Diamond Resorts International, Inc. (NYSE:DRII) (“Diamond”, “We”
or the “Company”), today announced results for the second quarter
ended June 30, 2015.
David F. Palmer, President and Chief Executive Officer, stated,
“This was another exceptional quarter of record results for the
Company. We posted all time record revenue and EBITDA and generated
more cash than any other quarter in our history - $72 million in
cash before applying a portion to share repurchases, debt
reduction, and other strategic investments. Our business continued
to benefit from compelling marketing programs evidenced by
increased average transaction size and an increased close rate. We
are reaffirming our previous guidance for the full year ending
December 31, 2015 and anticipate that our results will be towards
the top end of the range. Further, our Board of Directors has
authorized an additional $100 million for the repurchase of the
Company’s common stock under the Company’s stock repurchase
program.
In addition, earlier today we announced a sales and management
opportunity in connection with a new resort to be built by an
affiliate of Och Ziff Real Estate in Kona, Hawaii that we intend to
become a part of our high-demand Hawaii Collection. This initiative
provides us with an opportunity to add inventory sufficient to
support in excess of $400 million of sales in an efficient manner,
nicely complementing our inventory recapture program. We are also
pleased to have completed earlier today a $170 million
securitization with very favorable terms, underscoring the strength
of our business and the high quality of our loan portfolio.”
Second Quarter 2015 Highlights
- Total revenue increased $22.5 million,
or 10.8%, to $231.5 million.
- Net income increased $39.6 million to
$36.9 million from the prior year loss of $2.7 million.
- Pre-tax income, excluding non-cash
stock based compensation and a charge related to the loss on
extinguishment of debt and the contract renegotiation with Interval
International during the period in 2014, increased $21.6 million,
or 45.9%, to $68.8 million.
- We generated $72.6 million in free cash
flow prior to spending $13.0 million on share repurchases, $5.9
million in construction expenditures relating to the expansion of
our Cabo Azul resort, $4.1 million on reduction of notes payable
and $1.5 million capitalizing our Asian joint venture.
- Cash and Cash Equivalents at June 30,
2015 were $231.2 million which is after repurchasing $90.2 million
of our shares through June 30th.
- Adjusted EBITDA for the period in 2014
included a one-time benefit of $1.8 million related to the
renegotiation of our agreement with Interval International.
Excluding this benefit in 2014, Adjusted EBITDA increased $8.4
million, or 9.7% to $95.2 million.
- Earlier today we completed a $170.0
million securitization of consumer receivables at an advance rate
of 96.0% and at a weighted average interest rate of 2.76%.
Outlook
For the full year ending December 31, 2015, the Company is
reaffirming guidance for its expected operating results. We
anticipate for the year ending December 31, 2015 our operating
results will be towards the high end of the ranges.
Guidance Year Ending
December 31, 2015 ($ in thousands)
Low
High Pre-tax income $ 159,000 $ 191,000 Corporate interest
expense $ 28,000 $ 26,000 Vacation interest cost of sales(a) $
73,000 $ 63,000 Depreciation and amortization $ 38,000 $ 36,000
Other non-cash items(b) $ 47,000 $ 44,000
For the year ending December 31, 2015, we anticipate
capital expenditures(c) to be between $25.0 million and $30.0
million. In addition, we anticipate ordinary course cash
expenditures for the acquisition of inventory to be between $50.0
million and $55.0 million, and cash tax payments to be between
$17.0 million and $23.0 million. Consistent with our
capital allocation philosophy, we also anticipate investing
approximately $27.0 million of our cash in projects expected to
generate superior returns, including the build-out of inventory at
our Cabo Azul resort (we have spent $7.8 million through June 30,
2015) and other strategic investments. We continue to pursue other
opportunities to provide superior returns to our stockholders.
(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 Company’s Annual Report on Form 10-K for the year ended
December 31, 2014). This method requires the Company to make a
number of projections and estimates, which are subject to
significant uncertainty and retroactive adjustment in 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 and does not impact
Adjusted EBITDA. (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.
Second Quarter Earnings Summary
Hospitality and Management Services
Total management and member services revenue in our Hospitality
and Management Services segment increased $2.8 million, or 7.2%, to
$42.0 million for the second quarter of 2015 from $39.2 million for
the second quarter of 2014. Management fees increased as a result
of increases in operating costs at the resort level, which
generated higher management fee revenue under our cost-plus
management agreements. In addition, effective January 1, 2015, the
Company deconsolidated the operations of the two managed resorts in
St. Maarten; thus removing those resorts’ revenues and expenses
from our consolidated resort operations revenue and expense,
respectively, while recognizing the management fee revenue earned
in this line item.
Management and member services expense in our Hospitality and
Management Services segment increased $2.4 million, or 41.4%, to
$8.3 million for the second quarter of 2015 from $5.9 million for
the second quarter of 2014. For each of the second quarter of 2015
and 2014, management and member services expense included $0.3
million of non-cash stock-based compensation charges. In April
2014, we renegotiated our contract with Interval International, an
exchange company, which relieved us from our obligation to repay
the unearned portion of a marketing allowance to Interval
International under the original contract, and which resulted in
the one-time release of this deferred revenue to the statement of
operations and comprehensive income (loss) of $1.8 million as a
reduction of exchange company costs for the second quarter of 2014.
Excluding the non-cash stock-based compensation charges and the
non-cash one-time benefit, management and member services expense
as a percentage of management and member services revenue increased
slightly. Excluding these non-cash items, management and member
services expense would have been $7.4 million for the second
quarter of 2014, and management and member services expense for the
second quarter of 2015 would have increased 7.9% from the 2014
quarter. Including these non-cash items, management and member
services expense as a percentage of management and member services
revenue increased to 19.8% compared to 15.0%.
Vacation Interest Sales and Financing
Vacation Interest sales, net, increased $20.3 million, or 15.6%,
to $150.3 million for the second quarter of 2015 from $130.0
million for the second quarter of 2014. The increase in Vacation
Interest sales, net, was attributable to a $28.2 million increase
in Vacation Interest sales revenue, partially offset by an $8.0
million increase in our provision for uncollectible Vacation
Interest sales revenue. The $28.2 million increase in Vacation
Interest sales revenue during the second quarter of 2015 compared
to the second quarter of 2014 was generated by sales growth on a
same-store basis from 51 sales centers primarily attributable to an
increase in our volume per guest ("VPG," which represents Vacation
Interest sales revenue divided by the number of tours). VPG
increased by $596, or 23.7%, to $3,112 from $2,516, as a result of
a higher average sales price per transaction and a higher closing
percentage (which represents the percentage of VOI sales
transactions closed relative to the total number of tours at our
sales centers during the period presented). The number of tours
decreased to 56,911 from 58,267, due principally to the closure of
our Cabo Azul resort sales center as a result of the damage
suffered in Hurricane Odile as well as the impact of our decision
to change our mix of tours to improve efficiency. We expect sales
at Cabo Azul to commence during the fourth quarter. Our VOI sales
transactions increased to 8,542 compared to 8,276, and VOI average
sales price per transaction increased $3,020, or 17.0%, to $20,733
from $17,713. Our closing percentage increased to 15.0% from 14.2%.
The increase in average sales price per transaction and the higher
closing percentage (and as a result, higher VPG) are due
principally to the continued focus on selling larger point packages
and the success of the sales and marketing initiatives implemented
in association with this strategy.
Provision for uncollectible Vacation Interest Sales revenue
increased $8 million to $20.8 million during the second quarter of
2015 from $12.8 million during the second quarter in 2014. This
increase is primarily due to: (i) the change in mix of the overall
loans written during the quarter (based on consumer FICO score),
and increased sales revenue and percentage of sales financed; and
(ii) a slight increase in the percentage of loans in our portfolio
more than 90 days past due. The allowance for uncollectible
mortgages and contracts receivable as a percentage of gross
mortgages and contracts receivable was 22.1% as of June 30, 2015,
as compared to 21.8% as of June 30, 2014. The weighted average FICO
score of loans written during the second quarter of 2015 and 2014
were 752 and 753, respectively.
Advertising, sales and marketing expense for the second quarter
of 2015 and 2014 included non-cash charges of $0.5 million and $0.3
million, respectively, related to stock-based compensation.
Excluding these charges, advertising, sales and marketing expense
as a percentage of Vacation Interest sales revenue decreased 0.2
percentage points to 49.3% from 49.5%. This improvement was
primarily due to improved leverage of fixed costs through increased
sales efficiencies and a reduction in cost related to the focus on
more efficient tours. Including the non-cash charges, advertising,
sales and marketing expense as a percentage of Vacation Interest
sales revenue was 49.6% compared to 49.8%.
Vacation Interest cost of sales decreased $8.0 million, or
51.8%, to $7.5 million for the second quarter of 2015 from $15.5
million for the second quarter of 2014. This decrease consisted of
a $10.4 million decrease resulting from changes in estimates under
the relative sales value method, partially offset by a $2.4 million
increase related to the increase in Vacation Interest Sales
revenue. The changes under the relative sales value method related
to the recovery of a larger pool of low cost inventory, an increase
in the average retail sales price and a larger pool of inventory
becoming eligible for capitalization in accordance with our
inventory recovery agreement. Vacation Interest cost of sales as a
percentage of Vacation Interest sales, net decreased to 5.0% from
11.9%.
General and Administrative Expense
General and administrative expense for the second quarter of
2015 of $23.5 million and 2014 of $23.3 million included $3.4
million of non-cash stock-based compensation charges in both
periods. Excluding these charges, general and administrative
expense as a percentage of total revenue decreased 0.8 percentage
point to 8.7% from 9.5%. Including these charges, general and
administrative expense as a percentage of total revenue was 10.2%
as compared to 11.1%. The reduction of general and administrative
expense as a percentage of total revenue reflects the improved
leverage of fixed costs over a higher revenue base.
Pre-tax Income and Net Income (Loss)
Pre-tax income for the second quarter of 2015 and 2014 included
non-cash charges of $4.4 million and $4.2 million, respectively,
related to stock-based compensation. The second quarter in 2014
included a charge of $46.8 million related to the loss on
extinguishment of debt and a one-time benefit of $1.8 million
related to the contract renegotiation with Interval International.
Excluding the amounts discussed above, pre-tax income in 2015 would
have been $68.8 million, an increase of $21.6 million from $47.1
million. Including these items, pre-tax income for the second
quarter of 2015 was $64.3 million compared to a pre-tax loss of
$2.1 million in the second quarter of 2014.
Net income for the second quarter in 2015 and 2014 were
inclusive of the non-cash and one-time items discussed above. Net
income increased $39.6 million to $36.9 million during the period
for 2015 from a net loss of $2.7 million during the period in
2014.
Capital Resources and Liquidity
As of June 30, 2015, the Company had cash and cash equivalents
of $231.2 million and corporate indebtedness of $429.0 million.
During the second quarter of 2015, the Company had a net increase
of $48.2 million in cash and cash equivalents.
During the second quarter of 2015 and 2014, we used cash of
$18.1 million and $14.8 million, respectively, for acquisitions of
VOI inventory pursuant to inventory recovery agreements and in open
market and bulk VOI inventory purchases, for capitalized legal,
title and trust fees and for the construction of VOI inventory. Of
these total cash amounts, $5.9 million and $0.1 million during the
three months ended June 30, 2015 and 2014, respectively, were used
for the construction of VOI inventory, primarily related to
construction of additional units at our Cabo Azul resort.
In addition, we had increases in unsold Vacation Interests, net,
that did not have an impact on our working capital during the
respective periods. Specifically, we capitalized $18.2 million and
$17.5 million during the three months ended June 30, 2015 and 2014,
respectively, related to inventory recovery agreements in the U.S.,
offset by an equal increase in due to related parties, net where
cash will be used in future periods to settle these amounts. The
Company also transferred $2.5 million and $3.0 million during the
three months ended June 30, 2015 and 2014, respectively, from due
from related parties, net, to unsold Vacation Interests, net, as a
result of our recovery of VOI inventory pursuant to inventory
recovery arrangements in Europe; cash was used in prior periods
when these amounts were recorded to due from related parties, net.
Furthermore, we transferred $0.6 million and $0.4 million from
mortgages and contracts receivable, net, to unsold Vacation
Interests, net, during the three months ended June 30, 2015 and
2014, respectively, as a result of our recovery of underlying VOI
inventory due to loan defaults.
Net cash provided by operating activities for the three months
ended June 30, 2015 was $45.6 million and was primarily the result
of net income of $36.9 million and non-cash revenues and expenses
totaling $50.9 million, partially offset by other changes in
operating assets and liabilities that resulted in a net credit of
$42.2 million which primarily includes increases in mortgages and
contracts receivable, unsold vacation interest and deferred
revenues, reductions in accrued liabilities, as well as changes in
other working capital assets and liabilities. The significant
non-cash revenues and expenses included (i) $20.8 million in the
provision for uncollectible Vacation Interest sales revenue; (ii)
$12.8 million in deferred income taxes; (iii) $8.5 million in
depreciation and amortization; (iv) $4.4 million in stock-based
compensation expense; (v) $3.1 million in amortization of
capitalized loan origination costs and net portfolio discounts; and
(vi) $1.4 million in amortization of capitalized financing costs
and original issue discounts. Net cash provided by operating
activities for the three months ended June 30, 2014 was $19.2
million and was the result of net loss of $2.7 million and non-cash
revenues and expenses totaling $74.9 million, partially offset by
other changes in operating assets and liabilities that resulted in
a net credit of $52.9 million which primarily includes increases in
mortgages and contracts receivable, accrued liabilities and
deferred revenues, as well as changes in other working capital
assets and liabilities.
Net cash used in investing activities for the three months ended
June 30, 2015 was $8.3 million, consisting of (i) $6.8 million used
to purchase property and equipment, primarily associated with
information technology related projects and equipment and
renovation projects at certain sales centers; and (ii) a $1.5
million investment in the Joint Venture in Asia. Net cash used in
investing activities for the three months ended June 30, 2014 was
$3.9 million, which was used to purchase property and
equipment.
Net cash provided by financing activities for the three months
ended June 30, 2015 was $10.2 million, consisting of (i) $90.3
million in proceeds from the issuance of securitization notes and
funding facilities offset by (a) $62.8 million of payments on
securitization notes and funding facilities; (b) $13.0 million in
repurchases of our common stock; and (c) $4.1 million in repayments
on notes payable. During the three months ended June 30, 2014, net
cash provided by financing activities was $26.4 million, which
consisted of (i) $442.8 million in proceeds from the issuance of
the senior credit facility; and (ii) $69.2 million in proceeds from
the issuance of securitization notes and funding facilities; offset
by (a) $404.7 million in repayments of the senior secured note; (b)
$49.3 million of payments on securitization notes and funding
facilities; (c) $20.8 million in repayments on notes payable; and
(d) $10.7 million in payments of debt issuance cost.
Securitization
Earlier today, the Company completed a securitization involving
the issuance of $170.0 million of investment-grade rated
securities. The issuance was completed through Diamond Resorts
Owner Trust 2015-1 and is comprised of $158.5 million of AA- rated
vacation ownership loan backed notes and $11.5 million of A rated
vacation ownership loan backed notes. The notes have interest rates
of 2.7% and 3.2% respectively, for an overall weighted average
interest rate of 2.76%. The advance rate for this transaction was
96.0%.
Business Interruption Insurance Recovery
Earlier this month, the Company received $3.0 million as the
first installment from its insurance carrier under its business
interruption insurance policy related to lost profits during the
period that the Cabo Azul Resort remains closed as a result of the
damage suffered in Hurricane Odile in September 2014. This cash
receipt will be recorded as other revenue in the Company's
condensed consolidated statement of operations for the quarter
ending September 30, 2015. The total claim remains under
negotiation with the insurance carrier and any further payments
will also be recorded as other revenue in the periods in which they
are received.
Stock Repurchase Program
In October 2014, we announced a plan to repurchase up to $100.0
million of our common stock. We are announcing today that the Board
of Directors of the Company has authorized the expenditure of up to
an additional $100 million for the repurchase of the Company’s
common stock under the stock repurchase program. During the second
quarter, we used cash of $13.0 million to repurchase shares of our
common stock. With the new authorization approximately $109.8
million is available under the plan. Any repurchases under the
expanded program will be made from time to time in accordance with
applicable securities laws in the open market and/or in privately
negotiated transactions, and may include repurchases pursuant to
Rule 10b5-1 trading plans.
The expanded repurchase program does not obligate the Company to
acquire any additional shares of common stock or impose any
particular timetable for repurchases, and the program may be
suspended or modified at any time at the Company’s discretion. The
timing and amount of any stock repurchases will be determined by
the Company’s management based on its evaluation of market
conditions, the trading price of the stock, potential alternative
uses of cash resources, applicable legal requirements, compliance
with the provisions of the Company’s credit agreement, and other
factors.
Second Quarter 2015 Earnings Call
The company will be conducting a conference call to discuss the
second quarter financial results at 5:00 p.m. Eastern Time on July
29, 2015, available via webcast on the Company's website at
http://investors.diamondresorts.com. 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 (888) 753-4238 from the United States, or (706) 643-3355
from outside the U.S. with conference ID 77782829; please dial in
fifteen minutes early to ensure a timely start.
Cautionary Notes 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 Company’s
current expectations, 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 overall, as well as in specific
Collections; the market price of the Company's stock prevailing
from time to time; alternative uses of cash and investment
opportunities pursued by the Company from time to time; the
Company’s compliance with the financial and other covenants
contained in the credit agreement with respect to the Company’s
senior secured credit facility; 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.
The securitization transaction discussed above was completed in
reliance upon Rule 144A and Regulation S as a placement of
securities not registered under the Securities Act of 1933, as
amended (the “Securities Act”), or any state securities law. All of
such securities having been sold, this announcement of their sale
appears as a matter of record only. The notes have not been
registered under the Securities Act, or the securities laws of any
state or other jurisdiction, and may not be offered or sold in the
United States without registration or an applicable exemption from
the Securities Act and applicable state securities laws.
Additionally, the statements about the Company’s current
expectations with respect to potential future repurchases of its
common stock are subject to a variety of factors, including,
without limitation, future economic, competitive and market
conditions; the market price of the Company’s stock prevailing from
time to time; alternative uses of cash and the nature of other
investment opportunities that may be available to the Company from
time to time; the Company’s compliance with the financial and other
covenants contained in the credit agreement with respect to the
Company’s senior secured credit facility (under which the currently
available basket for restricted payments, including purchases under
the Company’s stock repurchase program, is approximately $89.3
million); and future business decisions.
About Diamond Resorts International®
Diamond Resorts International® (NYSE: DRII), with its network of
more than 330 vacation destinations located in 34 countries
throughout the continental United States, Hawaii, Canada, Mexico,
the Caribbean, South America, Central America, Europe, Asia,
Australasia and Africa, provides guests with choice and flexibility
to let them create their dream vacation, whether they are traveling
an hour away or around the world. Our relaxing vacations have the
power to give guests an increased sense of happiness and
satisfaction in their lives, while feeling healthier and more
fulfilled in their relationships, by enjoying memorable and
meaningful experiences that let them Stay Vacationed.™
Diamond Resorts International® manages vacation ownership
resorts and sells vacation ownership points that provide members
and owners with Vacations for Life® at over 330 managed and
affiliated properties and cruise itineraries.
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, 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, operating income or
any other measure of financial performance, in any such 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 the Senior Credit
Facility Agreement 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 measures calculated
in a manner similar to the calculation of Adjusted EBITDA. As a
result, we believe that supplementing our consolidated financial
statements presented in accordance with U.S. GAAP with this
non-U.S. GAAP measure provides investors with useful information
with respect to our liquidity. As of June 30, 2015, all of our
subsidiaries were designated as restricted subsidiaries, as defined
in the Senior Credit Facility Agreement.
In addition to its application under the Senior Credit Facility
Agreement, 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
certain personnel.
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;
- 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.
In this release, we present Adjusted EBITDA excluding the
one-time cash charge related to the contract termination referenced
above; because management excludes this charge from its forecasts
and evaluation of our operational performance and because we
believe that Adjusted EBITDA including this item is not indicative
of our core cash flows or operating results.
The following tables present Adjusted EBITDA, excluding the
one-time charge related to the contract termination and the
one-time benefit related to the contract renegotiation reconciled
to each of (i) our net cash provided by operating activities and
(ii) our net income for the periods presented. These tables further
reconcile to free cash flow for the periods presented.
We define Free Cash Flow as our Adjusted EBITDA, less: (i) cash
interest paid on corporate indebtedness; (ii) impact of receivables
financing; (iii) cash spend for acquisitions of VOI inventory
pursuant to inventory recovery agreements and in open market and
bulk VOI inventory purchases, for capitalized legal and title and
trust fees; (iv) cash spend for corporate capital expenditures; and
(v) other changes in net working capital. In arriving at free cash
flow, we also adjust for certain net changes in working
capital.
We believe that free cash flow is an important measure of our
operating performance and, more specifically, that our presentation
of free cash flow provides useful information regarding our
generation of cash from our operations and our ability to execute
our business and growth strategies (including potential strategic
transactions) from a financial perspective. We also anticipate
that free cash flow will be incorporated into the factors used to
determine compensation for certain of our employees.
($ in thousands) (Unaudited) Quarter
Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014 Net
cash provided by operating activities $ 45,617 $ 19,206 $ 91,395 $
52,874 Provision for income taxes 27,459 657 46,984 12,704
Provision for uncollectible Vacation Interest sales revenue(a)
(20,811 ) (12,843 ) (34,907 ) (24,276 ) Amortization of capitalized
financing costs and original
issue discounts(a)
(1,399 ) (1,517 ) (2,801 ) (2,954 ) Deferred income taxes(b)
(12,819 ) 478 (23,266 ) (10,782 ) (Loss) gain on foreign
currency(c) (100 ) 4 (198 ) (84 ) Gain on mortgage purchase(a) 183
334 279 383 Unrealized gain (loss) on derivative instruments(d) 153
3 (105 ) (196 ) Unrealized loss on post-retirement benefit plan(e)
(43 ) (42 ) (86 ) (85 ) Corporate interest expense(f) 7,316 13,827
15,002 27,073 Change in operating assets and liabilities excluding
acquisitions(g)
42,155 52,937 63,559 72,405 Vacation Interest cost of sales(h)
7,451 15,462 8,589
28,364 Adjusted EBITDA - Consolidated 95,162 88,506 164,445
155,426 One-time charge related to the contract termination(i) — —
7,830 — One-time benefit related to the contract renegotiation(j)
— (1,780 ) — (1,780 )
Adjusted EBITDA excluding the one-time
charge related to thecontract termination and one-time benefit
related to the contractrenegotiation
95,162 86,726 172,275 153,646 Less: One-time charge related to the
contract termination(i) — — (7,830 ) — Add: One-time benefit
related to the contract renegotiation(j) — 1,780 — 1,780 Cash
interest paid on corporate indebtedness(k) (6,069 ) (19,707 )
(12,163 ) (42,559 ) Impact of receivables financing(l) (1,827 )
(342 ) (6,783 ) 30,229 Cash spending on inventory purchases(m)
(12,207 ) (14,759 ) (27,743 ) (22,672 ) Cash spending on corporate
capital expenditures(n) (6,757 ) (4,141 ) (10,917 ) (9,862 ) Other
changes in working capital, net(o) 4,343
(2,352 ) 6,810 (18,408 ) Free Cash Flow $
72,645 $ 47,205 $ 113,649 $ 92,154
(a) Represents non-cash charge or gain. (b) Represents the
deferred income tax liability as a result of the provision for
income taxes recorded for the quarter and six months ended June 30,
2015 and 2014. (c) Represents net realized (loss) gain on foreign
exchange transactions settled at (unfavorable) favorable exchange
rates and unrealized net (loss) gain resulting from the
(devaluation) appreciation of foreign currency-denominated assets
and liabilities. (d) Represents the effects of the changes in
mark-to-market valuations of derivative assets and liabilities. (e)
Represents unrealized loss 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 and is included in Adjusted EBITDA. (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 a one-time cash charge related to the
termination of certain contractual relationships with our Chairman,
Stephen J. Cloobeck. (j) Represents a one-time benefit related to
the contract renegotiation with Interval International in April
2014. (k) Represents cash interest paid on corporate indebtedness.
(l) Represents the net impact of all receivables-backed financing
activities, including securitization and funding facilities
collection and reserve cash, mortgages and contracts receivable,
provision for uncollectible Vacation Interests sales revenue and
proceeds from issuance of securitization notes and funding
facilities, net of payments made on securitization notes and
funding facilities. (m) Represents cash spent on (i) acquisitions
of VOI inventory pursuant to inventory recovery agreements and in
open market and bulk VOI inventory purchases; and (ii) capitalized
legal, title and trust fees. (n) Represents cash spent on property
and equipment capital expenditure, primarily related to information
technology related projects and equipment and renovation projects
at certain sales centers. (o) Represents net changes in other
working capital items not specifically mentioned above.
($ in thousands) (Unaudited)
Quarter Ended June 30, Six Months Ended
June 30, 2015 2014 2015
2014 Net income (loss) $ 36,870 $ (2,731 ) $ 62,845 $ 11,279
Plus: Corporate interest expense(a) 7,316 13,827 15,002 27,073
Provision for income taxes 27,459 657 46,984 12,704 Depreciation
and amortization(b) 8,457 8,269 17,097 16,330 Vacation Interest
cost of sales(c) 7,451 15,462 8,589 28,364 Loss on extinguishment
of debt(d) — 46,807 — 46,807 Impairments and other non-cash
write-offs(b) 7 35 12 42 Loss (gain) on disposal of assets(b) 72
(149 ) 38 (153 ) Amortization of loan origination costs(b) 3,087
2,147 6,129 4,211 Amortization of net portfolio premiums
(discount)(b) 21 16 32 (93 ) Stock-based compensation(e)
4,422 4,166 7,717 8,862
Adjusted EBITDA - Consolidated 95,162 88,506 164,445 155,426
One-time charge related to the contract termination(f) — — 7,830 —
One-time benefit related to the contract renegotiation (g) —
(1,780 ) — (1,780 )
Adjusted EBITDA excluding the one-time
charge related to the
contract termination and the one-time
benefit related to the
contract renegotiation
95,162 86,726 172,275 153,646 Less: One-time charge related to the
contract termination(f) — — (7,830 ) — Add: One-time benefit
related to the contract renegotiation — 1,780 — 1,780 Cash interest
paid on corporate indebtedness(h) (6,069 ) (19,707 ) (12,163 )
(42,559 ) Impact of receivables financing(i) (1,827 ) (342 ) (6,783
) 30,229 Cash spending on inventory purchases(j) (12,207 ) (14,759
) (27,743 ) (22,672 ) Cash spending on corporate capital
expenditures(k) (6,757 ) (4,141 ) (10,917 ) (9,862 ) Other changes
in working capital, net(l) 4,343 (2,352 )
6,810 (18,408 ) Free Cash Flow $ 72,645
$ 47,205 $ 113,649 $ 92,154 (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) For the three and six months ended June 30,
2014, represents (i) $30.2 million of redemption premium paid on
June 9, 2014 in connection with the redemption of the outstanding
Senior Secured Notes using proceeds from the term loan portion of
the Senior Credit Facility and (ii) $16.6 million of unamortized
debt issuance costs and debt discount written off upon the
extinguishment of the Senior Secured Notes and certain other
indebtedness. (e) Represents the non-cash charge related to
stock-based compensation expense. (f) Represents a one-time cash
charge related to the termination of certain contractual
relationships with our Chairman, Stephen J. Cloobeck. (g)
Represents a one-time benefit related to the contract renegotiation
with Interval International in April 2014. (h) Represents cash
interest paid on corporate indebtedness. (i) Represents the net
impact of all receivables-backed financing activities, including
securitization and funding facilities collection and reserve cash,
mortgages and contracts receivable, provision for uncollectible
Vacation Interests sales revenue and proceeds from issuance of
securitization notes and funding facilities, net of payments made
on securitization notes and funding facilities. (j) Represents cash
spent on (i) acquisitions of VOI inventory pursuant to inventory
recovery agreements and in open market and bulk VOI inventory
purchases; and (ii) capitalized legal, title and trust fees. (k)
Represents cash spent on property and equipment capital
expenditure, primarily related to information technology related
projects and equipment and renovation projects at certain sales
centers. (l) Represents net changes in other working capital items
not specifically mentioned above
The following tables present a reconciliation of (i) management
and member services expense as reported to management and member
services expense after excluding non-cash stock-based compensation
and including one-time non-cash benefit related to the contract
renegotiation with Interval International; (ii) advertising, sales
and marketing expense as reported to advertising, sales and
marketing expense after excluding non-cash stock-based
compensation; (iii) general and administrative expense as reported
to general and administrative expense after excluding non-cash
stock-based compensation and the one-time cash charge related to
the contract termination referenced above; and (iv) income (loss)
before provision for income taxes to income before provision for
income taxes after excluding non-cash stock-based compensation,
cash and non-cash charges from early extinguishment of debt, the
one-time cash charge related to the contract termination and the
one-time non-cash benefit related to the contract renegotiation
with Interval International. We exclude these non-cash and one-time
items because management excludes them from its forecasts and
evaluation of our operational performance and because we believe
that the U.S. GAAP measures including these items are not
indicative of our core operating results.
($ in thousands) (Unaudited)
Quarter Ended June 30, Six Months Ended
June 30, 2015 2014 2015
2014 Management and member services expenses $ 8,316 $ 5,881
$ 16,397 $ 14,828 Less: Stock-based compensation (345 ) (275 ) (625
) (964 ) Plus: One-time benefit related to the contract
renegotiation — 1,780 —
1,780
Management and member services expenses
after excluding
stock-based compensation and one-time
benefit related to the
contract renegotiation
$ 7,971 $ 7,386 $ 15,772 $ 15,644
($ in thousands) (Unaudited) Quarter Ended
June 30, Six Months Ended June 30, 2015
2014 2015 2014 Advertising, sales and
marketing expense $ 84,878 $ 71,107 $ 153,391 $ 131,882 Stock-based
compensation (547 ) (340 ) (916 )
(1,266 )
Advertising, sales and marketing expense
after excluding stock-
based compensation
$ 84,331 $ 70,767 $ 152,475 $ 130,616
($ in thousands) (Unaudited) Quarter Ended
June 30, Six Months Ended June 30, 2015
2014 2015 2014 General and administrative
expense $ 23,531 $ 23,264 $ 55,787 $ 47,456 Stock-based
compensation (3,366 ) (3,421 ) (5,880 ) (6,249 ) One-time cash
charge related to the contract termination — —
(7,830 ) —
General and administrative expense after
excluding stock-based
compensation and one-time cash charge
related to the contract
termination
$ 20,165 $ 19,843 $ 42,077 $ 41,207
($ in thousands) (Unaudited) Quarter Ended
June 30, Six Months Ended June 30, 2015
2014 2015 2014 Income (loss) before provision
for income taxes $ 64,329 $ (2,074 ) $ 109,829 $ 23,983 Stock-based
compensation 4,422 4,166 7,717 8,862 Non-cash charge related to
early extinguishment of debt — 16,564 — 16,564 One-time cash charge
related to early extinguishment of debt — 30,243 — 30,243 One-time
cash charge related to the contract termination — — 7,830 —
One-time benefit related to the contract renegotiation —
(1,780 ) — (1,780 )
Income before provision for income taxes
after excluding stock-
based compensation, non-cash and one-time
cash charges related
to early extinguishment of debt, one-time
cash charge related to
the contract termination and a one-time
non-cash benefit related
to the Interval International contract
renegotiation
$ 68,751 $ 47,119 $ 125,376 $ 77,872
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, operating income 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 Diamond
Collections, revenue from its operations of the Clubs 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
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 June
30, 2015 and 2014 (In thousands) (Unaudited)
Quarter Ended June 30, 2015 Quarter Ended June 30,
2014
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
$ 42,039 $ — $ — $ 42,039 $ 39,219 $ — $ — $ 39,219 Consolidated
resort operations 4,125 — — 4,125 9,621 — — 9,621
Vacation Interest sales, net
of provision of $0, $20,811,
$0, $20,811, $0, $12,843, $0
and $12,843, respectively
— 150,281 — 150,281 — 130,005 — 130,005 Interest — 18,420 379
18,799 — 15,759 447 16,206 Other 2,411 13,847
— 16,258 3,173 10,790 —
13,963 Total revenues 48,575 182,548
379 231,502 52,013 156,554
447 209,014
Costs and Expenses:
Management and member services 8,316 — — 8,316 5,881 — — 5,881
Consolidated resort operations 4,048 — — 4,048 8,675 — — 8,675
Vacation Interest cost of sales — 7,451 — 7,451 — 15,462 — 15,462
Advertising, sales and marketing — 84,878 — 84,878 — 71,107 —
71,107 Vacation Interest carrying cost, net — 9,373 — 9,373 — 6,729
— 6,729 Loan portfolio 326 1,855 — 2,181 268 2,091 — 2,359 Other
operating — 7,338 — 7,338 — 5,266 — 5,266 General and
administrative — — 23,531 23,531 — — 23,264 23,264 Depreciation and
amortization — — 8,457 8,457 — — 8,269 8,269 Interest expense —
4,205 7,316 11,521 — 3,556 13,827 17,383 Loss on extinguishment of
debt — — — — — — 46,807 46,807 Impairments and other write-offs — —
7 7 — — 35 35 Loss (gain) on disposal of assets — —
72 72 — — (149 )
(149 ) Total costs and expenses 12,690 115,100
39,383 167,173 14,824 104,211
92,053 211,088
Income (loss) before
provision for income taxes
35,885 67,448 (39,004 ) 64,329 37,189 52,343 (91,606 ) (2,074 )
Provision for income taxes — — 27,459
27,459 — — 657 657
Net income (loss) $ 35,885 $ 67,448 $ (66,463 ) $ 36,870 $ 37,189 $
52,343 $ (92,263 ) $ (2,731 )
DIAMOND RESORTS
INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING
STATEMENTS OF OPERATIONS BY BUSINESS SEGMENT For the Six
Months Ended June 30, 2015 and 2014 (In thousands)
(Unaudited)
Six Months Ended June 30, 2015 Six Months Ended
June 30, 2014
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
$ 82,678 $ — $ — $ 82,678 $ 77,443 $ — $ — $ 77,443 Consolidated
resort operations 7,334 — — 7,334 18,344 — — 18,344
Vacation Interest sales, net
of provision of $0, $34,907,
$0, $34,907, $0, $24,276, $0 and $24,276,
respectively
— 272,847 — 272,847 — 235,902 — 235,902 Interest — 36,836 765
37,601 — 31,016 864 31,880 Other 4,305 24,257
— 28,562 5,334 21,336 —
26,670 Total revenues 94,317 333,940
765 429,022 101,121 288,254
864 390,239
Costs and Expenses:
Management and member services 16,397 — — 16,397 14,828 — — 14,828
Consolidated resort operations 7,749 — — 7,749 16,446 — — 16,446
Vacation Interest cost of sales — 8,589 — 8,589 — 28,364 — 28,364
Advertising, sales and marketing — 153,391 — 153,391 — 131,882 —
131,882 Vacation Interest carrying cost, net — 19,741 — 19,741 —
14,604 — 14,604 Loan portfolio 660 4,258 — 4,918 510 4,339 — 4,849
Other operating — 12,349 — 12,349 — 10,803 — 10,803 General and
administrative — — 55,787 55,787 — — 47,456 47,456 Depreciation and
amortization — — 17,097 17,097 — — 16,330 16,330 Interest expense —
8,123 15,002 23,125 — 6,925 27,073 33,998 Loss on extinguishment of
debt — — — — — — 46,807 46,807 Impairments and other write-offs — —
12 12 — — 42 42 Loss (gain) on disposal of assets — —
38 38 — — (153 )
(153 ) Total costs and expenses 24,806 206,451
87,936 319,193 31,784 196,917
137,555 366,256
Income (loss) before provision forincome
taxes
69,511 127,489 (87,171 ) 109,829 69,337 91,337 (136,691 ) 23,983
Provision for income taxes — — 46,984
46,984 — — 12,704 12,704
Net income (loss) $ 69,511 $ 127,489 $ (134,155 ) $ 62,845 $
69,337 $ 91,337 $ (149,395 ) $ 11,279
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS As of June 30, 2015
and December 31, 2014 (In thousands, except share data)
June 30,
2015
(Unaudited)
December 31, 2014
(Audited)
Assets: Cash and cash equivalents $ 231,246 $ 242,486 Cash
in escrow and restricted cash 90,413 80,914 Mortgages and contracts
receivable, net of allowance of $145,830 and $130,639,
respectively
535,345 498,662 Due from related parties, net 38,452 51,651 Other
receivables, net 28,194 59,821 Income tax receivable 772 467
Deferred tax asset 336 423 Prepaid expenses and other assets, net
150,529 86,439 Unsold Vacation Interests, net 318,003 262,172
Property and equipment, net 73,474 70,871 Assets held for sale
1,386 14,452 Goodwill 30,642 30,632 Intangible assets, net
178,301 178,786 Total assets $ 1,677,093
$ 1,577,776
Liabilities and Stockholder's
Equity: Accounts payable $ 23,951 $ 14,084 Due to related
parties, net 95,937 34,768 Accrued liabilities 154,601 134,680
Income taxes payable 22 108 Deferred income taxes 70,590 47,250
Deferred revenues 93,733 124,997
Senior Credit Facility, net of unamortized
original issue discount of $1,908
and $2,055, respectively
422,758 440,720
Securitization notes and Funding
Facilities, net of unamortized original issue
discount of $127 and $156,
respectively
536,450 509,208 Derivative liabilities 81 — Notes payable
6,255 4,612 Total liabilities 1,404,378
1,310,427
Stockholders' equity:
Common stock $0.01 par value per share;
authorized - 250,000,000 shares, issued
- 73,501,912 and 75,732,088
shares, respectively
735 757 Preferred stock $0.01 par value per share; authorized
5,000,000 shares — — Additional paid in capital 423,271 482,732
Accumulated deficit (117,657 ) (180,502 ) Accumulated other
comprehensive loss (20,649 ) (19,561 ) Subtotal
285,700 283,426 Less: Treasury stock at cost; 399,810 and 642,900
shares, respectively (12,985 ) (16,077 ) Total
stockholders' equity 272,715 267,349
Total liabilities and stockholders' equity $ 1,677,093 $
1,577,776
DIAMOND RESORTS INTERNATIONAL,
INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS For the Quarters and Six Months ended June 30,
2015 and 2014 (In thousands) (Unaudited)
Quarter Ended June 30,
Six Months Ended June 30, 2015 2014
2015 2014 Operating Activities: Net income (loss) $
36,870 $ (2,731 ) $ 62,845 $ 11,279 Adjustments to reconcile net
income (loss) to net cash provided by operating activities:
Provision for uncollectible Vacation Interest sales revenue 20,811
12,843 34,907 24,276 Amortization of capitalized financing costs
and original issue discounts 1,399 1,517 2,801 2,954 Amortization
of capitalized loan origination costs and net portfolio discount
3,108 2,163 6,161 4,118 Depreciation and amortization 8,457 8,269
17,097 16,330 Stock-based compensation 4,422 4,166 7,717 8,862 Loss
on extinguishment of debt — 46,807 — 46,807 Impairments and other
write-offs 7 35 12 42 Loss (gain) on disposal of assets 72 (149 )
38 (153 ) Deferred income taxes 12,819 (478 ) 23,266 10,782 Loss
(gain) on foreign currency exchange 100 (4 ) 198 84 Gain on
mortgage repurchase (183 ) (334 ) (279 ) (383 ) Unrealized (gain)
loss on derivative instrument (153 ) (3 ) 105 196 Unrealized loss
on post-retirement benefit plan 43 42 86 85 Changes in operating
assets and liabilities excluding acquisitions: Mortgages and
contracts receivable (50,009 ) (32,246 ) (77,427 ) (51,361 ) Due
from related parties, net 24,290 2,834 19,561 11,107 Other
receivables, net 8,821 4,634 31,731 18,233 Prepaid expenses and
other assets, net 20,184 11,272 (53,603 ) (69,375 ) Unsold Vacation
Interests, net (31,614 ) (2,995 ) (42,529 ) 1,828 Accounts payable
5,327 696 9,724 448 Due to related parties, net (13,211 ) (10,286 )
61,701 42,429 Accrued liabilities 11,883 (9,772 ) 19,130 (23,710 )
Income taxes receivable/payable (398 ) (96 ) (391 ) 477 Deferred
revenues (17,428 ) (16,978 ) (31,456 )
(2,481 ) Net cash provided by operating activities 45,617
19,206 91,395 52,874
Investing activities: Property and equipment capital
expenditures (6,757 ) (4,141 ) (10,917 ) (9,862 ) Purchase of
intangible assets — — (8,993 ) — Investment in joint venture in
Asia (1,500 ) — (1,500 ) — Cash paid upon deconsolidation of St.
Maarten HOAs — — — — Proceeds from sale of assets 2
264 238 264 Net cash used
in investing activities $ (8,255 ) $ (3,877 ) $ (21,172 ) $ (9,598
)
DIAMOND
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued For the
Quarters and Six Months ended June 30, 2015 and 2014
(Unaudited) (In thousands) Quarter Ended
June 30, Six Months Ended June 30, 2015
2014 2015 2014 Financing activities: Changes
in cash in escrow and restricted cash $ (284 ) $ (20 ) $ (9,505 ) $
14,617 Proceeds from issuance of Senior Credit Facility — 442,775 —
442,775 Proceeds from issuance of securitization notes and Funding
Facilities 90,284 69,189 153,490 115,098 Proceeds from issuance of
notes payable — — — 1,113 Payments on Senior Credit Facility — —
(18,109 ) — Payments on senior secured notes, including redemption
premium — (404,683 ) — (404,683 ) Payments on securitization notes
and Funding Facilities (62,830 ) (49,339 ) (126,276 ) (94,473 )
Payments on notes payable (4,109 ) (20,806 ) (6,849 ) (25,833 )
Adjustment (payment) of debt issuance costs 18 (10,739 ) (2,350 )
(10,669 ) Excess tax benefits from stock-based compensation — — 375
— Common stock repurchases under the share repurchase program
(12,985 ) — (74,126 ) — Proceeds from exercise of stock options 389
63 2,205 299 Payments for derivative instrument (316 )
— (316 ) — Net cash provided by
(used in) financing activities 10,167 26,440
(81,461 ) 38,244 Net increase
(decrease) in cash and cash equivalents 47,529 41,769 (11,238 )
81,520 Effect of changes in exchange rates on cash and cash
equivalents 624 337 (2 ) 417 Cash and cash equivalents, beginning
of period 183,093 75,776 242,486
35,945 Cash and cash equivalents, end of
period $ 231,246 $ 117,882 $ 231,246 $ 117,882
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash interest paid on corporate indebtedness $ 6,069 $
19,707 $ 12,163 $ 42,559 Cash interest paid on
securitization notes and Funding Facilities $ 4,195 $ 3,588
$ 8,092 $ 6,999 Cash paid for taxes, net of
cash tax refunds $ 475 $ 1,022 $ 486 $ 1,240
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: Insurance premiums financed through issuance of notes
payable $ — $ — $ 8,492 $ 6,173 Unsold
Vacation Interests, net reclassified to property and equipment $ —
$ 5,616 $ — $ 5,616 Assets held for
sale reclassified to unsold Vacation Interests $ — $ —
$ 12,982 $ — Unsold Vacation Interests
reclassified to assets held for sale $ 177 $ — $ —
$ —
Information technology software and
support financed through issuance of notes payable
$ — $ 472 $ — $ 472
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150729006747/en/
Media Contact:Diamond Resorts International®Stevi Wara,
702.823.7069media@diamondresorts.comorInvestor Contact:Sloane and
CompanyJoshua Hochberg, 212.486.9500jhochberg@sloanepr.com
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