Price | 32.32 | EPS | 1 | |
Shares | 126 | P/E | 22 | |
MCap | 4,068 | P/FCF | 27 | |
Net Debt | 547 | EBIT | 241 | |
TEV | 4,615 | TEV/EBIT | 19 | 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 |
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 |
Balance Sheet | Income Statement | Cash Flow |
---|---|---|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
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 | 26‑2590997 |
6262 Sunset Drive, Miami, FL | 33143 |
(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 ☐ |
|
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.
|
| Page |
|
| |
3 | ||
| 3 | |
| 4 | |
| 5 | |
| 6 | |
| 7 | |
| 8 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 50 | |
82 | ||
84 | ||
|
| |
84 | ||
84 | ||
86 | ||
86 | ||
86 | ||
88 |
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.
7
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.
8
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):