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| 8-K - 8-K EARNINGS RELEASE Q3-2013 - Diamond Resorts International, Inc. | a8-kq3x2013earningsrelease.htm |
Media Contact: Stevi Wara
Diamond Resorts International®
Tel: 702.823.7069
media@diamondresorts.com
Investor Contact: Joshua Hochberg
Sloane and Company
Tel: 212.486.9500
jhochberg@sloanepr.com
Diamond Resorts International, Inc. Reports Record Third Quarter 2013 Financial Results
Provides Guidance for Full Year 2013
October 31, 2013, Las Vegas, NV - Diamond Resorts International, Inc. (NYSE: DRII) (“Diamond” or the “Company”), today announced results for the quarter ended September 30, 2013.
“We are very pleased to report a record third quarter, as our unique business model delivered strong operating performance, underscoring the advantages of our asset light, integrated hospitality platform,” stated David F. Palmer, President and Chief Executive Officer. “As we look to the remainder of the year and 2014, we remain confident that our hospitality-oriented approach to our business and our value proposition for consumers and HOAs position us to produce strong future results and shareholder value.”
Third Quarter 2013 Highlights
• | Total revenue increased $48.9 million, or 34.3%, to $191.6 million for the three months ended September 30, 2013 from $142.7 million for the three months ended September 30, 2012. |
• | Hospitality and Management Services revenue grew by $4.8 million, or 12.1%, for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. This growth was driven mainly by increased management fees as a result of the inclusion of the managed properties from the Island One and PMR Service Companies acquisitions (both completed in July 2013) and increased club revenues. |
• | Vacation Interest sales, net grew by $40.4 million, or 48.5%, for the third quarter of 2013 compared to the same period in 2012. This growth was driven by a: |
◦ | 8.3% increase in tours to 56,822 from 52,474 |
◦ | 9.1% increase in transactions to 8,342 from 7,647 (reflecting closing percentages of 14.7% for the 2013 period and 14.6% for the 2012 period) |
◦ | 36.0% increase in average transaction price to $16,881 from $12,414 |
• | Advertising, sales and marketing expense for the quarter included a non-cash charge of $2.0 million related to the IPO. Excluding this charge, advertising, sales and marketing as a percentage of Vacation Interest sales revenue decreased 5.3 percentage points to 50.0%, from 55.3% in the 2012 period. The non-cash charge related to stock-based compensation was recognized in the three months ended September 30, 2013. Giving effect to this charge, advertising, sales and marketing as a percentage Vacation Interest sales revenue was 51.4%. This improvement was primarily due to improved leverage of fixed costs through increased sales efficiencies. |
• | The pre-tax loss for the quarter included non-cash items netting to $49.1 million related to the IPO and related transactions. Excluding these items, pre-tax income would have increased $26.4 million to $15.2 million for the three months ended September 30, 2013 from a pre-tax loss of $11.3 million for the three months ended September 30, 2012. The non-cash items were charges related to stock-based compensation of $38.5 million and early extinguishment of debt of $13.4 million, offset in part by a gain on bargain purchase of $2.8 million, each recognized in the three months ended September 30, 2013. Giving effect to these items, the pre-tax loss was $34.0 million for the three months ended September 30, 2013. |
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• | Net cash used by operations for the three months ended September 30, 2013 was $13.0 million, reflecting $43.8 million, net of repayments, from the buildup of receivables which will be included in future securitizations. |
• | Adjusted EBITDA for the Company and its Restricted Subsidiaries increased $21.8 million, or 56.5%, to $60.6 million for the period from $38.8 million for the three months ended September 30, 2012. This is based on Adjusted EBITDA for the Company on a consolidated basis of $60.4 million for the three months ended September 30, 2013 and $32.3 million for the three months ended September 30, 2012. |
Third Quarter Earnings Summary
Hospitality and Management Services
Total management and member services revenue in our Hospitality and Management Services segment increased $3.6 million, or 12.0%, to $33.6 million for the three months ended September 30, 2013 from $30.0 million for the three months ended September 30, 2012. Management fees increased as a result of the inclusion of the managed properties from our acquisitions of Island One and the PMR Service Companies (both completed in July 2013) for the three months ended September 30, 2013. We also experienced higher club revenues due to increased membership dues, higher collection rate and higher club member count in the three months ended September 30, 2013 compared to the three months ended September 30, 2012. We had a total of 183,110 and 154,987 club members as of September 30, 2013 and 2012, respectively. These increases were partially offset by the reduction in commissions earned on fee-for-service agreements with Island One which were terminated in conjunction with the Island One acquisition on July 24, 2013.
Other revenue in our Hospitality and Management Services segment increased $0.2 million to $1.2 million for the three months ended September 30, 2013 from $1.0 million for the three months ended September 30, 2012.
Management and member services expense increased $0.5 million, or 6.2%, to $9.4 million for the three months ended September 30, 2013 from $8.9 million for the three months ended September 30, 2012. The increase was primarily attributable to higher operating expense associated with higher club member count and higher operating costs at the resorts that we manage. The above increases were partially offset by a reduction in the costs incurred under the fee-for-service agreements with Island One that terminated in conjunction with the Island One acquisition and an increase in the allocation of certain resort management expenses to the HOAs that we manage. Management and member services expense as a percentage of management and member services revenue decreased to 28.0% for the three months ended September 30, 2013 from 29.5% for the three months ended September 30, 2012.
Vacation Interest Sales and Financing
Vacation Interest sales, net, increased $40.4 million, or 48.5%, to $123.7 million for the three months ended September 30, 2013 from $83.3 million for the three months ended September 30, 2012. The increase in Vacation Interest sales, net, was attributable to a $48.0 million increase in Vacation Interest sales revenue, partially offset by a $7.6 million increase in our provision for uncollectible Vacation Interest sales revenue. The $48.0 million increase in Vacation Interest sales revenue during the three months ended September 30, 2013 compared to the three months ended September 30, 2012 was generated by sales growth on a same-store basis from 47 sales centers due to an increase in the number of transactions and a higher average sales price per transaction. During the quarter, the Company closed two low performing off-site sales centers, which will enable us to increase sales efficiencies. Our total number of tours increased to 56,822 for the three months ended September 30, 2013 from 52,474 for the three months ended September 30, 2012, primarily due to an increase in the number of tours generated on a same-store basis resulting from the expansion of our lead-generation and marketing programs. We closed a total of 8,342 Vacation Interest sales transactions during the three months ended September 30, 2013, compared to 7,647 transactions during the three months ended September 30, 2012. Our closing percentage (which represents the percentage of Vacation Interest sales closed relative to the total number of sales presentations at our sales centers during the period presented) increased slightly to 14.7% for the three months ended September 30, 2013 from 14.6% for the three months ended September 30, 2012. Vacation Interest sales price per transaction increased to $16,881 for the three months ended September 30, 2013 from $12,414 for the three months ended September 30, 2012 due principally to a change in our selling strategy to focus on selling larger point packages and the success of the sales and marketing initiatives implemented in furtherance of this strategy.
Sales incentives increased $1.2 million, or 53.8%, to $3.6 million for the three months ended September 30, 2013 from $2.4 million for the three months ended September 30, 2012. As a percentage of gross Vacation Interest sales revenue, sales incentives were 2.6% for both the three months ended September 30, 2013 and the three months ended September 30, 2012.
Provision for uncollectible Vacation Interest sales revenue increased $7.6 million, or 120.7%, to $13.9 million for the three months ended September 30, 2013 from $6.3 million for the three months ended September 30, 2012, primarily due to the increase in Vacation Interest sales revenue and an increase in the percentage of financed Vacation Interest sales for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012.
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Advertising, sales and marketing costs as a percentage of Vacation Interest sales revenue, were 51.4% for the three months ended September 30, 2013, compared to 55.3% for the three months ended September 30, 2012. Advertising, sales and marketing expense includes a charge of $2.0 million for stock-based compensation related to option grants made at the time of the IPO. Without this non-cash charge, advertising, sales and marketing as a percentage of gross Vacation Interest sales revenue would have been 50.0%, a decrease of 5.3 percentage points from the prior year period. The decrease of such costs as a percentage of Vacation Interest sales revenue was primarily due to improved absorption of fixed costs through increased sales efficiencies.
Vacation Interest cost of sales related to our Vacation Interest Sales and Financing Segment increased $1.8 million, or 10.9%, to $18.6 million for the three months ended September 30, 2013 from $16.8 million for the three months ended September 30, 2012. Vacation Interest cost of sales as a percentage of Vacation Interest revenue decreased to 13.5% for the three months ended September 30, 2013 from 18.7% for the three months ended September 30, 2012. The decrease was primarily due to an increase in low-cost inventory added during the third quarter of 2013 as compared to the third quarter of 2012, primarily as a result of our inventory recovery agreements and the Island One acquisition.
Corporate General and Administrative Expense
General and administrative expense for the quarter included a non-cash charge of $35.4 million related to the IPO. Excluding this charge, general and administrative expense would have decreased $2.3 million, or 8.1%, to $25.7 million for the three months ended September 30, 2013 from $28.0 million for the three months ended September 30, 2012. This decrease was due to lower legal and professional expenses after the integration of the Pacific Monarch Resorts acquisition and higher allocation of our expenses to the HOAs and the Collections, partially offset by higher payroll expense to support operations acquired in connection with the Island One acquisition and the PMR Service Companies acquisition.
The $35.4 million non-cash charge noted above relates to stock-based compensation recognized in the three months ended September 30, 2013 due to the issuance of 6.4 million stock options by Diamond in connection with the IPO. Giving effect to this charge, general administrative expense as reported was $61.1 million for the three months ended September 30, 2013.
Pre-tax Income/Loss and Net Loss
The pre-tax loss for the quarter included non-cash items netting to $49.1 million related to the IPO and related transactions. Excluding these items, pre-tax income would have increased $26.4 million to $15.2 million for the three months ended September 30, 2013 from a pre-tax loss of $11.3 million for the three months ended September 30, 2012.
The non-cash items were charges related to stock-based compensation of $38.5 million and early extinguishment of debt of $13.4 million, offset in part by a gain on bargain purchase of $2.8 million, each recognized in the three months ended September 30, 2013. Giving effect to these items, the pre-tax loss was $34.0 million for the three months ended September 30, 2013.
Net loss increased $14.7 million to $26.3 million for the three months ended September 30, 2013 from $11.6 million for the three months ended September 30, 2012.
Capital Resources and Liquidity
As of September 30, 2013, we had cash and cash equivalents of $29.9 million and total indebtedness of $735.6 million (which included approximately $386.0 million of corporate debt and approximately $349.6 million of non-recourse debt). Our cash used in operating activities was $13.0 million for the three months ended September 30, 2013, compared to cash provided by operating activities of $5.3 million for the three months ended September 30, 2012. Capital expenditures for the three months ended September 30, 2013 were $4.3 million, a decrease of $0.9 million from $5.2 million for the three months ended September 30, 2012. Cash expenditures for the acquisition of the PMR Service Companies during the three months ended September 30, 2013 were $47.8 million.
The indenture governing our 12% senior secured notes due 2018 includes covenants which are determined by reference to the Adjusted EBITDA of Diamond and its “restricted subsidiaries.” Adjusted EBITDA, as defined in the indenture, was $60.6 million for the three months ended September 30, 2013. The calculation of Adjusted EBITDA in accordance with the indenture is detailed in the table below:
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Quarter Ended September 30, | |||||||
2013 | 2012 | ||||||
($ in thousands) | |||||||
Net cash used in operating activities | $ | (12,981 | ) | $ | (5,251 | ) | |
(Benefit) provision for income taxes | (7,626 | ) | 340 | ||||
Provision for uncollectible Vacation Interest sales revenue(a) | (13,851 | ) | (6,276 | ) | |||
Amortization of capitalized financing costs and original issue discounts(a) | (1,804 | ) | (1,660 | ) | |||
Deferred income taxes(b) | 8,040 | 159 | |||||
Gain on foreign currency (c) | 3 | 154 | |||||
Gain on mortgage purchase(a) | 33 | 7 | |||||
Unrealized loss on derivative instruments(d) | (657 | ) | — | ||||
Corporate interest expense(e) | 16,658 | 20,254 | |||||
Change in operating assets and liabilities excluding acquisitions(f) | 53,983 | 7,797 | |||||
Vacation interest cost of sales(g) | 18,605 | 16,778 | |||||
Adjusted EBITDA - Consolidated | 60,403 | 32,302 | |||||
Less: Adjusted EBITDA - Unrestricted Subsidiaries(h) | 7,917 | 756 | |||||
Plus: Intercompany elimination(i) | 8,099 | 7,172 | |||||
Adjusted EBITDA - Diamond and Restricted Subsidiaries | $ | 60,585 | $ | 38,718 | |||
(a) Represents non-cash charge or gain.
(b) | Represents the deferred income tax liability arising from the difference between the treatment for financial reporting purposes as compared to income tax return purposes, primarily related to the Island One acquisition. |
(c) | Represents net realized gains on foreign exchange transactions settled at favorable exchange rates and unrealized net gains resulting from the revaluation of foreign currency-denominated assets and liabilities. |
(d) Represents the effects of the changes in mark-to-market valuations of derivative liabilities.
(e) | 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 Vacation Interest consumer loans. |
(f) | 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. |
(g) | 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. |
(h) | Represents the Adjusted EBITDA of unrestricted subsidiaries as defined in, and calculated in accordance with our 12% senior secured notes. |
(i) | Represents the elimination of revenues and expenses related to agreements entered into between our restricted and unrestricted subsidiaries. The agreements include service agreements for sales and marketing management (terminated on July 24, 2013), resort management, reservation services and portfolio management, whereby certain restricted subsidiaries operate these functions on behalf of the unrestricted subsidiaries for a fee. In addition to these service agreements, we have also entered into intercompany sales agreements, whereby certain restricted subsidiaries purchase unsold Vacation Interests from unrestricted subsidiaries. |
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Outlook
For the full year ending December 31, 2013, the Company is providing the following guidance for its expected operating results:
Year Ending December 31, 2013 | ||||||||
($ in thousands) | Low | High | ||||||
Pre-tax income (loss) | $ | (11,700 | ) | $ | 5,500 | |||
Corporate interest expense | $ | 70,100 | $ | 69,600 | ||||
Vacation interest cost of sales(a) | $ | 70,000 | $ | 61,600 | ||||
Depreciation and amortization | $ | 28,600 | $ | 27,600 | ||||
Other non-cash items(b) | $ | 55,400 | $ | 54,400 | ||||
For the year ending December 31, 2013, the Company anticipates cash expenditures for the acquisition of inventory, excluding inventory from acquisitions, to be between $25.0 million and $30.0 million, including inventory acquired pursuant to the company’s inventory recovery agreements and excluding construction in progress related to the lobby and other common areas at the Company’s Cabo Azul resort. In addition, the company anticipates capital expenditures(c) to be between $15.0 million and $17.0 million.
(a) | In accordance with ASC 978, the Company records Vacation Interest Cost of Sales using the relative sales value method (See Note 2 - Summary of Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December 31, 2012 of Diamond Resorts Corporation). This method requires the Company to make a number of projections and estimates, which are subject to significant uncertainty and retroactive adjustment in the future periods. These "true-up" adjustments may result, and for the Company have resulted in prior periods, in major swings (both positive and negative) in the Company's pre-tax income computed in accordance with US GAAP that do not have a direct correlation to the operating performance for the periods in which the "true-ups" are made. It is difficult to predict with any degree of precision what the projections and estimates used in connection with the relative sales value method will be and what impact those projections and estimates will have on the amount recorded in future periods as Vacation Interest Cost of Sales. As a result, guidance for Vacation Interest Cost of Sales (and as a result, pre-tax income) covers a wide range of outcomes. |
(b) | Other non-cash items include: stock based compensation, loss on extinguishment of debt, impairments and other write-offs, gain on disposal of assets, gain on bargain purchase from business combinations, amortization of loan origination costs, and amortization of net portfolio (discounts) 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. |
Third Quarter 2013 Earnings Call
The company will be conducting a conference call to discuss the second quarter financial results at 10:00 a.m. Eastern Time on October 31, 2013, available via webcast on the Company's website at http://www.diamondresorts.com/corporate/about/investor/earnings.html. A webcast replay will become available within 2 hours of the call and will run for approximately one year on the Company’s website. Alternatively, participants may call into (866) 562-5561 from the United States, or (706) 679-1894 from outside the U.S. with conference ID 86342767; please dial in fifteen minutes early to ensure a timely start. A call replay will be available from 12:00 p.m. Eastern Time on October 31, 2013 through November 7, 2013 and can be accessed by dialing (800) 585-8367 with conference ID 86342767.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, including the guidance for expected operating results presented under “Outlook” above and other statements regarding the current expectations of Diamond Resorts International, Inc. (the “Company”) about its prospects and opportunities. These forward-looking statements are covered by the "Safe Harbor for Forward-Looking Statements" provided by the Private Securities Litigation Reform Act of 1995. The Company has tried to identify these forward looking statements by using words such as “expect,” “anticipate,” “estimate,” “plan,” “will,” “would,” “should,” “could,” “forecast,” “believe,” “guidance,” “projection,” “target” or similar expressions, but these words are not the exclusive means for identifying such statements. The Company cautions that a number of risks, uncertainties and other factors could cause the Company's actual results to differ materially from those expressed in, or implied by, the forward-looking statements, including, without limitation, adverse trends or disruptions in economic conditions generally or in the vacation ownership, vacation rental and travel industries; adverse changes to, or interruptions in, relationships with the Company's affiliates and other third parties, including termination of the Company's hospitality management contracts; the Company's ability to maintain an optimal inventory of vacation ownership interests for sale; the Company's ability to sell, securitize or borrow against its consumer loans; decreased demand from prospective purchasers of
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Vacation Interests; adverse events or trends in vacation destinations and regions where the resorts in our network are located; changes in the Company's senior management; the Company's ability to comply with regulations applicable to the vacation ownership industry; the effects of the Company's indebtedness and its compliance with the terms thereof; the Company's ability to successfully implement its growth strategy; and the Company's ability to compete effectively. For a detailed discussion of factors that could affect the Company's future operating results, please see the Company's filings with the Securities and Exchange Commission, including the disclosures under “Risk Factors” in those filings. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason.
ABOUT DIAMOND RESORTS INTERNATIONAL®
Diamond Resorts International®, with its network of 306 vacation destinations located in 33 countries throughout the continental United States, Hawaii, Canada, Mexico, the Caribbean, South America, Central America, Europe, Asia, Australia and Africa provides guests with choices and flexibility as they design their dream vacation, whether they're traveling an hour away or around the world. Our hassle-free, relaxing vacations give guests a truly memorable experience every time, for a lifetime.
Diamond Resorts International® owns, operates and manages vacation ownership resorts and, through resort and partner affiliation agreements, provides members and owners with access to 92 managed resorts, 162 affiliated resorts, 48 affiliated hotels and four cruise itineraries through THE Club® at Diamond Resorts International®. To learn more, visit Diamondresorts.com.
Basis of Presentation
On July 24, 2013, Diamond closed the initial public offering (“IPO”) of its common stock. Prior to the consummation of the initial public offering, Diamond was a newly-formed Delaware corporation that had not conducted any activities other than those incident to its formation and other actions in connection with the IPO. Diamond was formed for the purpose of changing the organizational structure of Diamond Resorts Parent, LLC (“DRP”) from a limited liability company to a corporation. Immediately prior to the consummation of the IPO, DRP was the sole stockholder of Diamond. In connection with, and immediately prior to the completion of the IPO, various reorganization transactions were effected ultimately with DRP merging with and into Diamond. See “Organizational Structure-Reorganization Transactions” in the Registration Statement on Form S-1 filed by Diamond with the Securities and Exchange Commission for additional information concerning these reorganization transactions. References in this press release to “Diamond,” “the Company,” ”DRII,” “we,” “us” and “our,” refer to Diamond Resorts International, Inc. and its subsidiaries, after giving effect to those reorganization transactions, and our consolidated financial statements and other historical financial data included in this press release for periods prior to July 24, 2013 are those of DRP and its subsidiaries after giving effect to the reorganization transactions.
Presentation of Certain Financial Metrics
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.
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We define Adjusted EBITDA as our net income (loss), plus: (i) corporate interest expense; (ii) provision (benefit) for income taxes; (iii) depreciation and amortization; (iv) Vacation Interest cost of sales; (v) loss on extinguishment of debt; (vi) impairments and other non-cash write-offs; (vii) loss on the disposal of assets; (viii) amortization of loan origination costs; (ix) amortization of net portfolio premiums; and (x) stock-based compensation; less (a) gain on the disposal of assets; (b) gain on bargain purchase from business combination; and (c) amortization of net portfolio discounts. Adjusted EBITDA is a non-U.S. GAAP financial measure and should not be considered in isolation, or as an alternative to net cash provided by operating activities or any other measure of liquidity, or as an alternative to net income (loss), operating income (loss) or any other measure of financial performance, in each case calculated and presented in accordance with U.S. GAAP. Additional information regarding our calculation of Adjusted EBITDA is provided below.
We present Adjusted EBITDA primarily because, as indicated above, the indenture governing our 12% senior secured notes due 2018 includes covenants which are determined by reference to the Adjusted EBITDA of the Company and its “restricted subsidiaries,” and other of our debt-related agreements include covenants that are determined by reference to Adjusted EBITDA. As a result, we believe that supplementing our consolidated financial statements presented in accordance with US GAAP with this non-GAAP measure provides investors with useful information with respect to our liquidity.
In addition to its application under the Indenture for our senior secured notes, our management uses Adjusted EBITDA: (i) for planning purposes, including the preparation of our annual operating budget; (ii) to allocate resources to enhance the financial performance of our business; (iii) to evaluate the effectiveness of our business strategies and (iv) as a factor for determining compensation for personnel employed by the Company.
We understand that, although measures similar to Adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, it has limitations as an analytical tool, including:
• | Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or Vacation Interest inventory; |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect cash requirements for income taxes; |
• | Adjusted EBITDA does not reflect interest expense for our corporate indebtedness; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often |
have to be replaced, and Adjusted EBITDA does not reflect any cash requirements for these replacements;
• | we make expenditures to replenish Vacation Interests inventory (principally pursuant to our inventory recovery agreements and in connection with our strategic acquisitions), and Adjusted EBITDA does not reflect our cash requirements for these expenditures or certain costs of carrying such inventory (which are capitalized); and |
• | other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as |
a comparative measure.
See “Capital Resources and Liquidity” above for a reconciliation of Adjusted EBITDA to Net cash used in operating activities.
We present pre-tax income excluding non-cash items netting to $49.1 million for the third quarter of 2013 because management excludes these items from its forecasts and evaluation of our operational performance and because we believe that our pre-tax loss including these items are not indicative of our core operating results. We believe this is particularly the case because these items relate to actions related to our IPO and related transactions. The following is a reconciliation of our pre-tax income excluding these non-cash items to our pre-tax loss for the three months ended September 30, 2013:
Quarter Ended September 30, 2013 | |||
($ in thousands) | |||
Loss before benefit for income taxes | $ | (33,935 | ) |
Plus: Non-cash charge from stock-based compensation | 38,495 | ||
Non-cash charge from early extinguishment from of debt | 13,383 | ||
Less: Gain on bargain purchase | (2,756 | ) | |
Income before provision for income taxes excluding net non-cash items | $ | 15,187 | |
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To properly and prudently evaluate our business, we encourage you to review our U.S. GAAP consolidated financial statements included in this press release, and not to rely on any single financial measure to evaluate our business. The non-U.S. GAAP financial measures included in this press release should not be considered in isolation, or as an alternative to net cash provided by operating activities or any other measure of liquidity, or as an alternative to net income (loss), operating income (loss) or any other measure of financial performance, in any such case calculated and presented in accordance with U.S. GAAP.
Segment Reporting
The Company presents its results of operations in two segments: (i) Hospitality and Management Services, which includes operations related to the management of resort properties and the Collections, revenue from club operations and the provision of other services; and (ii) Vacation Interest Sales and Financing, which includes operations relating to the marketing and sales of Vacation Interests, as well as the consumer financing activities related to such sales. While certain line items reflected on the statement of operations and comprehensive income (loss) fall completely into one of these business segments, other line items relate to revenues or expenses which are applicable to more than one segment. For line items that are applicable to more than one segment, revenues or expenses are allocated by management, which involves significant estimates. Certain expense items (principally corporate interest expense and depreciation and amortization) are not, in management's view, allocable to either of these business segments as they apply to the entire Company. In addition, general and administrative expenses are not allocated to either of these business segments because, historically, management has not allocated these expenses for purposes of evaluating the Company's different operational divisions. Accordingly, these expenses are presented under Corporate and Other.
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DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS SEGMENT | |||||||||||||||||||||||||||||||
For the Quarters Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Quarter Ended September 30, 2013 | Quarter Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Management and member services | $ | 33,610 | $ | — | $ | — | $ | 33,610 | $ | 29,999 | $ | — | $ | — | $ | 29,999 | |||||||||||||||
Consolidated resort operations | 9,326 | — | — | 9,326 | 8,361 | — | — | 8,361 | |||||||||||||||||||||||
Vacation Interest sales, net of provision of $0, $13,851, $0, $13,851, $0, $6,276, $0 and $6,276, respectively | — | 123,708 | — | 123,708 | — | 83,318 | — | 83,318 | |||||||||||||||||||||||
Interest | — | 13,971 | 326 | 14,297 | — | 12,551 | 335 | 12,886 | |||||||||||||||||||||||
Other | 1,227 | 9,434 | — | 10,661 | 1,019 | 7,129 | — | 8,148 | |||||||||||||||||||||||
Total revenues | 44,163 | 147,113 | 326 | 191,602 | 39,379 | 102,998 | 335 | 142,712 | |||||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||||
Management and member services | 9,408 | — | — | 9,408 | 8,862 | — | — | 8,862 | |||||||||||||||||||||||
Consolidated resort operations | 9,602 | — | — | 9,602 | 7,314 | — | — | 7,314 | |||||||||||||||||||||||
Vacation Interest cost of sales | — | 18,605 | — | 18,605 | — | 16,778 | — | 16,778 | |||||||||||||||||||||||
Advertising, sales and marketing | — | 70,714 | — | 70,714 | — | 49,554 | — | 49,554 | |||||||||||||||||||||||
Vacation Interest carrying cost, net | — | 10,154 | — | 10,154 | — | 8,226 | — | 8,226 | |||||||||||||||||||||||
Loan portfolio | 278 | 2,018 | — | 2,296 | 189 | 2,257 | — | 2,446 | |||||||||||||||||||||||
Other operating | — | 3,912 | — | 3,912 | — | 2,454 | — | 2,454 | |||||||||||||||||||||||
General and administrative | — | — | 61,114 | 61,114 | — | — | 27,976 | 27,976 | |||||||||||||||||||||||
Depreciation and amortization | — | — | 7,583 | 7,583 | — | — | 5,205 | 5,205 | |||||||||||||||||||||||
Interest | — | 4,267 | 16,658 | 20,925 | — | 4,554 | 20,254 | 24,808 | |||||||||||||||||||||||
Loss on extinguishment of debt | — | — | 13,383 | 13,383 | — | — | — | — | |||||||||||||||||||||||
Impairments and other write-offs | — | — | 1,200 | 1,200 | — | — | 401 | 401 | |||||||||||||||||||||||
Gain on disposal of assets | — | — | (585 | ) | (585 | ) | — | — | (122 | ) | (122 | ) | |||||||||||||||||||
(Gain) adjustment on bargain purchase from business combinations | — | — | (2,756 | ) | (2,756 | ) | — | — | 115 | 115 | |||||||||||||||||||||
Total costs and expenses | 19,288 | 109,670 | 96,597 | 225,555 | 16,365 | 83,823 | 53,829 | 154,017 | |||||||||||||||||||||||
Income (loss) before (benefit) provision for income taxes | 24,875 | 37,443 | (96,271 | ) | (33,953 | ) | 23,014 | 19,175 | (53,494 | ) | (11,305 | ) | |||||||||||||||||||
(Benefit) provision for income taxes | — | — | (7,626 | ) | (7,626 | ) | — | — | 340 | 340 | |||||||||||||||||||||
Net income (loss) | $ | 24,875 | $ | 37,443 | $ | (88,645 | ) | $ | (26,327 | ) | $ | 23,014 | $ | 19,175 | $ | (53,834 | ) | $ | (11,645 | ) | |||||||||||
9
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS SEGMENT | |||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | Hospitality and Management Services | Vacation Interest Sales and Financing | Corporate and Other | Total | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Management and member services | $ | 96,304 | $ | — | $ | — | $ | 96,304 | $ | 85,574 | $ | — | $ | — | $ | 85,574 | |||||||||||||||
Consolidated resort operations | 26,465 | — | — | 26,465 | 25,522 | — | — | 25,522 | |||||||||||||||||||||||
Vacation Interest sales, net of provision of $0, $29,731, $0, $29,731, $0, $16,093, $0 and $16,093, respectively | — | 325,815 | — | 325,815 | — | 202,764 | — | 202,764 | |||||||||||||||||||||||
Interest | — | 40,021 | 1,138 | 41,159 | — | 38,015 | 1,039 | 39,054 | |||||||||||||||||||||||
Other | 7,535 | 21,649 | — | 29,184 | 3,835 | 16,357 | — | 20,192 | |||||||||||||||||||||||
Total revenues | 130,304 | 387,485 | 1,138 | 518,927 | 114,931 | 257,136 | 1,039 | 373,106 | |||||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||||
Management and member services | 27,952 | — | — | 27,952 | 25,597 | — | — | 25,597 | |||||||||||||||||||||||
Consolidated resort operations | 26,169 | — | — | 26,169 | 22,620 | — | — | 22,620 | |||||||||||||||||||||||
Vacation Interest cost of sales | — | 45,451 | — | 45,451 | — | 17,175 | — | 17,175 | |||||||||||||||||||||||
Advertising, sales and marketing | — | 181,668 | — | 181,668 | — | 124,591 | — | 124,591 | |||||||||||||||||||||||
Vacation Interest carrying cost, net | — | 29,141 | — | 29,141 | — | 26,674 | — | 26,674 | |||||||||||||||||||||||
Loan portfolio | 782 | 6,773 | — | 7,555 | 631 | 6,549 | — | 7,180 | |||||||||||||||||||||||
Other operating | — | 6,518 | — | 6,518 | — | 5,419 | — | 5,419 | |||||||||||||||||||||||
General and administrative | — | — | 105,612 | 105,612 | — | — | 70,937 | 70,937 | |||||||||||||||||||||||
Depreciation and amortization | — | — | 19,912 | 19,912 | — | — | 13,379 | 13,379 | |||||||||||||||||||||||
Interest | — | 12,451 | 58,110 | 70,561 | — | 14,240 | 55,718 | 69,958 | |||||||||||||||||||||||
Loss on extinguishment of debt | — | — | 13,383 | 13,383 | — | — | — | — | |||||||||||||||||||||||
Impairments and other write-offs | — | — | 1,279 | 1,279 | — | — | 390 | 390 | |||||||||||||||||||||||
Gain on disposal of assets | — | — | (673 | ) | (673 | ) | — | — | (218 | ) | (218 | ) | |||||||||||||||||||
Gain on bargain purchase from business combinations | — | — | (2,726 | ) | (2,726 | ) | — | — | (22,634 | ) | (22,634 | ) | |||||||||||||||||||
Total costs and expenses | 54,903 | 282,002 | 194,897 | 531,802 | 48,848 | 194,648 | 117,572 | 361,068 | |||||||||||||||||||||||
Income (loss) before benefit for income taxes | 75,401 | 105,483 | (193,759 | ) | (12,875 | ) | 66,083 | 62,488 | (116,533 | ) | 12,038 | ||||||||||||||||||||
Benefit for income taxes | — | — | (6,777 | ) | (6,777 | ) | — | — | (13,353 | ) | (13,353 | ) | |||||||||||||||||||
Net income (loss) | $ | 75,401 | $ | 105,483 | $ | (186,982 | ) | $ | (6,098 | ) | $ | 66,083 | $ | 62,488 | $ | (103,180 | ) | $ | 25,391 | ||||||||||||
10
Consolidating Financial Statements - Restricted and Unrestricted Subsidiaries
The following consolidating financial statements present the financial position, results of operations, and statements of cash flow for (1) those subsidiaries of the Company which have been designated "Unrestricted Subsidiaries" for purposes of the Senior Secured Note Indenture; and (2) the Company and all of its other subsidiaries. As of September 30, 2013 and December 31, 2012, the Unrestricted Subsidiaries were FLRX Inc. and its subsidiaries, ILX Acquisition Inc. and its subsidiaries, Tempus Acquisition, LLC and its subsidiaries, DPM Acquisition, LLC and its subsidiaries and Aegean Blue Holdings Plc and its subsidiaries. As of September 30, 2012, the Unrestricted Subsidiaries were FLRX Inc. and its subsidiaries, ILX Acquisition Inc. and its subsidiaries, Tempus Acquisition, LLC and its subsidiaries and DPM Acquisition, LLC and its subsidiaries.
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||||
For the Quarters Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Quarter Ended September 30, 2013 | Quarter Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Management and member services | $ | 31,851 | $ | 6,099 | $ | (4,340 | ) | $ | 33,610 | $ | 29,772 | $ | 4,220 | $ | (3,993 | ) | $ | 29,999 | |||||||||||||
Consolidated resort operations | 8,216 | 1,110 | — | 9,326 | 7,262 | 1,099 | — | 8,361 | |||||||||||||||||||||||
Vacation Interest sales, net of provision (adjustment) of $13,494, $357, $0, $13,851, $6,639, $(363), $0 and $6,276, respectively | 113,110 | 10,598 | — | 123,708 | 77,318 | 6,000 | — | 83,318 | |||||||||||||||||||||||
Interest | 12,964 | 1,333 | — | 14,297 | 10,053 | 2,833 | — | 12,886 | |||||||||||||||||||||||
Other | 11,774 | 12,665 | (13,778 | ) | 10,661 | 9,034 | 10,178 | (11,064 | ) | 8,148 | |||||||||||||||||||||
Total revenues | 177,915 | 31,805 | (18,118 | ) | 191,602 | 133,439 | 24,330 | (15,057 | ) | 142,712 | |||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||||
Management and member services | 10,002 | 2,887 | (3,481 | ) | 9,408 | 9,837 | 2,432 | (3,407 | ) | 8,862 | |||||||||||||||||||||
Consolidated resort operations | 8,333 | 1,269 | — | 9,602 | 6,183 | 1,131 | — | 7,314 | |||||||||||||||||||||||
Vacation Interest cost of sales | 18,121 | 484 | — | 18,605 | 16,121 | 657 | — | 16,778 | |||||||||||||||||||||||
Advertising, sales and marketing | 63,840 | 7,715 | (841 | ) | 70,714 | 46,721 | 3,405 | (572 | ) | 49,554 | |||||||||||||||||||||
Vacation Interest carrying cost, net | 7,394 | 3,783 | (1,023 | ) | 10,154 | 6,518 | 2,498 | (790 | ) | 8,226 | |||||||||||||||||||||
Loan portfolio | 2,267 | 650 | (621 | ) | 2,296 | 2,316 | 1,204 | (1,074 | ) | 2,446 | |||||||||||||||||||||
Other operating | 4,508 | 3,457 | (4,053 | ) | 3,912 | 2,973 | 1,523 | (2,042 | ) | 2,454 | |||||||||||||||||||||
General and administrative | 57,473 | 3,641 | — | 61,114 | 17,780 | 10,196 | — | 27,976 | |||||||||||||||||||||||
Depreciation and amortization | 3,847 | 3,736 | — | 7,583 | 2,348 | 2,857 | — | 5,205 | |||||||||||||||||||||||
Interest | 14,591 | 6,334 | — | 20,925 | 16,952 | 7,856 | — | 24,808 | |||||||||||||||||||||||
Loss on extinguishment of debt | 8,443 | 4,940 | — | 13,383 | — | — | — | — | |||||||||||||||||||||||
Impairments and other write-offs | — | 1,200 | — | 1,200 | 401 | — | — | 401 | |||||||||||||||||||||||
(Gain) loss on disposal of assets | (590 | ) | 5 | — | (585 | ) | (122 | ) | — | — | (122 | ) | |||||||||||||||||||
(Gain) adjustment on bargain purchase from business combinations | — | (2,756 | ) | — | (2,756 | ) | — | 115 | — | 115 | |||||||||||||||||||||
Total costs and expenses | 198,229 | 37,345 | (10,019 | ) | 225,555 | 128,028 | 33,874 | (7,885 | ) | 154,017 | |||||||||||||||||||||
(Loss) income before (benefit) provision for income taxes | (20,314 | ) | (5,540 | ) | (8,099 | ) | (33,953 | ) | 5,411 | (9,544 | ) | (7,172 | ) | (11,305 | ) | ||||||||||||||||
(Benefit) provision for income taxes | (7,705 | ) | 79 | — | (7,626 | ) | 450 | (110 | ) | — | 340 | ||||||||||||||||||||
Net (loss) income | $ | (12,609 | ) | $ | (5,619 | ) | $ | (8,099 | ) | $ | (26,327 | ) | $ | 4,961 | $ | (9,434 | ) | $ | (7,172 | ) | $ | (11,645 | ) | ||||||||
11
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Management and member services | $ | 93,171 | $ | 16,046 | $ | (12,913 | ) | $ | 96,304 | $ | 85,023 | $ | 9,173 | $ | (8,622 | ) | $ | 85,574 | |||||||||||||
Consolidated resort operations | 22,285 | 4,180 | — | 26,465 | 21,430 | 4,092 | — | 25,522 | |||||||||||||||||||||||
Vacation Interest sales, net of provision (adjustment) of $28,930, $801, $0, $29,731, $17,273, $(1,180), $0 and $16,093, respectively | 301,644 | 24,171 | — | 325,815 | 189,776 | 12,988 | — | 202,764 | |||||||||||||||||||||||
Interest | 34,829 | 6,330 | — | 41,159 | 28,853 | 10,201 | — | 39,054 | |||||||||||||||||||||||
Other | 32,884 | 33,267 | (36,967 | ) | 29,184 | 23,657 | 18,374 | (21,839 | ) | 20,192 | |||||||||||||||||||||
Total revenues | 484,813 | 83,994 | (49,880 | ) | 518,927 | 348,739 | 54,828 | (30,461 | ) | 373,106 | |||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||||
Management and member services | 30,285 | 8,070 | (10,403 | ) | 27,952 | 26,395 | 5,948 | (6,746 | ) | 25,597 | |||||||||||||||||||||
Consolidated resort operations | 22,166 | 4,003 | — | 26,169 | 18,949 | 3,671 | — | 22,620 | |||||||||||||||||||||||
Vacation Interest cost of sales | 43,139 | 2,312 | — | 45,451 | 16,249 | 926 | — | 17,175 | |||||||||||||||||||||||
Advertising, sales and marketing | 167,396 | 16,734 | (2,462 | ) | 181,668 | 119,072 | 6,507 | (988 | ) | 124,591 | |||||||||||||||||||||
Vacation Interest carrying cost, net | 22,175 | 10,072 | (3,106 | ) | 29,141 | 22,875 | 5,708 | (1,909 | ) | 26,674 | |||||||||||||||||||||
Loan portfolio | 7,436 | 2,196 | (2,077 | ) | 7,555 | 6,960 | 2,143 | (1,923 | ) | 7,180 | |||||||||||||||||||||
Other operating | 8,702 | 7,892 | (10,076 | ) | 6,518 | 7,309 | 3,419 | (5,309 | ) | 5,419 | |||||||||||||||||||||
General and administrative | 94,084 | 11,528 | — | 105,612 | 51,923 | 19,014 | — | 70,937 | |||||||||||||||||||||||
Depreciation and amortization | 9,198 | 10,714 | — | 19,912 | 6,793 | 6,586 | — | 13,379 | |||||||||||||||||||||||
Interest | 47,984 | 22,577 | — | 70,561 | 50,534 | 19,424 | — | 69,958 | |||||||||||||||||||||||
Loss on extinguishment of debt | 8,443 | 4,940 | — | 13,383 | — | — | — | — | |||||||||||||||||||||||
Impairments and other write-offs | 79 | 1,200 | — | 1,279 | 390 | — | — | 390 | |||||||||||||||||||||||
(Gain) loss on disposal of assets | (674 | ) | 1 | — | (673 | ) | (218 | ) | — | — | (218 | ) | |||||||||||||||||||
Gain on bargain purchase from business combinations | — | (2,726 | ) | — | (2,726 | ) | — | (22,634 | ) | — | (22,634 | ) | |||||||||||||||||||
Total costs and expenses | 460,413 | 99,513 | (28,124 | ) | 531,802 | 327,231 | 50,712 | (16,875 | ) | 361,068 | |||||||||||||||||||||
Income (loss) before (benefit) provision for income taxes | 24,400 | (15,519 | ) | (21,756 | ) | (12,875 | ) | 21,508 | 4,116 | (13,586 | ) | 12,038 | |||||||||||||||||||
(Benefit) provision for income taxes | (6,946 | ) | 169 | — | (6,777 | ) | 209 | (13,562 | ) | — | (13,353 | ) | |||||||||||||||||||
Net income (loss) | $ | 31,346 | $ | (15,688 | ) | $ | (21,756 | ) | $ | (6,098 | ) | $ | 21,299 | $ | 17,678 | $ | (13,586 | ) | $ | 25,391 | |||||||||||
12
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||||||||||||
As of September 30, 2013 and December 31, 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
September 30, 2013 (Unaudited) | December 31, 2012 (Audited) | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 22,868 | $ | 7,008 | $ | — | $ | 29,876 | $ | 16,963 | $ | 4,098 | $ | — | $ | 21,061 | |||||||||||||||
Cash in escrow and restricted cash | 58,544 | 2,698 | — | 61,242 | 40,785 | 1,526 | — | 42,311 | |||||||||||||||||||||||
Mortgages and contracts receivable, net of allowance of $91,904, $6,249, $0, $98,153, $61,067, $22,717, $0, and $83,784, respectively | 359,207 | 18,306 | — | 377,513 | 266,303 | 46,633 | (4 | ) | 312,932 | ||||||||||||||||||||||
Due from related parties, net | 240,915 | 2,460 | (206,917 | ) | 36,458 | 45,428 | 4,510 | (26,943 | ) | 22,995 | |||||||||||||||||||||
Other receivables, net | 28,112 | 4,865 | — | 32,977 | 40,292 | 5,757 | — | 46,049 | |||||||||||||||||||||||
Income tax receivable | 25 | 5,807 | (5,807 | ) | 25 | 927 | — | — | 927 | ||||||||||||||||||||||
Prepaid expenses and other assets, net | 71,547 | 17,862 | (528 | ) | 88,881 | 49,512 | 9,409 | (897 | ) | 58,024 | |||||||||||||||||||||
Unsold Vacation Interests, net | 272,869 | 72,858 | (44,018 | ) | 301,709 | 263,493 | 74,635 | (22,261 | ) | 315,867 | |||||||||||||||||||||
Property and equipment, net | 40,688 | 20,530 | — | 61,218 | 33,664 | 21,456 | — | 55,120 | |||||||||||||||||||||||
Assets held for sale | 5,326 | 5,855 | — | 11,181 | 5,070 | 154 | — | 5,224 | |||||||||||||||||||||||
Intangible assets, net | 107,685 | 123,440 | — | 231,125 | 30,914 | 81,584 | — | 112,498 | |||||||||||||||||||||||
Total assets | $ | 1,207,786 | $ | 281,689 | $ | (257,270 | ) | $ | 1,232,205 | $ | 793,351 | $ | 249,762 | $ | (50,105 | ) | $ | 993,008 | |||||||||||||
Liabilities and Stockholders' equity (deficit): | |||||||||||||||||||||||||||||||
Accounts payable | $ | 8,569 | $ | 5,997 | $ | — | $ | 14,566 | $ | 13,467 | $ | 2,252 | $ | — | $ | 15,719 | |||||||||||||||
Due to related parties, net | 41,730 | 253,798 | (216,249 | ) | 79,279 | 42,632 | 57,179 | (35,607 | ) | 64,204 | |||||||||||||||||||||
Accrued liabilities | 85,199 | 14,802 | (1,055 | ) | 98,946 | 91,511 | 16,004 | (1,064 | ) | 106,451 | |||||||||||||||||||||
Income taxes payable | 1,091 | — | — | 1,091 | 701 | — | — | 701 | |||||||||||||||||||||||
Deferred income taxes | 17,706 | — | (5,807 | ) | 11,899 | — | — | — | — | ||||||||||||||||||||||
Deferred revenues | 83,406 | 6,332 | — | 89,738 | 92,490 | 1,343 | — | 93,833 | |||||||||||||||||||||||
Senior Secured Notes, net of unamortized original issue discount of $6,798, $0, $0, $6,798, $8,509, $0, $0, and $8,509, respectively | 367,642 | — | — | 367,642 | 416,491 | — | — | 416,491 | |||||||||||||||||||||||
Securitization notes and Funding Facilities, net of unamortized original issue discount for $515, $0, $0, $515, $753, $0, $0, $753, respectively | 324,364 | 5,698 | — | 330,062 | 209,450 | 46,852 | — | 256,302 | |||||||||||||||||||||||
Revolving credit facility | 15,000 | — | — | 15,000 | — | — | — | — | |||||||||||||||||||||||
Derivative liabilities | 657 | — | — | 657 | — | — | — | — | |||||||||||||||||||||||
Notes payable | 3,347 | 19,519 | — | 22,866 | 3,238 | 134,668 | — | 137,906 | |||||||||||||||||||||||
Total liabilities | 948,711 | 306,146 | (223,111 | ) | 1,031,746 | 869,980 | 258,298 | (36,671 | ) | 1,091,607 | |||||||||||||||||||||
Stockholders' equity (deficit): | |||||||||||||||||||||||||||||||
Common stock $0.01 par value; authorized - 250,000,000 shares; issued and outstanding - 75,458,402, 0, 0 and 75,458,402, 54,057,867, 0, 0 and 54,057,867 shares | 755 | — | — | 755 | 541 | — | — | 541 | |||||||||||||||||||||||
Additional paid-in capital | 461,733 | 9,675 | (9,675 | ) | 461,733 | 155,027 | 9,675 | (9,675 | ) | 155,027 | |||||||||||||||||||||
Accumulated deficit | (184,753 | ) | (33,251 | ) | (25,528 | ) | (243,532 | ) | (215,433 | ) | (17,563 | ) | (4,438 | ) | (237,434 | ) | |||||||||||||||
Accumulated other comprehensive (loss) income | (18,660 | ) | (881 | ) | 1,044 | (18,497 | ) | (16,764 | ) | (648 | ) | 679 | (16,733 | ) | |||||||||||||||||
Total stockholders' equity (deficit) | 259,075 | (24,457 | ) | (34,159 | ) | 200,459 | (76,629 | ) | (8,536 | ) | (13,434 | ) | (98,599 | ) | |||||||||||||||||
Total liabilities and stockholders' equity (deficit) | $ | 1,207,786 | $ | 281,689 | $ | (257,270 | ) | $ | 1,232,205 | $ | 793,351 | $ | 249,762 | $ | (50,105 | ) | $ | 993,008 | |||||||||||||
13
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||||||||
For the Quarters Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Quarter Ended September 30, 2013 | Quarter Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Operating Activities: | |||||||||||||||||||||||||||||||
Net (loss) income | $ | (12,609 | ) | $ | (5,619 | ) | $ | (8,099 | ) | $ | (26,327 | ) | $ | 4,961 | $ | (9,434 | ) | $ | (7,172 | ) | $ | (11,645 | ) | ||||||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||||||||||||||||||||||||||||
Provision for uncollectible Vacation Interest sales revenue | 13,494 | 357 | — | 13,851 | 6,639 | (363 | ) | — | 6,276 | ||||||||||||||||||||||
Amortization of capitalized financing costs and original issue discounts | 1,688 | 116 | — | 1,804 | 1,433 | 227 | — | 1,660 | |||||||||||||||||||||||
Amortization of capitalized loan origination costs and net portfolio discount | 1,372 | 401 | — | 1,773 | 823 | 153 | — | 976 | |||||||||||||||||||||||
Depreciation and amortization | 3,847 | 3,736 | — | 7,583 | 2,348 | 2,857 | — | 5,205 | |||||||||||||||||||||||
Stock-based compensation | 38,495 | — | — | 38,495 | — | — | — | — | |||||||||||||||||||||||
Loss on extinguishment of debt | 8,443 | 4,940 | — | 13,383 | — | — | — | — | |||||||||||||||||||||||
Impairments and other write-offs | — | 1,200 | — | 1,200 | 401 | — | — | 401 | |||||||||||||||||||||||
(Gain) loss on disposal of assets | (590 | ) | 5 | — | (585 | ) | (122 | ) | — | — | (122 | ) | |||||||||||||||||||
(Gain) adjustment on bargain purchase from business combinations | — | (2,756 | ) | — | (2,756 | ) | — | 115 | — | 115 | |||||||||||||||||||||
Deferred income taxes | (611 | ) | (1,622 | ) | (5,807 | ) | (8,040 | ) | — | (159 | ) | — | (159 | ) | |||||||||||||||||
Gain on foreign currency exchange | (1 | ) | (2 | ) | — | (3 | ) | (154 | ) | — | — | (154 | ) | ||||||||||||||||||
Loss (gain) on mortgage repurchase | 6 | (39 | ) | — | (33 | ) | (7 | ) | — | — | (7 | ) | |||||||||||||||||||
Unrealized loss on derivative instrument | 657 | — | — | 657 | — | — | — | — | |||||||||||||||||||||||
Unrealized loss on post-retirement benefit plan | 774 | — | — | 774 | — | — | — | — | |||||||||||||||||||||||
Changes in operating assets and liabilities excluding acquisitions: | |||||||||||||||||||||||||||||||
Mortgages and contracts receivable | (67,110 | ) | 23,294 | (1 | ) | (43,817 | ) | (24,609 | ) | 2,271 | — | (22,338 | ) | ||||||||||||||||||
Due from related parties, net | (164,795 | ) | 4,339 | 159,928 | (528 | ) | 7,678 | (381 | ) | 4,248 | 11,545 | ||||||||||||||||||||
Other receivables, net | 352 | 963 | — | 1,315 | (46 | ) | 330 | 16 | 300 | ||||||||||||||||||||||
Prepaid expenses and other assets, net | 23,041 | 2,470 | 197 | 25,708 | 19,822 | 4,346 | 51 | 24,219 | |||||||||||||||||||||||
Unsold Vacation Interests, net | 1,532 | 2,094 | 8,098 | 11,724 | (11,763 | ) | (3,840 | ) | 7,171 | (8,432 | ) | ||||||||||||||||||||
Accounts payable | (1,386 | ) | 1,558 | — | 172 | (938 | ) | (525 | ) | — | (1,463 | ) | |||||||||||||||||||
Due to related parties, net | (17,156 | ) | 158,870 | (160,079 | ) | (18,365 | ) | (5,163 | ) | 6,854 | (4,247 | ) | (2,556 | ) | |||||||||||||||||
Accrued liabilities | (15,900 | ) | (4,913 | ) | (44 | ) | (20,857 | ) | (6,635 | ) | 7,977 | (67 | ) | 1,275 | |||||||||||||||||
Income taxes payable | 76 | (5,807 | ) | 5,807 | 76 | (457 | ) | — | — | (457 | ) | ||||||||||||||||||||
Deferred revenues | (12,863 | ) | 2,678 | — | (10,185 | ) | (9,477 | ) | (413 | ) | — | (9,890 | ) | ||||||||||||||||||
Net cash (used in) provided by operating activities | (199,244 | ) | 186,263 | — | (12,981 | ) | (15,266 | ) | 10,015 | — | (5,251 | ) | |||||||||||||||||||
Investing activities: | |||||||||||||||||||||||||||||||
Property and equipment capital expenditures | (4,263 | ) | (48 | ) | — | (4,311 | ) | (5,150 | ) | (16 | ) | — | (5,166 | ) | |||||||||||||||||
Cash acquired in connection with the Island One Acquisition | 725 | — | — | 725 | — | — | — | — | |||||||||||||||||||||||
Purchase of assets in connection with the PMR Service Companies Acquisition, net of cash acquired of $0, $0, $0, $0, $0, $0, $0 and $0, respectively | — | (47,758 | ) | — | (47,758 | ) | — | — | — | — | |||||||||||||||||||||
Proceeds from sale of assets | 1,656 | — | — | 1,656 | 177 | — | — | 177 | |||||||||||||||||||||||
Net cash used in investing activities | $ | (1,882 | ) | $ | (47,806 | ) | $ | — | $ | (49,688 | ) | $ | (4,973 | ) | $ | (16 | ) | $ | — | $ | (4,989 | ) | |||||||||
14
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||||||||
For the Quarters Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Quarter Ended September 30, 2013 | Quarter Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Financing activities: | |||||||||||||||||||||||||||||||
Changes in cash in escrow and restricted cash | $ | 914 | $ | (1,258 | ) | $ | — | $ | (344 | ) | $ | 4,304 | $ | (200 | ) | $ | — | $ | 4,104 | ||||||||||||
Proceeds from issuance of revolving credit facility | 15,000 | — | — | 15,000 | — | — | — | — | |||||||||||||||||||||||
Proceeds from issuance of securitization notes and Funding Facilities | 94,584 | — | — | 94,584 | 36,878 | 101 | — | 36,979 | |||||||||||||||||||||||
Proceeds from issuance of notes payable | — | 1,407 | — | 1,407 | 1,124 | 13 | — | 1,137 | |||||||||||||||||||||||
Payments on securitization notes and Funding Facilities | (37,818 | ) | (29,467 | ) | — | (67,285 | ) | (19,096 | ) | (4,888 | ) | — | (23,984 | ) | |||||||||||||||||
Payments on senior secured notes | (50,560 | ) | — | — | (50,560 | ) | — | — | — | — | |||||||||||||||||||||
Payments on notes payable | (2,844 | ) | (109,040 | ) | — | (111,884 | ) | (2,378 | ) | (5,451 | ) | — | (7,829 | ) | |||||||||||||||||
Payments of debt issuance costs | (2,152 | ) | 41 | — | (2,111 | ) | — | — | — | — | |||||||||||||||||||||
Proceeds from issuance of common stock, net of related costs | 204,705 | — | — | 204,705 | — | — | — | — | |||||||||||||||||||||||
Repurchase of remaining outstanding warrants | (10,346 | ) | — | — | (10,346 | ) | — | — | — | — | |||||||||||||||||||||
Payments of costs related to issuance of common units | 10 | — | — | 10 | (26 | ) | — | — | (26 | ) | |||||||||||||||||||||
Net cash provided by (used in) financing activities | 211,493 | (138,317 | ) | — | 73,176 | 20,806 | (10,425 | ) | — | 10,381 | |||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 10,367 | 140 | — | 10,507 | 567 | (426 | ) | — | 141 | ||||||||||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | 447 | 75 | — | 522 | 230 | — | — | 230 | |||||||||||||||||||||||
Cash and cash equivalents, beginning of period | 12,054 | 6,793 | — | 18,847 | 17,001 | 875 | — | 17,876 | |||||||||||||||||||||||
Cash and cash equivalents, end of period | $ | 22,868 | $ | 7,008 | $ | — | $ | 29,876 | $ | 17,798 | $ | 449 | $ | — | $ | 18,247 | |||||||||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||||||||||||||||||||||
Cash paid for interest | $ | 24,630 | $ | 9,957 | $ | — | $ | 34,587 | $ | 28,778 | $ | 4,259 | $ | — | $ | 33,037 | |||||||||||||||
Cash paid for taxes, net of cash tax refunds | $ | 332 | $ | 60 | $ | — | $ | 392 | $ | 941 | $ | 49 | $ | — | $ | 990 | |||||||||||||||
Purchase of assets in connection with the Island One Acquisition: | |||||||||||||||||||||||||||||||
Fair value of assets acquired based on valuation reports | $ | 83,164 | $ | — | $ | — | $ | 83,164 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Goodwill acquired | 27,665 | — | — | 27,665 | — | — | — | — | |||||||||||||||||||||||
DRII common stock issued | (73,307 | ) | — | — | (73,307 | ) | — | — | — | — | |||||||||||||||||||||
Deferred tax liability | (18,317 | ) | — | — | (18,317 | ) | — | — | — | — | |||||||||||||||||||||
Liabilities assumed | $ | 19,205 | $ | — | $ | — | $ | 19,205 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Purchase of assets in connection with the PMR Service Companies Acquisition: | |||||||||||||||||||||||||||||||
Fair value of assets acquired based on valuation reports | $ | — | $ | 52,291 | $ | — | $ | 52,291 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Gain on bargain purchase recognized | — | (2,756 | ) | — | (2,756 | ) | — | — | — | — | |||||||||||||||||||||
Cash paid | — | (47,758 | ) | — | (47,758 | ) | — | — | — | — | |||||||||||||||||||||
Deferred tax liability | — | (1,622 | ) | — | (1,622 | ) | — | — | — | — | |||||||||||||||||||||
Liabilities assumed | $ | — | $ | 155 | $ | — | $ | 155 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||||||||||||||||||||||
Unsold Vacation Interests, net reclassified to assets held for sale | $ | 14 | $ | — | $ | — | $ | 14 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
15
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||||||||
For the Quarters Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Quarter Ended September 30, 2013 | Quarter Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Assets held for sale reclassified to management contracts (intangible assets, net) | $ | — | $ | — | $ | — | $ | — | $ | 5 | $ | — | $ | — | $ | 5 | |||||||||||||||
Assets held for sale reclassified to unsold Vacation Interests, net | $ | — | $ | — | $ | — | $ | — | $ | 38 | $ | — | $ | — | $ | 38 | |||||||||||||||
16
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Operating Activities: | |||||||||||||||||||||||||||||||
Net income (loss) | $ | 31,346 | $ | (15,688 | ) | $ | (21,756 | ) | $ | (6,098 | ) | $ | 21,299 | $ | 17,678 | $ | (13,586 | ) | $ | 25,391 | |||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | |||||||||||||||||||||||||||||||
Provision for uncollectible Vacation Interest sales revenue | 28,930 | 801 | — | 29,731 | 17,273 | (1,180 | ) | — | 16,093 | ||||||||||||||||||||||
Amortization of capitalized financing costs and original issue discounts | 4,860 | 747 | — | 5,607 | 4,163 | 579 | — | 4,742 | |||||||||||||||||||||||
Amortization of capitalized loan origination costs and net portfolio discounts (premiums) | 3,815 | 493 | — | 4,308 | 2,282 | (706 | ) | — | 1,576 | ||||||||||||||||||||||
Depreciation and amortization | 9,198 | 10,714 | — | 19,912 | 6,793 | 6,586 | — | 13,379 | |||||||||||||||||||||||
Stock-based compensation | 38,495 | — | — | 38,495 | — | — | — | — | |||||||||||||||||||||||
Loss on extinguishment of debt | 8,443 | 4,940 | — | 13,383 | — | — | — | — | |||||||||||||||||||||||
Impairments and other write-offs | 79 | 1,200 | — | 1,279 | 390 | — | — | 390 | |||||||||||||||||||||||
(Gain) loss on disposal of assets | (674 | ) | 1 | — | (673 | ) | (218 | ) | — | — | (218 | ) | |||||||||||||||||||
Gain on bargain purchase from business combinations | — | (2,726 | ) | — | (2,726 | ) | — | (22,634 | ) | — | (22,634 | ) | |||||||||||||||||||
Deferred income taxes | (611 | ) | (1,622 | ) | (5,807 | ) | (8,040 | ) | — | (13,612 | ) | — | (13,612 | ) | |||||||||||||||||
Loss (gain) on foreign currency exchange | 138 | 77 | — | 215 | (98 | ) | — | — | (98 | ) | |||||||||||||||||||||
Loss (gain) on mortgage repurchase | 7 | (78 | ) | — | (71 | ) | (26 | ) | — | — | (26 | ) | |||||||||||||||||||
Unrealized loss on derivative instruments | 657 | — | — | 657 | — | — | — | — | |||||||||||||||||||||||
Unrealized loss on post-retirement benefit plan | 774 | — | — | 774 | — | — | — | — | |||||||||||||||||||||||
Gain on insurance settlement | (2,876 | ) | — | — | (2,876 | ) | — | — | — | — | |||||||||||||||||||||
Changes in operating assets and liabilities excluding acquisitions: | |||||||||||||||||||||||||||||||
Mortgages and contracts receivable | (111,575 | ) | 27,110 | (4 | ) | (84,469 | ) | (42,828 | ) | 11,803 | (2 | ) | (31,027 | ) | |||||||||||||||||
Due from related parties, net | (191,209 | ) | 1,825 | 179,821 | (9,563 | ) | 9,225 | 348 | 8,735 | 18,308 | |||||||||||||||||||||
Other receivables, net | 16,860 | 1,946 | — | 18,806 | 14,783 | (1,422 | ) | 19 | 13,380 | ||||||||||||||||||||||
Prepaid expenses and other assets, net | (16,448 | ) | (11,973 | ) | 108 | (28,313 | ) | (20,289 | ) | 1,638 | (21 | ) | (18,672 | ) | |||||||||||||||||
Unsold Vacation Interests, net | (9,229 | ) | (5,158 | ) | 21,757 | 7,370 | (39,266 | ) | (7,745 | ) | 12,737 | (34,274 | ) | ||||||||||||||||||
Accounts payable | (6,039 | ) | 3,622 | — | (2,417 | ) | 1,270 | 1,042 | — | 2,312 | |||||||||||||||||||||
Due to related parties, net | 1,179 | 196,628 | (179,974 | ) | 17,833 | 41,079 | 15,613 | (7,896 | ) | 48,796 | |||||||||||||||||||||
Accrued liabilities | (14,263 | ) | 1,135 | 48 | (13,080 | ) | 1,515 | 10,912 | 14 | 12,441 | |||||||||||||||||||||
Income taxes payable | 1,294 | (5,807 | ) | 5,807 | 1,294 | (2,046 | ) | — | — | (2,046 | ) | ||||||||||||||||||||
Deferred revenues | (12,105 | ) | 4,990 | — | (7,115 | ) | (10,139 | ) | 1,277 | — | (8,862 | ) | |||||||||||||||||||
Net cash (used in) provided by operating activities | (218,954 | ) | 213,177 | — | (5,777 | ) | 5,162 | 20,177 | — | 25,339 | |||||||||||||||||||||
Investing activities: | |||||||||||||||||||||||||||||||
Property and equipment capital expenditures | (12,183 | ) | (609 | ) | — | (12,792 | ) | (11,005 | ) | (268 | ) | — | (11,273 | ) | |||||||||||||||||
Cash acquired in connection with the Island One Acquisition | 725 | — | — | 725 | — | — | — | — | |||||||||||||||||||||||
Purchase of assets in connection with the PMR Service Companies Acquisition, net of cash acquired of $0, $0, $0, $0, $0, $0, $0, and $0, respectively | — | (47,758 | ) | — | (47,758 | ) | — | — | — | — | |||||||||||||||||||||
Purchase of assets in connection with the PMR Acquisition, net of cash acquired of $0, $0, $0, $0, $0, $0, $0, and $0, respectively | — | — | — | — | — | (51,635 | ) | — | (51,635 | ) | |||||||||||||||||||||
Proceeds from sale of assets | 3,126 | — | — | 3,126 | 497 | — | — | 497 | |||||||||||||||||||||||
Net cash used in investing activities | $ | (8,332 | ) | $ | (48,367 | ) | $ | — | $ | (56,699 | ) | $ | (10,508 | ) | $ | (51,903 | ) | $ | — | $ | (62,411 | ) | |||||||||
17
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Financing activities: | |||||||||||||||||||||||||||||||
Changes in cash in escrow and restricted cash | $ | (16,496 | ) | $ | (1,174 | ) | $ | — | $ | (17,670 | ) | $ | (4,521 | ) | $ | (232 | ) | $ | — | $ | (4,753 | ) | |||||||||
Proceeds from issuance of revolving credit facility | 15,000 | — | — | 15,000 | — | — | — | — | |||||||||||||||||||||||
Proceeds from issuance of securitization notes and Funding Facilities | 265,160 | 713 | — | 265,873 | 80,997 | 1,867 | — | 82,864 | |||||||||||||||||||||||
Proceeds from issuance of notes payable | — | 3,882 | — | 3,882 | 1,124 | 64,138 | — | 65,262 | |||||||||||||||||||||||
Payments on securitization notes and Funding Facilities | (159,717 | ) | (41,867 | ) | — | (201,584 | ) | (66,937 | ) | (15,358 | ) | — | (82,295 | ) | |||||||||||||||||
Payments on senior secured notes | (50,560 | ) | — | — | (50,560 | ) | — | — | — | — | |||||||||||||||||||||
Payments on notes payable | (8,409 | ) | (123,423 | ) | — | (131,832 | ) | (7,426 | ) | (15,919 | ) | — | (23,345 | ) | |||||||||||||||||
Payments of debt issuance costs | (6,147 | ) | (16 | ) | — | (6,163 | ) | (24 | ) | (2,570 | ) | — | (2,594 | ) | |||||||||||||||||
Proceeds from issuance of Common Stock, net of related costs | 204,705 | — | — | 204,705 | — | — | — | — | |||||||||||||||||||||||
Repurchase of remaining outstanding warrants | (10,346 | ) | — | — | (10,346 | ) | — | — | — | — | |||||||||||||||||||||
Payments of costs related to issuance of common and preferred units | — | — | — | — | (35 | ) | — | — | (35 | ) | |||||||||||||||||||||
Net cash provided by (used in) financing activities | 233,190 | (161,885 | ) | — | 71,305 | 3,178 | 31,926 | — | 35,104 | ||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 5,904 | 2,925 | — | 8,829 | (2,168 | ) | 200 | — | (1,968 | ) | |||||||||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | 1 | (15 | ) | — | (14 | ) | 318 | — | — | 318 | |||||||||||||||||||||
Cash and cash equivalents, beginning of period | 16,963 | 4,098 | — | 21,061 | 19,648 | 249 | — | 19,897 | |||||||||||||||||||||||
Cash and cash equivalents, end of period | $ | 22,868 | $ | 7,008 | $ | — | $ | 29,876 | $ | 17,798 | $ | 449 | $ | — | $ | 18,247 | |||||||||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||||||||||||||||||||||
Cash paid for interest | $ | 55,505 | $ | 18,922 | $ | — | $ | 74,427 | $ | 61,067 | $ | 11,032 | $ | — | $ | 72,099 | |||||||||||||||
(Cash tax refunds, net of cash paid for taxes) Cash paid for taxes, net of cash tax refunds | $ | (138 | ) | $ | 150 | $ | — | $ | 12 | $ | 2,337 | $ | — | $ | — | $ | 2,337 | ||||||||||||||
Purchase of assets in connection with the Island One Acquisition: | |||||||||||||||||||||||||||||||
Fair value of assets acquired based on valuation reports | $ | 83,164 | $ | — | $ | — | $ | 83,164 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Goodwill acquired | 27,665 | — | — | 27,665 | — | — | — | — | |||||||||||||||||||||||
DRII common stock issued | (73,307 | ) | — | — | (73,307 | ) | — | — | — | — | |||||||||||||||||||||
Deferred tax liability | (18,317 | ) | — | — | (18,317 | ) | — | — | — | — | |||||||||||||||||||||
Liabilities assumed | $ | 19,205 | $ | — | $ | — | $ | 19,205 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Purchase of assets in connection with the PMR Service Companies Acquisition: | |||||||||||||||||||||||||||||||
Fair value of assets acquired based on valuation reports | $ | — | $ | 52,291 | $ | — | $ | 52,291 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Gain on bargain purchase recognized | — | (2,756 | ) | — | (2,756 | ) | — | — | — | — | |||||||||||||||||||||
Cash paid | — | (47,758 | ) | — | (47,758 | ) | — | — | — | — | |||||||||||||||||||||
Deferred tax liability | — | (1,622 | ) | — | (1,622 | ) | — | — | — | — | |||||||||||||||||||||
Liabilities assumed | $ | — | $ | 155 | $ | — | $ | 155 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
18
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued | |||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2013 and 2012 | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2013 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||
Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | Diamond and Restricted Subsidiaries | Unrestricted Subsidiaries | Elimination | Total | ||||||||||||||||||||||||
Purchase of assets in connection with the PMR Acquisition: | |||||||||||||||||||||||||||||||
Fair value of assets acquired based on valuation reports | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 89,760 | $ | — | $ | 89,760 | |||||||||||||||
Gain on bargain purchase recognized | — | — | — | — | — | (22,765 | ) | — | (22,765 | ) | |||||||||||||||||||||
Cash paid | — | — | — | — | — | (51,635 | ) | — | (51,635 | ) | |||||||||||||||||||||
Deferred tax liability | — | — | — | — | — | (13,612 | ) | — | (13,612 | ) | |||||||||||||||||||||
Liabilities assumed | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,748 | $ | — | $ | 1,748 | |||||||||||||||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||||||||||||||||||||||
Insurance premiums financed through issuance of notes payable | $ | 7,822 | $ | — | $ | — | $ | 7,822 | $ | 7,573 | $ | — | $ | — | $ | 7,573 | |||||||||||||||
Assets held for sale reclassified to unsold vacation interests | $ | — | $ | — | $ | — | $ | — | $ | 1,353 | $ | — | $ | — | $ | 1,353 | |||||||||||||||
Unsold Vacation Interests, net reclassified to assets held for sale | $ | 4,464 | $ | 5,701 | $ | — | $ | 10,165 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Assets held for sale reclassified to management contracts (intangible assets, net) | $ | — | $ | — | $ | — | $ | — | $ | 192 | $ | — | $ | — | $ | 192 | |||||||||||||||
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