4Q09 Consolidated Revenue Grows 2.5%; FY09 Free Cash Flow of $72.2 Million:
“I am pleased with ILG’s results for the fourth quarter and fiscal year 2009. During the past year, our fee for service business model has generated over $72 million in free cash flow and at the same time we have reduced our debt by $34 million. When ILG results are adjusted for incremental items related to the spin-off from IAC in August 2008, it is clear that our core business has performed very well year over year,” said Craig M. Nash, Chairman, President and Chief Executive Officer of Interval Leisure Group. “While 2009 was a difficult year for many of our developer clients, we successfully renewed several significant long term relationships, launched new products and services, broadened Aston’s geographic footprint and delivered consistent, solid financial results.”
Discussion of Results – Fourth Quarter 2009 Consolidated Operating Results
Consolidated revenue for the fourth quarter ended December 31, 2009 was $93.7 million, an increase of 2.5% from $91.4 million for the fourth quarter of 2008. In constant currency, consolidated revenue would have been $93.4 million. The increase in consolidated revenue was driven by an increase in Interval revenue of 3.4%. Aston revenue for the fourth quarter of 2009 declined by 1.7% year over year.
Net income for the three months ended December 31, 2009 was $4.6 million, an increase of $16.2 million from a net loss of $11.6 million for the same period of 2008. Net income for the 2009 period includes a $1.8 million after-tax accrual related to European Value Added Tax (“VAT”). Fourth quarter 2008 net loss includes a $20.9 million after-tax goodwill impairment charge related to the Aston segment. Diluted earnings per share (EPS) were $0.08 compared to diluted loss per share of $0.21 for the same period of 2008.
EBITDA was $30.1 million for the quarter ended December 31, 2009, compared to EBITDA of $32.0 million for the same period of 2008. EBITDA for 2009 includes a pre-tax $2.2 million European VAT accrual.
Interval and Aston’s EBITDA for the quarter ended December 31, 2009 decreased 2.5% and 65.6%, respectively, from the comparable period in 2008.
Discussion of Results – Full Year 2009 Consolidated Operating Results
Consolidated revenue for the full year ended December 31, 2009 was $405.0 million, a decrease of 2.6% from $415.8 million for 2008. In constant currency, consolidated revenue would have been $412.1 million. Consolidated revenue was comprised of 85% and 15% from Interval and Aston, respectively.
Net income for the full year 2009 was $38.2 million, including $4.6 million of pre-tax incremental non-cash compensation expense and stand-alone and public company costs, $21.4 million of incremental pre-tax interest expense and $10.6 million less of pre-tax interest income attributable to the spin-off in August 2008. Diluted EPS was $0.67 compared to $0.80 for the full year 2008.
Adjusted net income for the year ended December 31, 2009 was $43.2 million or $0.76 of adjusted diluted EPS, compared to adjusted net income of $66.1 million or $1.17 of adjusted diluted EPS for 2008. Adjusted net income and adjusted EPS for 2009 excludes $3.2 million of after-tax incremental stand-alone and public company costs, including non-cash compensation expense, and a $1.8 million after-tax VAT accrual. Adjusted net income and adjusted EPS for 2008 excludes a $20.9 million after-tax goodwill impairment charge related to the Aston segment.
Adjusted EBITDA was $153.3 million for the year ended December 31, 2009, compared to EBITDA of $154.6 million for 2008.
Business Segment Results
ILG’s principal operating segment, Interval, provides membership services to the individual members of its exchange networks and affinity groups, as well as related services to developers of vacation ownership resorts. As of December 31, 2009, the Interval Network includes over 2,500 resorts located in more than 75 countries. The Interval segment consists of Interval International, Inc. and certain related subsidiaries.
Interval’s revenue for the three months and full year ended December 31, 2009, was $78.5 million and $346.0 million, respectively. For the full year 2009, membership fee and transaction revenue were $132.1 million and $189.8 million, respectively, representing a decrease of 1.2% and an increase of 2.2%, respectively, over the prior year. Year over year, average revenue per member increased to $40.22 or 11.9% in the fourth quarter and increased to $175.56 or 6.5% for the full year, primarily reflecting a shift in membership mix.
Total active members at December 31, 2009 were approximately 1.8 million, a decrease of 1.5% over total active members at December 31, 2008, excluding the Disney members who exited the system on January 1, 2009.
Interval’s adjusted EBITDA was $31.7 million and $148.4 million in the fourth quarter and full year 2009, respectively, representing an increase of 4.7% and 2.3% over the segment’s EBITDA of $30.3 million and $145.1 million in the fourth quarter and full year 2008, respectively. In constant currency, Interval segment adjusted EBITDA was $31.8 million and $150.2 million in the fourth quarter and full year 2009, respectively.
Throughout 2009, Interval continued to expand and strengthen its high-quality international vacation exchange networks both by renewing strategic agreements with key clients, while affiliating 80 new vacation ownership resorts in domestic and international markets. In 2009, 80% of new affiliations were located in non-US locations.
The Aston segment consists of Aston Hotels & Resorts, LLC and Maui Condo and Home, LLC. Aston provides hotel and resort management services to 26 resorts and hotels, primarily in Hawaii, as well as other more limited management services to certain additional properties.
Aston’s revenue for the three months and full year ended December 31, 2009, was $15.3 million and $59.0 million, respectively, including $10.4 million and $37.6 million of Pass-through Revenue (defined below).
The decrease in fee income earned by Aston from managed vacation properties was driven by a reduction in revenue per available room (“RevPAR”). RevPAR for the quarter ended December 31, 2009 was $82.48 compared to $96.35 for the same period in 2008. RevPAR for the year ended December 31, 2009 was $91.47 compared to $117.08 in 2008. Lower occupancy and lower average daily rate led to the reduction in RevPAR. Overall, 2009 occupancy rates were negatively impacted by the macroeconomic conditions. Aston has been generally tracking the results of comparable properties in Hawaii.
Aston reported EBITDA of $0.6 million in the fourth quarter of 2009, a decrease of 65.6% from EBITDA of $1.8 million in the prior year period. Aston’s adjusted EBITDA for the full year 2009 was $4.8 million, compared to EBITDA of $9.5 million for the same period in 2008.
Capital Resources and Liquidity
As of December 31, 2009, ILG’s cash and cash equivalents totaled $160.0 million, compared to $120.3 million as of December 31, 2008. As of December 31, 2009, the Company’s total debt outstanding, which was incurred in connection with the spin-off, was $395.3 million, net of unamortized discount, compared to $427.2 million as of December 31, 2008.
For the full year 2009, ILG’s capital expenditures totaled $15.2 million, or 3.7% of revenue, net cash provided by operating activities was $87.3 million and free cash flow (defined below) was $72.2 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, constant currency 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.
ILG will host a conference call today at 4:30 p.m. Eastern Time to discuss its results for the fourth quarter and full year 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: 57247849 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: 57247849. 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 operates mainly through Interval International, a membership-based organization that offers a comprehensive array of year-round benefits, including the opportunity to exchange the use of shared ownership vacation time. Today, Interval’s primary vacation network comprises more than 2,500 resorts in over 75 nations. Through offices in 16 countries, Interval offers high-quality products and benefits to resort clients and approximately 2 million families who are enrolled in various membership programs.
ILG’s other business segment is Aston, formerly ResortQuest Hawaii, which traces its roots in lodging back 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 more than 2,500 employees worldwide.
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. 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 financial tables accompanying this press release, please visit the Investor Relations section of ILG’s Web site at www.iilg.com
SOURCE: Interval Leisure Group