revenue were 2.8% in 2013 compared to 2.9% in 2012.
Provision for uncollectible Vacation Interest sales revenue increased $19.2 million, or 75.5%, to $44.7 million for the twelve months ended December 31, 2013 from $25.5 million for the twelve months ended December 31, 2012, primarily due to the increase in Vacation Interest sales revenue and an increase in the percentage of financed Vacation Interest sales in 2013 as compared to 2012.
Advertising, sales and marketing costs as a percentage of Vacation Interest sales revenue were 50.7% for the twelve months ended December 31, 2013, compared to 56.0% for the twelve months ended December 31, 2012, primarily due to the increase in Vacation Interest sales. Advertising, sales and marketing expense in 2013 included a charge of $2.1 million for stock-based compensation. Without this non-cash charge, advertising, sales and marketing as a percentage of gross Vacation Interest sales revenue would have been 50.3%, a decrease of 5.7 percentage points from the prior year period. The decrease of such costs as a percentage of Vacation Interest sales revenue was primarily due to improved absorption of fixed costs through increased sales efficiencies.
Vacation Interest cost of sales increased $24.5 million, or 76.3%, to $56.7 million for the twelve months ended December 31, 2013 from $32.2 million for the twelve months ended December 31, 2012. Of this increase, $18.7 million was due to an increase in Vacation Interest Sales in 2013 as compared to 2012. The remaining increase was a combination of the impact of the inclusion of the inventory purchased in the Pacific Monarch Resorts acquisition in 2012 and the impact of a smaller pool of low-cost inventory becoming eligible for recovery and capitalization pursuant to our inventory recovery agreements in 2013 as compared to 2012. The inventory purchased in the Pacific Monarch Resorts acquisition reduced the cost of sales in 2012 as the inventory had a lower cost basis than the average cost basis of our then existing inventory. The increase to cost of sales was compounded as a smaller pool of inventory became available for recovery and capitalization pursuant to our inventory recovery agreements in 2013.
General and Administrative Expense
General and administrative expense for the twelve months ended December 31, 2013 and December 31, 2012 included non-cash charges related to stock based compensation of $37.0 million and $3.3 million, respectively. In 2013, there was a one-time charge of $10.5 million ($5.0 million of which was cash) related to the final settlement of the FLRX litigation. In 2012, there was a one-time charge of $5.0 million related to the Executive Termination. Excluding these charges, general and administrative expense would have been $98.4 million in 2013, an increase of $7.7 million, or 8.5%, from $90.7 million in 2012. This increase is primarily due to additional costs incurred in connection with the operation of the Pacific Monarch Resorts for a full year, and the PMR Service Companies and Island One acquisitions. Giving effect to these charges, general and administrative expense as reported was $145.9 million in 2013 and $99.0 million in 2012.
Pre-tax Income/Loss and Net Income / Loss
Pre-tax income for twelve months ended December 31, 2013 and the twelve months ended December 31, 2012 included non-cash and one-time charges and adjustments of $63.8 million and $12.3 million, respectively. The non-cash items were charges related to stock-based compensation of $40.5 million in 2013 and $3.3 million in 2012, a one-time charge of $5.5 million related to the final settlement of the FLRX litigation in 2013 (representing the carrying value of our interest in certain Mexican land transferred to the plaintiff), a charge of $6.6 million related to the early extinguishment of debt which was repaid with proceeds from our IPO in July 2013, and a gain on bargain purchase from business combinations of $2.9 million in 2013 and $20.6 million in 2012. In addition, 2013 included a cash charge of $9.0 million related to the early extinguishment of debt and a one-time cash charge of $5.0 million related to the final settlement of the FLRX litigation. In 2012, there was a one-time cash charge of $5.0 million related to the Executive Termination. Excluding these items, pre-tax income in 2013 would have been $67.0 million, an increase of $80.0 million from a pre-tax loss of $13.0 million in 2012. Including these items, pre-tax income in 2013 was $3.2 million and the pre-tax loss in 2012 was $0.7 million.
Net income for the twelve months ended December 31, 2013 and the twelve months ended December 31, 2012 included the pre-tax charges discussed above. 2013 had a net loss of $2.5 million, which is a decrease of $16.1 million from a net income of $13.6 million in 2012.
Fourth Quarter Earnings Summary
Hospitality and Management Services
Total management and member services revenue in our Hospitality and Management Services segment increased $5.5 million, or 19.0%, to $34.9 million for the three months ended December 31, 2013 from $29.4 million for the three months ended December 31, 2012. Management fees increased as a result of the inclusion of the managed properties from our acquisitions of Island One and the PMR Service Companies (both completed in July 2013) during the period in 2013. We also experienced higher revenue from the clubs due to increased membership dues, higher collection rate and higher club member count during the period in 2013 compared to the period in 2012. These increases were partially offset by the reduction in commissions earned on fee-for-service agreements with Island One which were terminated in conjunction with the Island One acquisition on July 24, 2013.
Management and member services expense increased $0.2 million, or 2.3%, to $9.9 million for the three months ended December 31, 2013 from $9.7 million for the three months ended December 31, 2012. The increase was primarily attributable to higher operating expense associated with higher club member count and higher operating costs at the resorts for which we act as the HOA. The above increases were partially offset by a reduction in the costs incurred under the fee-for-service agreements with Island One that terminated in conjunction with the Island One acquisition and an increase in the absorption of certain resort management expenses to the HOAs that we manage. Management and member services expense as a percentage of management and member services revenue decreased to 28.5% during the period in 2013 from 33.1% during the period in 2012.
Vacation Interest Sales and Financing
Vacation Interest sales, net, increased $48.5 million, or 53.6%, to $138.8 million for the three months ended December 31, 2013 from $90.3 million for the three months ended December 31, 2012. The increase in Vacation Interest sales, net, was attributable to a $54.0 million increase in Vacation Interest sales revenue, partially offset by a $5.6 million increase in our provision for uncollectible Vacation Interest sales revenue. The $54.0 million increase in Vacation Interest sales revenue during the period in 2013 compared to the period in 2012 was generated due to an increase in the number of transactions and a higher average sales price per transaction. During the quarter, the Company closed one low performing off-site sales center, which will enable us to increase sales efficiencies. Our total number of tours increased to 50,104 during the period in 2013 from 50,098 during the period in 2012. We closed a total of 7,926 Vacation Interest sales transactions during the period in 2013, compared to 8,024 transactions during the period in 2012. Our closing percentage (which represents the percentage of Vacation Interest sales transactions closed relative to the total number of sales presentations at our sales centers during the period presented) decreased slightly to 15.8% during the period in 2013 from 16.0% during the period in 2012. Vacation Interest sales price per transaction increased to $18,313 during the period in 2013 from $13,007 during the period in 2012 due principally to a change in our selling strategy to focus on selling larger point packages and the success of the sales and marketing initiatives implemented in furtherance of this strategy.
Sales incentives increased $1.2 million, or 28.9% to $5.2 million for the three months ended December 31, 2013 from $4.0 million for the three months ended December 31, 2012. Sales incentives as a percentage of gross Vacation Interest sales revenue were 3.4% for the period in 2013 compared to 4.0% for the period in 2012.
Provision for uncollectible Vacation Interest sales revenue increased $5.6 million, or 59.5%, to $14.9 million during the period in 2013 from $9.4 million during the period in 2012, primarily due to the increase in Vacation Interest sales revenue and an increase in the percentage of financed Vacation Interest sales during the period in 2013 as compared to the period in 2012.
Advertising, sales and marketing costs as a percentage of Vacation Interest sales revenue were 49.9% for the three months ended December 31, 2013, compared to 53.9% for the three months ended December 31, 2012. The decrease of such costs as a percentage of Vacation Interest sales revenue was primarily due to improved absorption of fixed costs through increased sales efficiencies.
Vacation Interest cost of sales decreased $3.7 million, to $11.2 million for the three months ended December 31, 2013 from $15.0 million for the three months ended December 31, 2012. Of this change, $3.6 million was an increase related to the increase in Vacation Interest Sales during the period in 2013 as compared to the period in 2012. The $3.6 million increase was offset by a $7.3 million decrease due to a larger pool of low-cost inventory becoming eligible for recovery and capitalization pursuant to our inventory recovery agreements during the period in 2013 as compared to the period in 2012.
General and Administrative Expense
General and administrative expense for the three months ended December 31, 2013 and the three months ended December 31, 2012 included a non-cash charge related to stock based compensation of $1.7 million and $3.3 million, respectively. During the period for 2013, there was a one-time charge of $10.5 million ($5.0 million of which was cash) related to the final settlement of the FLRX litigation. Excluding these charges, general and administrative expense would have increased $3.4 million, or 13.7%, to $28.2 million during the period in 2013 from $24.8 million during the period in 2012. This increase is primarily due to additional costs incurred in connection with the PMR Service Companies and Island One acquisitions completed in the third quarter of 2013. Giving effect to these charges, general and administrative expense as reported was $40.3 million during the period in 2013 and $28.1 million during the period in 2012.
Pre-tax Income/Loss and Net Income / Loss
The pre-tax income for the three months ended December 31, 2013 and the three months ended December 31, 2012 included non-cash and one-time charges of $14.6 million and $5.3 million, respectively. The non-cash items were charges related to stock-based compensation of $2.0 million in 2013 and $3.3 million in 2012, a one-time charge of $5.5 million related to the final settlement of the FLRX litigation in 2013, a charge of $2.2 million related to the early extinguishment of debt, a gain on bargain purchase from business combinations of $0.2 million in 2013 and an adjustment to bargain purchase from business combinations of $2.0 million in 2012. In addition, 2013 included a one-time cash charge of $5.0 million related to the final settlement of the FLRX litigation. Excluding these items, pre-tax income in 2013 would have been $30.7 million, an increase of $38.1 million from pre-tax loss of $7.4 million in 2012. Including these items, pre-tax income in 2013 was $16.1 million and the pre-tax loss in 2012 was $12.7 million.
Net income for the three months ended December 31, 2013 and the three months ended December 31, 2012 included the pre-tax charges discussed above. Net income increased $15.3 million to $3.6 million during the period for 2013 from a net loss of $11.7 million during the period in 2012.
Capital Resources and Liquidity
As of December 31, 2013, we had cash and cash equivalents of $35.9 million, corporate indebtedness of $377.7 million and non-recourse debt of $411.3 million. Our cash used in operating activities was $5.4 million, reflecting $128.8 million net working capital use from the buildup of receivables, net of repayments. Our receivables are generally monetized through a securitization transaction, or by pledging them under one of our funding facilities. This monetization is shown under “financing activities” on our statement of cash flows. During 2013 we generated $125.2 million of net cash related to the monetization of our receivables portfolio which included $38.5 million as of December 31, 2013 in receivables activity related to the DROT 2013-2 securitization. Capital expenditures for the year ended December 31, 2013 were $15.2 million, an increase of $0.9 million from $14.3 million for the year ended December 31, 2012. Cash expenditures for the July 2013 acquisition of the PMR Service Companies were $47.4 million.
The indenture governing our 12% senior secured notes due 2018 includes covenants which are determined by reference to the Adjusted EBITDA of Diamond and its “restricted subsidiaries.” Adjusted EBITDA, as defined in the indenture, was $220.2 million for the year ended December 31, 2013. This includes a one-time charge of $10.5 million ($5.0 million of which was cash) related to the final settlement of the FLRX litigation.
Outlook
For the full year ending December 31, 2014, the Company is providing the following guidance for its expected operating results:
| Year Ending December 31, 2014 | ||||||||
| ($ in thousands) | Low |
High |
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| Pre-tax income | $ | 65,000 | $ | 92,500 | ||||
| Corporate interest expense | $ | 56,500 | $ | 54,500 | ||||
| Vacation interest cost of sales(a) | $ | 79,500 | $ | 69,500 | ||||
| Depreciation and amortization | $ | 32,000 | $ | 30,000 | ||||
| Other non-cash items(b) | $ | 22,000 | $ | 18,500 | ||||
For the year ending December 31, 2014, the Company anticipates cash expenditures for the acquisition of inventory, excluding inventory from acquisitions, to be between $30.0 million and $35.0 million. In addition, the company anticipates capital expenditures(c) to be between $18.0 million and $20.0 million.
|
(a) |
In accordance with ASC 978, the Company records Vacation Interest Cost of Sales using the relative sales value method (See Note 2 - Summary of Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December 31, 2012 of Diamond Resorts Corporation). This method requires the Company to make a number of projections and estimates, which are subject to significant uncertainty and retroactive adjustment in the future periods. These "true-up" adjustments may result, and for the Company have resulted in prior periods, in major swings (both positive and negative) in the Company's pre-tax income computed in accordance with US GAAP that do not have a direct correlation to the operating performance for the periods in which the "true-ups" are made. It is difficult to predict with any degree of precision what the projections and estimates used in connection with the relative sales value method will be and what impact those projections and estimates will have on the amount recorded in future periods as Vacation Interest Cost of Sales. As a result, guidance for Vacation Interest Cost of Sales (and as a result, pre-tax income) covers a wide range of outcomes. | ||
| (b) | Other non-cash items include: stock based compensation, amortization of loan origination costs, and amortization of net portfolio discounts and premiums. | ||
|
(c) |
Principally for IT infrastructure and sales center expansion/refurbishment. This does not include expenditures for the acquisition of inventory, or resort-level capital improvements which are paid by the homeowners associations. |
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Year End 2014 Earnings Call
The company will be conducting a conference call to discuss the full year and fourth quarter financial results at 5:00 p.m. Eastern Time on February 19, 2014, available via webcast on the Company's website at http://investors.diamondresorts.com/phoenix.zhtml?p=irol-eventDetails&c=251836&eventID=5098362. A webcast replay will become available within 2 hours of the call and will run for approximately one year on the Company’s website. Alternatively, participants may call into (866) 562-5561 from the United States, or (706) 679-1894 from outside the U.S. with conference ID 81171106; please dial in fifteen minutes early to ensure a timely start. A call replay will be available from 8:00 p.m. Eastern Time on February 19, 2014 through February 26, 2014 and can be accessed by dialing (800) 585-8367 with conference ID 81171106.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, including the guidance for expected operating results presented under “Outlook” above and other statements regarding the current expectations of Diamond Resorts International, Inc. (the “Company”) about its prospects and opportunities. These forward-looking statements are covered by the "Safe Harbor for Forward-Looking Statements" provided by the Private Securities Litigation Reform Act of 1995. The Company has tried to identify these forward looking statements by using words such as “expect,” “anticipate,” “estimate,” “plan,” “will,” “would,” “should,” “could,” “forecast,” “believe,” “guidance,” “projection,” “target” or similar expressions, but these words are not the exclusive means for identifying such statements. The Company cautions that a number of risks, uncertainties and other factors could cause the Company's actual results to differ materially from those expressed in, or implied by, the forward-looking statements, including, without limitation, adverse trends or disruptions in economic conditions generally or in the vacation ownership, vacation rental and travel industries; adverse changes to, or interruptions in, relationships with the Company's affiliates and other third parties, including termination of the Company's hospitality management contracts; the Company's ability to maintain an optimal inventory of vacation ownership interests for sale; the Company's ability to sell, securitize or borrow against its consumer loans; decreased demand from prospective purchasers of Vacation Interests; adverse events or trends in vacation destinations and regions where the resorts in our network are located; changes in the Company's senior management; the Company's ability to comply with regulations applicable to the vacation ownership industry; the effects of the Company's indebtedness and its compliance with the terms thereof; the Company's ability to successfully implement its growth strategy; and the Company's ability to compete effectively. For a detailed discussion of factors that could affect the Company's future operating results, please see the Company's filings with the Securities and Exchange Commission, including the disclosures under “Risk Factors” in those filings. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason.
About Diamond Resorts International®
Diamond Resorts International®, with its network of 306 vacation destinations located in 33 countries throughout the continental United States, Hawaii, Canada, Mexico, the Caribbean, South America, Central America, Europe, Asia, Australia and Africa provides guests with choices and flexibility as they design their dream vacation, whether they're traveling an hour away or around the world. Our hassle-free, relaxing vacations give guests a truly memorable experience every time, for a lifetime.
Diamond Resorts International® owns, operates and manages vacation ownership resorts and, through resort and partner affiliation agreements, provides members and owners with access to 92 managed resorts, 162 affiliated resorts, 48 affiliated hotels and four cruise itineraries through THE Club® at Diamond Resorts International®. To learn more, visit Diamondresorts.com.
Basis of Presentation
On July 24, 2013, Diamond closed the initial public offering (“IPO”) of its common stock. Prior to the consummation of the initial public offering, Diamond was a newly-formed Delaware corporation that had not conducted any activities other than those incident to its formation and other actions in connection with the IPO. Diamond was formed for the purpose of changing the organizational structure of Diamond Resorts Parent, LLC (“DRP”) from a limited liability company to a corporation. Immediately prior to the consummation of the IPO, DRP was the sole stockholder of Diamond. In connection with, and immediately prior to the completion of the IPO, various reorganization transactions were effected ultimately with DRP merging with and into Diamond. See “Organizational Structure-Reorganization Transactions” in the Registration Statement on Form S-1 filed by Diamond with the Securities and Exchange Commission for additional information concerning these reorganization transactions. References in this press release to “Diamond,” “the Company,” ”DRII,” “we,” “us” and “our,” refer to Diamond Resorts International, Inc. and its subsidiaries, after giving effect to those reorganization transactions, and our consolidated financial statements and other historical financial data included in this press release for periods prior to July 24, 2013 are those of DRP and its subsidiaries after giving effect to the reorganization transactions.
Reconciliation of GAAP to Non-GAAP Measures
We believe supplementing our consolidated financial statements presented in accordance with U.S. GAAP with non-U.S. GAAP measures provides investors with useful information regarding our liquidity and short-term and long-term trends.
We define Adjusted EBITDA as our net income (loss), plus: (i) corporate interest expense; (ii) provision (benefit) for income taxes; (iii) depreciation and amortization; (iv) Vacation Interest cost of sales; (v) loss on extinguishment of debt; (vi) impairments and other non-cash write-offs; (vii) loss on the disposal of assets; (viii) amortization of loan origination costs; (ix) amortization of net portfolio premiums; and (x) stock-based compensation; less (a) gain on the disposal of assets; (b) gain on bargain purchase from business combination; and (c) amortization of net portfolio discounts. Adjusted EBITDA is a non-U.S. GAAP financial measure and should not be considered in isolation, or as an alternative to net cash provided by operating activities or any other measure of liquidity, or as an alternative to net income (loss), operating income (loss) or any other measure of financial performance, in each case calculated and presented in accordance with U.S. GAAP. Additional information regarding our calculation of Adjusted EBITDA is provided below.
We present Adjusted EBITDA primarily because, as indicated above, the indenture governing our 12% senior secured notes due 2018 includes covenants which are determined by reference to the Adjusted EBITDA of the Company and its “restricted subsidiaries,” and other of our debt-related agreements include covenants that are determined by reference to Adjusted EBITDA. As a result, we believe that supplementing our consolidated financial statements presented in accordance with US GAAP with this non-GAAP measure provides investors with useful information with respect to our liquidity.
In addition to its application under the Indenture for our senior secured notes, our management uses Adjusted EBITDA: (i) for planning purposes, including the preparation of our annual operating budget; (ii) to allocate resources to enhance the financial performance of our business; (iii) to evaluate the effectiveness of our business strategies and (iv) as a factor for determining compensation for personnel employed by the Company.
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, including:
- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or Vacation Interest 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, and Adjusted EBITDA does not reflect any cash requirements for these replacements;
- we make expenditures to replenish Vacation Interests inventory (principally pursuant to our inventory recovery agreements and in connection with our strategic acquisitions), and Adjusted EBITDA does not reflect our cash requirements for these expenditures or certain costs of carrying such inventory (which are capitalized); and
- other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
The following tables present Adjusted EBITDA for us and our restricted subsidiaries, as calculated in accordance with, and for purposes of covenants contained in, the Notes Indenture, reconciled to each of (i) our net cash provided by (used in) operating activities and (ii) our net income (loss) for the periods presented.
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 367 | $ | (739 | ) | $ | (5,410 | ) | $ | 24,600 | |||||||||
| Provision (benefit) for income taxes | 12,554 | (957 | ) | 5,777 | (14,310 | ) | |||||||||||||
| Provision for uncollectible Vacation Interest sales revenue(a) | (14,939 | ) | (9,364 | ) | (44,670 | ) | (25,457 | ) | |||||||||||
|
Amortization of capitalized financing costs and original issue discounts(a) |
(1,472 | ) | (1,551 | ) | (7,079 | ) | (6,293 | ) | |||||||||||
| Deferred income taxes(b) | (11,304 | ) | (602 | ) | (3,264 | ) | 13,010 | ||||||||||||
| Loss on foreign currency (c) | (30 | ) | (211 | ) | (245 | ) | (113 | ) | |||||||||||
| Gain on mortgage purchase(a) | 40 | 1 | 111 | 27 | |||||||||||||||
| Unrealized gain on derivative instruments(d) | 657 | — | — | — | |||||||||||||||
|
Unrealized loss on post-retirement benefit plan(e) |
(113 | ) | — | (887 | ) | — | |||||||||||||
| Corporate interest expense(f) | 14,105 | 21,704 | 72,215 | 77,422 | |||||||||||||||
|
Change in operating assets and liabilities excluding acquisitions(g) |
44,392 | 12,539 | 146,922 | 12,183 | |||||||||||||||
| Vacation interest cost of sales(h) | 11,244 | 14,975 | 56,695 | 32,150 | |||||||||||||||
| Adjusted EBITDA - Consolidated | 55,501 | 35,795 | 220,165 | 113,219 | |||||||||||||||
| Less: Adjusted EBITDA - Unrestricted Subsidiaries(i) | 9,308 | 5,624 | 30,238 | 8,957 | |||||||||||||||
| Plus: Intercompany elimination(j) | 7,339 | 5,472 | 29,095 | 19,058 | |||||||||||||||
| Adjusted EBITDA - Diamond Resorts International, Inc. and Restricted Subsidiaries | $ | 53,532 | $ | 35,643 | $ | 219,022 | $ | 123,320 | |||||||||||
| (a) | Represents non-cash charge or gain. | ||
| (b) | Represents the deferred income tax liability arising from the difference between the treatment for financial reporting purposes as compared to income tax return purposes, primarily related to the Island One Acquisition and the PMR Service Companies Acquisition in 2013 and the PMR Acquisition in 2012. | ||
| (c) | Represents net realized losses on foreign exchange transactions settled at unfavorable exchange rates and unrealized net losses resulting from the devaluation of foreign currency-denominated assets and liabilities. | ||
| (d) | Represents the effects of the changes in mark-to-market valuations of derivative liabilities. | ||
| (e) | Represents unrealized losses on our post-retirement benefit plan related to a collective labor agreement entered into with the employees of our two resorts in St. Maarten. | ||
| (f) | Represents corporate interest expense; does not include interest expense related to non-recourse indebtedness incurred by our special-purpose subsidiaries that is secured by our VOI consumer loans. | ||
| (g) | Represents the net change in operating assets and liabilities excluding acquisitions, as computed directly from the statements of cash flows. Vacation Interest cost of sales is included in the net changes in unsold Vacation Interests, net, as presented in the statements of cash flows. | ||
| (h) | We record Vacation Interest cost of sales using the relative sales value method in accordance with ASC 978, "Real-estate Time-Sharing Activities," which requires us to make significant estimates which are subject to significant uncertainty. In determining the appropriate amount of costs using the relative sales value method, we rely on complex, multi-year financial models that incorporate a variety of estimated inputs. These models are reviewed on a regular basis, and the relevant estimates used in the models are revised based upon historical results and management's new estimates. | ||
| (i) | Represents the Adjusted EBITDA of unrestricted subsidiaries as defined in, and calculated in accordance with, the Notes Indenture. | ||
| (j) | Represents the elimination of revenues and expenses related to agreements entered into between our restricted and unrestricted subsidiaries. The agreements include service agreements for sales and marketing management (terminated on July 24, 2013), resort management, reservation services and portfolio management, whereby certain restricted subsidiaries operate these functions on behalf of the unrestricted subsidiaries for a fee. In addition to these service agreements, we have also entered into intercompany sales agreements, whereby certain restricted subsidiaries purchase unsold Vacation Interests from unrestricted subsidiaries. | ||
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||||||||
| Net income (loss) | $ | 3,573 | $ | (11,748 | ) | $ | (2,525 | ) | $ | 13,643 | |||||||||
| Plus: Corporate interest expense(a) | 14,105 | 21,704 | 72,215 | 77,422 | |||||||||||||||
| Provision (benefit) for income taxes | 12,554 | (957 | ) | 5,777 | (14,310 | ) | |||||||||||||
| Depreciation and amortization(b) | 8,273 | 5,478 | 28,185 | 18,857 | |||||||||||||||
| Vacation Interest cost of sales(c) | 11,244 | 14,975 | 56,695 | 32,150 | |||||||||||||||
| Loss on extinguishment of debt(c) | 2,221 | — | 15,604 | — | |||||||||||||||
| Impairments and other non-cash write-offs(b) | 308 | 619 | 1,587 | 1,009 | |||||||||||||||
| Gain on the disposal of assets(b) | (309 | ) | (387 | ) | (982 | ) | (605 | ) | |||||||||||
| (Gain) adjustment on bargain purchase from business combinations(d) | (153 | ) | 2,024 | (2,879 | ) | (20,610 | ) | ||||||||||||
| Amortization of loan origination costs(b) | 1,543 | 904 | 5,419 | 3,295 | |||||||||||||||
| Amortization of net portfolio premium (discounts)(b) | 104 | (138 | ) | 536 | (953 | ) | |||||||||||||
| Stock-based compensation(e) | 2,038 | 3,321 | 40,533 | 3,321 | |||||||||||||||
| Adjusted EBITDA - Consolidated | 55,501 | 35,795 | 220,165 | 113,219 | |||||||||||||||
| Less: Adjusted EBITDA - Unrestricted Subsidiaries(f) | 9,308 | 5,624 | 30,238 | 8,957 | |||||||||||||||
| Plus: Adjusted EBITDA - Intercompany elimination(g) | 7,339 | 5,472 | 29,095 | 19,058 | |||||||||||||||
| Adjusted EBITDA - Diamond Resorts International, Inc. and Restricted Subsidiaries | $ | 53,532 | $ | 35,643 | $ | 219,022 | $ | 123,320 | |||||||||||
| (a) | Corporate interest expense does not include interest expense related to non-recourse indebtedness incurred by our special-purpose vehicles that is secured by our VOI consumer loans. | ||
| (b) | These items represent non-cash charges/gains. | ||
| (c) | We record Vacation Interest cost of sales using the relative sales value method in accordance with ASC 978, which requires us to make significant estimates which are subject to significant uncertainty. In determining the appropriate amount of costs using the relative sales value method, we rely on complex, multi-year financial models that incorporate a variety of estimated inputs. These models are reviewed on a regular basis, and the relevant estimates used in the models are revised based upon historical results and management's new estimates. | ||
| (d) | Represents the amount by which the fair value of the assets acquired net of the liabilities assumed in the PMR Service Companies Acquisition and the PMR Acquisition exceeded the respective purchase prices in 2013 and 2012, respectively. | ||
| (e) | Represents the non-cash charge related to stock-based compensation due to stock options exercisable for approximately 6.6 million shares of common stock we issued in connection with the IPO. | ||
| (f) | Represents the Adjusted EBITDA of unrestricted subsidiaries as defined in, and calculated in accordance with, the Notes Indenture. | ||
| (g) |
Represents the elimination of revenues and expenses related to agreements entered into between our restricted and unrestricted subsidiaries. The significant agreements include service agreements for sales and marketing management, resort management, reservation services and portfolio management, whereby certain restricted subsidiaries operate these functions on behalf of the unrestricted subsidiaries for a fee. In addition to these service agreements, we have also entered into intercompany sales agreements, whereby certain restricted subsidiaries purchase unsold Vacation Interests from unrestricted subsidiaries. |
||
|
|
The following tables present a reconciliation of (i) advertising, sales and marketing expense as reported to advertising, sales and marketing expense after excluding certain non-cash items; (ii) general and administrative expense as reported to general and administrative expense after excluding certain non-cash and one-time items; and (iii) income (loss) before provision (benefit) for income taxes to income (loss) before provision (benefit) for income taxes after excluding certain non-cash items for the periods presented below. We exclude these non-cash items because management excludes them from its forecasts and evaluation of our operational performance and because we believe that the GAAP measures including these items are not indicative of our core operating results.
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| ($ in thousands) | ($ in thousands) | |||||||||||||||||
| Advertising, sales and marketing expense | $ | 76,783 | $ | 53,774 | $ | 258,451 | $ | 178,365 | ||||||||||
| Stock-based compensation | (155 | ) | — | (2,104 | ) | — | ||||||||||||
|
Advertising, sales and marketing expense excluding stock-based compensation |
$ | 76,628 | $ | 53,774 | $ | 256,347 | $ | 178,365 | ||||||||||
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||||||||
| General and administrative expense | $ | 40,313 | $ | 28,078 | $ | 145,925 | $ | 99,015 | |||||||||||
| Stock-based compensation | (1,655 | ) | (3,321 | ) | (37,044 | ) | (3,321 | ) | |||||||||||
| Final settlement for the FLRX litigation | (10,500 | ) | — | (10,500 | ) | — | |||||||||||||
| Executive Termination | — | — | — | (5,000 | ) | ||||||||||||||
| General and administrative expense after excluding certain non-cash items | $ | 28,158 | $ | 24,757 | $ | 98,381 | $ | 90,694 | |||||||||||
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| ($ in thousands) | ($ in thousands) | ||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | 16,127 | $ | (12,705 | ) | $ | 3,252 | $ | (667 | ) | |||||||||
| Plus: Non-cash charge from stock-based compensation | 2,038 | 3,321 | 40,533 | 3,321 | |||||||||||||||
| Non-cash charge from early extinguishment of debt | 2,221 | — | 6,570 | — | |||||||||||||||
| Non-cash charge from final settlement related to the FLRX litigation | 5,500 | — | 5,500 | — | |||||||||||||||
| Cash charge from early extinguishment of debt | — | — | 9,034 | ||||||||||||||||
| Cash charge from final settlement related to the FLRX litigation | 5,000 | — | 5,000 | — | |||||||||||||||
| Cash charge related to the Executive Termination | — | — | — | 5,000 | |||||||||||||||
| (Gain on) adjustment to bargain purchase | (153 | ) | 2,024 | (2,879 | ) | (20,610 | ) | ||||||||||||
| Income (loss) before provision (benefit) for income taxes after excluding certain items | $ | 30,733 | $ | (7,360 | ) | $ | 67,010 | $ | (12,956 | ) | |||||||||
To properly and prudently evaluate our business, we encourage you to review our U.S. GAAP consolidated financial statements included in this press release, and not to rely on any single financial measure to evaluate our business. The non-U.S. GAAP financial measures included in this press release should not be considered in isolation, or as an alternative to net cash provided by operating activities or any other measure of liquidity, or as an alternative to net income (loss), operating income (loss) or any other measure of financial performance, in any such case calculated and presented in accordance with U.S. GAAP.
Segment Reporting
The Company presents its results of operations in two segments: (i) Hospitality and Management Services, which includes operations related to the management of resort properties and the Collections, revenue from club operations and the provision of other services; and (ii) Vacation Interest Sales and Financing, which includes operations relating to the marketing and sales of Vacation Interests, as well as the consumer financing activities related to such sales. While certain line items reflected on the statement of operations and comprehensive income (loss) fall completely into one of these business segments, other line items relate to revenues or expenses which are applicable to more than one segment. For line items that are applicable to more than one segment, revenues or expenses are allocated by management, which involves significant estimates. Certain expense items (principally corporate interest expense and depreciation and amortization) are not, in management's view, allocable to either of these business segments as they apply to the entire Company. In addition, general and administrative expenses are not allocated to either of these business segments because, historically, management has not allocated these expenses for purposes of evaluating the Company's different operational divisions. Accordingly, these expenses are presented under Corporate and Other.
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS SEGMENT | |||||||||||||||||||||||||||||||||
| For the Quarters Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| Quarter Ended December 31, 2013 | Quarter Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Hospitality and
Management Services |
Vacation
Interest Sales and Financing |
Corporate
and Other |
Total |
Hospitality and
Management Services |
Vacation
Interest Sales and Financing |
Corporate
and Other |
Total | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Management and member services | $ | 34,934 | $ | — | $ | — | $ | 34,934 | $ | 29,363 | $ | — | $ | — | $ | 29,363 | |||||||||||||||||
| Consolidated resort operations | 9,047 | — | — | 9,047 | 8,234 | — | — | 8,234 | |||||||||||||||||||||||||
|
Vacation Interest sales, net of
provision of $0, $14,939, $0, $14,939, $0, $9,364, $0 and $9,364, respectively |
— | 138,798 | — | 138,798 | — | 90,334 | — | 90,334 | |||||||||||||||||||||||||
| Interest | — | 15,580 | 305 | 15,885 | — | 13,754 | 398 | 14,152 | |||||||||||||||||||||||||
| Other | 1,137 | 11,060 | — | 12,197 | 760 | 7,719 | — | 8,479 | |||||||||||||||||||||||||
| Total revenues | 45,118 | 165,438 | 305 | 210,861 | 38,357 | 111,807 | 398 | 150,562 | |||||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||
| Management and member services | 9,955 | — | — | 9,955 | 9,733 | — | — | 9,733 | |||||||||||||||||||||||||
| Consolidated resort operations | 8,164 | — | — | 8,164 | 7,691 | — | — | 7,691 | |||||||||||||||||||||||||
| Vacation Interest cost of sales | — | 11,244 | — | 11,244 | — | 14,975 | — | 14,975 | |||||||||||||||||||||||||
| Advertising, sales and marketing | — | 76,783 | — | 76,783 | — | 53,774 | — | 53,774 | |||||||||||||||||||||||||
| Vacation Interest carrying cost, net | — | 12,206 | — | 12,206 | — | 9,689 | — | 9,689 | |||||||||||||||||||||||||
| Loan portfolio | 329 | 1,747 | — | 2,076 | 227 | 2,079 | — | 2,306 | |||||||||||||||||||||||||
| Other operating | — | 5,588 | — | 5,588 | — | 3,088 | — | 3,088 | |||||||||||||||||||||||||
| General and administrative | — | — | 40,313 | 40,313 | — | — | 28,078 | 28,078 | |||||||||||||||||||||||||
| Depreciation and amortization | — | — | 8,273 | 8,273 | — | — | 5,478 | 5,478 | |||||||||||||||||||||||||
| Interest | — | 3,960 | 14,105 | 18,065 | — | 4,495 | 21,704 | 26,199 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | 2,221 | 2,221 | — | — | — | — | |||||||||||||||||||||||||
| Impairments and other write-offs | — | — | 308 | 308 | — | — | 619 | 619 | |||||||||||||||||||||||||
| Gain on disposal of assets | — | — | (309 | ) | (309 | ) | — | — | (387 | ) | (387 | ) | |||||||||||||||||||||
|
(Gain) adjustment on bargain
purchase from business combinations |
— | — | (153 | ) | (153 | ) | — | — | 2,024 | 2,024 | |||||||||||||||||||||||
| Total costs and expenses | 18,448 | 111,528 | 64,758 | 194,734 | 17,651 | 88,100 | 57,516 | 163,267 | |||||||||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | 26,670 | 53,910 | (64,453 | ) | 16,127 | 20,706 | 23,707 | (57,118 | ) | (12,705 | ) | ||||||||||||||||||||||
| Provision (benefit) for income taxes | — | — | 12,554 | 12,554 | — | — | (957 | ) | (957 | ) | |||||||||||||||||||||||
| Net income (loss) | $ | 26,670 | $ | 53,910 | $ | (77,007 | ) | $ | 3,573 | $ | 20,706 | $ | 23,707 | $ | (56,161 | ) | $ | (11,748 | ) | ||||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS SEGMENT | |||||||||||||||||||||||||||||||||
| For the Years Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Hospitality and
Management Services |
Vacation
Interest Sales and Financing |
Corporate
and Other |
Total |
Hospitality and
Management Services |
Vacation
Interest Sales and Financing |
Corporate
and Other |
Total | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Management and member services | $ | 131,238 | $ | — | $ | — | $ | 131,238 | $ | 114,937 | $ | — | $ | — | $ | 114,937 | |||||||||||||||||
| Consolidated resort operations | 35,512 | — | — | 35,512 | 33,756 | — | — | 33,756 | |||||||||||||||||||||||||
|
Vacation Interest sales, net of
provision of $0, $44,670, $0, $44,670, $0, $25,457, $0 and $25,457, respectively |
— | 464,613 | — | 464,613 | — | 293,098 | — | 293,098 | |||||||||||||||||||||||||
| Interest | — | 55,601 | 1,443 | 57,044 | — | 51,769 | 1,437 | 53,206 | |||||||||||||||||||||||||
| Other | 8,673 | 32,708 | — | 41,381 | 4,595 | 24,076 | — | 28,671 | |||||||||||||||||||||||||
| Total revenues | 175,423 | 552,922 | 1,443 | 729,788 | 153,288 | 368,943 | 1,437 | 523,668 | |||||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||
| Management and member services | 37,907 | — | — | 37,907 | 35,330 | — | — | 35,330 | |||||||||||||||||||||||||
| Consolidated resort operations | 34,333 | — | — | 34,333 | 30,311 | — | — | 30,311 | |||||||||||||||||||||||||
| Vacation Interest cost of sales | — | 56,695 | — | 56,695 | — | 32,150 | — | 32,150 | |||||||||||||||||||||||||
| Advertising, sales and marketing | — | 258,451 | — | 258,451 | — | 178,365 | — | 178,365 | |||||||||||||||||||||||||
| Vacation Interest carrying cost, net | — | 41,347 | — | 41,347 | — | 36,363 | — | 36,363 | |||||||||||||||||||||||||
| Loan portfolio | 1,111 | 8,520 | — | 9,631 | 858 | 8,628 | — | 9,486 | |||||||||||||||||||||||||
| Other operating | — | 12,106 | — | 12,106 | — | 8,507 | — | 8,507 | |||||||||||||||||||||||||
| General and administrative | — | — | 145,925 | 145,925 | — | — | 99,015 | 99,015 | |||||||||||||||||||||||||
| Depreciation and amortization | — | — | 28,185 | 28,185 | — | — | 18,857 | 18,857 | |||||||||||||||||||||||||
| Interest | — | 16,411 | 72,215 | 88,626 | — | 18,735 | 77,422 | 96,157 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | 15,604 | 15,604 | — | — | — | — | |||||||||||||||||||||||||
| Impairments and other write-offs | — | — | 1,587 | 1,587 | — | — | 1,009 | 1,009 | |||||||||||||||||||||||||
| Gain on disposal of assets | — | — | (982 | ) | (982 | ) | — | — | (605 | ) | (605 | ) | |||||||||||||||||||||
|
Gain on bargain purchase from
business combinations |
— | — | (2,879 | ) | (2,879 | ) | — | — | (20,610 | ) | (20,610 | ) | |||||||||||||||||||||
| Total costs and expenses | 73,351 | 393,530 | 259,655 | 726,536 | 66,499 | 282,748 | 175,088 | 524,335 | |||||||||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | 102,072 | 159,392 | (258,212 | ) | 3,252 | 86,789 | 86,195 | (173,651 | ) | (667 | ) | ||||||||||||||||||||||
| Provision (benefit) for income taxes | — | — | 5,777 | 5,777 | — | — | (14,310 | ) | (14,310 | ) | |||||||||||||||||||||||
| Net income (loss) | $ | 102,072 | $ | 159,392 | $ | (263,989 | ) | $ | (2,525 | ) | $ | 86,789 | $ | 86,195 | $ | (159,341 | ) | $ | 13,643 | ||||||||||||||
Consolidating Financial Statements - Restricted and Unrestricted Subsidiaries
The following consolidating financial statements present the financial position, results of operations, and statements of cash flow for (1) those subsidiaries of the Company which have been designated "Unrestricted Subsidiaries" for purposes of the Senior Secured Note Indenture; and (2) the Company and all of its other subsidiaries. As of December 31, 2013 and December 31, 2012, the Unrestricted Subsidiaries were FLRX Inc. and its subsidiaries, ILX Acquisition Inc. and its subsidiaries, Tempus Acquisition, LLC and its subsidiaries, DPM Acquisition, LLC and its subsidiaries and Aegean Blue Holdings Plc and its subsidiaries.
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||||||
| For the Quarters Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| Quarter Ended December 31, 2013 | Quarter Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Management and member services | $ | 33,597 | $ | 6,160 | $ | (4,823 | ) | $ | 34,934 | $ | 29,166 | $ | 3,859 | $ | (3,662 | ) | $ | 29,363 | |||||||||||||||
| Consolidated resort operations | 8,191 | 856 | — | 9,047 | 6,922 | 1,312 | — | 8,234 | |||||||||||||||||||||||||
|
Vacation Interest sales, net of provision (adjustment) of $14,307, $632, $0, $14,939, $9,807, $(443), $0 and $9,364, respectively |
128,337 | 10,461 | — | 138,798 | 80,714 | 9,620 | — | 90,334 | |||||||||||||||||||||||||
| Interest | 15,267 | 618 | — | 15,885 | 11,061 | 3,091 | — | 14,152 | |||||||||||||||||||||||||
| Other | 12,973 | 12,032 | (12,808 | ) | 12,197 | 8,885 | 9,679 | (10,085 | ) | 8,479 | |||||||||||||||||||||||
| Total revenues | 198,365 | 30,127 | (17,631 | ) | 210,861 | 136,748 | 27,561 | (13,747 | ) | 150,562 | |||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||
| Management and member services | 10,890 | 2,834 | (3,769 | ) | 9,955 | 10,489 | 2,775 | (3,531 | ) | 9,733 | |||||||||||||||||||||||
| Consolidated resort operations | 7,697 | 467 | — | 8,164 | 6,417 | 1,274 | — | 7,691 | |||||||||||||||||||||||||
| Vacation Interest cost of sales | 12,300 | (1,056 | ) | — | 11,244 | 14,043 | 932 | — | 14,975 | ||||||||||||||||||||||||
| Advertising, sales and marketing | 71,971 | 5,852 | (1,040 | ) | 76,783 | 49,833 | 4,906 | (965 | ) | 53,774 | |||||||||||||||||||||||
| Vacation Interest carrying cost, net | 8,835 | 4,321 | (950 | ) | 12,206 | 7,208 | 3,135 | (654 | ) | 9,689 | |||||||||||||||||||||||
| Loan portfolio | 2,050 | 464 | (438 | ) | 2,076 | 2,279 | 893 | (866 | ) | 2,306 | |||||||||||||||||||||||
| Other operating | 6,019 | 3,664 | (4,095 | ) | 5,588 | 3,376 | 1,971 | (2,259 | ) | 3,088 | |||||||||||||||||||||||
| General and administrative | 37,285 | 3,028 | — | 40,313 | 22,401 | 5,677 | — | 28,078 | |||||||||||||||||||||||||
| Depreciation and amortization | 4,088 | 4,185 | — | 8,273 | 2,438 | 3,040 | — | 5,478 | |||||||||||||||||||||||||
| Interest | 13,015 | 5,050 | — | 18,065 | 16,858 | 9,341 | — | 26,199 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | 2,221 | — | — | 2,221 | — | — | — | — | |||||||||||||||||||||||||
| Impairments and other write-offs | 308 | — | — | 308 | 619 | — | — | 619 | |||||||||||||||||||||||||
| (Gain) loss on disposal of assets | (309 | ) | — | — | (309 | ) | (418 | ) | 31 | — | (387 | ) | |||||||||||||||||||||
|
(Gain) adjustment on bargain purchase from business combinations |
— | (153 | ) | — | (153 | ) | — | 2,024 | — | 2,024 | |||||||||||||||||||||||
| Total costs and expenses | 176,370 | 28,656 | (10,292 | ) | 194,734 | 135,543 | 35,999 | (8,275 | ) | 163,267 | |||||||||||||||||||||||
|
Income (loss) before provision (benefit) for income taxes |
21,995 | 1,471 | (7,339 | ) | 16,127 | 1,205 | (8,438 | ) | (5,472 | ) | (12,705 | ) | |||||||||||||||||||||
|
Provision (benefit) for income taxes |
11,718 | 836 | — | 12,554 | (1,615 | ) | 658 | — | (957 | ) | |||||||||||||||||||||||
|
Net income (loss) |
$ | 10,277 | $ | 635 | $ | (7,339 | ) | $ | 3,573 | $ | 2,820 | $ | (9,096 | ) | $ | (5,472 | ) | $ | (11,748 | ) | |||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||||||
| For the Years Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Management and member services | $ | 126,768 | $ | 22,206 | $ | (17,736 | ) | $ | 131,238 | $ | 114,189 | $ | 13,032 | $ | (12,284 | ) | $ | 114,937 | |||||||||||||||
| Consolidated resort operations | 30,476 | 5,036 | — | 35,512 | 28,352 | 5,404 | — | 33,756 | |||||||||||||||||||||||||
|
Vacation Interest sales, net of provision (adjustment) of $43,237, $1,433, $0, $44,670, $27,080, $(1,623), $0 and $25,457, respectively |
429,981 | 34,632 | — | 464,613 | 270,490 | 22,608 | — | 293,098 | |||||||||||||||||||||||||
| Interest | 50,096 | 6,948 | — | 57,044 | 39,914 | 13,292 | — | 53,206 | |||||||||||||||||||||||||
| Other | 45,857 | 45,299 | (49,775 | ) | 41,381 | 32,542 | 28,053 | (31,924 | ) | 28,671 | |||||||||||||||||||||||
| Total revenues | 683,178 | 114,121 | (67,511 | ) | 729,788 | 485,487 | 82,389 | (44,208 | ) | 523,668 | |||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||
| Management and member services | 41,175 | 10,904 | (14,172 | ) | 37,907 | 36,884 | 8,723 | (10,277 | ) | 35,330 | |||||||||||||||||||||||
| Consolidated resort operations | 29,863 | 4,470 | — | 34,333 | 25,366 | 4,945 | — | 30,311 | |||||||||||||||||||||||||
| Vacation Interest cost of sales | 55,439 | 1,256 | — | 56,695 | 30,292 | 1,858 | — | 32,150 | |||||||||||||||||||||||||
| Advertising, sales and marketing | 239,367 | 22,586 | (3,502 | ) | 258,451 | 168,905 | 11,413 | (1,953 | ) | 178,365 | |||||||||||||||||||||||
| Vacation Interest carrying cost, net | 31,010 | 14,393 | (4,056 | ) | 41,347 | 30,083 | 8,843 | (2,563 | ) | 36,363 | |||||||||||||||||||||||
| Loan portfolio | 9,486 | 2,660 | (2,515 | ) | 9,631 | 9,239 | 3,036 | (2,789 | ) | 9,486 | |||||||||||||||||||||||
| Other operating | 14,721 | 11,556 | (14,171 | ) | 12,106 | 10,685 | 5,390 | (7,568 | ) | 8,507 | |||||||||||||||||||||||
| General and administrative | 131,369 | 14,556 | — | 145,925 | 74,324 | 24,691 | — | 99,015 | |||||||||||||||||||||||||
| Depreciation and amortization | 13,286 | 14,899 | — | 28,185 | 9,231 | 9,626 | — | 18,857 | |||||||||||||||||||||||||
| Interest | 60,999 | 27,627 | — | 88,626 | 67,392 | 28,765 | — | 96,157 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | 10,664 | 4,940 | — | 15,604 | — | — | — | — | |||||||||||||||||||||||||
| Impairments and other write-offs | 387 | 1,200 | — | 1,587 | 1,009 | — | — | 1,009 | |||||||||||||||||||||||||
| (Gain) loss on disposal of assets | (983 | ) | 1 | — | (982 | ) | (636 | ) | 31 | — | (605 | ) | |||||||||||||||||||||
|
Gain on bargain purchase from business combinations |
— | (2,879 | ) | — | (2,879 | ) | — | (20,610 | ) | — | (20,610 | ) | |||||||||||||||||||||
| Total costs and expenses | 636,783 | 128,169 | (38,416 | ) | 726,536 | 462,774 | 86,711 | (25,150 | ) | 524,335 | |||||||||||||||||||||||
|
Income (loss) before provision (benefit)
for income taxes |
46,395 | (14,048 | ) | (29,095 | ) | 3,252 | 22,713 | (4,322 | ) | (19,058 | ) | (667 | ) | ||||||||||||||||||||
|
Provision (benefit) for income taxes |
4,772 | 1,005 | — | 5,777 | (1,406 | ) | (12,904 | ) | — | (14,310 | ) | ||||||||||||||||||||||
| Net income (loss) | $ | 41,623 | $ | (15,053 | ) | $ | (29,095 | ) | $ | (2,525 | ) | $ | 24,119 | $ | 8,582 | $ | (19,058 | ) | $ | 13,643 | |||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||||||||||||||
| As of December 31, 2013 and December 31, 2012 | |||||||||||||||||||||||||||||||||
| (In thousands, except share data) | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| December 31, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 26,678 | $ | 9,266 | $ | — | $ | 35,944 | $ | 16,963 | $ | 4,098 | $ | — | $ | 21,061 | |||||||||||||||||
| Cash in escrow and restricted cash | 90,363 | 1,868 | — | 92,231 | 40,785 | 1,526 | — | 42,311 | |||||||||||||||||||||||||
|
Mortgages and contracts receivable, net of allowance of $98,549, $7,041, $0, $105,590, $61,067, $22,717, $0, and $83,784, respectively |
388,538 | 16,915 | 1 | 405,454 | 266,303 | 46,633 | (4 | ) | 312,932 | ||||||||||||||||||||||||
|
Due from related parties, net |
261,422 | 11,463 | (226,623 | ) | 46,262 | 45,428 | 4,510 | (26,943 | ) | 22,995 | |||||||||||||||||||||||
| Other receivables, net | 50,422 | 4,166 | — | 54,588 | 40,292 | 5,757 | — | 46,049 | |||||||||||||||||||||||||
| Income tax receivable | 25 | 16,706 | (16,706 | ) | 25 | 927 | — | — | 927 | ||||||||||||||||||||||||
| Prepaid expenses and other assets, net | 53,388 | 14,460 | 410 | 68,258 | 49,512 | 9,409 | (897 | ) | 58,024 | ||||||||||||||||||||||||
| Unsold Vacation Interests, net | 276,717 | 72,750 | (51,357 | ) | 298,110 | 263,493 | 74,635 | (22,261 | ) | 315,867 | |||||||||||||||||||||||
| Property and equipment, net | 40,359 | 20,037 | — | 60,396 | 33,664 | 21,456 | — | 55,120 | |||||||||||||||||||||||||
| Assets held for sale | 1,207 | 9,455 | — | 10,662 | 5,070 | 154 | — | 5,224 | |||||||||||||||||||||||||
| Intangible assets, net | 109,183 | 120,082 | — | 229,265 | 30,914 | 81,584 | — | 112,498 | |||||||||||||||||||||||||
| Total assets | $ | 1,298,302 | $ | 297,168 | $ | (294,275 | ) | $ | 1,301,195 | $ | 793,351 | $ | 249,762 | $ | (50,105 | ) | $ | 993,008 | |||||||||||||||
|
Liabilities and Stockholders' equity (deficit): |
|||||||||||||||||||||||||||||||||
| Accounts payable | $ | 11,798 | $ | 2,831 | $ | — | $ | 14,629 | $ | 13,467 | $ | 2,252 | $ | — | $ | 15,719 | |||||||||||||||||
| Due to related parties, net | 15,750 | 263,377 | (234,483 | ) | 44,644 | 42,632 | 57,179 | (35,607 | ) | 64,204 | |||||||||||||||||||||||
| Accrued liabilities | 106,570 | 10,993 | (128 | ) | 117,435 | 91,511 | 16,004 | (1,064 | ) | 106,451 | |||||||||||||||||||||||
| Income taxes payable | 1,069 | — | — | 1,069 | 701 | — | — | 701 | |||||||||||||||||||||||||
| Deferred income taxes | 27,715 | 11,395 | (16,706 | ) | 22,404 | — | — | — | — | ||||||||||||||||||||||||
| Deferred revenues | 103,745 | 7,147 | — | 110,892 | 92,490 | 1,343 | — | 93,833 | |||||||||||||||||||||||||
|
Senior Secured Notes, net of unamortized original issue discount of $6,548, $0, $0, $6,548, $8,509, $0, $0, and $8,509, respectively |
367,892 | — | — | 367,892 | 416,491 | — | — | 416,491 | |||||||||||||||||||||||||
|
Securitization notes and Funding Facilities, net of unamortized original issue discount for $226, $0, $0, $226, $753, $0, $0, $753, respectively |
386,501 | 4,766 | — | 391,267 | 209,450 | 46,852 | — | 256,302 | |||||||||||||||||||||||||
| Revolving credit facility | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Derivative liabilities | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Notes payable | 3,302 | 19,848 | — | 23,150 | 3,238 | 134,668 | — | 137,906 | |||||||||||||||||||||||||
| Total liabilities | 1,024,342 | 320,357 | (251,317 | ) | 1,093,382 | 869,980 | 258,298 | (36,671 | ) | 1,091,607 | |||||||||||||||||||||||
| Stockholders' equity (deficit): | |||||||||||||||||||||||||||||||||
|
Common stock $0.01 par value; authorized - 250,000,000 shares; issued and outstanding - 75,458,402, 0, 0 and 75,458,402, 54,057,867, 0, 0 and 54,057,867 shares |
755 | — | — | 755 | 541 | — | — | 541 | |||||||||||||||||||||||||
| Additional paid-in capital | 463,194 | 9,675 | (9,675 | ) | 463,194 | 155,027 | 9,675 | (9,675 | ) | 155,027 | |||||||||||||||||||||||
| Accumulated deficit | (173,722 | ) | (32,416 | ) | (33,821 | ) | (239,959 | ) | (215,433 | ) | (17,563 | ) | (4,438 | ) | (237,434 | ) | |||||||||||||||||
|
Accumulated other comprehensive (loss) income |
(16,267 | ) | (448 | ) | 538 | (16,177 | ) | (16,764 | ) | (648 | ) | 679 | (16,733 | ) | |||||||||||||||||||
|
Total stockholders' equity (deficit) |
273,960 | (23,189 | ) | (42,958 | ) | 207,813 | (76,629 | ) | (8,536 | ) | (13,434 | ) | (98,599 | ) | |||||||||||||||||||
|
Total liabilities and stockholders' equity (deficit) |
$ | 1,298,302 | $ | 297,168 | $ | (294,275 | ) | $ | 1,301,195 | $ | 793,351 | $ | 249,762 | $ | (50,105 | ) | $ | 993,008 | |||||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||||||||||
| For the Quarters Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| Quarter Ended December 31, 2013 | Quarter Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Operating Activities: | |||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 10,277 | $ | 635 | $ | (7,339 | ) | $ | 3,573 | $ | 2,820 | $ | (9,096 | ) | $ | (5,472 | ) | $ | (11,748 | ) | |||||||||||||
|
Adjustments to reconcile net income
(loss) to net cash (used in) provided by operating activities: |
|||||||||||||||||||||||||||||||||
| Provision (benefit) for uncollectible Vacation Interest sales revenue | 14,307 | 632 | — | 14,939 | 9,807 | (443 | ) | — | 9,364 | ||||||||||||||||||||||||
|
Amortization of capitalized financing
costs and original issue discounts |
1,433 | 39 | — | 1,472 | 1,463 | 88 | — | 1,551 | |||||||||||||||||||||||||
|
Amortization of capitalized loan
origination costs and net portfolio discounts (premiums) |
1,576 | 71 | — | 1,647 | 835 | (69 | ) | — | 766 | ||||||||||||||||||||||||
| Depreciation and amortization | 4,088 | 4,185 | — | 8,273 | 2,438 | 3,040 | — | 5,478 | |||||||||||||||||||||||||
| Stock-based compensation | 2,038 | — | — | 2,038 | 3,321 | — | — | 3,321 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | 2,221 | — | — | 2,221 | — | — | — | — | |||||||||||||||||||||||||
| Impairments and other write-offs | 308 | — | — | 308 | 619 | — | — | 619 | |||||||||||||||||||||||||
| (Gain) loss on disposal of assets | (309 | ) | — | — | (309 | ) | (418 | ) | 31 | — | (387 | ) | |||||||||||||||||||||
|
(Gain) adjustment on bargain purchase from
business combinations |
— | (153 | ) | — | (153 | ) | — | 2,024 | — | 2,024 | |||||||||||||||||||||||
| Deferred income taxes | 10,923 | 11,280 | (10,899 | ) | 11,304 | — | 602 | — | 602 | ||||||||||||||||||||||||
| (Gain) loss on foreign currency exchange | (14 | ) | 44 | — | 30 | 142 | 69 | — | 211 | ||||||||||||||||||||||||
| (Gain) on mortgage repurchase | — | (40 | ) | — | (40 | ) | (1 | ) | — | — | (1 | ) | |||||||||||||||||||||
| Unrealized gain on derivative instruments | (657 | ) | — | — | (657 | ) | — | — | — | — | |||||||||||||||||||||||
| Unrealized loss on post-retirement benefit plan | 113 | — | — | 113 | — | — | — | — | |||||||||||||||||||||||||
|
Changes in operating assets and
liabilities excluding acquisitions: |
|||||||||||||||||||||||||||||||||
| Mortgages and contracts receivable | (45,106 | ) | 742 | (1 | ) | (44,365 | ) | (25,834 | ) | 5,145 | — | (20,689 | ) | ||||||||||||||||||||
| Due from related parties, net | (11,960 | ) | (9,420 | ) | 19,859 | (1,521 | ) | (26,323 | ) | (495 | ) | 10,388 | (16,430 | ) | |||||||||||||||||||
| Other receivables, net | (22,865 | ) | 1,027 | — | (21,838 | ) | (22,230 | ) | 1,094 | — | (21,136 | ) | |||||||||||||||||||||
| Prepaid expenses and other assets, net | 19,512 | 3,448 | (1,168 | ) | 21,792 | 13,250 | 1,192 | (65 | ) | 14,377 | |||||||||||||||||||||||
| Unsold Vacation Interests, net | 817 | (3,431 | ) | 7,339 | 4,725 | 2,318 | 1,611 | 6,320 | 10,249 | ||||||||||||||||||||||||
| Accounts payable | (449 | ) | (3,565 | ) | — | (4,014 | ) | 371 | (3,185 | ) | — | (2,814 | ) | ||||||||||||||||||||
| Due to related parties, net | (29,027 | ) | 10,126 | (19,706 | ) | (38,607 | ) | (13,363 | ) | (1,176 | ) | (11,236 | ) | (25,775 | ) | ||||||||||||||||||
| Accrued liabilities | 20,091 | (3,395 | ) | 1,016 | 17,712 | 20,706 | (1,026 | ) | 65 | 19,745 | |||||||||||||||||||||||
| Income taxes payable | (34 | ) | (10,899 | ) | 10,899 | (34 | ) | (1,186 | ) | — | — | (1,186 | ) | ||||||||||||||||||||
| Deferred revenues | 20,954 | 804 | — | 21,758 | 31,433 | (313 | ) | — | 31,120 | ||||||||||||||||||||||||
|
Net cash (used in) provided by
operating activities |
(1,763 | ) | 2,130 | — | 367 | 168 | (907 | ) | — | (739 | ) | ||||||||||||||||||||||
| Investing activities: | |||||||||||||||||||||||||||||||||
| Property and equipment capital expenditures | (2,471 | ) | 59 | — | (2,412 | ) | (2,989 | ) | (73 | ) | — | (3,062 | ) | ||||||||||||||||||||
|
Cash acquired in connection with the
Island One Acquisition |
(156 | ) | — | — | (156 | ) | — | — | — | — | |||||||||||||||||||||||
|
Purchase of assets in connection with
the Pacific Monarch and Post Net of : $0, $0, $0, $0, $0, $0, $0, and $0, respectively cash acquired |
— | 341 | — | 341 | — | — | — | — | |||||||||||||||||||||||||
|
Purchase of assets in connection with
the Aegean Blue Acquisition, net of cash acquired of $0, $0, $0, $0, $0, $2,072, $0, and $2,072, respectively |
— | — | — | — | — | (4,471 | ) | — | (4,471 | ) | |||||||||||||||||||||||
| Proceeds from sale of assets | 1,001 | — | — | 1,001 | 606 | — | — | 606 | |||||||||||||||||||||||||
|
Net cash (used in) provided by investing
activities |
$ | (1,626 | ) | $ | 400 | $ | — | $ | (1,226 | ) | $ | (2,383 | ) | $ | (4,544 | ) | $ | — | $ | (6,927 | ) | ||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||||||||||
| For the Quarters Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| Quarter Ended December 31, 2013 | Quarter Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Financing activities: | |||||||||||||||||||||||||||||||||
| Changes in cash in escrow and restricted cash | $ | (31,904 | ) | $ | 849 | $ | — | $ | (31,055 | ) | $ | (2,854 | ) | $ | 1,226 | $ | — | $ | (1,628 | ) | |||||||||||||
|
Proceeds from issuance of
securitization notes and Funding Facilities |
286,804 | — | — | 286,804 | 35,357 | 1,586 | — | 36,943 | |||||||||||||||||||||||||
|
Proceeds from issuance of notes
payable |
— | 1,475 | — | 1,475 | — | 15,403 | — | 15,403 | |||||||||||||||||||||||||
| Payments on revolving credit facility | (15,000 | ) | — | — | (15,000 | ) | — | — | — | — | |||||||||||||||||||||||
|
Payments on securitization notes and
Funding Facilities |
(224,956 | ) | (932 | ) | — | (225,888 | ) | (28,433 | ) | (3,973 | ) | — | (32,406 | ) | |||||||||||||||||||
| Payments on senior secured notes | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Payments on notes payable | (3,704 | ) | (1,686 | ) | — | (5,390 | ) | (2,837 | ) | (5,085 | ) | — | (7,922 | ) | |||||||||||||||||||
| Payments of debt issuance costs | (3,833 | ) | — | — | (3,833 | ) | (89 | ) | 100 | — | 11 | ||||||||||||||||||||||
|
Proceeds from issuance of Common
Stock, net of related costs |
(373 | ) | — | — | (373 | ) | — | — | — | — | |||||||||||||||||||||||
|
Payments of costs related to issuance
of common and preferred units |
— | — | — | — | 35 | — | — | 35 | |||||||||||||||||||||||||
|
Net cash provided by (used in)
financing activities |
7,034 | (294 | ) | — | 6,740 | 1,179 | 9,257 | — | 10,436 | ||||||||||||||||||||||||
|
Net increase (decrease) in cash and
cash equivalents |
3,645 | 2,236 | — | 5,881 | (1,036 | ) | 3,806 | — | 2,770 | ||||||||||||||||||||||||
|
Effect of changes in exchange rates
on cash and cash equivalents |
165 | 22 | — | 187 | 201 | (157 | ) | — | 44 | ||||||||||||||||||||||||
|
Cash and cash equivalents, beginning
of period |
22,868 | 7,008 | — | 29,876 | 17,798 | 449 | — | 18,247 | |||||||||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 26,678 | $ | 9,266 | $ | — | $ | 35,944 | $ | 16,963 | $ | 4,098 | $ | — | $ | 21,061 | |||||||||||||||||
|
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION: |
|||||||||||||||||||||||||||||||||
| Cash paid for interest | $ | 3,935 | $ | 1,191 | $ | — | $ | 5,126 | $ | 3,209 | $ | 5,059 | $ | — | $ | 8,268 | |||||||||||||||||
| Cash paid for taxes, net of cash tax refunds (cash tax refunds, net of cash paid for taxes) | $ | 1,242 | $ | 87 | $ | — | $ | 1,329 | $ | (432 | ) | $ | 56 | $ | — | $ | (376 | ) | |||||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||
| For the Quarters Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Quarter Ended December 31, 2013 | Quarter Ended December 31, 2012 | ||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||||||||||||||||
| Insurance premiums financed through issuance of notes payable | $ | 3,658 | $ | — | $ | — | $ | 3,658 | $ | 2,931 | $ | — | $ | — | $ | 2,931 | |||||||||
|
Assets held for sale reclassified to
unsold vacation interests |
$ | 3,995 | $ | — | $ | — | $ | 3,995 | $ | — | $ | — | $ | — | $ | — | |||||||||
|
Unsold Vacation Interests, net
reclassified to assets held for sale |
$ | — | $ | 3,600 | $ | — | $ | 3,600 | $ | 1,784 | $ | — | $ | — | $ | 1,784 | |||||||||
|
Other receivables reclassified to
assets held for sale |
$ | — | $ | — | $ | — | $ | — | $ | 54 | $ | — | $ | — | $ | 54 | |||||||||
| Management contracts reclassified to assets held for sale | $ | — | $ | — | $ | — | $ | — | $ | 205 | $ | — | $ | — | $ | 205 | |||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||||||||||
| For the Years Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Operating Activities: | |||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 41,623 | $ | (15,053 | ) | $ | (29,095 | ) | $ | (2,525 | ) | $ | 24,119 | $ | 8,582 | $ | (19,058 | ) | $ | 13,643 | |||||||||||||
|
Adjustments to reconcile net income
(loss) to net cash (used in) provided by operating activities: |
|||||||||||||||||||||||||||||||||
| Provision (benefit) for uncollectible Vacation Interest sales revenue | 43,237 | 1,433 | — | 44,670 | 27,080 | (1,623 | ) | — | 25,457 | ||||||||||||||||||||||||
|
Amortization of capitalized financing
costs and original issue discounts |
6,293 | 786 | — | 7,079 | 5,626 | 667 | — | 6,293 | |||||||||||||||||||||||||
|
Amortization of capitalized loan
origination costs and net portfolio discounts (premiums) |
5,391 | 564 | — | 5,955 | 3,117 | (775 | ) | — | 2,342 | ||||||||||||||||||||||||
| Depreciation and amortization | 13,286 | 14,899 | — | 28,185 | 9,231 | 9,626 | — | 18,857 | |||||||||||||||||||||||||
| Stock-based compensation | 40,533 | — | — | 40,533 | 3,321 | — | — | 3,321 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | 10,664 | 4,940 | — | 15,604 | — | — | — | — | |||||||||||||||||||||||||
| Impairments and other write-offs | 387 | 1,200 | — | 1,587 | 1,009 | — | — | 1,009 | |||||||||||||||||||||||||
| (Gain) loss on disposal of assets | (983 | ) | 1 | — | (982 | ) | (636 | ) | 31 | — | (605 | ) | |||||||||||||||||||||
|
Gain on bargain purchase from
business combinations |
— | (2,879 | ) | — | (2,879 | ) | — | (20,610 | ) | — | (20,610 | ) | |||||||||||||||||||||
| Deferred income taxes | 10,312 | 9,658 | (16,706 | ) | 3,264 | — | (13,010 | ) | — | (13,010 | ) | ||||||||||||||||||||||
| Loss on foreign currency exchange | 124 | 121 | — | 245 | 44 | 69 | — | 113 | |||||||||||||||||||||||||
| Loss (gain) on mortgage repurchase | 7 | (118 | ) | — | (111 | ) | (27 | ) | — | — | (27 | ) | |||||||||||||||||||||
| Unrealized loss on post-retirement benefit plan | 887 | — | — | 887 | — | — | — | — | |||||||||||||||||||||||||
|
Changes in operating assets and
liabilities excluding acquisitions: |
|||||||||||||||||||||||||||||||||
| Mortgages and contracts receivable | (156,681 | ) | 27,852 | (5 | ) | (128,834 | ) | (68,662 | ) | 16,948 | (2 | ) | (51,716 | ) | |||||||||||||||||||
| Due from related parties, net | (203,169 | ) | (7,595 | ) | 199,680 | (11,084 | ) | (17,098 | ) | (147 | ) | 19,123 | 1,878 | ||||||||||||||||||||
| Other receivables, net | (8,881 | ) | 2,973 | — | (5,908 | ) | (7,447 | ) | (328 | ) | 19 | (7,756 | ) | ||||||||||||||||||||
| Prepaid expenses and other assets, net | 3,064 | (8,525 | ) | (1,060 | ) | (6,521 | ) | (7,039 | ) | 2,830 | (86 | ) | (4,295 | ) | |||||||||||||||||||
| Unsold Vacation Interests, net | (8,412 | ) | (8,589 | ) | 29,096 | 12,095 | (36,948 | ) | (6,134 | ) | 19,057 | (24,025 | ) | ||||||||||||||||||||
| Accounts payable | (6,488 | ) | 57 | — | (6,431 | ) | 1,641 | (2,143 | ) | — | (502 | ) | |||||||||||||||||||||
| Due to related parties, net | (27,848 | ) | 206,754 | (199,680 | ) | (20,774 | ) | 27,716 | 14,437 | (19,132 | ) | 23,021 | |||||||||||||||||||||
| Accrued liabilities | 5,828 | (2,260 | ) | 1,064 | 4,632 | 22,221 | 9,886 | 79 | 32,186 | ||||||||||||||||||||||||
| Income taxes payable | 1,260 | (16,706 | ) | 16,706 | 1,260 | (3,232 | ) | — | — | (3,232 | ) | ||||||||||||||||||||||
| Deferred revenues | 8,849 | 5,794 | — | 14,643 | 21,294 | 964 | — | 22,258 | |||||||||||||||||||||||||
|
Net cash (used in) provided by
operating activities |
(220,717 | ) | 215,307 | — | (5,410 | ) | 5,330 | 19,270 | — | 24,600 | |||||||||||||||||||||||
| Investing activities: | |||||||||||||||||||||||||||||||||
| Property and equipment capital expenditures | (14,654 | ) | (550 | ) | — | (15,204 | ) | (13,994 | ) | (341 | ) | — | (14,335 | ) | |||||||||||||||||||
|
Cash acquired in connection with the
Island One Acquisition |
569 | — | — | 569 | — | — | — | — | |||||||||||||||||||||||||
|
Purchase of assets in connection with
the Pacific Monarch and Post Net of : $0, $0, $0, $0, $0, $0, $0, and $0, respectively cash acquired |
— | (47,417 | ) | — | (47,417 | ) | — | (51,635 | ) | — | (51,635 | ) | |||||||||||||||||||||
|
Purchase of assets in connection with the Aegean Blue Acquisition, net of cash acquired of $0, $0, $0, $0, $0, $2,072, $0, and $2,072, respectively |
— | — | — | — | — | (4,471 | ) | — | (4,471 | ) | |||||||||||||||||||||||
| Proceeds from sale of assets | 4,127 | — | — | 4,127 | 1,103 | — | — | 1,103 | |||||||||||||||||||||||||
|
Net cash used in investing
activities |
$ | (9,958 | ) | $ | (47,967 | ) | $ | — | $ | (57,925 | ) | $ | (12,891 | ) | $ | (56,447 | ) | $ | — | $ | (69,338 | ) | |||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||||||||||
| For the Years Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||
| Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||||||||||
| Financing activities: | |||||||||||||||||||||||||||||||||
| Changes in cash in escrow and restricted cash | $ | (48,400 | ) | $ | (325 | ) | $ | — | $ | (48,725 | ) | $ | (7,375 | ) | $ | 994 | $ | — | $ | (6,381 | ) | ||||||||||||
| Proceeds from issuance of revolving credit facility | 15,000 | — | — | 15,000 | — | — | — | — | |||||||||||||||||||||||||
|
Proceeds from issuance of
securitization notes and Funding Facilities |
551,964 | 713 | — | 552,677 | 116,354 | 3,453 | — | 119,807 | |||||||||||||||||||||||||
|
Proceeds from issuance of notes
payable |
— | 5,357 | — | 5,357 | 1,124 | 79,541 | — | 80,665 | |||||||||||||||||||||||||
| Payments on revolving credit facility | (15,000 | ) | — | — | (15,000 | ) | — | — | — | — | |||||||||||||||||||||||
|
Payments on securitization notes and
Funding Facilities |
(384,673 | ) | (42,799 | ) | — | (427,472 | ) | (95,370 | ) | (19,331 | ) | — | (114,701 | ) | |||||||||||||||||||
| Payments on senior secured notes | (50,560 | ) | — | — | (50,560 | ) | — | — | — | — | |||||||||||||||||||||||
| Payments on notes payable | (12,113 | ) | (125,109 | ) | — | (137,222 | ) | (10,263 | ) | (21,004 | ) | — | (31,267 | ) | |||||||||||||||||||
| Payments of debt issuance costs | (9,980 | ) | (16 | ) | — | (9,996 | ) | (113 | ) | (2,470 | ) | — | (2,583 | ) | |||||||||||||||||||
|
Proceeds from issuance of Common
Stock, net of related costs |
204,332 | — | — | 204,332 | — | — | — | — | |||||||||||||||||||||||||
| Repurchase of remaining outstanding warrants | (10,346 | ) | — | — | (10,346 | ) | — | — | — | — | |||||||||||||||||||||||
|
Net cash provided by (used in)
financing activities |
240,224 | (162,179 | ) | — | 78,045 | 4,357 | 41,183 | — | 45,540 | ||||||||||||||||||||||||
|
Net increase (decrease) in cash and
cash equivalents |
9,549 | 5,161 | — | 14,710 | (3,204 | ) | 4,006 | — | 802 | ||||||||||||||||||||||||
|
Effect of changes in exchange rates
on cash and cash equivalents |
166 | 7 | — | 173 | 519 | (157 | ) | — | 362 | ||||||||||||||||||||||||
|
Cash and cash equivalents, beginning
of period |
16,963 | 4,098 | — | 21,061 | 19,648 | 249 | — | 19,897 | |||||||||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 26,678 | $ | 9,266 | $ | — | $ | 35,944 | $ | 16,963 | $ | 4,098 | $ | — | $ | 21,061 | |||||||||||||||||
|
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION: |
|||||||||||||||||||||||||||||||||
| Cash paid for interest | $ | 59,440 | $ | 20,113 | $ | — | $ | 79,553 | $ | 64,276 | $ | 16,091 | $ | — | $ | 80,367 | |||||||||||||||||
|
Cash paid for taxes, net of
cash tax refunds |
$ | 1,104 | $ | 237 | $ | — | $ | 1,341 | $ | 1,960 | $ | — | $ | — | $ | 1,960 | |||||||||||||||||
|
Purchase of assets from Island One,
PMR Service Cos (2013) and PMR (2012): |
|||||||||||||||||||||||||||||||||
|
Fair value of assets acquired based
on valuation reports |
$ | 81,281 | $ | 52,554 | $ | — | $ | 133,835 | $ | — | $ | 103,780 | $ | — | $ | 103,780 | |||||||||||||||||
|
Gain on bargain purchase
recognized |
— | (2,879 | ) | — | (2,879 | ) | — | (20,741 | ) | — | (20,741 | ) | |||||||||||||||||||||
| Goodwill acquired | 30,632 | — | — | 30,632 | — | — | — | — | |||||||||||||||||||||||||
| Cash paid | 569 | (47,417 | ) | — | (46,848 | ) | — | (56,106 | ) | — | (56,106 | ) | |||||||||||||||||||||
| DRII common stock issued | (73,307 | ) | — | — | (73,307 | ) | — | — | — | — | |||||||||||||||||||||||
| Deferred tax liability | (17,403 | ) | (1,737 | ) | — | (19,140 | ) | — | (13,010 | ) | — | (13,010 | ) | ||||||||||||||||||||
| Liabilities assumed | $ | 21,772 | $ | 521 | $ | — | $ | 22,293 | $ | — | $ | 13,923 | $ | — | $ | 13,923 | |||||||||||||||||
| DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||
| CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||
| For the Years Ended December 31, 2013 and 2012 | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||||||||||||||||
|
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total |
Diamond
and Restricted Subsidiaries |
Unrestricted
Subsidiaries |
Elimination | Total | ||||||||||||||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||||||||||||||||
| Insurance premiums financed through issuance of notes payable | $ | 11,480 | $ | — | $ | — | $ | 11,480 | $ | 10,504 | $ | — | $ | — | $ | 10,504 | |||||||||
|
Unsold Vacation Interests, net
reclassified to assets held for sale |
$ | 469 | $ | 9,301 | $ | — | $ | 9,770 | $ | 431 | $ | — | $ | — | $ | 431 | |||||||||
|
Other receivables reclassified to
assets held for sale |
$ | — | $ | — | $ | — | $ | — | $ | 54 | $ | — | $ | — | $ | 54 | |||||||||
| Management contracts reclassified to assets held for sale | $ | — | $ | — | $ | — | $ | — | $ | 13 | $ | — | $ | — | $ | 13 | |||||||||