Diamond Resorts International, Inc. (NYSE: DRII) (“Diamond” or
the “Company”), today announced results for the quarter ended June
30, 2013.
“We are pleased to have completed our initial public offering in
July and to have delivered strong year-over-year improvement in our
operating results,” stated David F. Palmer, President and Chief
Executive Officer. “We see this quarter’s performance as continuing
validation of our differentiated business model, highlighted by
predictable and recurring revenue streams, capital efficiency, and
our integrated hospitality platform. In addition, we believe our
acquisitions of Island One and the assets of the PMR Service
Companies will allow us to drive growth by leveraging our operating
platform.”
Second Quarter 2013 Highlights
- Total revenue increased $52.5 million,
or 43.2%, to $173.9 million for the three months ended June 30,
2013 from $121.4 million for the three months ended June 30,
2012.
- Hospitality and Management Services
revenue grew by $3.6 million, or 9.2%, for the three months ended
June 30, 2013 compared to the three months ended June 30, 2012.
This growth was driven by the addition of managed resorts from the
Pacific Monarch Resorts acquisition, higher “same store” management
fee revenues and increased revenues from THE Club.
- Vacation Interest sales revenues grew
by $45.5 million, or 70.2%, between the second quarter of 2013 and
the same period in 2012. This growth was driven by a:
- 28.0% increase in tours to 55,650 from
43,467;
- 25.2% increase in transactions to 7,518
from 6,006 (reflecting closing percentages of 13.5% for the period
in 2013 and 13.8% for the period in 2012);
- 29.7% increase in average transaction
price to $16,012 from $12,347.
- Advertising, sales and marketing
expense as a percentage of Vacation Interest sales revenue
decreased 6.4 percentage points to 50.6%, from 57.0% in the 2012
period. This improvement was primarily due to improved leverage of
fixed costs through increased sales efficiencies.
- Net income was $18.0 million for the
three months ended June 30, 2013, a decrease of $28.6 million from
$46.6 million for the three months ended June 30, 2012. Net income
for the period in 2012 included a gain on bargain purchase from
business combinations of $22.7 million and a $7.8 million credit
for Vacation Interest cost of sales compared to a charge of $9.0
million for Vacation Interest cost of sales for the period in
2013.
- Net cash used by operating activities
for the three months ended June 30, 2013 was $3.1 million and was
the result of net income of $18.0 million and non-cash revenues and
expenses of $18.0 million offset by changes in operating assets and
liabilities of $39.0 million.
- Adjusted EBITDA for the Company and its
Restricted Subsidiaries increased $30.8 million, or 116.2%, to
$57.3 million for the period from $26.5 million for the three
months ended June 30, 2012, based on Adjusted EBITDA for the
Company on a consolidated basis of $55.4 million for the three
months ended June 30, 2013 and $25.1 million for the three months
ended June 30, 2012. See “Capital Resources and Liquidity”
below.
Other Highlights
- On July 24th, the Company completed its
initial public offering of common stock, raising approximately
$210.2 million of net proceeds before offering expenses.
- Concurrently with the IPO, the Company
completed two acquisitions. We acquired Island One, which added
nine managed resorts and approximately 25,000 owner-families to the
Company. We also acquired assets from the PMR Service Companies,
which added several new management agreements to our Hospitality
and Management Services business.
- Approximately $112.1 million of the net
proceeds of the IPO were used to repay outstanding debt and the
associated interest and fees, up to approximately $10.3 million
will be used to repurchase warrants and approximately $47.8 million
were used to acquire assets from the PMR Service Companies.
- On July 26th, the Company commenced a
tender offer to purchase a portion of its 12% Senior Secured Notes
due 2018, to be funded with up to $56.8 million of proceeds from
the IPO.
Second Quarter Earnings Summary
Net income was $18.0 million for the three months ended June 30,
2013, a decrease of $28.6 million from $46.6 million for the three
months ended June 30, 2012. Net income for the period in 2012
included a gain on bargain purchase from business combinations of
$22.7 million and a $7.8 million credit for Vacation Interest cost
of sales compared to a charge of $9.0 million for Vacation Interest
cost of sales for the period in 2013.
Hospitality and Management Services
Total management and member services revenue in our Hospitality
and Management Services segment increased $2.8 million, or 9.9%, to
$31.1 million for the three months ended June 30, 2013 from $28.3
million for the three months ended June 30, 2012. Management fees
increased as a result of the inclusion for the full period of the
managed properties from the PMR Acquisition (completed in May 2012)
and increases in operating costs at the resort level, which
generated higher management fee revenue on a same-store basis under
74 of our cost-plus management agreements. We also experienced
higher Club revenues due to increased membership dues, higher
collection rate and higher member count in THE Club in the three
months ended June 30, 2013 compared to the three months ended June
30, 2012. THE Club had a total of 172,081 and 153,420 members as of
June 30, 2013 and 2012, respectively.
Other revenue in our Hospitality and Management Services segment
increased $0.9 million, or 45.6%, to $2.8 million for the three
months ended June 30, 2013 from $1.9 million for the three months
ended June 30, 2012. This increase was primarily attributable to
$0.7 million in insurance proceeds receivable recorded during the
three months ended June 30, 2013.
Management and member services expense as a percentage of
management and member services revenue decreased slightly to 28.2%
for the three months ended June 30, 2013 from 29.9% for the
three months ended June 30, 2012. The decrease was principally
attributable to the recognition of certain insurance proceeds
receivable in the 2013 period.
Vacation Interest Sales and Financing
Vacation Interest, net, increased $45.5 million, or 70.2%, to
$110.4 million for the three months ended June 30, 2013 from $64.9
million for the three months ended June 30, 2012. This increase was
attributable to a $49.1 million increase in Vacation Interest sales
revenue, partially offset by a $3.5 million increase in our
provision for uncollectible Vacation Interest sales revenue. The
$49.1 million increase in Vacation Interest sales revenue during
the three months ended June 30, 2013 compared to the three months
ended June 30, 2012, was generated by sales growth on a same-store
basis from 49 sales centers and the revenue contribution for the
full quarter from our sales centers acquired pursuant to the PMR
Acquisition. Our total number of tours increased to 55,650 for the
three months ended June 30, 2013 from 43,467 for the three months
ended June 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, as well as the
addition of a full quarter of tour flow from the sales centers
acquired pursuant to the PMR Acquisition. We closed a total of
7,518 VOI sales transactions during the three months ended June 30,
2013, compared to 6,006 transactions during the three months ended
June 30, 2012. Our closing percentage (which represents the
percentage of VOI sales closed relative to the total number of
sales presentations at our sales centers during the period
presented) decreased to 13.5% for the three months ended June 30,
2013 from 13.8% for the three months ended June 30, 2012. This
decrease in closing percentage was primarily due to a higher
percentage of tours presented to prospective new customers (which
have a lower closing percentage than tours presented to existing
owners) during the three months ended June 30, 2013 as compared to
the three months ended June 30, 2012. VOI sales price per
transaction increased to $16,012 for the three months ended June
30, 2013 from $12,347 for the three months ended June 30, 2012 due
principally to a change in our selling strategy that focuses on
selling larger point packages and the impact of sales and marketing
initiatives implemented in furtherance of this strategy, as
well as a slightly higher percentage of sales to new customers,
which tend to have a higher transaction size than sales to existing
owners.
As a percentage of gross Vacation Interest sales revenue, sales
incentives were 1.8% for the three months ended June 30, 2013,
compared to 2.6% for the three months ended June 30, 2012.
Commencing with the three months ended March 31, 2013, as we now
have adequate data regarding historical usage of our sales
incentives provided under a program implemented in December 2011,
the amount we record as sales incentives in each reporting period
is reduced by an estimate of the amount of such sales incentives
that we do not expect customers to redeem. In addition, for the
three months ended June 30, 2013, the amount we recorded as
sales incentives was reduced (and our Vacation Interest sales
revenue was increased) by $0.8 million relating to the expiration,
and expected future expiration, of sales incentives we provided to
customers prior to such period. Excluding the $0.8 million
reduction, sales incentives as a percentage of gross Vacation
Interest sales revenue were 2.4% for the three months ended June
30, 2013, compared to 2.6% for the three months ended June 30,
2012.
Advertising, sales and marketing costs as a percentage of
Vacation Interest sales revenue were 50.6% for the three months
ended June 30, 2013, compared to 57.0% for the three months ended
June 30, 2012. The decrease of such costs as a percentage of
Vacation Interest sales revenue was primarily due to improved
leverage of fixed costs through increased sales efficiencies, as
well as an increase in Vacation Interest sales revenue resulting
from the increase in VOI sales price per transaction and the
expiration, and expected future expiration, of sales incentives we
provided to customers prior to the three months ended June 30,
2013. Excluding the increase in Vacation Interest sales revenue
resulting from the expiration and expected future expiration of
sales incentives provided to customers in periods prior to the
three months ended June 30, 2013, as discussed above, advertising,
sales and marketing costs as a percentage of Vacation Interest
sales revenue, were 51.0% for the three months ended June 30, 2013,
compared to 57.0% for the three months ended June 30, 2012.
Vacation Interest cost of sales increased $16.8 million, from
$(7.8) million to $9.0 million for the three months ended June 30,
2013, compared to the three months ended June 30, 2012. Vacation
Interest cost of sales is recorded using the relative sales value
method (the “RSV Method”) in accordance with ASC 978. For a
discussion of the RSV Method, including the impact that various
projections and estimates may make on the amount recorded, please
see our filings with the Securities and Exchange Commission.
Corporate General and Administrative Expense
General and administrative expense decreased $0.5 million, or
2.3%, to $21.7 million for the three months ended June 30, 2013
from $22.2 million for the three months ended June 30, 2012. This
decrease was primarily attributable to lower legal and professional
expenses after the successful integration of the PMR Acquisition.
In addition, the allocation of our expenses to the HOAs and the
Collections we manage was higher for the three months ended June
30, 2013 as compared to the three months ended June 30, 2012. These
decreases were partially offset by increased payroll expense to
support ongoing operations acquired in connection with the PMR
Acquisition.
Other Transactions
On July 24, 2013, we closed our initial public offering of an
aggregate of 17,825,000 shares of common stock at the initial
public offering price of $14.00 per share. The net proceeds to the
Company were $210.2 million before deducting offering expenses
payable by the Company. The net proceeds of the offering are
principally being used to repay outstanding indebtedness and the
associated interest and fees (approximately $112.1 million), to
acquire the PMR Service Companies (described below) for
approximately $47.8 million, and to purchase outstanding warrants
(up to approximately $10.3 million).
On July 24, 2013, following the consummation of the offering, a
subsidiary of the Company, completed the acquisition of various
assets of each of Monarch Owner Services, LLC, Resort Services
Group, LLC and Monarch Grand Vacations Management, LLC (the “PMR
Service Companies”) for an aggregate cash purchase price of $47.8
million.
Also on July 24, 2013, the Company completed its acquisition of
all of the equity interests in Island One, Inc. and Crescent One,
LLC by issuing an aggregate of 5,236,251 shares of our common stock
as well as making a distribution of $1.75 million in cash
representing excess working capital and excess accrual for certain
bad debt expenses.
On July 26, 2013, our subsidiary, Diamond Resorts Corporation,
commenced a tender offer to purchase a portion of its 12% Senior
Secured Notes due 2018, to be funded with up to $56.8 million of
proceeds from the initial public offering. The tender offer is
scheduled to expire on August 22, 2013.
Capital Resources and Liquidity
As of June 30 2013, we had cash and cash equivalents of $18.8
million and total indebtedness of $843.1 million (which included
approximately $422.5 of corporate debt and approximately $420.6
million of non-recourse debt). Approximately $105.0 million of
corporate debt was repaid with proceeds from the IPO. Our cash used
in operating activities was $3.1 million for the three months ended
June 30, 2013, compared to cash provided from operating activities
of $9.9 million for the three months ended June 30, 2012. Capital
expenditures for the three months ended June 30, 2013 were $6.0
million, an increase of $1.8 million from $4.2 million for the
three months ended June 30, 2012. Cash expenditures for the
acquisition of vacation ownership inventory during the three months
ended June 30, 2013 were $12.3 million, an increase of $6.6 million
from expenditures of $5.7 million in the three months ended June
30, 2012.
The indenture governing our 12% senior secured notes due 2018
includes covenants which are determined by reference to the
Adjusted EBITDA of Diamond Resorts Parent LLC and its “restricted
subsidiaries.” Adjusted EBITDA, as defined in the indenture, was
$57.3 million for the three months ended June 30, 2013. The
calculation of Adjusted EBITDA in accordance with the indenture is
detailed in the table below:
Quarter Ended June 30, 2013 2012
($ in thousands) Net cash (used in) provided by operating
activities $ (3,134 ) $ 9,889 Provision (benefit) for income taxes
411 (14,668 ) Provision for uncollectible Vacation Interest sales
revenue(a) (9,208 ) (5,702 )
Amortization of capitalized financing
costs and original issue discounts(a)
(1,929 ) (1,576 ) Deferred income taxes(b) - 13,453 Loss on foreign
currency (c) (157 ) (85 ) Gain on mortgage purchase(a) 38 8 Gain on
insurance settlement(d) 673 - Corporate interest expense(e) 20,688
18,453
Change in operating assets and liabilities
excluding acquisiions(f)
39,045 13,119 Vacation interest cost of sales(g) 9,000
(7,834 ) Adjusted EBITDA - Consolidated 55,427 25,057
Less: Adjusted EBITDA - Unrestricted Subsidiaries(h) (5,039 )
(2,068 ) Plus: Intercompany elimination(i) 6,906
3,509
Adjusted EBITDA - Diamond Resorts Parent,
LLC and Restricted Subsidiaries
$ 57,294 $ 26,498 (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, related to the intangible assets acquired in connection
with the PMR Acquisition. (c) Represents net realized losses on
foreign exchange transactions settled at unfavorable exchange rates
and unrealized losses resulting from the devaluation of foreign
currency-denominated assets and liabilities. (d) Represents
insurance settlements to be received in future periods in
connection with property damage claims or reimbursement of defense
costs related to litigation. (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 VOI 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, 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, the Notes Indenture.
(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, 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.
On April 11, 2013, we entered into an amended and restated
Conduit Facility agreement that extended the maturity date of the
facility to April 10, 2015. The amended and restated Conduit
Facility provides for a $125.0 million, 24-month facility that is
annually renewable for 364-day periods at the election of the
lenders, bears interest at either LIBOR or the commercial paper
rate (each having a floor of 0.50%) plus 3.25% and has a non-use
fee of 0.75%. The overall advance rate on loans receivable in the
portfolio is limited to 85% of the aggregate face value of the
eligible loans.
Second Quarter 2013 Earnings Call
The company will be conducting a conference call to discuss the
second quarter financial results at 4:30 p.m. Eastern Time on
August 7, 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 one year. Alternatively, participants may call
into (866) 562-5561 from the United States, or (706) 679-1894 from
outside the U.S. with conference ID 25321338; please dial in
fifteen minutes early to ensure a timely start. A call replay will
be available from 7:30 p.m. Eastern Time on August 7, 2013 through
August 14, 2013 and can be accessed by dialing (800) 585-8367 with
conference ID 25321338.
Note: This press release contains forward-looking statements,
including statements regarding the current expectations of Diamond
Resorts International, Inc. (the “Company”) about its prospects and
opportunities. 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 (VOIs) for sale; the Company’s ability to sell,
securitize or borrow against its consumer loans; decreased demand
from prospective purchasers of VOIs; 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 more than
300 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® manages vacation ownership
resorts and sells vacation ownership points that provide our
members with access to 92 managed resorts, 210 affiliated
properties 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 Resorts International, Inc. (“DRII”)
closed the initial public offering (“IPO”) of its common stock.
Prior to the consummation of the initial public offering, DRII
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. DRII 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 DRII. In connection with, and immediately prior to
the completion of the IPO, various reorganization transactions were
effected ultimately with DRP merging with and into DRII. See
“Organizational Structure—Reorganization Transactions” in the
Registration Statement on Form S-1 filed by DRII with the
Securities and Exchange Commission for additional information
concerning these reorganization transactions. References in this
press release to “Diamond,” “the Company,” “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 are those of DRP and its
subsidiaries and do not give effect to the reorganization
transactions.
Presentation of Certain Financial Metrics
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; and (ix)
amortization of net portfolio premiums; 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 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 VOI 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 VOI
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.
To properly and prudently evaluate our business, we encourage
you to review our U.S. GAAP consolidated financial statements
included in the quarterly report on 10-Q for the quarter ended June
30, 2013 filed with the Securities and Exchange Commission, and not
to rely on any single financial measure to evaluate our
business.
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 its operation of THE Club 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.
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS
SEGMENT For the Quarters Ended June 30, 2013 and 2012
(In thousands) (Unaudited) Quarter
Ended June 30, 2013 Quarter Ended June 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 $ 31,107 $ - $ - $ 31,107 $ 28,295 $ - $ - $ 28,295
Consolidated resort operations 8,519 - - 8,519 8,627 - - 8,627
Vacation Interest sales, net of provision
of $0, $9,208, $0, $9,208, $0, $5,702, $0 and $5,702,
respectively
- 110,439 - 110,439 - 64,874 - 64,874 Interest - 13,192 415 13,607
- 12,137 375 12,512 Other 2,816 7,385 -
10,201 1,934 5,202 -
7,136 Total revenues 42,442
131,016 415 173,873 38,856
82,213 375 121,444
Costs and Expenses: Management and member services 8,765 - -
8,765 8,460 - - 8,460 Consolidated resort operations 8,845 - -
8,845 8,224 - - 8,224 Vacation Interest cost of sales - 9,000 -
9,000 - (7,834 ) - (7,834 ) Advertising, sales and marketing -
60,595 - 60,595 - 40,218 - 40,218 Vacation Interest carrying cost,
net - 10,750 - 10,750 - 9,176 - 9,176 Loan portfolio 258 2,496 -
2,754 218 2,165 - 2,383 Other operating - 2,238 - 2,238 - 1,807 -
1,807 General and administrative - - 21,698 21,698 - - 22,201
22,201 Depreciation and amortization - - 6,075 6,075 - - 4,369
4,369 Interest - 4,106 20,688 24,794 - 4,767 18,452 23,219 Gain on
disposal of assets - - (38 ) (38 ) - - (24 ) (24 )
Adjustment to (gain) on bargain purchase
from business combinations
- - 30 30 -
- (22,698 ) (22,698 ) Total costs and expenses
17,868 89,185 48,453 155,506
16,902 50,299 22,300
89,501
Income (loss) before provision (benefit)
for income taxes
24,574 41,831 (48,038 ) 18,367 21,954 31,914 (21,925 ) 31,943
Provision (benefit) for income taxes - - 411
411 - - (14,668 )
(14,668 ) Net income (loss) $ 24,574 $ 41,831 $ (48,449 ) $
17,956 $ 21,954 $ 31,914 $ (7,257 ) $ 46,611
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS
SEGMENT For the Six Months Ended June 30, 2013 and 2012
(In thousands) (Unaudited) Six
Months Ended June 30, 2013 Six Months Ended June 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 $ 62,694 $ - $ - $ 62,694 $ 55,575 $ - $ - $ 55,575
Consolidated resort operations 17,139 - - 17,139 17,161 - - 17,161
Vacation Interest sales, net of provision
of $0, $15,880, $0, $15,880, $0, $9,817, $0 and $9,817,
respectively
- 202,107 - 202,107 - 119,446 - 119,446 Interest - 26,050 812
26,862 - 25,464 704 26,168 Other 6,307 12,216
- 18,523 2,816 9,228 -
12,044 Total revenues 86,140
240,373 812 327,325 75,552
154,138 704 230,394
Costs and
Expenses: Management and member services 18,544 - - 18,544
16,735 - - 16,735 Consolidated resort operations 16,567 - - 16,567
15,306 - - 15,306 Vacation Interest cost of sales - 26,846 - 26,846
- 397 - 397 Advertising, sales and marketing - 110,954 - 110,954 -
75,037 - 75,037 Vacation Interest carrying cost, net - 18,987 -
18,987 - 18,448 - 18,448 Loan portfolio 504 4,755 - 5,259 441 4,293
- 4,734 Other operating - 2,606 - 2,606 - 2,965 - 2,965 General and
administrative - - 44,498 44,498 - - 42,961 42,961 Depreciation and
amortization - - 12,329 12,329 - - 8,174 8,174 Interest - 8,184
41,452 49,636 - 9,687 35,463 45,150 Impairments and other
write-offs - - 79 79 - - (11 ) (11 ) Gain on disposal of assets - -
(88 ) (88 ) - - (96 ) (96 )
Adjustment to (gain) on bargain purchase
from business combinations
- - 30 30 -
- (22,749 ) (22,749 ) Total costs and expenses
35,615 172,332 98,300 306,247
32,482 110,827 63,742 207,051
Income (loss) before provision (benefit)
for income taxes
50,525 68,041 (97,488 ) 21,078 43,070 43,311 (63,038 ) 23,343
Provision (benefit) for income taxes - - 849
849 - - (13,693 )
(13,693 ) Net income (loss) $ 50,525 $ 68,041 $ (98,337 ) $ 20,229
$ 43,070 $ 43,311 $ (49,345 ) $ 37,036
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 June 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 June 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 PARENT, LLC AND SUBSIDIARIES CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS For the Quarters
Ended June 30, 2013 and 2012 (In thousands)
(Unaudited) Quarter Ended June 30, 2013
Quarter Ended June 30, 2012 Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total
Revenues: Management and member services $ 30,222 $ 4,854 $
(3,969 ) $ 31,107 $ 27,782 $ 2,970 $ (2,457 ) $ 28,295 Consolidated
resort operations 7,206 1,313 - 8,519 7,336 1,291 - 8,627
Vacation Interest sales, net of provision
(adjustment) of $9,034, $174, $0, $9,208, $6,535, $(833), $0 and
$5,702, respectively
102,587 7,852 - 110,439 60,656 4,218 - 64,874 Interest 11,148 2,459
- 13,607 9,392 3,120 - 12,512 Other 11,443
10,796 (12,038 ) 10,201 8,509
5,228 (6,601 ) 7,136
Total revenues 162,606 27,274
(16,007 ) 173,873 113,675 16,827
(9,058 ) 121,444
Costs and
Expenses: Management and member services 9,303 2,691 (3,229 )
8,765 8,434 2,231 (2,205 ) 8,460 Consolidated resort operations
7,457 1,388 - 8,845 6,935 1,289 - 8,224 Vacation Interest cost of
sales 7,228 1,772 - 9,000 (7,976 ) 142 - (7,834 ) Advertising,
sales and marketing 55,442 5,880 (727 ) 60,595 38,765 1,689 (236 )
40,218 Vacation Interest carrying cost, net 7,610 4,167 (1,027 )
10,750 8,270 1,632 (726 ) 9,176 Loan portfolio 2,694 754 (694 )
2,754 2,329 599 (545 ) 2,383 Other operating 3,104 2,558 (3,424 )
2,238 2,502 1,142 (1,837 ) 1,807 General and administrative 17,910
3,788 - 21,698 17,410 4,791 - 22,201 Depreciation and amortization
2,765 3,310 - 6,075 2,217 2,152 - 4,369 Interest 16,794 8,000 -
24,794 16,917 6,302 - 23,219 Gain on disposal of assets (34 ) (4 )
- (38 ) (24 ) - - (24 )
Adjustment to (gain) on bargain purchase
from business combinations
- 30 - 30
- (22,698 ) - (22,698 )
Total costs and expenses 130,273 34,334
(9,101 ) 155,506 95,779
(729 ) (5,549 ) 89,501
Income (loss) before provision (benefit)
for income taxes
32,333 (7,060 ) (6,906 ) 18,367 17,896 17,556 (3,509 ) 31,943
Provision (benefit) for income taxes
363 48 - 411
(1,216 ) (13,452 ) -
(14,668 ) Net income (loss) $ 31,970 $ (7,108 ) $ (6,906 ) $
17,956 $ 19,112 $ 31,008 $ (3,509 ) $ 46,611
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS For the
Six Months Ended June 30, 2013 and 2012 (In thousands)
(Unaudited)
Six Months Ended June 30, 2013 Six Months Ended
June 30, 2012 Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Revenues: Management
and member services $ 61,320 $ 9,947 $ (8,573 ) $ 62,694 $ 55,251 $
4,953 $ (4,629 ) $ 55,575 Consolidated resort operations 14,069
3,070 - 17,139 14,168 2,993 - 17,161
Vacation Interest sales, net of provision
(adjustment) of $15,436, $444, $0, $15,880, $10,634, $(817), $0 and
$9,817, respectively
188,534 13,573 - 202,107 112,458 6,988 - 119,446 Interest 21,865
4,997 - 26,862 18,800 7,368 - 26,168 Other 21,110
20,602 (23,189 ) 18,523
14,623 8,196 (10,775 ) 12,044
Total revenues 306,898 52,189
(31,762 ) 327,325 215,300
30,498 (15,404 ) 230,394
Costs and
Expenses: Management and member services 20,283 5,183 (6,922 )
18,544 16,558 3,516 (3,339 ) 16,735 Consolidated resort operations
13,833 2,734 - 16,567 12,766 2,540 - 15,306 Vacation Interest cost
of sales 25,018 1,828 - 26,846 128 269 - 397 Advertising, sales and
marketing 103,556 9,019 (1,621 ) 110,954 72,351 3,102 (416 ) 75,037
Vacation Interest carrying cost, net 14,781 6,289 (2,083 ) 18,987
16,357 3,210 (1,119 ) 18,448 Loan portfolio 5,169 1,546 (1,456 )
5,259 4,644 939 (849 ) 4,734 Other operating 4,194 4,435 (6,023 )
2,606 4,336 1,896 (3,267 ) 2,965 General and administrative 36,611
7,887 - 44,498 34,143 8,818 - 42,961 Depreciation and amortization
5,351 6,978 - 12,329 4,445 3,729 - 8,174 Interest 33,393 16,243 -
49,636 33,582 11,568 - 45,150 Impairments and other write-offs 79 -
- 79 (11 ) - - (11 ) Gain on disposal of assets (84 ) (4 ) - (88 )
(96 ) - - (96 )
Adjustment to (gain) on bargain purchase
from business combinations
- 30 - 30
- (22,749 ) - (22,749 )
Total costs and expenses 262,184 62,168
(18,105 ) 306,247 199,203
16,838 (8,990 ) 207,051
Income (loss) before provision (benefit)
for income taxes
44,714 (9,979 ) (13,657 ) 21,078 16,097 13,660 (6,414 ) 23,343
Provision (benefit) for income taxes
759 90 - 849
(241 ) (13,452 ) -
(13,693 ) Net income (loss) $ 43,955 $ (10,069 ) $ (13,657 )
$ 20,229 $ 16,338 $ 27,112 $ (6,414 ) $ 37,036
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS As of June 30,
2013 and December 31, 2012 (In thousands)
June 30, 2013
(Unaudited)
December 31, 2012
(Audited)
Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Assets: Cash
and cash equivalents $ 12,054 $ 6,793 $ - $ 18,847 $ 16,963 $ 4,098
$ - $ 21,061 Cash in escrow and restricted cash 58,127 1,394 -
59,521 40,785 1,526 - 42,311
Mortgages and contracts receivable, net of
allowance of $67,674, $19,519, $0, $87,193, $61,067, $22,717, $0,
and $83,784, respectively
292,795 42,282 (1 ) 335,076 266,303 46,633 (4 ) 312,932 Due from
related parties, net 73,421 6,138 (46,836 ) 32,723 45,428 4,510
(26,943 ) 22,995 Other receivables, net 25,885 4,774 - 30,659
40,292 5,757 - 46,049 Income tax receivable 47 - - 47 927 - - 927
Prepaid expenses and other assets, net 90,554 23,328 (369 ) 113,513
49,512 9,409 (897 ) 58,024 Unsold Vacation Interests, net 267,548
75,985 (35,920 ) 307,613 263,493 74,635 (22,261 ) 315,867 Property
and equipment, net 37,490 20,973 - 58,463 33,664 21,456 - 55,120
Assets held for sale 6,195 5,855 - 12,050 5,070 154 - 5,224
Intangible assets, net 29,369 75,591
- 104,960 30,914
81,584 - 112,498 Total assets $
893,485 $ 263,113 $ (83,126 ) $ 1,073,472 $
793,351 $ 249,762 $ (50,105 ) $ 993,008
Liabilities and Member Capital
(Deficit):
Accounts payable $ 8,691 $ 4,242 $ - $ 12,933 $ 13,467 $ 2,252 $ -
$ 15,719 Due to related parties, net 56,947 94,474 (55,943 ) 95,478
42,632 57,179 (35,607 ) 64,204 Accrued liabilities 89,865 17,304
(1,010 ) 106,159 91,511 16,004 (1,064 ) 106,451 Income taxes
payable 1,004 - - 1,004 701 - - 701 Deferred revenues 92,478 3,627
- 96,105 92,490 1,343 - 93,833
Senior Secured Notes, net of unamortized
original issue discount of $7,988, $0, $0, $7,988, $8,509, $0, $0,
and $8,509, respectively
417,012 - - 417,012 416,491 - - 416,491
Securitization notes and Funding
Facilities, net of unamortized original issue discount for $596,
$0, $0, $596, $753, $0, $0, $753, respectively
258,301 35,165 - 293,466 209,450 46,852 - 256,302 Notes payable
5,495 127,152 -
132,647 3,238 134,668 -
137,906 Total liabilities 929,793
281,964 (56,953 ) 1,154,804
869,980 258,298 (36,671 )
1,091,607
Member capital (deficit)
155,558 9,675 (9,675 ) 155,558 155,568 9,675 (9,675 ) 155,568
Accumulated deficit (171,916 ) (27,632 ) (17,657 ) (217,205 )
(215,433 ) (17,563 ) (4,438 ) (237,434 )
Accumulated other comprehensive (loss)
income
(19,950 ) (894 ) 1,159 (19,685 )
(16,764 ) (648 ) 679 (16,733 )
Total member (deficit) capital
(36,308 ) (18,851 ) (26,173 ) (81,332 )
(76,629 ) (8,536 ) (13,434 ) (98,599 )
Total liabilities and member capital
(deficit)
$ 893,485 $ 263,113 $ (83,126 ) $
1,073,472
$ 793,351 $ 249,762 $ (50,105 ) $
993,008
DIAMOND RESORTS PARENT, LLC AND
SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS For the Quarters Ended June 30, 2013 and 2012
(In thousands) (Unaudited)
Quarter Ended June 30,
2013 Quarter Ended June 30, 2012 Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Operating Activities: Net income
(loss) $ 31,970 $ (7,108 ) $ (6,906 ) $ 17,956 $ 19,112 $ 31,008 $
(3,509 ) $ 46,611
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Provision for uncollectible Vacation Interest sales revenue 9,034
174 - 9,208 6,535 (833 ) - 5,702
Amortization of capitalized financing
costs and original issue discounts
1,603 326 - 1,929 1,380 196 - 1,576
Amortization of capitalized loan
origination costs and net portfolio discount (premiums)
1,261 44 - 1,305 788 60 - 848 Depreciation and amortization 2,765
3,310 - 6,075 2,217 2,152 - 4,369 Gain on disposal of assets (34 )
(4 ) - (38 ) (24 ) - - (24 )
Adjustment to (gain) on bargain purchase
from business combinations
- 30 - 30 - (22,698 ) - (22,698 ) Deferred income taxes - - - - -
(13,453 ) - (13,453 ) (Gain) loss on foreign currency exchange (24
) 181 - 157 85 - - 85 Loss (gain) on mortgage repurchase 1 (39 ) -
(38 ) (8 ) - - (8 ) Gain on insurance settlement (673 ) - - (673 )
- - - - Changes in operating assets and liabilities excluding
acquisitions: Mortgages and contracts receivable (25,524 ) 932 (2 )
(24,594 ) (11,369 ) 3,314 - (8,055 ) Due from related parties, net
(18,909 ) (2,709 ) 10,494 (11,124 ) 3,432 247 (1,505 ) 2,174 Other
receivables, net 4,832 466 - 5,298 3,030 (2,167 ) (9 ) 854 Prepaid
expenses and other assets, net 10,345 211 (170 ) 10,386 8,099
10,075 (1,011 ) 17,163 Unsold Vacation Interests, net (17,148 )
(7,324 ) 6,908 (17,564 ) (28,228 ) (2,578 ) 3,510 (27,296 )
Accounts payable (1,099 ) 394 - (705 ) 2,482 1,513 - 3,995 Due to
related parties, net (7,395 ) 18,374 (10,333 ) 646 7,439 (8,063 )
1,504 880 Accrued liabilities 7,826 2,830 172 10,828 14,827 1,685
187 16,699 Income taxes payable 129 - - 129 (2,024 ) - - (2,024 )
Deferred revenues (12,190 ) (155 ) -
(12,345 ) (17,994 ) (348 ) 833
(17,509 ) Net cash (used in) provided by operating
activities (13,230 ) 9,933 163
(3,134 ) 9,779 110 -
9,889 Investing activities: Property
and equipment capital expenditures (5,528 ) (429 ) - (5,957 )
(4,115 ) (107 ) - (4,222 )
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
1,470 - - 1,470
101 - - 101
Net cash used in investing activities $ (4,058 ) $ (429 ) $ -
$ (4,487 ) $ (4,014 ) $ (51,742 ) $ - $ (55,756 )
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued
For the Quarters Ended June 30, 2013 and 2012
(Unaudited) (In thousands) Quarter
Ended June 30, 2013 Quarter Ended June 30, 2012
Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Financing activities:
Changes in cash in escrow and restricted cash $ (2,954 ) $ (183 ) $
- $ (3,137 ) $ (88 ) $ (4 ) $ - $ (92 )
Proceeds from issuance of securitization
notes and Funding Facilities
43,609 - - 43,609 21,221 (5,943 ) - 15,278 Proceeds from issuance
of notes payable - 1,156 - 1,156 - 64,060 - 64,060 Payments on
securitization notes and Funding Facilities (25,294 ) (3,854 ) -
(29,148 ) (24,762 ) 2,216 - (22,546 ) Payments on notes payable
(2,999 ) (7,133 ) - (10,132 ) (2,552 ) (5,876 ) - (8,428 ) Payments
of debt issuance costs (2,021 ) (57 ) - (2,078 ) - (2,570 ) -
(2,570 )
Payments of costs related to issuance of
common and preferred units
(10 ) - - (10 ) (1
) - - (1 ) Net cash provided by (used
in) financing activities 10,331 (10,071 )
- 260 (6,182 ) 51,883
- 45,701 Net (decrease) increase
in cash and cash equivalents (6,957 ) (567 ) 163 (7,361 ) (417 )
251 - (166 )
Effect of changes in exchange rates on
cash and cash equivalents
(445 ) 612 (163 ) 4 (149 ) - - (149 ) Cash and cash equivalents,
beginning of period 19,456 6,748
- 26,204 17,567 624
- 18,191 Cash and cash equivalents, end
of period $ 12,054 $ 6,793 $ - $ 18,847
$ 17,001 $ 875 $ - $ 17,876
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 2,493 $ 4,658 $ - $
7,151 $ 3,262 $ 3,746 $ - $ 7,008 Cash
paid for taxes, net of cash tax refunds $ 228 $ 48 $
- $ 276 $ 798 $ - $ - $ 798
Purchase of assets in connection with the
PMR Acquisition:
Fair value of assets acquired based on valuation reports $ - $ - $
- $ - $ - $ 89,704 $ - $ 89,704 Gain on bargain purchase recognized
- - - - - (22,880 ) - (22,880 ) Cash paid - - - - - (51,635 ) -
(51,635 ) Deferred tax liability - -
- - - (13,453 )
- (13,453 ) Liabilities assumed $ - $ -
$ - $ - $ - $ 1,736 $ - $ 1,736
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Insurance premiums financed through
issuance of notes payable
$ 1,908 $ - $ - $ 1,908 $ 1,530
$ - $ - $ 1,530
Unsold Vacation Interests, net
reclassified to assets held for sale
$ 4,450 $ 5,701 $ - $ 10,151 $ -
$ - $ - $ -
Assets held for sale reclassified to
management contracts (intangible assets, net)
$ - $ - $ - $ - $ 187 $ -
$ - $ 187
Assets held for sale reclassified to
unsold Vacation Interests, net
$ - $ - $ - $ - $ 1,297 $ -
$ - $ 1,297
DIAMOND RESORTS PARENT, LLC AND
SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS For the Six Months Ended June 30, 2013 and 2012
(In thousands) (Unaudited) Six
Months Ended June 30, 2013 Six Months Ended June 30,
2012 Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Operating Activities:
Net income (loss) $ 43,955 $ (10,069 ) $ (13,657 ) $ 20,229 $
16,338 $ 27,112 $ (6,414 ) $ 37,036
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Provision for uncollectible Vacation
Interest sales revenue
15,436 444 - 15,880 10,634 (817 ) - 9,817
Amortization of capitalized financing
costs and original issue discounts
3,172 631 - 3,803 2,730 352 - 3,082
Amortization of capitalized loan
origination costs and net portfolio discount (premiums)
2,443 92 - 2,535 1,459 (859 ) - 600 Depreciation and amortization
5,351 6,978 - 12,329 4,445 3,729 - 8,174 Impairments and other
write-offs 79 - - 79 (11 ) - - (11 ) Gain on disposal of assets (84
) (4 ) - (88 ) (96 ) - - (96 )
Adjustment to (gain) on bargain purchase
from business combinations
- 30 - 30 - (22,749 ) - (22,749 ) Deferred income taxes - - - - -
(13,453 ) - (13,453 ) Loss on foreign currency exchange 139 79 -
218 56 - - 56 Loss (gain) on mortgage repurchase 1 (39 ) - (38 )
(19 ) - - (19 ) Gain on insurance settlement (2,876 ) - - (2,876 )
- - - - Changes in operating assets and liabilities excluding
acquisitions: Mortgages and contracts receivable (44,465 ) 3,816 (3
) (40,652 ) (18,219 ) 9,532 (2 ) (8,689 ) Due from related parties,
net (26,414 ) (2,514 ) 19,893 (9,035 ) 1,547 729 4,487 6,763 Other
receivables, net 16,508 983 - 17,491 14,829 (1,752 ) 3 13,080
Prepaid expenses and other assets, net (39,489 ) (14,443 ) (89 )
(54,021 ) (40,111 ) (2,708 ) (72 ) (42,891 ) Unsold Vacation
Interests, net (10,761 ) (7,252 ) 13,659 (4,354 ) (27,503 ) (3,905
) 5,566 (25,842 ) Accounts payable (4,653 ) 2,064 - (2,589 ) 2,208
1,567 - 3,775 Due to related parties, net 18,335 37,758 (19,895 )
36,198 46,242 8,759 (3,649 ) 51,352 Accrued liabilities 1,637 6,048
92 7,777 8,150 2,935 81 11,166 Income taxes payable 1,218 - - 1,218
(1,589 ) - - (1,589 ) Deferred revenues 758
2,312 - 3,070 (662 )
1,690 - 1,028 Net cash
(used in) provided by operating activities (19,710 )
26,914 - 7,204 20,428
10,162 - 30,590
Investing activities: Property and equipment capital
expenditures (7,920 ) (561 ) - (8,481 ) (5,855 ) (252 ) - (6,107 )
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
1,470 - - 1,470
320 - - 320
Net cash used in investing activities $ (6,450 ) $ (561 ) $ -
$ (7,011 ) $ (5,535 ) $ (51,887 ) $ - $ (57,422 )
DIAMOND RESORTS PARENT, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued
For the Six Months Ended June 30, 2013 and 2012
(Unaudited) (In thousands) Six
Months Ended June 30, 2013 Six Months Ended June 30,
2012 Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
Resorts
Parent, LLC
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Financing activities:
Changes in cash in escrow and restricted cash $ (17,410 ) $ 84 $ -
$ (17,326 ) $ (8,825 ) $ (32 ) $ - $ (8,857 )
Proceeds from issuance of securitization
notes and Funding Facilities
170,576 713 - 171,289 44,119 1,766 - 45,885 Proceeds from issuance
of notes payable - 2,475 - 2,475 - 64,125 - 64,125 Payments on
securitization notes and Funding Facilities (121,899 ) (12,400 ) -
(134,299 ) (47,841 ) (10,470 ) - (58,311 ) Payments on notes
payable (5,565 ) (14,383 ) - (19,948 ) (5,048 ) (10,468 ) - (15,516
) Payments of debt issuance costs (3,995 ) (57 ) - (4,052 ) (24 )
(2,570 ) - (2,594 )
Payments of costs related to issuance of
common and preferred units
(10 ) - - (10 ) (9 )
- - (9 ) Net cash provided by (used in)
financing activities 21,697 (23,568 ) -
(1,871 ) (17,628 ) 42,351 -
24,723 Net (decrease) increase in cash and
cash equivalents (4,463 ) 2,785 - (1,678 ) (2,735 ) 626 - (2,109 )
Effect of changes in exchange rates on
cash and cash equivalents
(446 ) (90 ) - (536 ) 88 - - 88 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 $ 12,054 $ 6,793 $ - $ 18,847 $ 17,001
$ 875 $ - $ 17,876
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 30,875 $ 8,965 $ - $ 39,840
$ 32,289 $ 6,773 $ - $ 39,062
(Cash tax refunds, net of cash paid for
taxes) Cash paid for taxes, net of cash tax refunds
$ (470 ) $ 90 $ - $ (380 ) $ 1,347 $ - $ - $
1,347 Purchase of assets in connection with the PMR
Acquisition: Fair value of assets acquired based on valuation
reports $ - $ - $ - $ - $ - $ 89,704 $ - $ 89,704 Gain on bargain
purchase recognized - - - - - (22,880 ) - (22,880 ) Cash paid - - -
- - (51,635 ) - (51,635 ) Deferred tax liability -
- - - -
(13,453 ) - (13,453 ) Liabilities assumed $ -
$ - $ - $ - $ - $ 1,736 $ - $ 1,736
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
Unsold Vacation Interests, net
reclassified to assets held for sale
$ 4,450 $ 5,701 $ - $ 10,151 $ - $ -
$ - $ -
Assets held for sale reclassified to
management contracts (intangible assets, net)
$ - $ - $ - $ - $ 187 $ - $ - $
187
Assets held for sale reclassified to
unsold Vacation Interests, net
$ - $ - $ - $ - $ 1,315 $ - $ -
$ 1,315
Media:Diamond Resorts International®Stevi Wara, 702-823-7069Fax:
702-684-8705media@diamondresorts.comorInvestor:Joshua Hochberg,
212-486-9500Sloane and CompanyFax:
212-486-9094jhochberg@sloanepr.com
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