Company Quick10K Filing
ILG
Price32.32 EPS1
Shares126 P/E22
MCap4,068 P/FCF27
Net Debt547 EBIT241
TEV4,615 TEV/EBIT19
TTM 2018-06-30, in MM, except price, ratios
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-03-01
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-05
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-07
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-09
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-09
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-12
8-K 2018-08-31
8-K 2018-08-31
8-K 2018-08-28
8-K 2018-08-21
8-K 2018-08-20
8-K 2018-08-03
8-K 2018-07-26
8-K 2018-07-19
8-K 2018-07-03
8-K 2018-06-12
8-K 2018-06-05
8-K 2018-05-03
8-K 2018-04-30
8-K 2018-02-28

ILG 10Q Quarterly Report

Part I—Financial Statements
Item 1. Consolidated Financial Statements
Note 1—Organization and Basis of Presentation
Note 2—Significant Accounting Policies
Note 3—Revenue Recognition
Note 4—Restricted Cash
Note 5—Vacation Ownership Mortgages Receivable
Note 6—Vacation Ownership Inventory
Note 7—Investments in Unconsolidated Entities
Note 8—Property and Equipment
Note 9—Goodwill and Other Intangible Assets
Note 10—Consolidated Variable Interest Entities
Note 11—Accrued Expenses and Other Current Liabilities
Note 12—Deferred Revenue
Note 13—Securitized Vacation Ownership Debt
Note 14—Long-Term Debt
Note 15—Fair Value Measurements
Note 16—Equity
Note 17—Benefit Plans
Note 18—Stock‑Based Compensation
Note 19—Income Taxes
Note 20—Segment Information
Note 21—Commitments and Contingencies
Note 22— Supplemental Guarantor Information
Note 23— Pending Business Combination
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ilg-20180630ex311fe4c3d.htm
EX-31.2 ilg-20180630ex312fdbe3c.htm
EX-31.3 ilg-20180630ex3132b286b.htm
EX-32.1 ilg-20180630ex321fa5447.htm
EX-32.2 ilg-20180630ex322b1b9f3.htm
EX-32.3 ilg-20180630ex32340a337.htm

ILG Earnings 2018-06-30

Balance SheetIncome StatementCash Flow
3.83.02.31.50.80.02013201520172019
Assets, Equity
0.50.40.30.20.10.02013201520172019
Rev, G Profit, Net Income
0.30.20.1-0.1-0.2-0.32013201520172019
Ops, Inv, Fin

10-Q 1 ilg-20180630x10q.htm 10-Q ilg_10Q

As filed with the Securities and Exchange Commission as of August 3, 2018

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10‑Q

 

 

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 

Commission File No. 1‑34062


ILG, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware
(State or other jurisdiction of
incorporation or organization)

26‑2590997
(I.R.S. Employer
Identification No.)

6262 Sunset Drive, Miami, FL
(Address of Registrant’s
principal executive offices)

33143
(Zip Code)

 

(305) 666‑1861

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. (Check one):

 

 

 

 

 

 

 

 

Large accelerated filer ☒

Accelerated filer ☐

 Non‑accelerated filer ☐
(Do not check if a
smaller reporting company)

 

 

Smaller reporting company ☐

Emerging growth company ☐

 

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

As of August 1, 2018, 124,415,714 shares of the registrant’s common stock were outstanding.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I 

 

 

Item 1. 

Financial Statements

3

 

Condensed Consolidated Statements of Income

3

 

Condensed Consolidated Statements of Comprehensive Income

4

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statement of Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

50

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

82

Item 4. 

Controls and Procedures

84

PART II 

 

 

Item 1. 

Legal Proceedings

84

Item 1A. 

Risk Factors

84

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3-5. 

Not applicable

86

Item 6. 

Exhibits

86

Signatures 

88

 

 

 

 


 

PART I—FINANCIAL STATEMENTS

Item 1. Consolidated Financial Statements

ILG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Service and membership related

 

$

148

 

$

119

 

$

300

 

$

247

Sales of vacation ownership products, net

 

 

121

 

 

118

 

 

244

 

 

223

Rental and ancillary services

 

 

104

 

 

97

 

 

222

 

 

204

Consumer financing

 

 

23

 

 

22

 

 

47

 

 

43

Cost reimbursements

 

 

65

 

 

85

 

 

131

 

 

168

Total revenues

 

 

461

 

 

441

 

 

944

 

 

885

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service and membership related sales

 

 

67

 

 

33

 

 

132

 

 

68

Cost of vacation ownership product sales

 

 

22

 

 

28

 

 

61

 

 

54

Cost of sales of rental and ancillary services

 

 

70

 

 

78

 

 

142

 

 

155

Cost of consumer financing

 

 

 7

 

 

 7

 

 

15

 

 

14

Cost reimbursements

 

 

65

 

 

85

 

 

131

 

 

168

Royalty fee expense

 

 

11

 

 

11

 

 

22

 

 

21

Selling and marketing expense

 

 

81

 

 

76

 

 

159

 

 

145

General and administrative expense

 

 

65

 

 

58

 

 

124

 

 

112

Amortization expense of intangibles

 

 

 5

 

 

 5

 

 

10

 

 

10

Depreciation expense

 

 

16

 

 

15

 

 

31

 

 

30

Total operating costs and expenses

 

 

409

 

 

396

 

 

827

 

 

777

Operating income

 

 

52

 

 

45

 

 

117

 

 

108

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 1

 

 

 —

 

 

 1

 

 

 —

Interest expense

 

 

(7)

 

 

(7)

 

 

(15)

 

 

(12)

Gain on bargain purchase

 

 

 —

 

 

 2

 

 

 —

 

 

 2

Other income (expense), net

 

 

(5)

 

 

(2)

 

 

 —

 

 

 8

Equity in earnings from unconsolidated entities

 

 

 —

 

 

 1

 

 

 1

 

 

 3

Total other income (expense), net

 

 

(11)

 

 

(6)

 

 

(13)

 

 

 1

Earnings before income taxes and noncontrolling interests

 

 

41

 

 

39

 

 

104

 

 

109

Income tax provision

 

 

(13)

 

 

(13)

 

 

(33)

 

 

(38)

Net income

 

 

28

 

 

26

 

 

71

 

 

71

Net income attributable to noncontrolling interests

 

 

(1)

 

 

 —

 

 

(2)

 

 

(1)

Net income attributable to common stockholders

 

$

27

 

$

26

 

$

69

 

$

70

Earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.21

 

$

0.21

 

$

0.56

 

$

0.56

Diluted

 

$

0.21

 

$

0.20

 

$

0.55

 

$

0.55

Weighted average number of shares of common stock outstanding (in 000's):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

124,241

 

 

124,384

 

 

124,033

 

 

124,191

Diluted

 

 

125,874

 

 

126,141

 

 

125,813

 

 

125,862

Dividends declared per share of common stock

 

$

0.175

 

$

0.15

 

$

0.35

 

$

0.30

 

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

3


 

ILG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Net income

 

$

28

 

$

26

 

$

71

 

$

71

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

(12)

 

 

 9

 

 

(4)

 

 

15

Total comprehensive income, net of tax

 

 

16

 

 

35

 

 

67

 

 

86

Less: Net income attributable to noncontrolling interests

 

 

(1)

 

 

 —

 

 

(2)

 

 

(1)

Less: Other comprehensive income attributable to noncontrolling interests

 

 

 2

 

 

(1)

 

 

 1

 

 

(2)

Total comprehensive income attributable to noncontrolling interests

 

 

 1

 

 

(1)

 

 

(1)

 

 

(3)

Comprehensive income attributable to common stockholders

 

$

17

 

$

34

 

$

66

 

$

83

 

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

 

4


 

ILG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

 

 

 

 

 

 

 

 

    

(Unaudited)

 

 

 

 

 

June 30, 

 

December 31, 

 

 

2018

 

2017

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

143

 

$

122

Restricted cash and cash equivalents (including $17 and $19 in variable interest entities, "VIEs," respectively)

 

 

215

 

 

227

Accounts receivable, net of allowance for doubtful accounts of $13 for both periods

 

 

115

 

 

121

Vacation ownership mortgages receivable, net of allowance of $5 and $4, respectively (including a net $56 and $61 in VIEs, respectively)

 

 

77

 

 

79

Vacation ownership inventory

 

 

486

 

 

496

Prepaid income taxes

 

 

36

 

 

58

Prepaid expenses

 

 

91

 

 

64

Other current assets (including $3 and $4 of interest receivables in VIEs, respectively)

 

 

30

 

 

33

Total current assets

 

 

1,193

 

 

1,200

Restricted cash and cash equivalents (including $1 in variable interest entities, "VIEs" for both periods)

 

 

 4

 

 

 3

Vacation ownership mortgages receivable, net of allowance of $69 and $51, respectively (including a net $423 and $498 in VIEs, respectively)

 

 

657

 

 

658

Vacation ownership inventory

 

 

72

 

 

60

Investments in unconsolidated entities

 

 

54

 

 

55

Property and equipment, net

 

 

606

 

 

616

Goodwill

 

 

564

 

 

564

Intangible assets, net

 

 

428

 

 

440

Other non-current assets

 

 

83

 

 

91

TOTAL ASSETS

 

$

3,661

 

$

3,687

LIABILITIES AND EQUITY

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Accounts payable, trade

 

$

46

 

$

46

Current portion of securitized debt from VIEs

 

 

128

 

 

146

Deferred revenue

 

 

177

 

 

162

Accrued compensation and benefits

 

 

64

 

 

72

Accrued expenses and other current liabilities (including a net $1 of interest payables in VIEs for both periods)

 

 

256

 

 

215

Total current liabilities

 

 

671

 

 

641

Long-term debt

 

 

548

 

 

562

Securitized debt from VIEs

 

 

361

 

 

429

Income taxes payable, non-current

 

 

 2

 

 

11

Other long-term liabilities

 

 

118

 

 

118

Deferred revenue

 

 

82

 

 

76

Deferred income taxes

 

 

142

 

 

133

Total liabilities

 

 

1,924

 

 

1,970

Redeemable noncontrolling interest

 

 

 1

 

 

 1

Commitments and contingencies

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

Preferred stock—authorized 25,000,000 shares, of which 100,000 shares are designated Series A Junior Participating Preferred Stock; $0.01 par value; none issued and outstanding

 

 

 —

 

 

 —

Common stock—authorized 300,000,000 shares; $0.01 par value; issued 134,403,465 and 134,053,132 shares, respectively

 

 

 1

 

 

 1

Treasury stock— 9,987,627 shares at cost each period

 

 

(164)

 

 

(164)

Additional paid-in capital

 

 

1,281

 

 

1,278

Retained earnings

 

 

615

 

 

597

Accumulated other comprehensive loss

 

 

(36)

 

 

(33)

Total ILG stockholders’ equity

 

 

1,697

 

 

1,679

Noncontrolling interests

 

 

39

 

 

37

Total equity

 

 

1,736

 

 

1,716

TOTAL LIABILITIES AND EQUITY

 

$

3,661

 

$

3,687

 

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

 

 

5


 

ILG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In millions, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Total ILG

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

Total

 

Noncontrolling

 

Stockholders’

 

Common Stock

 

Treasury Stock

 

Paid-in

 

Retained

 

Comprehensive

 

    

Equity

    

Interests

    

Equity

    

Amount

    

Shares

    

Amount

    

Shares

    

Capital

    

Earnings

    

Loss

Balance as of December 31, 2017

 

$

1,716

 

$

37

 

$

1,679

 

$

 1

 

134,053,132

 

$

(164)

 

9,987,627

 

$

1,278

 

$

597

 

$

(33)

Net income

 

 

71

 

 

 2

 

 

69

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

69

 

 

 —

Cumulative adjustment related to change in accounting principle

 

 

(7)

 

 

 —

 

 

(7)

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(7)

 

 

 —

Other comprehensive income, net of tax

 

 

(4)

 

 

(1)

 

 

(3)

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(3)

Non-cash compensation expense

 

 

11

 

 

 —

 

 

11

 

 

 —

 

 —

 

 

 —

 

 —

 

 

11

 

 

 —

 

 

 —

Issuance of restricted stock for converted shares in connection with the Vistana acquisition

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

(163,976)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock upon vesting of RSUs, net of withholding taxes

 

 

(9)

 

 

 —

 

 

(9)

 

 

 —

 

513,574

 

 

 —

 

 —

 

 

(9)

 

 

 —

 

 

 —

Dividends declared on common stock

 

 

(43)

 

 

 —

 

 

(43)

 

 

 —

 

735

 

 

 —

 

 —

 

 

 1

 

 

(44)

 

 

 —

Other

 

 

 1

 

 

 1

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

Balance as of June 30, 2018

 

$

1,736

 

$

39

 

$

1,697

 

$

 1

 

134,403,465

 

$

(164)

 

9,987,627

 

$

1,281

 

$

615

 

$

(36)

 

 

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

 

 

6


 

ILG, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

 

    

2018

    

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

71

 

$

71

Adjustments to reconcile net income to net cash and restricted cash provided by operating activities:

 

 

 

 

 

 

Amortization expense of intangibles

 

 

10

 

 

10

Amortization of debt issuance costs

 

 

 2

 

 

 2

Depreciation expense

 

 

31

 

 

30

Bad debt expense

 

 

 4

 

 

 1

Allowance for losses on originated loans

 

 

23

 

 

15

Allowance for impairment on acquired loans

 

 

 3

 

 

 5

Accretion of mortgages receivable

 

 

 2

 

 

 3

Non-cash compensation expense

 

 

11

 

 

12

Deferred income taxes

 

 

10

 

 

13

Equity in earnings from unconsolidated entities

 

 

(1)

 

 

(3)

Distributions from investments in unconsolidated entities

 

 

 2

 

 

 —

Gain on bargain purchase of Vistana acquisition

 

 

 —

 

 

(2)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(41)

 

 

 4

Vacation ownership mortgages receivable (originations)

 

 

(171)

 

 

(163)

Vacation ownership mortgages receivable (collections)

 

 

139

 

 

140

Vacation ownership inventory (additions)

 

 

(39)

 

 

(120)

Vacation ownership inventory (disposals)

 

 

53

 

 

49

Vacation ownership operating related insurance proceeds

 

 

19

 

 

 —

Vacation ownership consolidated HOAs related insurance proceeds

 

 

23

 

 

 —

Prepaid expenses and other current assets

 

 

(26)

 

 

(20)

Prepaid income taxes and income taxes payable

 

 

11

 

 

 9

Accounts payable and other current liabilities

 

 

27

 

 

(1)

Deferred income

 

 

21

 

 

36

Other, net

 

 

 —

 

 

(9)

Net cash and restricted cash provided by operating activities

 

 

184

 

 

82

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(22)

 

 

(48)

Purchases of trading investments

 

 

 4

 

 

 —

Net cash used in investing activities

 

 

(18)

 

 

(48)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings (payments) on revolving credit facility, net

 

 

(15)

 

 

71

Payments on securitized debt

 

 

(86)

 

 

(66)

Purchases of treasury stock

 

 

 —

 

 

(3)

Dividend payments to stockholders

 

 

(43)

 

 

(37)

Withholding taxes on vesting of restricted stock units and restricted stock

 

 

(9)

 

 

(5)

Net cash and restricted cash used in financing activities

 

 

(153)

 

 

(40)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(3)

 

 

 3

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

10

 

 

(3)

Cash, cash equivalents and restricted cash at beginning of period

 

 

352

 

 

244

Cash, cash equivalents and restricted cash at end of period

 

$

362

 

$

241

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Interest paid, net of amounts capitalized

 

$

21

 

$

17

Income taxes paid, net of refunds

 

$

12

 

$

16

 

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

 

 

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Table of Contents

ILG, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2018

(Unaudited)

 

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

Organization

ILG, Inc. is a leading provider of professionally delivered vacation experiences and the exclusive global licensee for the Hyatt®, Sheraton®  and Westin® brands in vacation ownership. We operate in the following two segments: Vacation Ownership (VO) and Exchange and Rental.

Our VO segment engages in sales, marketing, financing and development of vacation ownership interests (VOIs); the management of vacation ownership resorts; and related services to owners and associations. The VO operating segment consists of the VOI sales and financing business of Vistana Signature Experiences (Vistana) and Hyatt Vacation Ownership (HVO) as well as the management related lines of business of Vistana, HVO, Vacation Resorts International (VRI), Trading Places International (TPI), VRI Europe and certain homeowners’ associations (HOAs) under our control.

Our Exchange and Rental segment offers access to vacation accommodations and other travel-related transactions and services to members of our programs and other leisure travelers, by providing vacation exchange services and vacation rentals, working with resort developers, HOAs and operating vacation rental properties. The Exchange and Rental operating segment consists of Interval International (referred to as Interval), the Vistana Signature Network, the Hyatt Residence Club, the TPI exchange business, and Aqua-Aston Holdings, Inc. (Aqua-Aston).

ILG was incorporated as a Delaware corporation in May 2008 under the name Interval Leisure Group, Inc. and commenced trading on The NASDAQ Stock Market in August 2008 under the symbol "IILG" and now trades under “ILG.”

On May 11, 2016, we acquired the vacation ownership business of Starwood Hotels & Resorts Worldwide, LLC (Starwood), now known as Vistana. In connection with the acquisition, Vistana entered into an exclusive, 80 - year global license agreement with Starwood for the use of the Sheraton and Westin brands in vacation ownership. The global license agreement may also be extended for two 30 – year terms, subject to meeting certain sales performance tests. Also, Vistana has the non-exclusive license for the existing St. Regis® and The Luxury Collection® vacation ownership properties and an affiliation with the Starwood Preferred Guest program.

On April 30, 2018, we entered into an Agreement and Plan of Merger (“Merger Agreement”), with Marriott Vacations Worldwide Corporation (“Marriott Vacations”), Ignite Holdco, Inc. and Ignite Holdco Subsidiary, Inc. (two of our wholly owned subsidiaries), and Volt Merger Sub, Inc. and Volt Merger Sub, LLC (two wholly owned subsidiaries of Marriott Vacations), pursuant to which Marriott Vacations will acquire ILG in a series of transactions (the “Combination Transactions”) and ILG stockholders will receive $14.75 in cash (without interest) and 0.165 shares of common stock of Marriott Vacations for each share of ILG common stock held by such stockholder.  This will result in ILG stockholders owning approximately 43% of Marriott Vacations following the merger transactions. See Note 23 for further discussion.

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Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of ILG’s management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not indicative of the results that may be expected for a full year.

Individual amounts presented by quarter in our interim financial statements may not add to the year-to-date amount due to rounding and, in the case of per share amounts, differences in the average common shares outstanding during each period.

Additionally, the prior period condensed consolidated financial statements presented in this report have been restated as part of our adoption of ASC 606. See Note 3 for additional information.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of ILG, our wholly‑owned subsidiaries, and companies in which we have a controlling interest, including variable interest entities (“VIEs”) where we are the primary beneficiary in accordance with consolidation guidance. All significant intercompany balances and transactions have been eliminated in these condensed consolidated financial statements. References in these financial statements to net income attributable to common stockholders and ILG stockholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non‑wholly owned entities and are reported separately.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10‑K.

Seasonality

Revenue at ILG is influenced by the seasonal nature of travel. Within our VO segment, our sales and financing business experiences a modest impact from seasonality, with higher sales volumes during the traditional vacation periods. Our vacation ownership management businesses by and large do not experience significant seasonality, with the exception of our resort operations revenue which tends to be higher in the first quarter.

 

Within our Exchange and Rental segment, we recognize exchange and Getaway revenue based on confirmation of the vacation, with the first quarter generally experiencing higher revenue and the fourth quarter generally experiencing lower revenue. Remaining rental revenue is recognized based on occupancy. For the vacation rental business, the first and third quarters generally generate higher revenue as a result of increased leisure travel to our Hawaii‑based managed properties during these periods, and the second and fourth quarters generally generate lower revenue.

 

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies were described in Note 2 accompanying our audited consolidated financial statements included in our 2017 Annual Report on Form 10-K. There have been no significant changes in our significant accounting policies for the six months ended June 30, 2018 other than changes related to the adoption of ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606) (“ASU 2014‑09”). See Note 3 for further details and related disclosures.  

 

9


 

Accounting Estimates

ILG’s management is required to make certain estimates and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.

Significant estimates underlying the accompanying condensed consolidated financial statements include:

·

the recovery of long‑lived assets as well as goodwill and other intangible assets;

·

purchase price allocations of business combinations;

·

allowance for loan losses for vacation ownership mortgages receivable;

·

accounting for acquired vacation ownership mortgages receivable;

·

cost of vacation ownership product sales related estimates included in our relative sales value calculation, such as future projected sales revenue and expected project costs to complete;

·

the accounting for income taxes including deferred income taxes and related valuation allowances;

·

the determination of deferred membership revenue and deferred membership costs; and

·

the determination of stock‑based compensation.

 

In the opinion of ILG’s management, the assumptions underlying the condensed consolidated financial statements of ILG and its subsidiaries are reasonable.

Earnings per Share

Basic earnings per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings per share attributable to common stockholders is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the assumed exercise of common stock options and the vesting of RSUs and restricted stock using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is antidilutive. The computations of diluted earnings per share available to common stockholders exclude 0.1 million RSUs and restricted shares for each of the three months ended June 30, 2018 and 2017 and 0.3 million and 0.4 million RSUs and restricted shares for the six months ended June 30, 2018 and 2017, respectively, as the effect of their inclusion would have been antidilutive to earnings per share.

The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30, 

 

 

June 30, 

 

    

2018

 

    

2017

 

    

2018

 

    

2017

Basic weighted average shares of common stock outstanding

 

124,241

 

 

124,384

 

 

124,033

 

 

124,191

Net effect of common stock equivalents assumed to be vested related to RSUs and restricted stock

 

1,633

 

 

1,757

 

 

1,780

 

 

1,671

Diluted weighted average shares of common stock outstanding

 

125,874

 

 

126,141

 

 

125,813

 

 

125,862

 

10


 

Earnings per share for the three and six months ended June 30, 2018 and 2017 are as follows (in thousands, except per share data):

 

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