Interval Leisure Group Reports Third Quarter 2009 Results

MIAMI, Nov. 12, 2009 (GLOBE NEWSWIRE) — Interval Leisure Group (Nasdaq:IILG) (“ILG”) today announced results for the three months ended September 30, 2009.

THIRD QUARTER 2009 HIGHLIGHTS

• ILG generated diluted earnings per share of $0.14
• Consolidated EBITDA was $34.9 million
• Third consecutive quarter of gross margin year-over-year improvement
• The Interval segment delivered revenue of $83.3 million, or $84.6 million in constant currency. Interval segment adjusted EBITDA, in constant currency, increased 1.7%
• Average revenue per member increased 5.1%
• Interval affiliated 21 resorts in 13 countries during the third quarter
• Net cash from operating activities was $66.2 million and free cash flow was $54.6 million for the first nine months of 2009

“ILG has now completed four quarters as a stand-alone public company. We have consistently reported results that reflect the strength of our value proposition to developers, owners and members. In the third quarter, our disciplined approach to running our business once again delivered respectable EBITDA figures and we continue to benefit from a strong balance sheet,” said Craig M. Nash, Chairman, President and Chief Executive Officer of Interval Leisure Group. “While conditions for many developers continue to be challenging, we have seen improvement in the availability of credit to a number of our clients. Additionally, we have recently started to expand the Aston footprint to include vacation destinations beyond the Hawaiian Islands. When economic recovery occurs, we believe that ILG is well positioned to benefit.”
Discussion of Results

Third Quarter 2009 Consolidated Operating Results

Consolidated revenue for the third quarter ended September 30, 2009 was $97.3 million, a decrease of 4.3% from $101.7 million for the third quarter of 2008. The decline in revenue reflects the impact of overall macroeconomic conditions that negatively affected the leisure travel industry, specifically the Aston business segment, and the unfavorable impact of foreign currency translations due to the strengthening of the U.S. dollar. In constant currency, consolidated revenue would have been $98.7 million. Consolidated revenue was comprised of 86% and 14% from Interval and Aston, respectively.

Net income for the three months ended September 30, 2009 was $8.1 million, a decrease of 35% from net income of $12.5 million for the same period of 2008. Net income for the period was impacted by a $3.5 million decrease in pre-tax interest income and $3.2 million of pre-tax incremental expenses resulting from the spin-off from IAC/InterActiveCorp on August 20, 2008. For the third quarter of 2009, these incremental expenses included $4.0 million of interest expense, $0.5 million of stand-alone and public company costs and $0.8 million of incremental non cash compensation which were offset by a non-recurring $2.1 million decrease in non-cash compensation expense, related to the acceleration in the third quarter of 2008 of existing stock-based compensation awards made in connection with the spin-off.

Diluted earnings per share were $0.14 compared to diluted earnings per share of $0.22 for the same period of 2008. This difference is due to the decrease in interest income and the increase in interest expense in connection with spin-off.

Adjusted net income for the three months ended September 30, 2009 was $7.7 million or $0.13 of adjusted diluted EPS. Adjusted net income and adjusted diluted EPS for the third quarter 2009 exclude after-tax incremental non-cash compensation expense and stand-alone and public company costs.

Adjusted EBITDA was $35.3 million for the quarter ended September 30, 2009, a decrease of 3.4% compared to EBITDA of $36.6 million for the same period of 2008. Adjusted EBITDA excludes $0.5 million in incremental stand-alone and public company costs for the quarter. Excluding the unfavorable net effect of foreign currency translations of $0.3 million, adjusted EBITDA decreased by $1.0 million, or 2.7% from the same period of 2008.

Business Segment Results

Interval

Interval’s revenue for the three months ended September 30, 2009, was $83.3 million declining 2.6% over the comparable period in 2008. Excluding the effect of unfavorable foreign currency translations of $1.3 million, Interval segment revenue would have been $84.6 million, a decrease of 1.1% for the three months ended September 30, 2009 compared to 2008.

For the third quarter of 2009, membership fee revenue was $33.0 million, a decrease of 2.5% from the same period of 2008. Transaction revenue for the third quarter of 2009 was $43.5 million, relatively flat when compared to the same period of 2008. The effects of unfavorable foreign currency translations on membership fee revenue and transaction revenue were $0.6 million and $0.7 million, respectively. For the quarter, excluding these effects, membership fee revenue would have been $33.6 million and transaction revenue would have been $44.2 million, relatively flat when compared to 2008.

Total active members at September 30, 2009 were approximately 1.9 million, a decrease of 7.4% over total active members of approximately 2.0 million at September 30, 2008. The year-over-year decrease was primarily due to the non-renewal of the Disney affiliation and a decrease of new members entering the Interval Network as a result of a decline in the number of new sales by vacation ownership resort developers.

Average revenue per member for the third quarter of 2009 increased to $42.11, an increase of 5.1% from the third quarter of 2008. The increase in average revenue per member was primarily due to a change in membership mix. In constant currency, average revenue per member would have been $42.82 in the third quarter.

Interval affiliated 21 new resorts in 13 countries during the third quarter.

Interval’s adjusted EBITDA was $34.3 million in the third quarter representing an increase of 0.9% over the segment’s EBITDA of $34.0 million in the third quarter 2008. In constant currency, adjusted EBITDA would have been $34.6 million, an increase of 1.7% compared to the 2008 period.

Aston

Aston’s revenue for the three months ended September 30, 2009 was $14.0 million, a decrease of 12.9% from the comparable period of 2008. Aston revenue for the third quarter included $8.8 million of pass-through revenue (defined below).

The decrease in Aston revenue was primarily driven by a reduction in revenue per available room (“RevPAR”). RevPAR for the quarter ended September 30, 2009 was $89.37 compared to $114.23 for the same period in 2008, a decline of 21.8%. Lower average daily rate, and to a lesser extent, lower occupancy led to the reduction in RevPAR. Aston has been generally tracking the results of comparable properties in the Hawaiian market.

Aston reported EBITDA of $1.0 million in the third quarter of 2009, a decrease of 60.8% from EBITDA of $2.6 million in the prior year period. The decline in EBITDA was primarily a function of 17.3% lower average daily rate driving more stable year over year occupancy rates compared to the first and second quarters.

Capital Resources and Liquidity

As of September 30, 2009, ILG’s cash and cash equivalents totaled $153.4 million, compared to $120.3 million as of December 31, 2008. The Company’s total debt outstanding, which was incurred in connection with the spin-off from IAC, was $402.5 million, net of unamortized bond discount, as of September 30, 2009. During the third quarter, the Company made an $8.75 million voluntary prepayment on its term loan, covering principal amortization payments through September 30, 2010.

For the first nine months of 2009, ILG’s capital expenditures totaled $11.6 million, or 3.7% of revenue, net cash provided by operating activities was $66.2 million and free cash flow (defined below) was $54.6 million. Total interest paid during the nine-month period was $33.3 million.

Presentation of Financial Information

ILG management believes that the presentation of non-generally accepted accounting principles (non-GAAP) financial measures, including, among others, EBITDA, adjusted EBITDA, adjusted net income, adjusted diluted EPS and free cash flow, serves to enhance the understanding of ILG’s performance. These non-GAAP financial measures should be considered in addition to and not as substitutes for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, EBITDA (with certain additional add-backs) is used to calculate compliance with certain financial covenants in ILG’s credit agreement. Management believes that these non-GAAP measures improve the transparency of our disclosures, provide meaningful presentations of our results from our business operations excluding the impact of certain items not related to our core business operations and improve the period to period comparability of results from business operations. These measures may also be useful in comparing our results to those of other companies, however our calculations may differ from the calculations of these measures used by other companies. More information about the non-GAAP financial measures, including reconciliations of GAAP results to the non-GAAP measures, is available in the financial tables that accompany this press release.

Conference Call

ILG will host a conference call today at 4:30 p.m. Eastern Time to discuss its results for the third quarter 2009, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (866) 322-1501 (toll-free domestic) or (706) 679-2585 (international); conference ID: 35541186 or password: Interval. Please register at least 10 minutes before the conference call begins. A live webcast of the conference call will be available on the Investor Relations section of ILG’s Web site at www.iilg.com. The replay can be accessed for seven days after the call at (800) 642-1687 (toll-free domestic) or (706) 645-9291 (international); conference ID: 21158420. The webcast will be archived on ILG’s Web site for 90 days after the call.

About Interval Leisure Group

Interval Leisure Group (ILG) is a leading global provider of membership and leisure services to the vacation industry.

Its principal business segment, Interval, has been serving the vacation ownership market for more than 33 years. Interval International is a membership-based organization that offers a comprehensive package of year-round benefits, including the opportunity to exchange the use of shared ownership vacation time for alternate accommodations. Today, Interval has a network of approximately 2,500 resorts in more than 75 countries, and offers its resort clients and about 2 million member families high-quality products and programs through offices in 26 cities in 16 countries.

ILG’s other business segment is Aston, formerly ResortQuest Hawaii, which traces its roots in lodging back nearly 60 years. Through a portfolio of approximately 5,000 units, Aston Hotels & Resorts and Maui Condo and Home, provide hotel and resort management and vacation rental services to vacationers and property owners primarily in the Hawaiian Islands. ILG is headquartered in Miami, Florida, and has over 2,500 employees worldwide.

Forward-Looking Statements

This press release contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to: our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

Actual results could differ materially from those contained in the forward looking statements included herein for a variety of reasons, including, among others: adverse trends in economic conditions generally or in the vacation ownership, vacation rental and travel industries; adverse changes to, or interruptions in, relationships with third parties; lack of available financing for or insolvency of developers; decreased demand from prospective purchasers of vacation interests; travel related health concerns, such as pandemics; changes in our senior management; regulatory changes; our ability to compete effectively; the effects of our significant indebtedness and our compliance with the terms thereof; adverse events or trends in key vacation destinations; and our ability to expand successfully in international markets and manage risks specific to international operations. Certain of these and other risks and uncertainties are discussed in our filings with the SEC. Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward looking statements discussed in this release may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this press release. Except as required by applicable laws, ILG does not undertake to update these forward-looking statements.

To view the entire financial statement, including the financial tables, visit http://www.iilg.com

Contact:

Interval Leisure Group
Investor Contact:
Investor Relations
Jennifer Klein Trager
305-925-7302
Jennifer.Klein@iilg.com
Media Contact:
Corporate Communications
Christine Boesch
305-925-7267
Chris.Boesch@intervalintl.com

SOURCE: Interval Leisure Group

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