Diamond Resorts International, Inc. (NYSE:DRII) (“Diamond” or
the “Company”), today announced results for the fourth quarter and
full year ended December 31, 2013.
David F. Palmer, President and Chief Executive Officer, stated,
“Our business performed strongly this period, as we delivered a
record fourth quarter, concluding a record year. Our results
clearly reinforce the advantages of our differentiated business
model, which combined with solid execution by our team, led to
growth across nearly all the key metrics that define our business.
As we look to 2014, we expect to continue to benefit from the
recurring and predictable contractual cash flows and revenue growth
associated with our hospitality and management services business
and that we will capitalize on the flexibility of our vacation
interest business to continue the positive momentum we have seen to
date. We believe we have a unique business model in a highly
fragmented and under-penetrated industry and are confident in our
ability to continue to deliver strong results in the quarters and
years ahead.”
Full Year 2013 Highlights
- Total revenue increased $206.1 million,
or 39.4%, to $729.8 million for 2013 from $523.7 million for
2012.
- Hospitality and Management Services
revenue grew by $22.1 million, or 14.4%, for 2013 compared to 2012.
This growth was driven by the full year ownership of Pacific
Monarch Resorts (acquired in May 2012), the inclusion of the PMR
Services Companies and Island One (both acquired in July 2013),
increases in operating costs at the resort level which generated
higher same-store management fee revenue, and increases in revenue
from our club operations.
- Vacation Interest sales, net grew by
$171.5 million, or 58.5%, for 2013 compared to 2012. This growth
was driven by a:
- 14.4% increase in tours to 207,075 from
180,981
- 12.0% increase in transactions to
29,955 from 26,734 (reflecting closing percentages of 14.5% for
2013 and 14.8% for 2012)
- 34.1% increase in average transaction
price to $16,771 from $12,510
- Advertising, sales and marketing
expense for 2013 included a non-cash charge of $2.1 million related
to stock based compensation. Excluding this charge, advertising,
sales and marketing as a percentage of Vacation Interest sales
revenue decreased 5.7 percentage points to 50.3%, from 56.0% in
2012. Including this non-cash charge, advertising, sales and
marketing as a percentage of Vacation Interest sales revenue was
50.7%. This improvement was primarily due to improved leverage of
fixed costs through increased sales efficiencies.
- Pre-tax income for 2013 and 2012
included non-cash and one-time charges and adjustments of $63.8
million and $12.3 million, respectively. The non-cash items were
charges related to stock-based compensation of $40.5 million in
2013 and $3.3 million in 2012, a one-time charge of $5.5 million
related to the final settlement of the FLRX Alter Ego suit (“FLRX
litigation”) in 2013 (representing the carrying value of our
interest in certain Mexican land transferred to the plaintiff), a
charge of $6.6 million related to the early extinguishment of debt
which was repaid with proceeds from our IPO in July 2013, and a
gain on bargain purchase from business combinations of $2.9 million
in 2013 and $20.6 million in 2012. In addition, 2013 included a
cash charge of $9.0 million related to the early extinguishment of
debt and a one-time cash charge of $5.0 million related to the
final settlement of the FLRX litigation. In 2012, there was a
one-time cash charge of $5.0 million related to the termination of
consultants who had been executives of an acquired company
(“Executive Termination”). Excluding these items, pre-tax income in
2013 would have been $67.0 million, an increase of $80.0 million
from a pre-tax loss of $13.0 million in 2012. Including these
items, pre-tax income in 2013 was $3.2 million and the pre-tax loss
in 2012 was $0.7 million.
- Net cash used by operations in 2013 was
$5.4 million. This includes a $128.8 million net working
capital use from the buildup of receivables, net of
repayments. Our receivables are generally monetized through a
securitization transaction, or by pledging them under one of our
funding facilities. This monetization is shown under
“financing activities” on our statement of cash flows. During
2013 we generated $125.2 million of net cash related to the
monetization of our receivables portfolio which included $38.5
million as of December 31, 2013 in receivables activity related to
the DROT 2013-2 securitization.
- Adjusted EBITDA for the Company and its
Restricted Subsidiaries was $219.0 million for 2013. Adjusted
EBITDA for the Company on a consolidated basis was $220.2 million
for 2013. Adjusted EBITDA for 2013 included a one-time charge of
$10.5 million ($5.0 million of which was cash) related to the final
settlement of the FLRX litigation. Adjusted EBITDA for the Company
and its Restricted Subsidiaries was $123.3 million for 2012. On a
consolidated basis, Adjusted EBITDA was $113.2 million for 2012.
Adjusted EBITDA for 2012 included a $5.0 million charge related to
the Executive Termination.
- In 2013 we completed three
securitization transactions issuing notes with an aggregate face
value of $349.6 million.
Fourth Quarter 2013 Highlights
- Total revenue increased $60.3 million,
or 40.0%, to $210.9 million for 2013 from $150.6 million for
2012.
- Hospitality and Management Services
revenue grew by $6.8 million, or 17.6%, for 2013 compared to 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 (completed in July 2013)
and increased revenues from our club operations.
- Vacation Interest sales, net grew by
$48.5 million, or 53.6%, in 2013 compared to the same period in
2012. This growth was driven primarily by a 40.8% increase in
average transaction price to $18,313 from $13,007.
- Advertising, sales and marketing as a
percentage of Vacation Interest sales revenue decreased 4.0
percentage points to 49.9%, from 53.9% in 2012. This improvement
was primarily due to improved leverage of fixed costs through
increased sales efficiencies.
- Pre-tax income for 2013 and 2012
included non-cash and one-time charges of $14.6 million and $5.3
million, respectively. The non-cash items were charges related to
stock-based compensation of $2.0 million in 2013 and $3.3 million
in 2012, a one-time charge of $5.5 million related to the final
settlement of the FLRX litigation in 2013, a charge of $2.2 million
related to the early extinguishment of debt, a gain on bargain
purchase from business combinations of $0.2 million in 2013 and an
adjustment to bargain purchase from business combinations of $2.0
million in 2012. In addition, 2013 included a one-time cash charge
of $5.0 million related to the final settlement of the FLRX
litigation. Excluding these items, pre-tax income in 2013 would
have been $30.7 million, an increase of $38.1 million from pre-tax
loss of $7.4 million in 2012. Including these items, pre-tax income
in 2013 was $16.1 million and the pre-tax loss in 2012 was $12.7
million.
- Net cash used in 2013 was $0.4
million. This includes a $44.4 million net working capital use
from the buildup of receivables, net of repayments while we
generated $60.9 million in cash related to the monetization of our
receivables portfolio.
- Adjusted EBITDA for the Company and its
Restricted Subsidiaries was $53.5 million for 2013. Adjusted EBITDA
for the Company on a consolidated basis was $55.5 million for 2013.
Adjusted EBITDA for 2013 included a one-time charge of $10.5
million ($5.0 million of which was cash) related to the final
settlement of the FLRX litigation. Adjusted EBITDA for the Company
and its Restricted Subsidiaries was $35.6 million for 2012. On a
consolidated basis, Adjusted EBITDA was $35.8 million for
2012.
- On November 20, 2013, we completed a
securitization transaction and issued DROT 2013-2 Class A and B
Notes with a face value of $225.0 million.
Full Year Earnings Summary
Hospitality and Management Services
Total management and member services revenue in our Hospitality
and Management Services segment increased $16.3 million, or 14.2%,
to $131.2 million for the twelve months ended December 31, 2013
from $114.9 million for the twelve months ended December 31, 2012.
Management fees increased as a result of full year ownership of
Pacific Monarch Resorts, the inclusion of the managed properties
from our acquisitions of Island One and the PMR Service Companies
(both completed in July 2013) in 2013. We also experienced higher
revenue from our club operations due to increased membership dues,
higher collection rate and higher club member count in 2013
compared to 2012. We had a total of approximately 200,000 and
170,000 club members as of December 31, 2013 and 2012,
respectively. These increases were partially offset by the
reduction in commissions earned on fee-for-service management
agreements with Island One which were terminated in conjunction
with the Island One acquisition on July 24, 2013.
Management and member services expense increased $2.6 million,
or 7.3%, to $37.9 million for the twelve months ended December 31,
2013 from $35.3 million for the twelve months ended December 31,
2012. The increase was primarily attributable to higher operating
expense associated with higher club member count and higher
operating costs at the resorts for which we act as the HOA. 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 absorption of certain expenses by the HOAs that we
manage. Management and member services expense as a percentage of
management and member services revenue decreased to 28.9% in 2013
from 30.7% in 2012.
Vacation Interest Sales and Financing
Vacation Interest sales, net, increased $171.5 million, or
58.5%, to $464.6 million for the twelve months ended December 31,
2013 from $293.1 million for the twelve months ended December 31,
2012. The increase in Vacation Interest sales, net, was
attributable to a $190.7 million increase in Vacation Interest
sales revenue, partially offset by a $19.2 million increase in our
provision for uncollectible Vacation Interest sales revenue. The
$190.7 million increase in Vacation Interest sales revenue in 2013
compared to 2012 was generated by an increase in the number of
transactions and a higher average sales price per transaction.
During the third and fourth quarter, the Company closed three low
performing off-site sales centers, which will enable us to increase
sales efficiencies. Our total number of tours increased to 207,075
in 2013 from 180,981 in 2012, primarily due to an increase in the
number of tours resulting from the expansion of our lead-generation
and marketing programs. We closed a total of 29,955 Vacation
Interest sales transactions in 2013, compared to 26,734
transactions in 2012. Our closing percentage (which represents the
percentage of Vacation Interest sales transactions closed relative
to the total number of tours at our sales centers during the period
presented) decreased slightly to 14.5% in 2013 from 14.8% in 2012
as a result of an increase in focus on sales to new customers.
Vacation Interest sales price per transaction increased to $16,771
in 2013 from $12,510 in 2012 due principally to a change in our
selling strategy which focused on selling larger point packages and
the success of the sales and marketing initiatives implemented in
furtherance of this strategy.
Sales incentives increased $1.8 million, or 18.8% to $11.1
million for the twelve months ended December 31, 2013 from $9.4
million for the twelve months ended December 31, 2012. The amount
we record as sales incentives is reduced by an estimated breakage
amount and, accordingly, the estimated amount of such breakage
increases our Vacation Interest sales revenue, net. In 2013,
we adjusted sales incentives by $3.2 million relating to the
expiration, and expected future expiration, of sales incentives we
provided to customers prior to June 30, 2013 as we had more
historical data to compute the estimated breakage. Excluding
the $3.2 million reduction, sales incentives as a percentage of
gross Vacation Interest sales revenue were 2.8% in 2013 compared to
2.9% in 2012.
Provision for uncollectible Vacation Interest sales revenue
increased $19.2 million, or 75.5%, to $44.7 million for the twelve
months ended December 31, 2013 from $25.5 million for the twelve
months ended December 31, 2012, primarily due to the increase in
Vacation Interest sales revenue and an increase in the percentage
of financed Vacation Interest sales in 2013 as compared to
2012.
Advertising, sales and marketing costs as a percentage of
Vacation Interest sales revenue were 50.7% for the twelve months
ended December 31, 2013, compared to 56.0% for the twelve months
ended December 31, 2012, primarily due to the increase in Vacation
Interest sales. Advertising, sales and marketing expense in 2013
included a charge of $2.1 million for stock-based compensation.
Without this non-cash charge, advertising, sales and marketing as a
percentage of gross Vacation Interest sales revenue would have been
50.3%, a decrease of 5.7 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 increased $24.5 million, or
76.3%, to $56.7 million for the twelve months ended December 31,
2013 from $32.2 million for the twelve months ended December 31,
2012. Of this increase, $18.7 million was due to an increase
in Vacation Interest Sales in 2013 as compared to 2012. The
remaining increase was a combination of the impact of the inclusion
of the inventory purchased in the Pacific Monarch Resorts
acquisition in 2012 and the impact of a smaller pool of low-cost
inventory becoming eligible for recovery and capitalization
pursuant to our inventory recovery agreements in 2013 as compared
to 2012. The inventory purchased in the Pacific Monarch
Resorts acquisition reduced the cost of sales in 2012 as the
inventory had a lower cost basis than the average cost basis of our
then existing inventory. The increase to cost of sales was
compounded as a smaller pool of inventory became available for
recovery and capitalization pursuant to our inventory recovery
agreements in 2013.
General and Administrative Expense
General and administrative expense for the twelve months ended
December 31, 2013 and December 31, 2012 included non-cash charges
related to stock based compensation of $37.0 million and $3.3
million, respectively. In 2013, there was a one-time charge of
$10.5 million ($5.0 million of which was cash) related to the final
settlement of the FLRX litigation. In 2012, there was a one-time
charge of $5.0 million related to the Executive Termination.
Excluding these charges, general and administrative expense would
have been $98.4 million in 2013, an increase of $7.7 million, or
8.5%, from $90.7 million in 2012. This increase is primarily due to
additional costs incurred in connection with the operation of the
Pacific Monarch Resorts for a full year, and the PMR Service
Companies and Island One acquisitions. Giving effect to these
charges, general and administrative expense as reported was $145.9
million in 2013 and $99.0 million in 2012.
Pre-tax Income/Loss and Net Income / Loss
Pre-tax income for twelve months ended December 31, 2013 and the
twelve months ended December 31, 2012 included non-cash and
one-time charges and adjustments of $63.8 million and $12.3
million, respectively. The non-cash items were charges related to
stock-based compensation of $40.5 million in 2013 and $3.3 million
in 2012, a one-time charge of $5.5 million related to the final
settlement of the FLRX litigation in 2013 (representing the
carrying value of our interest in certain Mexican land transferred
to the plaintiff), a charge of $6.6 million related to the early
extinguishment of debt which was repaid with proceeds from our IPO
in July 2013, and a gain on bargain purchase from business
combinations of $2.9 million in 2013 and $20.6 million in 2012. In
addition, 2013 included a cash charge of $9.0 million related to
the early extinguishment of debt and a one-time cash charge of $5.0
million related to the final settlement of the FLRX litigation. In
2012, there was a one-time cash charge of $5.0 million related to
the Executive Termination. Excluding these items, pre-tax income in
2013 would have been $67.0 million, an increase of $80.0 million
from a pre-tax loss of $13.0 million in 2012. Including these
items, pre-tax income in 2013 was $3.2 million and the pre-tax loss
in 2012 was $0.7 million.
Net income for the twelve months ended December 31, 2013 and the
twelve months ended December 31, 2012 included the pre-tax charges
discussed above. 2013 had a net loss of $2.5 million, which is a
decrease of $16.1 million from a net income of $13.6 million in
2012.
Fourth Quarter Earnings Summary
Hospitality and Management Services
Total management and member services revenue in our Hospitality
and Management Services segment increased $5.5 million, or 19.0%,
to $34.9 million for the three months ended December 31, 2013 from
$29.4 million for the three months ended December 31, 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) during the period
in 2013. We also experienced higher revenue from the clubs due to
increased membership dues, higher collection rate and higher club
member count during the period in 2013 compared to the period in
2012. 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.
Management and member services expense increased $0.2 million,
or 2.3%, to $9.9 million for the three months ended December 31,
2013 from $9.7 million for the three months ended December 31,
2012. The increase was primarily attributable to higher operating
expense associated with higher club member count and higher
operating costs at the resorts for which we act as the HOA. 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 absorption 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
28.5% during the period in 2013 from 33.1% during the period in
2012.
Vacation Interest Sales and Financing
Vacation Interest sales, net, increased $48.5 million, or 53.6%,
to $138.8 million for the three months ended December 31, 2013 from
$90.3 million for the three months ended December 31, 2012. The
increase in Vacation Interest sales, net, was attributable to a
$54.0 million increase in Vacation Interest sales revenue,
partially offset by a $5.6 million increase in our provision for
uncollectible Vacation Interest sales revenue. The $54.0 million
increase in Vacation Interest sales revenue during the period in
2013 compared to the period in 2012 was generated due to an
increase in the number of transactions and a higher average sales
price per transaction. During the quarter, the Company closed one
low performing off-site sales center, which will enable us to
increase sales efficiencies. Our total number of tours increased to
50,104 during the period in 2013 from 50,098 during the period in
2012. We closed a total of 7,926 Vacation Interest sales
transactions during the period in 2013, compared to 8,024
transactions during the period in 2012. Our closing percentage
(which represents the percentage of Vacation Interest sales
transactions closed relative to the total number of sales
presentations at our sales centers during the period presented)
decreased slightly to 15.8% during the period in 2013 from 16.0%
during the period in 2012. Vacation Interest sales price per
transaction increased to $18,313 during the period in 2013 from
$13,007 during the period in 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 28.9% to $5.2
million for the three months ended December 31, 2013 from $4.0
million for the three months ended December 31, 2012. Sales
incentives as a percentage of gross Vacation Interest sales revenue
were 3.4% for the period in 2013 compared to 4.0% for the period in
2012.
Provision for uncollectible Vacation Interest sales revenue
increased $5.6 million, or 59.5%, to $14.9 million during the
period in 2013 from $9.4 million during the period in 2012,
primarily due to the increase in Vacation Interest sales revenue
and an increase in the percentage of financed Vacation Interest
sales during the period in 2013 as compared to the period in
2012.
Advertising, sales and marketing costs as a percentage of
Vacation Interest sales revenue were 49.9% for the three months
ended December 31, 2013, compared to 53.9% for the three months
ended December 31, 2012. 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 decreased $3.7 million, to $11.2
million for the three months ended December 31, 2013 from $15.0
million for the three months ended December 31, 2012. Of this
change, $3.6 million was an increase related to the increase in
Vacation Interest Sales during the period in 2013 as compared to
the period in 2012. The $3.6 million increase was
offset by a $7.3 million decrease due to a larger pool of
low-cost inventory becoming eligible for recovery and
capitalization pursuant to our inventory recovery agreements during
the period in 2013 as compared to the period in 2012.
General and Administrative Expense
General and administrative expense for the three months ended
December 31, 2013 and the three months ended December 31, 2012
included a non-cash charge related to stock based compensation of
$1.7 million and $3.3 million, respectively. During the period for
2013, there was a one-time charge of $10.5 million ($5.0 million of
which was cash) related to the final settlement of the FLRX
litigation. Excluding these charges, general and administrative
expense would have increased $3.4 million, or 13.7%, to $28.2
million during the period in 2013 from $24.8 million during the
period in 2012. This increase is primarily due to additional costs
incurred in connection with the PMR Service Companies and Island
One acquisitions completed in the third quarter of 2013. Giving
effect to these charges, general and administrative expense as
reported was $40.3 million during the period in 2013 and $28.1
million during the period in 2012.
Pre-tax Income/Loss and Net Income / Loss
The pre-tax income for the three months ended December 31, 2013
and the three months ended December 31, 2012 included non-cash and
one-time charges of $14.6 million and $5.3 million, respectively.
The non-cash items were charges related to stock-based compensation
of $2.0 million in 2013 and $3.3 million in 2012, a one-time charge
of $5.5 million related to the final settlement of the FLRX
litigation in 2013, a charge of $2.2 million related to the early
extinguishment of debt, a gain on bargain purchase from business
combinations of $0.2 million in 2013 and an adjustment to bargain
purchase from business combinations of $2.0 million in 2012. In
addition, 2013 included a one-time cash charge of $5.0 million
related to the final settlement of the FLRX litigation. Excluding
these items, pre-tax income in 2013 would have been $30.7 million,
an increase of $38.1 million from pre-tax loss of $7.4 million in
2012. Including these items, pre-tax income in 2013 was $16.1
million and the pre-tax loss in 2012 was $12.7 million.
Net income for the three months ended December 31, 2013 and the
three months ended December 31, 2012 included the pre-tax charges
discussed above. Net income increased $15.3 million to $3.6 million
during the period for 2013 from a net loss of $11.7 million during
the period in 2012.
Capital Resources and Liquidity
As of December 31, 2013, we had cash and cash equivalents of
$35.9 million, corporate indebtedness of $377.7 million and
non-recourse debt of $411.3 million. Our cash used in operating
activities was $5.4 million, reflecting $128.8 million net working
capital use from the buildup of receivables, net of
repayments. Our receivables are generally monetized through a
securitization transaction, or by pledging them under one of our
funding facilities. This monetization is shown under
“financing activities” on our statement of cash flows. During
2013 we generated $125.2 million of net cash related to the
monetization of our receivables portfolio which included $38.5
million as of December 31, 2013 in receivables activity related to
the DROT 2013-2 securitization. Capital expenditures for the year
ended December 31, 2013 were $15.2 million, an increase of $0.9
million from $14.3 million for the year ended December 31,
2012. Cash expenditures for the July 2013 acquisition of the
PMR Service Companies were $47.4 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 $220.2 million
for the year ended December 31, 2013. This includes a one-time
charge of $10.5 million ($5.0 million of which was cash) related to
the final settlement of the FLRX litigation.
Outlook
For the full year ending December 31, 2014, the Company is
providing the following guidance for its expected operating
results:
Year Ending December 31, 2014 ($ in
thousands)
Low
High
Pre-tax income $ 65,000 $ 92,500 Corporate interest expense $
56,500 $ 54,500 Vacation interest cost of sales(a) $ 79,500 $
69,500 Depreciation and amortization $ 32,000 $ 30,000 Other
non-cash items(b) $ 22,000 $ 18,500
For the year ending December 31, 2014, the Company anticipates
cash expenditures for the acquisition of inventory, excluding
inventory from acquisitions, to be between $30.0 million and $35.0
million. In addition, the company anticipates capital
expenditures(c) to be between $18.0 million and $20.0 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, amortization of loan
origination costs, and amortization of net portfolio discounts and
premiums.
(c)
Principally for IT infrastructure and
sales center expansion/refurbishment. This does not include
expenditures for the acquisition of inventory, or resort-level
capital improvements which are paid by the homeowners
associations.
Year End 2014 Earnings Call
The company will be conducting a conference call to discuss the
full year and fourth quarter financial results at 5:00 p.m. Eastern
Time on February 19, 2014, available via webcast on the Company's
website at
http://investors.diamondresorts.com/phoenix.zhtml?p=irol-eventDetails&c=251836&eventID=5098362.
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 81171106; please dial in fifteen minutes early to
ensure a timely start. A call replay will be available from 8:00
p.m. Eastern Time on February 19, 2014 through February 26, 2014
and can be accessed by dialing (800) 585-8367 with conference ID
81171106.
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 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.
Reconciliation of GAAP to Non-GAAP Measures
We believe supplementing our consolidated financial statements
presented in accordance with U.S. GAAP with non-U.S. GAAP measures
provides investors with useful information regarding our liquidity
and short-term and long-term trends.
We define Adjusted EBITDA as our net income (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.
The following tables present Adjusted EBITDA for us and our
restricted subsidiaries, as calculated in accordance with, and for
purposes of covenants contained in, the Notes Indenture, reconciled
to each of (i) our net cash provided by (used in) operating
activities and (ii) our net income (loss) for the periods
presented.
Quarter Ended December
31, Year Ended December 31, 2013
2012 2013 2012 ($ in thousands) ($ in
thousands) Net cash provided by (used in) operating activities $
367 $ (739 ) $ (5,410 ) $ 24,600 Provision (benefit) for income
taxes 12,554 (957 ) 5,777 (14,310 ) Provision for uncollectible
Vacation Interest sales revenue(a) (14,939 ) (9,364 ) (44,670 )
(25,457 )
Amortization of capitalized financing
costs and original issue discounts(a)
(1,472 ) (1,551 ) (7,079 ) (6,293 ) Deferred income taxes(b)
(11,304 ) (602 ) (3,264 ) 13,010 Loss on foreign currency (c) (30 )
(211 ) (245 ) (113 ) Gain on mortgage purchase(a) 40 1 111 27
Unrealized gain on derivative instruments(d) 657 — — —
Unrealized loss on post-retirement benefit
plan(e)
(113 ) — (887 ) — Corporate interest expense(f) 14,105 21,704
72,215 77,422
Change in operating assets and liabilities
excluding acquisitions(g)
44,392 12,539 146,922 12,183 Vacation interest cost of sales(h)
11,244 14,975 56,695 32,150 Adjusted
EBITDA - Consolidated 55,501 35,795 220,165 113,219 Less: Adjusted
EBITDA - Unrestricted Subsidiaries(i) 9,308 5,624 30,238 8,957
Plus: Intercompany elimination(j) 7,339 5,472 29,095
19,058 Adjusted EBITDA - Diamond Resorts
International, Inc. and Restricted Subsidiaries $ 53,532 $
35,643 $ 219,022 $ 123,320 (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 and the PMR Service Companies Acquisition in 2013 and
the PMR Acquisition in 2012. (c) Represents net realized losses on
foreign exchange transactions settled at unfavorable exchange rates
and unrealized net losses resulting from the devaluation of foreign
currency-denominated assets and liabilities. (d) Represents the
effects of the changes in mark-to-market valuations of derivative
liabilities. (e) Represents unrealized losses on our
post-retirement benefit plan related to a collective labor
agreement entered into with the employees of our two resorts in St.
Maarten. (f) Represents corporate interest expense; does not
include interest expense related to non-recourse indebtedness
incurred by our special-purpose subsidiaries that is secured by our
VOI consumer loans. (g) Represents the net change in operating
assets and liabilities excluding acquisitions, as computed directly
from the statements of cash flows. Vacation Interest cost of sales
is included in the net changes in unsold Vacation Interests, net,
as presented in the statements of cash flows. (h) We record
Vacation Interest cost of sales using the relative sales value
method in accordance with ASC 978, "Real-estate Time-Sharing
Activities," which requires us to make significant estimates which
are subject to significant uncertainty. In determining the
appropriate amount of costs using the relative sales value method,
we rely on complex, multi-year financial models that incorporate a
variety of estimated inputs. These models are reviewed on a regular
basis, and the relevant estimates used in the models are revised
based upon historical results and management's new estimates. (i)
Represents the Adjusted EBITDA of unrestricted subsidiaries as
defined in, and calculated in accordance with, the Notes Indenture.
(j) 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.
Quarter Ended December 31,
Year Ended December 31, 2013 2012
2013 2012 ($ in thousands) ($ in thousands)
Net income (loss) $ 3,573 $ (11,748 ) $ (2,525 ) $ 13,643 Plus:
Corporate interest expense(a) 14,105 21,704 72,215 77,422 Provision
(benefit) for income taxes 12,554 (957 ) 5,777 (14,310 )
Depreciation and amortization(b) 8,273 5,478 28,185 18,857 Vacation
Interest cost of sales(c) 11,244 14,975 56,695 32,150 Loss on
extinguishment of debt(c) 2,221 — 15,604 — Impairments and other
non-cash write-offs(b) 308 619 1,587 1,009 Gain on the disposal of
assets(b) (309 ) (387 ) (982 ) (605 ) (Gain) adjustment on bargain
purchase from business combinations(d) (153 ) 2,024 (2,879 )
(20,610 ) Amortization of loan origination costs(b) 1,543 904 5,419
3,295 Amortization of net portfolio premium (discounts)(b) 104 (138
) 536 (953 ) Stock-based compensation(e) 2,038 3,321
40,533 3,321 Adjusted EBITDA - Consolidated 55,501
35,795 220,165 113,219 Less: Adjusted EBITDA - Unrestricted
Subsidiaries(f) 9,308 5,624 30,238 8,957 Plus: Adjusted EBITDA -
Intercompany elimination(g) 7,339 5,472 29,095
19,058 Adjusted EBITDA - Diamond Resorts International, Inc.
and Restricted Subsidiaries $ 53,532 $ 35,643 $
219,022 $ 123,320 (a) Corporate
interest expense does not include interest expense related to
non-recourse indebtedness incurred by our special-purpose vehicles
that is secured by our VOI consumer loans. (b) These items
represent non-cash charges/gains. (c) We record Vacation Interest
cost of sales using the relative sales value method in accordance
with ASC 978, which requires us to make significant estimates which
are subject to significant uncertainty. In determining the
appropriate amount of costs using the relative sales value method,
we rely on complex, multi-year financial models that incorporate a
variety of estimated inputs. These models are reviewed on a regular
basis, and the relevant estimates used in the models are revised
based upon historical results and management's new estimates. (d)
Represents the amount by which the fair value of the assets
acquired net of the liabilities assumed in the PMR Service
Companies Acquisition and the PMR Acquisition exceeded the
respective purchase prices in 2013 and 2012, respectively. (e)
Represents the non-cash charge related to stock-based compensation
due to stock options exercisable for approximately 6.6 million
shares of common stock we issued in connection with the IPO. (f)
Represents the Adjusted EBITDA of unrestricted subsidiaries as
defined in, and calculated in accordance with, the Notes Indenture.
(g)
Represents the elimination of revenues and
expenses related to agreements entered into between our restricted
and unrestricted subsidiaries. The significant 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.
The following tables present a reconciliation of (i)
advertising, sales and marketing expense as reported to
advertising, sales and marketing expense after excluding certain
non-cash items; (ii) general and administrative expense as reported
to general and administrative expense after excluding certain
non-cash and one-time items; and (iii) income (loss) before
provision (benefit) for income taxes to income (loss) before
provision (benefit) for income taxes after excluding certain
non-cash items for the periods presented below. We exclude these
non-cash items because management excludes them from its forecasts
and evaluation of our operational performance and because we
believe that the GAAP measures including these items are not
indicative of our core operating results.
Quarter Ended December
31, Year Ended December 31, 2013
2012 2013 2012 ($ in thousands) ($ in
thousands) Advertising, sales and marketing expense $ 76,783 $
53,774 $ 258,451 $ 178,365 Stock-based compensation (155 ) —
(2,104 ) —
Advertising, sales and marketing expense
excluding stock-based compensation
$ 76,628 $ 53,774 $ 256,347 $ 178,365
Quarter Ended December
31, Year Ended December 31, 2013
2012 2013 2012 ($ in thousands) ($ in
thousands) General and administrative expense $ 40,313 $ 28,078 $
145,925 $ 99,015 Stock-based compensation (1,655 ) (3,321 )
(37,044 ) (3,321 ) Final settlement for the FLRX litigation (10,500
) — (10,500 ) — Executive Termination — — —
(5,000 ) General and administrative expense after excluding
certain non-cash items $ 28,158 $ 24,757 $ 98,381
$ 90,694
Quarter Ended December 31, Year Ended December 31,
2013 2012 2013 2012 ($ in
thousands) ($ in thousands) Income (loss) before provision
(benefit) for income taxes $ 16,127 $ (12,705 ) $ 3,252 $
(667 ) Plus: Non-cash charge from stock-based compensation 2,038
3,321 40,533 3,321 Non-cash charge from early extinguishment of
debt 2,221 — 6,570 — Non-cash charge from final settlement related
to the FLRX litigation 5,500 — 5,500 — Cash charge from early
extinguishment of debt — — 9,034 Cash charge from final settlement
related to the FLRX litigation 5,000 — 5,000 — Cash charge related
to the Executive Termination — — — 5,000 (Gain on) adjustment to
bargain purchase (153 ) 2,024 (2,879 ) (20,610 ) Income
(loss) before provision (benefit) for income taxes after excluding
certain items $ 30,733 $ (7,360 ) $ 67,010 $ (12,956
)
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.
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS BY BUSINESS
SEGMENT For the Quarters Ended December 31, 2013 and
2012 (In thousands)
Quarter Ended December 31,
2013 Quarter Ended December 31, 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
$ 34,934 $ — $ — $ 34,934 $ 29,363 $ — $ — $ 29,363 Consolidated
resort operations 9,047 — — 9,047 8,234 — — 8,234 Vacation Interest
sales, net of
provision of $0, $14,939, $0,
$14,939, $0, $9,364, $0 and $9,364,
respectively
— 138,798 — 138,798 — 90,334 — 90,334 Interest — 15,580 305 15,885
— 13,754 398 14,152 Other 1,137 11,060 —
12,197 760 7,719 — 8,479 Total
revenues 45,118 165,438 305 210,861
38,357 111,807 398 150,562
Costs and
Expenses: Management and member services 9,955 — — 9,955 9,733
— — 9,733 Consolidated resort operations 8,164 — — 8,164 7,691 — —
7,691 Vacation Interest cost of sales — 11,244 — 11,244 — 14,975 —
14,975 Advertising, sales and marketing — 76,783 — 76,783 — 53,774
— 53,774 Vacation Interest carrying cost, net — 12,206 — 12,206 —
9,689 — 9,689 Loan portfolio 329 1,747 — 2,076 227 2,079 — 2,306
Other operating — 5,588 — 5,588 — 3,088 — 3,088 General and
administrative — — 40,313 40,313 — — 28,078 28,078 Depreciation and
amortization — — 8,273 8,273 — — 5,478 5,478 Interest — 3,960
14,105 18,065 — 4,495 21,704 26,199 Loss on extinguishment of debt
— — 2,221 2,221 — — — — Impairments and other write-offs — — 308
308 — — 619 619 Gain on disposal of assets — — (309 ) (309 ) — —
(387 ) (387 ) (Gain) adjustment on bargain
purchase from business combinations
— — (153 ) (153 ) — — 2,024
2,024 Total costs and expenses 18,448 111,528
64,758 194,734 17,651 88,100 57,516
163,267 Income (loss) before provision (benefit) for
income taxes 26,670 53,910 (64,453 ) 16,127 20,706 23,707 (57,118 )
(12,705 ) Provision (benefit) for income taxes — —
12,554 12,554 — — (957 ) (957 ) Net
income (loss) $ 26,670 $ 53,910 $ (77,007 ) $ 3,573
$ 20,706 $ 23,707 $ (56,161 ) $ (11,748 )
DIAMOND RESORTS INTERNATIONAL, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS BY BUSINESS SEGMENT For the Years Ended December
31, 2013 and 2012 (In thousands)
Year Ended
December 31, 2013 Year Ended December 31, 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
$ 131,238 $ — $ — $ 131,238 $ 114,937 $ — $ — $ 114,937
Consolidated resort operations 35,512 — — 35,512 33,756 — — 33,756
Vacation Interest sales, net of
provision of $0, $44,670, $0,
$44,670, $0, $25,457, $0 and $25,457,
respectively
— 464,613 — 464,613 — 293,098 — 293,098 Interest — 55,601 1,443
57,044 — 51,769 1,437 53,206 Other 8,673 32,708 —
41,381 4,595 24,076 — 28,671
Total revenues 175,423 552,922 1,443
729,788 153,288 368,943 1,437 523,668
Costs and Expenses: Management and member services
37,907 — — 37,907 35,330 — — 35,330 Consolidated resort operations
34,333 — — 34,333 30,311 — — 30,311 Vacation Interest cost of sales
— 56,695 — 56,695 — 32,150 — 32,150 Advertising, sales and
marketing — 258,451 — 258,451 — 178,365 — 178,365 Vacation Interest
carrying cost, net — 41,347 — 41,347 — 36,363 — 36,363 Loan
portfolio 1,111 8,520 — 9,631 858 8,628 — 9,486 Other operating —
12,106 — 12,106 — 8,507 — 8,507 General and administrative — —
145,925 145,925 — — 99,015 99,015 Depreciation and amortization — —
28,185 28,185 — — 18,857 18,857 Interest — 16,411 72,215 88,626 —
18,735 77,422 96,157 Loss on extinguishment of debt — — 15,604
15,604 — — — — Impairments and other write-offs — — 1,587 1,587 — —
1,009 1,009 Gain on disposal of assets — — (982 ) (982 ) — — (605 )
(605 ) Gain on bargain purchase from
business combinations
— — (2,879 ) (2,879 ) — — (20,610 )
(20,610 ) Total costs and expenses 73,351 393,530
259,655 726,536 66,499 282,748 175,088
524,335 Income (loss) before provision (benefit) for
income taxes 102,072 159,392 (258,212 ) 3,252 86,789 86,195
(173,651 ) (667 ) Provision (benefit) for income taxes — —
5,777 5,777 — — (14,310 )
(14,310 ) Net income (loss) $ 102,072 $ 159,392 $
(263,989 ) $ (2,525 ) $ 86,789 $ 86,195 $ (159,341 )
$ 13,643
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 December 31, 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.
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS For the Quarters
Ended December 31, 2013 and 2012 (In thousands)
(Unaudited)
Quarter Ended December 31, 2013 Quarter
Ended December 31, 2012 Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Revenues: Management
and member services $ 33,597 $ 6,160 $ (4,823 ) $ 34,934 $ 29,166 $
3,859 $ (3,662 ) $ 29,363 Consolidated resort operations 8,191 856
— 9,047 6,922 1,312 — 8,234
Vacation Interest sales, net of provision
(adjustment) of $14,307, $632, $0, $14,939, $9,807, $(443), $0 and
$9,364, respectively
128,337 10,461 — 138,798 80,714 9,620 — 90,334 Interest 15,267 618
— 15,885 11,061 3,091 — 14,152 Other 12,973 12,032
(12,808 ) 12,197 8,885 9,679 (10,085 ) 8,479
Total revenues 198,365 30,127 (17,631 )
210,861 136,748 27,561 (13,747 ) 150,562
Costs and Expenses: Management and member services
10,890 2,834 (3,769 ) 9,955 10,489 2,775 (3,531 ) 9,733
Consolidated resort operations 7,697 467 — 8,164 6,417 1,274 —
7,691 Vacation Interest cost of sales 12,300 (1,056 ) — 11,244
14,043 932 — 14,975 Advertising, sales and marketing 71,971 5,852
(1,040 ) 76,783 49,833 4,906 (965 ) 53,774 Vacation Interest
carrying cost, net 8,835 4,321 (950 ) 12,206 7,208 3,135 (654 )
9,689 Loan portfolio 2,050 464 (438 ) 2,076 2,279 893 (866 ) 2,306
Other operating 6,019 3,664 (4,095 ) 5,588 3,376 1,971 (2,259 )
3,088 General and administrative 37,285 3,028 — 40,313 22,401 5,677
— 28,078 Depreciation and amortization 4,088 4,185 — 8,273 2,438
3,040 — 5,478 Interest 13,015 5,050 — 18,065 16,858 9,341 — 26,199
Loss on extinguishment of debt 2,221 — — 2,221 — — — — Impairments
and other write-offs 308 — — 308 619 — — 619 (Gain) loss on
disposal of assets (309 ) — — (309 ) (418 ) 31 — (387 )
(Gain) adjustment on bargain purchase from
business combinations
— (153 ) — (153 ) — 2,024 —
2,024 Total costs and expenses 176,370 28,656
(10,292 ) 194,734 135,543 35,999 (8,275 )
163,267
Income (loss) before provision (benefit)
for income taxes
21,995 1,471 (7,339 ) 16,127 1,205 (8,438 ) (5,472 ) (12,705 )
Provision (benefit) for income taxes
11,718 836 — 12,554 (1,615 ) 658
— (957 )
Net income (loss)
$ 10,277 $ 635 $ (7,339 ) $ 3,573 $ 2,820
$ (9,096 ) $ (5,472 ) $ (11,748 )
DIAMOND
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATING
STATEMENTS OF OPERATIONS For the Years Ended December 31,
2013 and 2012 (In thousands) (Unaudited)
Year
Ended December 31, 2013 Year Ended December 31, 2012
Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Revenues: Management
and member services $ 126,768 $ 22,206 $ (17,736 ) $ 131,238 $
114,189 $ 13,032 $ (12,284 ) $ 114,937 Consolidated resort
operations 30,476 5,036 — 35,512 28,352 5,404 — 33,756
Vacation Interest sales, net of provision
(adjustment) of $43,237, $1,433, $0, $44,670, $27,080, $(1,623), $0
and $25,457, respectively
429,981 34,632 — 464,613 270,490 22,608 — 293,098 Interest 50,096
6,948 — 57,044 39,914 13,292 — 53,206 Other 45,857
45,299 (49,775 ) 41,381 32,542
28,053 (31,924 ) 28,671 Total
revenues 683,178 114,121 (67,511 ) 729,788
485,487 82,389 (44,208 ) 523,668
Costs and
Expenses: Management and member services 41,175 10,904 (14,172
) 37,907 36,884 8,723 (10,277 ) 35,330 Consolidated resort
operations 29,863 4,470 — 34,333 25,366 4,945 — 30,311 Vacation
Interest cost of sales 55,439 1,256 — 56,695 30,292 1,858 — 32,150
Advertising, sales and marketing 239,367 22,586 (3,502 ) 258,451
168,905 11,413 (1,953 ) 178,365 Vacation Interest carrying cost,
net 31,010 14,393 (4,056 ) 41,347 30,083 8,843 (2,563 ) 36,363 Loan
portfolio 9,486 2,660 (2,515 ) 9,631 9,239 3,036 (2,789 ) 9,486
Other operating 14,721 11,556 (14,171 ) 12,106 10,685 5,390 (7,568
) 8,507 General and administrative 131,369 14,556 — 145,925 74,324
24,691 — 99,015 Depreciation and amortization 13,286 14,899 —
28,185 9,231 9,626 — 18,857 Interest 60,999 27,627 — 88,626 67,392
28,765 — 96,157 Loss on extinguishment of debt 10,664 4,940 —
15,604 — — — — Impairments and other write-offs 387 1,200 — 1,587
1,009 — — 1,009 (Gain) loss on disposal of assets (983 ) 1 — (982 )
(636 ) 31 — (605 )
Gain on bargain purchase from business
combinations
— (2,879 ) — (2,879 ) —
(20,610 ) — (20,610 ) Total costs and
expenses 636,783 128,169 (38,416 ) 726,536
462,774 86,711 (25,150 ) 524,335 Income (loss)
before provision (benefit)
for income taxes
46,395 (14,048 ) (29,095 ) 3,252 22,713 (4,322 ) (19,058 ) (667 )
Provision (benefit) for income taxes
4,772 1,005 — 5,777
(1,406 ) (12,904 ) — (14,310 )
Net income (loss) $ 41,623 $ (15,053 ) $ (29,095 ) $ (2,525
) $ 24,119 $ 8,582 $ (19,058 ) $ 13,643
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS As of December 31, 2013 and
December 31, 2012 (In thousands, except share data)
(Unaudited) December 31, 2013
December 31, 2012 Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Assets: Cash
and cash equivalents $ 26,678 $ 9,266 $ — $ 35,944 $ 16,963 $ 4,098
$ — $ 21,061 Cash in escrow and restricted cash 90,363 1,868 —
92,231 40,785 1,526 — 42,311
Mortgages and contracts receivable, net of
allowance of $98,549, $7,041, $0, $105,590, $61,067, $22,717, $0,
and $83,784, respectively
388,538 16,915 1 405,454 266,303 46,633 (4 ) 312,932
Due from related parties, net
261,422 11,463 (226,623 ) 46,262 45,428 4,510 (26,943 ) 22,995
Other receivables, net 50,422 4,166 — 54,588 40,292 5,757 — 46,049
Income tax receivable 25 16,706 (16,706 ) 25 927 — — 927 Prepaid
expenses and other assets, net 53,388 14,460 410 68,258 49,512
9,409 (897 ) 58,024 Unsold Vacation Interests, net 276,717 72,750
(51,357 ) 298,110 263,493 74,635 (22,261 ) 315,867 Property and
equipment, net 40,359 20,037 — 60,396 33,664 21,456 — 55,120 Assets
held for sale 1,207 9,455 — 10,662 5,070 154 — 5,224 Intangible
assets, net 109,183 120,082 — 229,265
30,914 81,584 — 112,498 Total assets $
1,298,302 $ 297,168 $ (294,275 ) $ 1,301,195 $
793,351 $ 249,762 $ (50,105 ) $ 993,008
Liabilities and Stockholders' equity
(deficit):
Accounts payable $ 11,798 $ 2,831 $ — $ 14,629 $ 13,467 $ 2,252 $ —
$ 15,719 Due to related parties, net 15,750 263,377 (234,483 )
44,644 42,632 57,179 (35,607 ) 64,204 Accrued liabilities 106,570
10,993 (128 ) 117,435 91,511 16,004 (1,064 ) 106,451 Income taxes
payable 1,069 — — 1,069 701 — — 701 Deferred income taxes 27,715
11,395 (16,706 ) 22,404 — — — — Deferred revenues 103,745 7,147 —
110,892 92,490 1,343 — 93,833
Senior Secured Notes, net of unamortized
original issue discount of $6,548, $0, $0, $6,548, $8,509, $0, $0,
and $8,509, respectively
367,892 — — 367,892 416,491 — — 416,491
Securitization notes and Funding
Facilities, net of unamortized original issue discount for $226,
$0, $0, $226, $753, $0, $0, $753, respectively
386,501 4,766 — 391,267 209,450 46,852 — 256,302 Revolving credit
facility — — — — — — — — Derivative liabilities — — — — — — — —
Notes payable 3,302 19,848 — 23,150
3,238 134,668 — 137,906 Total
liabilities 1,024,342 320,357 (251,317 ) 1,093,382
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 463,194 9,675
(9,675 ) 463,194 155,027 9,675 (9,675 ) 155,027 Accumulated deficit
(173,722 ) (32,416 ) (33,821 ) (239,959 ) (215,433 ) (17,563 )
(4,438 ) (237,434 )
Accumulated other comprehensive (loss)
income
(16,267 ) (448 ) 538 (16,177 ) (16,764 ) (648 ) 679
(16,733 )
Total stockholders' equity (deficit)
273,960 (23,189 ) (42,958 ) 207,813 (76,629 ) (8,536
) (13,434 ) (98,599 )
Total liabilities and stockholders' equity
(deficit)
$ 1,298,302 $ 297,168 $ (294,275 ) $ 1,301,195
$ 793,351 $ 249,762 $ (50,105 ) $ 993,008
DIAMOND RESORTS INTERNATIONAL, INC. AND
SUBSIDIARIES CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Quarters Ended December 31, 2013 and 2012 (In
thousands) (Unaudited)
Quarter Ended December 31,
2013 Quarter Ended December 31, 2012 Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Operating Activities: Net income
(loss) $ 10,277 $ 635 $ (7,339 ) $ 3,573 $ 2,820 $ (9,096 ) $
(5,472 ) $ (11,748 ) Adjustments to reconcile net income
(loss) to net cash (used in) provided
by operating activities:
Provision (benefit) for uncollectible Vacation Interest sales
revenue 14,307 632 — 14,939 9,807 (443 ) — 9,364 Amortization of
capitalized financing
costs and original issue discounts
1,433 39 — 1,472 1,463 88 — 1,551 Amortization of capitalized loan
origination costs and net portfolio
discounts (premiums)
1,576 71 — 1,647 835 (69 ) — 766 Depreciation and amortization
4,088 4,185 — 8,273 2,438 3,040 — 5,478 Stock-based compensation
2,038 — — 2,038 3,321 — — 3,321 Loss on extinguishment of debt
2,221 — — 2,221 — — — — Impairments and other write-offs 308 — —
308 619 — — 619 (Gain) loss on disposal of assets (309 ) — — (309 )
(418 ) 31 — (387 ) (Gain) adjustment on bargain purchase from
business combinations
— (153 ) — (153 ) — 2,024 — 2,024 Deferred income taxes 10,923
11,280 (10,899 ) 11,304 — 602 — 602 (Gain) loss on foreign currency
exchange (14 ) 44 — 30 142 69 — 211 (Gain) on mortgage repurchase —
(40 ) — (40 ) (1 ) — — (1 ) Unrealized gain on derivative
instruments (657 ) — — (657 ) — — — — Unrealized loss on
post-retirement benefit plan 113 — — 113 — — — — Changes in
operating assets and
liabilities excluding acquisitions:
Mortgages and contracts receivable (45,106 ) 742 (1 ) (44,365 )
(25,834 ) 5,145 — (20,689 ) Due from related parties, net (11,960 )
(9,420 ) 19,859 (1,521 ) (26,323 ) (495 ) 10,388 (16,430 ) Other
receivables, net (22,865 ) 1,027 — (21,838 ) (22,230 ) 1,094 —
(21,136 ) Prepaid expenses and other assets, net 19,512 3,448
(1,168 ) 21,792 13,250 1,192 (65 ) 14,377 Unsold Vacation
Interests, net 817 (3,431 ) 7,339 4,725 2,318 1,611 6,320 10,249
Accounts payable (449 ) (3,565 ) — (4,014 ) 371 (3,185 ) — (2,814 )
Due to related parties, net (29,027 ) 10,126 (19,706 ) (38,607 )
(13,363 ) (1,176 ) (11,236 ) (25,775 ) Accrued liabilities 20,091
(3,395 ) 1,016 17,712 20,706 (1,026 ) 65 19,745 Income taxes
payable (34 ) (10,899 ) 10,899 (34 ) (1,186 ) — — (1,186 ) Deferred
revenues 20,954 804 — 21,758 31,433
(313 ) — 31,120 Net cash (used in) provided by
operating activities
(1,763 ) 2,130 — 367 168 (907 ) —
(739 ) Investing activities: Property and equipment
capital expenditures (2,471 ) 59 — (2,412 ) (2,989 ) (73 ) — (3,062
) Cash acquired in connection with the
Island One Acquisition
(156 ) — — (156 ) — — — — Purchase of assets in connection
with
the Pacific Monarch and Post Net of :
$0, $0, $0, $0, $0, $0, $0, and $0,
respectively cash acquired
— 341 — 341 — — — — Purchase of assets in connection with
the Aegean Blue Acquisition, net of
cash
acquired of $0, $0, $0, $0, $0, $2,072,
$0,
and $2,072, respectively
— — — — — (4,471 ) — (4,471 ) Proceeds from sale of assets 1,001
— — 1,001 606 — —
606 Net cash (used in) provided by investing
activities
$ (1,626 ) $ 400 $ — $ (1,226 ) $ (2,383 ) $ (4,544 )
$ — $ (6,927 )
DIAMOND RESORTS
INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATING
STATEMENTS OF CASH FLOWS—Continued For the Quarters Ended
December 31, 2013 and 2012 (Unaudited) (In
thousands)
Quarter Ended December 31, 2013 Quarter
Ended December 31, 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 $ (31,904 ) $ 849 $ — $ (31,055
) $ (2,854 ) $ 1,226 $ — $ (1,628 ) Proceeds from issuance of
securitization notes and Funding
Facilities
286,804 — — 286,804 35,357 1,586 — 36,943 Proceeds from issuance of
notes
payable
— 1,475 — 1,475 — 15,403 — 15,403 Payments on revolving credit
facility (15,000 ) — — (15,000 ) — — — — Payments on securitization
notes and
Funding Facilities
(224,956 ) (932 ) — (225,888 ) (28,433 ) (3,973 ) — (32,406 )
Payments on senior secured notes — — — — — — — — Payments on notes
payable (3,704 ) (1,686 ) — (5,390 ) (2,837 ) (5,085 ) — (7,922 )
Payments of debt issuance costs (3,833 ) — — (3,833 ) (89 ) 100 —
11 Proceeds from issuance of Common
Stock, net of related costs
(373 ) — — (373 ) — — — — Payments of costs related to issuance
of common and preferred units
— — — — 35 — — 35
Net cash provided by (used in)
financing activities
7,034 (294 ) — 6,740 1,179 9,257
— 10,436 Net increase (decrease) in cash and
cash equivalents
3,645 2,236 — 5,881 (1,036 ) 3,806 — 2,770 Effect of changes in
exchange rates
on cash and cash equivalents
165 22 — 187 201 (157 ) — 44 Cash and cash equivalents, beginning
of period
22,868 7,008 — 29,876 17,798 449
— 18,247 Cash and cash equivalents, end of
period $ 26,678 $ 9,266 $ — $ 35,944 $
16,963 $ 4,098 $ — $ 21,061
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid for interest $ 3,935 $ 1,191 $ — $
5,126 $ 3,209 $ 5,059 $ — $ 8,268
Cash paid for taxes, net of cash tax refunds (cash tax
refunds, net of cash paid for taxes) $ 1,242 $ 87 $ —
$ 1,329 $ (432 ) $ 56 $ — $ (376 )
DIAMOND RESORTS INTERNATIONAL, INC. AND
SUBSIDIARIES CONSOLIDATING STATEMENTS OF CASH
FLOWS—Continued For the Quarters Ended December 31, 2013 and
2012 (Unaudited) (In thousands)
Quarter Ended
December 31, 2013 Quarter Ended December 31, 2012
Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total SUPPLEMENTAL SCHEDULE
OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Insurance premiums
financed through issuance of notes payable $ 3,658 $ — $ — $ 3,658
$ 2,931 $ — $ — $ 2,931 Assets held for sale reclassified to
unsold vacation interests
$ 3,995 $ — $ — $ 3,995 $ — $ — $ — $ — Unsold Vacation Interests,
net
reclassified to assets held for sale
$ — $ 3,600 $ — $ 3,600 $ 1,784 $ — $ — $ 1,784 Other receivables
reclassified to
assets held for sale
$ — $ — $ — $ — $ 54 $ — $ — $ 54 Management contracts reclassified
to assets held for sale $ — $ — $ — $ — $ 205 $ — $ — $ 205
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS For the Years
Ended December 31, 2013 and 2012 (In thousands)
(Unaudited)
Year Ended December 31, 2013 Year Ended
December 31, 2012 Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Operating Activities: Net income
(loss) $ 41,623 $ (15,053 ) $ (29,095 ) $ (2,525 ) $ 24,119 $ 8,582
$ (19,058 ) $ 13,643 Adjustments to reconcile net income
(loss) to net cash (used in) provided
by operating activities:
Provision (benefit) for uncollectible Vacation Interest sales
revenue 43,237 1,433 — 44,670 27,080 (1,623 ) — 25,457 Amortization
of capitalized financing
costs and original issue discounts
6,293 786 — 7,079 5,626 667 — 6,293 Amortization of capitalized
loan
origination costs and net portfolio
discounts (premiums)
5,391 564 — 5,955 3,117 (775 ) — 2,342 Depreciation and
amortization 13,286 14,899 — 28,185 9,231 9,626 — 18,857
Stock-based compensation 40,533 — — 40,533 3,321 — — 3,321 Loss on
extinguishment of debt 10,664 4,940 — 15,604 — — — — Impairments
and other write-offs 387 1,200 — 1,587 1,009 — — 1,009 (Gain) loss
on disposal of assets (983 ) 1 — (982 ) (636 ) 31 — (605 ) Gain on
bargain purchase from
business combinations
— (2,879 ) — (2,879 ) — (20,610 ) — (20,610 ) Deferred income taxes
10,312 9,658 (16,706 ) 3,264 — (13,010 ) — (13,010 ) Loss on
foreign currency exchange 124 121 — 245 44 69 — 113 Loss (gain) on
mortgage repurchase 7 (118 ) — (111 ) (27 ) — — (27 ) Unrealized
loss on post-retirement benefit plan 887 — — 887 — — — — Changes in
operating assets and
liabilities excluding acquisitions:
Mortgages and contracts receivable (156,681 ) 27,852 (5 ) (128,834
) (68,662 ) 16,948 (2 ) (51,716 ) Due from related parties, net
(203,169 ) (7,595 ) 199,680 (11,084 ) (17,098 ) (147 ) 19,123 1,878
Other receivables, net (8,881 ) 2,973 — (5,908 ) (7,447 ) (328 ) 19
(7,756 ) Prepaid expenses and other assets, net 3,064 (8,525 )
(1,060 ) (6,521 ) (7,039 ) 2,830 (86 ) (4,295 ) Unsold Vacation
Interests, net (8,412 ) (8,589 ) 29,096 12,095 (36,948 ) (6,134 )
19,057 (24,025 ) Accounts payable (6,488 ) 57 — (6,431 ) 1,641
(2,143 ) — (502 ) Due to related parties, net (27,848 ) 206,754
(199,680 ) (20,774 ) 27,716 14,437 (19,132 ) 23,021 Accrued
liabilities 5,828 (2,260 ) 1,064 4,632 22,221 9,886 79 32,186
Income taxes payable 1,260 (16,706 ) 16,706 1,260 (3,232 ) — —
(3,232 ) Deferred revenues 8,849 5,794 —
14,643 21,294 964 — 22,258 Net
cash (used in) provided by
operating activities
(220,717 ) 215,307 — (5,410 ) 5,330 19,270
— 24,600 Investing activities: Property
and equipment capital expenditures (14,654 ) (550 ) — (15,204 )
(13,994 ) (341 ) — (14,335 ) Cash acquired in connection with the
Island One Acquisition
569 — — 569 — — — — Purchase of assets in connection with
the Pacific Monarch and Post Net of :
$0, $0, $0, $0, $0, $0, $0, and $0,
respectively cash acquired
— (47,417 ) — (47,417 ) — (51,635 ) — (51,635 )
Purchase of assets in connection with
the Aegean Blue Acquisition, net of
cash
acquired of $0, $0, $0, $0, $0, $2,072,
$0, and $2,072, respectively
— — — — — (4,471 ) — (4,471 ) Proceeds from sale of assets 4,127
— — 4,127 1,103 — —
1,103 Net cash used in investing
activities
$ (9,958 ) $ (47,967 ) $ — $ (57,925 ) $ (12,891 ) $ (56,447
) $ — $ (69,338 )
DIAMOND RESORTS
INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATING
STATEMENTS OF CASH FLOWS—Continued For the Years Ended
December 31, 2013 and 2012 (Unaudited) (In
thousands)
Year Ended December 31, 2013 Year Ended
December 31, 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 $ (48,400 ) $ (325 ) $ — $
(48,725 ) $ (7,375 ) $ 994 $ — $ (6,381 ) Proceeds from issuance of
revolving credit facility 15,000 — — 15,000 — — — — Proceeds from
issuance of
securitization notes and Funding
Facilities
551,964 713 — 552,677 116,354 3,453 — 119,807 Proceeds from
issuance of notes
payable
— 5,357 — 5,357 1,124 79,541 — 80,665 Payments on revolving credit
facility (15,000 ) — — (15,000 ) — — — — Payments on securitization
notes and
Funding Facilities
(384,673 ) (42,799 ) — (427,472 ) (95,370 ) (19,331 ) — (114,701 )
Payments on senior secured notes (50,560 ) — — (50,560 ) — — — —
Payments on notes payable (12,113 ) (125,109 ) — (137,222 ) (10,263
) (21,004 ) — (31,267 ) Payments of debt issuance costs (9,980 )
(16 ) — (9,996 ) (113 ) (2,470 ) — (2,583 ) Proceeds from issuance
of Common
Stock, net of related costs
204,332 — — 204,332 — — — — Repurchase of remaining outstanding
warrants (10,346 ) — — (10,346 ) — — —
— Net cash provided by (used in)
financing activities
240,224 (162,179 ) — 78,045 4,357
41,183 — 45,540 Net increase (decrease)
in cash and
cash equivalents
9,549 5,161 — 14,710 (3,204 ) 4,006 — 802 Effect of changes in
exchange rates
on cash and cash equivalents
166 7 — 173 519 (157 ) — 362 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 $ 26,678 $ 9,266 $ — $ 35,944 $
16,963 $ 4,098 $ — $ 21,061
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid for interest $ 59,440 $ 20,113 $ — $
79,553 $ 64,276 $ 16,091 $ — $ 80,367
Cash paid for taxes, net of
cash tax refunds
$ 1,104 $ 237 $ — $ 1,341 $ 1,960
$ — $ — $ 1,960 Purchase of
assets from Island One,
PMR Service Cos (2013) and PMR (2012):
Fair value of assets acquired based
on valuation reports
$ 81,281 $ 52,554 $ — $ 133,835 $ — $ 103,780 $ — $ 103,780 Gain on
bargain purchase
recognized
— (2,879 ) — (2,879 ) — (20,741 ) — (20,741 ) Goodwill acquired
30,632 — — 30,632 — — — — Cash paid 569 (47,417 ) — (46,848 ) —
(56,106 ) — (56,106 ) DRII common stock issued (73,307 ) — —
(73,307 ) — — — — Deferred tax liability (17,403 ) (1,737 ) —
(19,140 ) — (13,010 ) — (13,010 ) Liabilities
assumed $ 21,772 $ 521 $ — $ 22,293 $ —
$ 13,923 $ — $ 13,923
DIAMOND RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS—Continued For the
Years Ended December 31, 2013 and 2012 (Unaudited)
(In thousands)
Year Ended December 31, 2013 Year
Ended December 31, 2012 Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total Diamond
and Restricted
Subsidiaries
Unrestricted
Subsidiaries
Elimination Total SUPPLEMENTAL SCHEDULE
OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Insurance premiums
financed through issuance of notes payable $ 11,480 $ — $ — $
11,480 $ 10,504 $ — $ — $ 10,504 Unsold Vacation Interests, net
reclassified to assets held for sale
$ 469 $ 9,301 $ — $ 9,770 $ 431 $ — $ — $ 431 Other receivables
reclassified to
assets held for sale
$ — $ — $ — $ — $ 54 $ — $ — $ 54 Management contracts reclassified
to assets held for sale $ — $ — $ — $ — $ 13 $ — $ — $ 13
Media:Diamond Resorts International®Stevi Wara,
702-823-7069media@diamondresorts.comorInvestors:Sloane and
CompanyJoshua Hochberg, 212-486-9500jhochberg@sloanepr.com
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