ILG Reports Second Quarter 2018 Results
MIAMI--(BUSINESS WIRE)--Aug 3, 2018--ILG (Nasdaq: ILG) today announced results for the second quarter ended June 30, 2018.
SECOND QUARTER HIGHLIGHTSConsolidated revenue increased 5% to $461 million Consolidated revenue excluding cost reimbursements increased 11% to $396 million Net income attributable to common stockholders was $27 million, higher by 4% Adjusted net income* was $39 million, up 26%Diluted EPS and adjusted diluted EPS* were $0.21 and $0.31, respectivelyAdjusted EBITDA* was $90 million, higher by 13% Excluding the estimated impact of the hurricanes, our results would have been the following: Consolidated revenue of $479 million, up 9%Consolidated revenue excluding cost reimbursement increased 16% to $414 millionConsolidated timeshare contract sales of $140 million, higher by 9%Net income attributable to common stockholders of $31 million, up 19%Adjusted net income of $42 million, higher by 35%Adjusted EBITDA of $95 million, up 19%Diluted EPS and adjusted diluted EPS of $0.24 and $0.34, respectively Net cash and restricted cash from operating activities in the six months ended June 30, 2018 was $184 million Free cash flow* was $95 million, compared to $23 million ILG paid $43 million in dividends in the six months ended June 30, 2018
“We are very pleased with our results for the second quarter. Excluding the estimated impact of the hurricanes, consolidated revenue excluding cost reimbursements and Adjusted EBITDA would have increased 16% and 19%, respectively,” said Craig M. Nash, chairman, president, and CEO of ILG. “Through the hard work of our dedicated associates we continue to successfully execute on our strategic plan”.
* “Adjusted net income”, “Adjusted diluted EPS”, “Adjusted EBITDA” and “Free Cash Flow” are non-GAAP measures as defined by the U.S. Securities and Exchange Commission (the “SEC”). Please see “Presentation of Financial Information,” “Glossary of Terms” and “Reconciliations of Non-GAAP Measures” below for an explanation of non-GAAP measures used throughout this release.
In September 2017, Hurricanes Irma and Maria affected several Vistana and HVO resorts and sales centers, as well as nearly 300 properties within the Interval Network or managed by VRI or Aqua-Aston Hospitality. At June 30, 2018 our Westin St. John Resort Villas in the U.S. Virgin Islands and Hyatt Residence Club Dorado, Hacienda del Mar, in Puerto Rico were closed and expected to reopen early in 2019. Approximately 35 Interval Network properties on the hardest-hit islands remained closed at quarter end.
The table below summarizes our results for the second quarter of 2018 and provides the estimated impact of the hurricanes in these periods:
Second quarter consolidated operating results
Consolidated revenue was $461 million, and excluding the estimated hurricane impact, it would have been $479 million, up 9% over the prior year driven by strong performance in our vacation ownership segment.
Net income attributable to common stockholders was $27 million. Excluding the estimated impact of the hurricanes it would have been $31 million, up 19% compared to the prior year. Diluted earnings per share (EPS) was $0.21, compared to $0.20 in the prior year.
Adjusted net income was $39 million, higher by 26%. Excluding the estimated impact from the hurricanes, it would have been $42 million, up 35% compared to the prior year. Adjusted diluted EPS was $0.31. Excluding the impact from the hurricane it would have been $0.34, higher by 36%.
Adjusted EBITDA increased 13% to $90 million. Excluding the impact from the hurricane, it would have been $95 million, an increase of 19% compared to 2017.
Business segment results
Excluding cost reimbursements, Vacation Ownership segment revenue increased $37 million, to $263 million principally as a result of the following:$28 million increase in management fee and other revenue predominantly attributable to revenue from the consolidation of our HOAs starting in the fourth quarter of 2017. This increase is largely offset by a corresponding decrease in cost reimbursement revenue. $5 million increase in resort operations revenue primarily driven by higher available and occupied room nights and average daily rate resulting from the increase in the number of units which came on-line beginning in the second quarter of 2017. $3 million increase in sales of vacation ownership products principally attributable to higher consolidated contract sales
Vacation Ownership segment operating income more than doubled to $17 million and adjusted EBITDA was higher by $10 million to $41 million. Excluding the impact of the hurricanes, adjusted EBITDA would have increased $14 million to $45 million, 45% higher than 2017.
Exchange and Rental
Exchange and Rental segment revenue was $153 million dollars, relatively consistent with 2017. Excluding cost reimbursements, segment revenue was up 2% to $133 million dollars related to stronger club rental revenue resulting from the above-mentioned increase in available and occupied room nights and average daily rate.
Total Interval Network active members at quarter-end were 1.8 million, consistent with 2017, and average revenue per member was $48.14, up 2%.
Operating income for the segment was $35 million compared to $37 million in 2017 reflecting the adverse impact from the hurricanes and higher professional fees largely due to costs associated with our expected transaction with Marriott Vacations Worldwide. Adjusted EBITDA for the segment was $49 million, consistent with 2017. Excluding the estimated hurricane impact, adjusted EBITDA would have increased by 2%.
Capital Resources and Liquidity
As of June 30, 2018, ILG’s cash and cash equivalents totaled $143 million, compared to $122 million on December 31, 2017, and we had $242 million of eligible unsecuritized receivables.
The principal amount outstanding of long term corporate debt as of June 30, 2018 was $555 million consisting of $350 million 5 5/8% Senior Notes and $205 million drawn under our revolving credit facility.
ILG had $382 million available on its revolving credit facility, net of outstanding letters of credit as of June 30, 2018.
Net cash and restricted cash provided by operating activities in the first six months of 2018 was $184 million compared to $82 million. The $102 million increase was principally due to lower inventory spend of $81 million due to development activities at the Westin Nanea Ocean Villas in the prior year period, to higher net cash receipts partly attributable to property insurance proceeds of $42 million related primarily to the damage caused by the 2017 hurricanes on our Westin St. John resort and to lower taxes paid of $4 million. The increases were partly offset by $4 million of higher interest paid (net amounts capitalized).
Net cash used in investing activities was $18 million primarily related to capex associated with resort operations and sales and marketing locations, as well as IT initiatives. Capex in the quarter includes an offsetting $3 million of insurance proceeds for hurricane property damage.
Net cash and restricted cash used in financing activities was $153 million, reflecting $86 million repayments on securitized debt, net payments of $15 million on our revolving credit facility, dividend payments of $43 million, and $9 million withholding tax on the vesting of restricted stock units and shares.
Free cash flow for the six months ended June 30, 2018 was $95 million, compared to $23 million in 2017. The change is primarily a result of the increase in net cash provided by operating activities, and lower capital expenditures, partially offset by higher net securitization activities, including higher repayments on securitizations.
During the first six months of 2018, ILG paid $43 million, or $0.35 cents per share in dividends.
Combination with Marriott Vacations
On April 30, 2018, ILG announced it had entered into an agreement whereby Marriott Vacations Worldwide, Inc. (Marriott Vacations) will acquire ILG for a combination of cash and stock consideration which values the company at approximately $5.1 billion, based on Marriott Vacation’s closing price on April 27, 2018.
ILG shareholders will receive $14.75 per share in cash and the rest in newly issued shares of Marriott Vacations. The combination will result in ILG shareholders owning at closing approximately 43% of the company on a fully-diluted basis, based on a fixed exchange ratio. Two ILG directors will be appointed to the board of the combined company.
The transaction, which is subject to shareholder approval and other customary closing conditions, is expected to close at the end of August. More information on the transaction can be found on the ILG website, www.ilg.com.
PRESENTATION OF FINANCIAL INFORMATION
ILG management believes that the presentation of non-generally accepted accounting principles (non-GAAP) financial measures, including, among others, EBITDA, adjusted EBITDA, adjusted net income, adjusted basic and diluted EPS, and free cash flow, serves to enhance the understanding of ILG’s performance. These non-GAAP financial measures should be considered in addition to and not as substitutes for, or superior to, measures of financial performance and liquidity prepared in accordance with generally accepted accounting principles (GAAP). In addition, adjusted EBITDA (with certain different adjustments) is used to calculate compliance with certain financial covenants in ILG’s credit agreement and indenture. Management believes that these non-GAAP measures improve the transparency of our disclosures, provide meaningful presentations of our results from our business operations and liquidity excluding the impact of certain items not related to our core business operations and improve the period to period comparability of results from business operations. These measures may also be useful in comparing our results to those of other companies; however, our calculations may differ from the calculations of these measures used by other companies. More information about the non-GAAP financial measures, including reconciliations of historical GAAP results to the non-GAAP measures, is available in the financial tables that accompany this press release.
ILG (Nasdaq: ILG) is a leading provider of professionally delivered vacation experiences and the exclusive global licensee for the Hyatt ®, Sheraton ®, and Westin ® brands in vacation ownership. The company offers its owners, members, and guests access to an array of benefits and services, as well as world-class destinations through its international portfolio of resorts and clubs. ILG’s operating businesses include Aqua-Aston Hospitality, Hyatt Vacation Ownership, Interval International, Trading Places International, Vacation Resorts International, VRI Europe, and Vistana Signature Experiences. Through its subsidiaries, ILG independently owns and manages the Hyatt Residence Club program and uses the Hyatt Vacation Ownership name and other Hyatt marks under license from affiliates of Hyatt Hotels Corporation. In addition, ILG’s Vistana Signature Experiences, Inc. is the exclusive provider of vacation ownership for the Sheraton and Westin brands and uses related trademarks under license from Starwood Hotels & Resorts Worldwide, LLC. Headquartered in Miami, Florida, ILG has offices in 15 countries and more than 10,000 associates. For more information, visit www.ilg.com.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Information included or incorporated by reference in this communication, and information which may be contained in other filings with the Securities and Exchange Commission (the “SEC”) and press releases or other public statements, contains or may contain “forward-looking” statements, as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases. These forward-looking statements include, among other things, statements of plans, objectives, expectations (financial or otherwise) or intentions.
Forward-looking statements are any statements other than statements of historical fact, including statements regarding ILG, Inc.’s (the “Company”) and Marriott Vacations Worldwide Corporation’s (“MVW”) expectations, beliefs, hopes, intentions or strategies regarding the future. Among other things, these forward-looking statements may include statements regarding the proposed combination of the Company and MVW; our beliefs relating to value creation as a result of a potential combination of the Company and MVW; the expected timetable for completing the transactions; benefits and synergies of the transactions; future opportunities for the combined company; and any other statements regarding the Company’s and MVW’s future beliefs, expectations, plans, intentions, financial condition or performance. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expects,” “should,” “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “potential,” “continue,” or other words of similar meaning.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, our financial and business prospects, our capital requirements, our financing prospects, our relationships with associates and labor unions, our ability to consummate potential acquisitions or dispositions, our relationships with the holders of licensed marks, and those additional factors disclosed as risks in other reports filed by us with the Securities and Exchange Commission, including those described in Part I of the Company’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K as well as in MVW’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K and in the joint proxy statement/prospectus included in the registration statement on Form S-4 filed by MVW with the SEC, and any amendments thereto.
Other risks and uncertainties include the timing and likelihood of completion of the proposed transactions between the Company and MVW; the possibility that the Company’s stockholders may not approve the proposed transactions; the possibility that MVW’s stockholders may not approve the issuance of the MVW shares to be issued in connection with the proposed transactions; the possibility that the expected synergies and value creation from the proposed transactions will not be realized or will not be realized within the expected time period; the risk that the businesses of the Company and MVW will not be integrated successfully; the potential impact of disruption from the proposed transactions making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; the ability to retain key personnel; the availability of financing; the possibility that the proposed transactions do not close; as well as more specific risks and uncertainties. You should carefully consider these and other relevant factors, including those risk factors in this communication and other risks and uncertainties that affect the businesses of the Company and MVW described in their respective filings with the SEC, when reviewing any forward-looking statement. These factors are noted for investors as permitted under the Private Securities Litigation Reform Act of 1995. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.
NO OFFER OR SOLICITATION
This communication is for informational purposes only and is not intended to and does not constitute an offer to buy, nor a solicitation of an offer to sell, subscribe for or buy any securities or the solicitation of any vote or approval in any jurisdiction pursuant to or in connection with the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.
IMPORTANT INFORMATION AND WHERE TO FIND IT
The proposed transactions involving the Company and MVW will be submitted to the Company’s stockholders and MVW’s stockholders for their consideration. In connection with the proposed transaction, on July 19, 2018, MVW filed with the Securities and Exchange Commission (the “SEC”) an amendment to the registration statement on Form S-4 that included a joint proxy statement/prospectus for the stockholders of the Company and MVW and was filed with the SEC on June 6, 2018. The registration statement was declared effective by the SEC on July 23, 2018. The Company and MVW mailed the definitive joint proxy statement/prospectus to their respective stockholders on or about July 25, 2018 and each of the Company and MVW intend to hold the special meeting of the stockholders of the Company and MVW on August 28, 2018. This communication is not intended to be, and is not, a substitute for such filings or for any other document that the Company or MVW may file with the SEC in connection with the proposed transaction. SECURITY HOLDERS ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENT ON FORM S-4 AND THE JOINT PROXY STATEMENT/PROSPECTUS, CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The registration statement, the joint proxy statement/prospectus and other relevant materials and any other documents filed or furnished by the Company or MVW with the SEC may be obtained free of charge at the SEC’s web site at www.sec.gov. In addition, security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus from the Company by going to its investor relations page on its corporate web site at www.ilg.com and from MVW by going to its investor relations page on its corporate web site at www.marriottvacationsworldwide.com.
PARTICIPANTS IN THE SOLICITATION
The Company, MVW, their respective directors and certain of their respective executive officers and employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the Company’s directors and executive officers is set forth in its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 1, 2018 and in its definitive proxy statement filed with the SEC on May 7, 2018, and information about MVW’s directors and executive officers is set forth in its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 27, 2018, and in its definitive proxy statement filed with the SEC on April 3, 2018. These documents are available free of charge from the sources indicated above, and from the Company by going to its investor relations page on its corporate web site at www.ilg.com and from MVW by going to its investor relations page on its corporate web site at www.marriottvacationsworldwide.com. Additional information regarding the interests of participants in the solicitation of proxies in connection with the proposed transactions is presented in the definitive joint proxy statement/prospectus included in the registration statement on Form S-4 filed by MVW with the SEC, and may be included in other relevant materials that the Company and MVW file with the SEC.
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