Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Feb. 23, 2015 | Jun. 30, 2014 | |
Document and Entity Information | |||
Entity Registrant Name | Interval Leisure Group, Inc. | ||
Entity Central Index Key | 1434620 | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $856,476,607 | ||
Entity Common Stock, Shares Outstanding | 57,100,820 | ||
Document Fiscal Year Focus | 2014 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED_STATEMENTS_OF_INC
CONSOLIDATED STATEMENTS OF INCOME (USD $) | 12 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
CONSOLIDATED STATEMENTS OF INCOME | |||
Revenue | $614,373 | $501,215 | $473,339 |
Cost of sales (exclusive of depreciation and amortization shown separately below) | 264,481 | 179,510 | 168,259 |
Gross profit | 349,892 | 321,705 | 305,080 |
Selling and marketing expense | 61,615 | 53,722 | 53,559 |
General and administrative expense | 133,170 | 112,574 | 105,270 |
Amortization expense of intangibles | 12,301 | 8,133 | 23,041 |
Depreciation expense | 15,712 | 14,531 | 13,429 |
Operating income | 127,094 | 132,745 | 109,781 |
Other income (expense): | |||
Interest income | 412 | 362 | 1,792 |
Interest expense | -7,149 | -6,172 | -25,629 |
Other income (expense), net | 2,012 | 259 | -2,456 |
Loss on extinguishment of debt | -18,527 | ||
Equity in earnings from unconsolidated entities | 4,630 | ||
Total other expense, net | -95 | -5,551 | -44,820 |
Earnings before income taxes and noncontrolling interests | 126,999 | 127,194 | 64,961 |
Income tax provision | -45,051 | -45,412 | -24,252 |
Net Income | 81,948 | 81,782 | 40,709 |
Net income attributable to noncontrolling interests | -3,018 | -565 | -7 |
Net income attributable to common stockholders | $78,930 | $81,217 | $40,702 |
Earnings per share attributable to common stockholders: | |||
Basic (in dollars per share) | $1.38 | $1.42 | $0.72 |
Diluted (in dollars per share) | $1.36 | $1.40 | $0.71 |
Weighted average number of shares of common stock outstanding: | |||
Basic (in shares) | 57,343 | 57,243 | 56,549 |
Diluted (in shares) | 57,953 | 57,832 | 57,248 |
Dividends declared per share of common stock (in dollars per share) | $0.44 | $0.33 | $0.50 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income | $81,948 | $81,782 | $40,709 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency translation adjustments | -11,725 | 1,800 | 3,285 |
Total comprehensive income, net of tax | 70,223 | 83,582 | 43,994 |
Less: Net income attributable to noncontrolling interests, net of tax | -3,018 | -565 | -7 |
Less: Other comprehensive loss (income) attributable to noncontrolling interests | 2,322 | -796 | |
Total comprehensive loss (income) attributable to noncontrolling interests | -696 | -1,361 | -7 |
Comprehensive income attributable to common stockholders | $69,527 | $82,221 | $43,987 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
ASSETS | ||
Cash and cash equivalents | $80,493 | $48,462 |
Restricted cash and cash equivalents | 19,984 | 7,421 |
Accounts receivable, net of allowance of $193 and $290, respectively | 45,850 | 39,819 |
Vacation ownership mortgages receivable, net | 7,169 | |
Vacation ownership inventory | 54,061 | |
Deferred income taxes | 16,441 | 17,714 |
Deferred membership costs | 8,716 | 9,828 |
Prepaid income taxes | 22,029 | 11,211 |
Prepaid expenses and other current assets | 30,230 | 24,107 |
Total current assets | 284,973 | 158,562 |
Vacation ownership mortgages receivable, net | 29,333 | |
Investments in unconsolidated entities | 33,486 | |
Property and equipment, net | 86,601 | 59,556 |
Goodwill | 562,250 | 540,839 |
Intangible assets, net | 268,875 | 225,864 |
Deferred membership costs | 10,948 | 10,741 |
Deferred income taxes | 112 | 3,820 |
Other non-current assets | 51,041 | 25,237 |
TOTAL ASSETS | 1,327,619 | 1,024,619 |
LIABILITIES: | ||
Accounts payable, trade | 39,082 | 13,793 |
Deferred revenue | 89,850 | 92,503 |
Accrued compensation and benefits | 28,891 | 23,214 |
Member deposits | 8,222 | 8,977 |
Accrued expenses and other current liabilities | 47,923 | 51,071 |
Total current liabilities | 213,968 | 189,558 |
Long-term debt | 488,000 | 253,000 |
Other long-term liabilities | 18,247 | 14,156 |
Deferred revenue | 93,730 | 100,494 |
Deferred income taxes | 92,869 | 90,452 |
Total liabilities | 906,814 | 647,660 |
Redeemable noncontrolling interest | 457 | 426 |
Commitments and contingencies | ||
EQUITY: | ||
Preferred stock-authorized 25,000,000 shares, of which 100,000 shares are designated Series A Junior Participating Preferred Stock; $0.01 par value; none issued and outstanding | ||
Common stock-authorized 300,000,000 shares; $.01 par value; issued 59,463,200 and 59,124,834 shares, respectively | 595 | 591 |
Treasury stock-2,363,324 and 1,697,360 shares at cost, respectively | -35,034 | -20,913 |
Additional paid-in capital | 201,834 | 191,106 |
Retained earnings | 235,945 | 182,935 |
Accumulated other comprehensive loss | -19,297 | -9,894 |
Total ILG stockholders' equity | 384,043 | 343,825 |
Noncontrolling interests | 36,305 | 32,708 |
Total equity | 420,348 | 376,533 |
TOTAL LIABILITIES AND EQUITY | $1,327,619 | $1,024,619 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Accounts receivable, allowance (in dollars) | $193 | $290 |
Preferred stock, authorized shares | 25,000,000 | 25,000,000 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, authorized shares | 300,000,000 | 300,000,000 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, issued shares | 59,463,200 | 59,124,834 |
Treasury stock, shares | 2,363,324 | 1,697,360 |
Series A Junior Participating Preferred Stock | ||
Preferred stock, authorized shares | 100,000 | 100,000 |
CONSOLIDATED_STATEMENTS_OF_EQU
CONSOLIDATED STATEMENTS OF EQUITY (USD $) | Noncontrolling Interest | Total ILG Stockholders' Equity | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total |
In Thousands, except Share data, unless otherwise specified | ||||||||
Balance at Dec. 31, 2011 | $248,685 | $577 | ($20,913) | $173,518 | $109,686 | ($14,183) | $248,685 | |
Balance (in shares) at Dec. 31, 2011 | 57,712,621 | 1,697,360 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income attributable to common stockholders | 40,702 | 40,702 | 40,702 | |||||
Other comprehensive income (loss), net of tax | 3,285 | 3,285 | 3,285 | |||||
Non-cash compensation expense | 10,931 | 10,931 | 10,931 | |||||
Issuance of common stock upon exercise of stock options | 659 | 659 | 659 | |||||
Issuance of common stock upon exercise of stock options (in shares) | 52,718 | |||||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes | -6,182 | 9 | -6,191 | -6,182 | ||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes (in shares) | 787,926 | |||||||
Change in excess tax benefits from stock-based awards | 2,554 | 2,554 | 2,554 | |||||
Deferred stock compensation | -202 | -202 | -202 | |||||
Dividends declared on common stock | -28,366 | 862 | -29,228 | -28,366 | ||||
Balance at Dec. 31, 2012 | 272,066 | 586 | -20,913 | 182,131 | 121,160 | -10,898 | 272,066 | |
Balance (in shares) at Dec. 31, 2012 | 58,553,265 | 1,697,360 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income attributable to common stockholders | 565 | 81,217 | 81,217 | 81,782 | ||||
Other comprehensive income (loss), net of tax | 796 | 1,004 | 1,004 | 1,800 | ||||
Non-cash compensation expense | 10,428 | 10,428 | 10,428 | |||||
Acquisition of noncontrolling interests | 31,347 | 31,347 | ||||||
Issuance of common stock upon exercise of stock options | 889 | 889 | 889 | |||||
Issuance of common stock upon exercise of stock options (in shares) | 51,821 | |||||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes | -5,234 | 5 | -5,239 | -5,234 | ||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes (in shares) | 519,748 | |||||||
Change in excess tax benefits from stock-based awards | 2,864 | 2,864 | 2,864 | |||||
Deferred stock compensation | -475 | -475 | -475 | |||||
Dividends declared on common stock | -18,934 | 508 | -19,442 | -18,934 | ||||
Balance at Dec. 31, 2013 | 32,708 | 343,825 | 591 | -20,913 | 191,106 | 182,935 | -9,894 | 376,533 |
Balance (in shares) at Dec. 31, 2013 | 59,124,834 | 1,697,360 | 57,400,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income attributable to common stockholders | 2,986 | 78,930 | 78,930 | 81,916 | ||||
Other comprehensive income (loss), net of tax | -2,322 | -9,403 | -9,403 | -11,725 | ||||
Non-cash compensation expense | 11,363 | 11,363 | 11,363 | |||||
Acquisition of noncontrolling interests | 3,327 | 3,327 | ||||||
Adjustment to noncontrolling interest from prior year acquisition | -394 | -394 | ||||||
Issuance of common stock upon exercise of stock options | 341 | 341 | 341 | |||||
Issuance of common stock upon exercise of stock options (in shares) | 15,629 | |||||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes | -3,941 | 4 | -3,945 | -3,941 | ||||
Issuance of common stock upon vesting of restricted stock units, net of withholding taxes (in shares) | 322,737 | |||||||
Change in excess tax benefits from stock-based awards | 1,883 | 1,883 | 1,883 | |||||
Deferred stock compensation | 409 | 409 | 409 | |||||
Repurchases of common stock | -14,121 | -14,121 | -14,121 | |||||
Repurchases of common stock (in shares) | 665,964 | |||||||
Dividends declared on common stock | -25,243 | 677 | -25,920 | -25,243 | ||||
Balance at Dec. 31, 2014 | $36,305 | $384,043 | $595 | ($35,034) | $201,834 | $235,945 | ($19,297) | $420,348 |
Balance (in shares) at Dec. 31, 2014 | 59,463,200 | 2,363,324 | 57,100,000 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Cash flows from operating activities: | |||
Net income | $81,948 | $81,782 | $40,709 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Amortization expense of intangibles | 12,301 | 8,133 | 23,041 |
Amortization of debt issuance costs | 830 | 783 | 1,376 |
Depreciation expense | 15,712 | 14,531 | 13,429 |
Accretion of original issue discount | 1,840 | ||
Non-cash compensation expense | 11,363 | 10,428 | 10,931 |
Non-cash interest expense | 14 | 342 | 433 |
Non-cash interest income | 41 | -850 | |
Deferred income taxes | 7,150 | -1,569 | 6,507 |
Equity in earnings from unconsolidated entities | -4,630 | ||
Excess tax benefits from stock-based awards | -1,900 | -2,869 | -3,017 |
Loss (gain) on disposal of property and equipment | 18 | 191 | -256 |
Loss on extinguishment of debt | 18,527 | ||
Change in fair value of contingent consideration | -1,606 | 485 | -544 |
Changes in operating assets and liabilities: | |||
Accounts receivable | 2,906 | -661 | -2,945 |
Vacation ownership mortgages receivable | 125 | ||
Vacation ownership inventory | 1,742 | ||
Prepaid expenses and other current assets | 5,877 | 5,512 | -918 |
Prepaid income taxes and income taxes payable | -10,407 | 4,231 | -7,947 |
Accounts payable and other current liabilities | 2,989 | 29 | -18,004 |
Payment of contingent consideration | -1,184 | -443 | |
Deferred revenue | -6,688 | -13,934 | -5,414 |
Other, net | -5,943 | 2,450 | 3,983 |
Net cash provided by operating activities | 110,658 | 109,864 | 80,438 |
Cash flows from investing activities: | |||
Acquisitions, net of cash acquired | -208,523 | -127,266 | -39,963 |
Acquisition of assets | -1,952 | ||
Contributions to investments in unconsolidated entities | -4,125 | ||
Capital expenditures | -19,087 | -14,700 | -15,040 |
Proceeds from disposal of property and equipment | 10 | 230 | |
Investment in financing receivables | -15,897 | -9,480 | |
Payments received on financing receivables | 9,876 | 16,989 | |
Purchases of trading investments | -10,667 | ||
Net cash used in investing activities | -258,299 | -134,032 | -47,264 |
Cash flows from financing activities: | |||
Principal payments on term loan | -56,000 | ||
Redemption of senior notes | -300,000 | ||
Borrowings (payments) on revolving credit facility, net | 235,000 | -7,000 | 260,000 |
Payments of debt issuance costs | -1,711 | -3,912 | |
Purchase of treasury stock | 14,121 | ||
Dividend payments | -25,243 | -18,934 | -28,366 |
Payment of contingent consideration | -7,272 | -1,057 | |
Withholding taxes on vesting of restricted stock units | -3,943 | -5,234 | -6,182 |
Proceeds from the exercise of stock options | 341 | 835 | 659 |
Excess tax benefits from stock-based awards | 1,900 | 2,869 | 3,017 |
Net cash provided by (used in) financing activities | 184,951 | -27,464 | -131,841 |
Effect of exchange rate changes on cash and cash equivalents | -5,279 | -1,068 | 4,312 |
Net increase (decrease) in cash and cash equivalents | 32,031 | -52,700 | -94,355 |
Cash and cash equivalents at beginning of period | 48,462 | 101,162 | 195,517 |
Cash and cash equivalents at end of period | $80,493 | $48,462 | $101,162 |
ORGANIZATION_AND_BASIS_OF_PRES
ORGANIZATION AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2014 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION |
Organization | |
Interval Leisure Group, Inc., or ILG, is a leading global provider of non-traditional lodging, encompassing a portfolio of leisure businesses from exchange and vacation rental to vacation ownership. At the end of 2014, we re-aligned our operating segments to encompass the vacation ownership sales and marketing capabilities with the acquisition of the Hyatt Vacation Ownership business in October 2014. As of December 31, 2014, we operate in the following two segments: Exchange and Rental, and Vacation Ownership. Exchange and Rental offers access to vacation accommodations and other travel-related transactions and services to leisure travelers, by providing vacation exchange services and vacation rental, working with resort developers and operating vacation rental properties. Vacation Ownership engages in the management of vacation ownership resorts; sales, marketing, and financing of vacation ownership interests; and related services to owners and associations. | |
On February 28, 2012, we acquired all of the equity of Vacation Resorts International, or VRI, a non-developer provider of resort and homeowners association management services to the shared ownership industry. VRI was consolidated into our financial statements as of the acquisition date with its assets and results of operations primarily included in our Vacation Ownership operating segment. | |
On November 4, 2013, VRI Europe Limited, or VRI Europe, a subsidiary of ILG, purchased the European shared ownership resort management business of CLC World Resorts and Hotels (CLC). As part of this transaction, ILG issued to CLC shares totaling 24.5% of VRI Europe Limited. | |
On December 12, 2013, we acquired all of the equity of Aqua Hospitality LLC and Aqua Hotels and Resorts, Inc., referred to as Aqua, a Hawaii-based hotel and resort management company representing more than 25 properties in Hawaii and Guam. | |
On October 1, 2014, we acquired the Hyatt Vacation Ownership business, or HVO, which provides vacation ownership services at 16 Hyatt Residence Club resorts, from subsidiaries of Hyatt Hotels Corporation. In connection with the acquisition, we entered into a long-term exclusive license for use of the Hyatt® brand with respect to the shared ownership business. | |
ILG was incorporated as a Delaware corporation in May 2008 in connection with a plan by IAC/InterActiveCorp, or IAC, to separate into five publicly traded companies, referred to as the "spin-off." ILG commenced trading on The NASDAQ Stock Market in August 2008 under the symbol "IILG." | |
The Exchange and Rental operating segment consists of Interval International (referred to as Interval), the Hyatt Residence Club, the Trading Places International (known as TPI) operated exchange business, Aston Hotels & Resorts, Inc. (referred to as Aston), and Aqua. The Vacation Ownership operating segment consists of the management related lines of business of VRI, TPI, VRI Europe and HVO, as well as the HVO sales and financing of vacation ownership interests. | |
Basis of Presentation | |
Principles of Consolidation | |
The accompanying consolidated financial statements include the accounts of ILG, our wholly-owned subsidiaries, and companies in which we have a controlling interest, including variable interest entities ("VIEs") where we are the primary beneficiary in accordance with consolidation guidance. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. References in these financial statements to net income attributable to common stockholders and ILG stockholders' equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately. | |
Accounting Estimates | |
ILG's management is required to make certain estimates and assumptions during the preparation of its consolidated financial statements in accordance with generally accepted accounting principles ("GAAP"). These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. | |
Significant estimates underlying the accompanying consolidated financial statements include: the recovery of long-lived assets as well as goodwill and other intangible assets; purchase price allocations of business combinations; the determination of deferred income taxes including related valuation allowances; the determination of deferred revenue and membership costs; and the determination of stock-based compensation. In the opinion of ILG's management, the assumptions underlying the historical consolidated financial statements of ILG and its subsidiaries are reasonable. | |
Seasonality | |
Revenue at ILG is influenced by the seasonal nature of travel. Within our Exchange and Rental segment, our vacation exchange businesses recognize exchange and Getaway revenue based on confirmation of the vacation, with the first quarter generally experiencing higher revenue and the fourth quarter generally experiencing lower revenue. Our vacation rental businesses recognize rental revenue based on occupancy, with the first and third quarters generally generating higher revenue as a result of increased leisure travel to our Hawaii-based managed properties during these periods, and the second and fourth quarters generally generating lower revenue. | |
Within our Vacation Ownership segment, our sales and financing business experiences a modest impact from seasonality, with higher sales volumes during the traditional vacation periods, largely the third quarter (summer months). Our vacation ownership management businesses by and large do not experience significant seasonality. | |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SIGNIFICANT ACCOUNTING POLICIES | |||||||||||
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES | ||||||||||
Revenue Recognition | |||||||||||
Exchange and Rental | |||||||||||
Revenue, net of sales incentives, from membership fees from our Exchange and Rental segment is deferred and recognized over the terms of the applicable memberships, typically ranging from one to five years, on a straight-line basis. When multiple member benefits and services are provided over the term of the membership, revenue is recognized for each separable deliverable ratably over the membership period, as applicable. Generally, memberships are cancelable and refundable on a pro-rata basis, with the exception of our Platinum tier which is non-refundable. Direct costs of acquiring members (primarily commissions) and certain direct fulfillment costs related to deferred membership revenue are also deferred and amortized on a straight-line basis over the terms of the applicable memberships or benefit period, whichever is shorter. The recognition of previously deferred revenue and expense is based on estimates derived from an aggregation of member-level data. | |||||||||||
Revenue from exchange and Getaway transactions is recognized when confirmation of the transaction is provided as the earnings process is complete. Reservation servicing revenue is recognized when service is performed or on a straight-line basis over the applicable service period. All taxable revenue transactions are presented on a net-of-tax basis. | |||||||||||
Revenue from our vacation rental management businesses are comprised of base management fees which are typically either (i) fixed amounts, (ii) amounts based on a percentage of adjusted gross lodging revenue, or (iii) various revenue sharing arrangements with condominium owners based on stated formulas. Base management fees are recognized when earned in accordance with the terms of the contract. Incentive management fees for certain hotels and condominium resorts are generally a percentage of operating profits or improvement in operating profits. We recognize incentive management fees as earned throughout the incentive period based on actual results which are trued-up at the culmination of the incentive period. Service fee revenue is based on the services provided to owners including reservations, sales and marketing, property accounting and information technology services either internally or through third party providers. Service fee revenue is recognized when the service is provided. | |||||||||||
In certain instances we arrange services which are provided directly to property owners. Transactions for these services do not impact our consolidated financial statements as they are not included in our results of operations. Additionally, in most cases we employ on-site personnel to provide services such as housekeeping, maintenance and administration to property owners under our management agreements. For such services, we recognize revenue in an amount equal to the expenses incurred. | |||||||||||
Vacation Ownership | |||||||||||
The Vacation Ownership segment's revenue is derived principally from sales of vacation ownership intervals, fees for timeshare resort and homeowners' association management, and other management related services. Management fees in this segment consist of base management fees, service fees, and annual maintenance fees, as applicable. | |||||||||||
ILG recognizes revenue from sales of vacation ownership intervals in accordance with Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 970, Real Estate—General, and FASB ASC 978, Real Estate—Time-Sharing Activities. The stated sales price of the vacation ownership interests (VOI) is divided into separate revenue components, which include the revenue earned on the sale of the VOI and the revenue earned on the sales incentive given to the customer as motivation to purchase the VOI. ILG offers several types of sales incentives, including Hyatt Gold Passport Points, free bonus week, down payment credits to buyers, and waiver of first year maintenance fees. | |||||||||||
Consolidated VOI sales are recognized and included in revenues after a binding sales contract has been executed, a 10% minimum down payment has been received as a measure of substantiating the purchaser's commitment, the rescission period has expired, and construction is substantially complete. Pursuant to accounting rules for real estate time-sharing transactions, as part of determining when we have met the criteria necessary for revenue recognition we must also take into consideration the fair value of certain incentives provided to the purchaser when assessing the adequacy of the purchaser's initial investment. The agreement for sale generally provides for a down payment and a note secured by a mortgage payable in monthly installments, including interest, over a period of up to 10 years. All payments received prior to the recognition of the sale as revenue are recognized in deferred revenue in the accompanying consolidated balance sheets. Customer deposits relating to contracts cancelled after the applicable rescission period are forfeited and recorded in revenue at the time of forfeiture. | |||||||||||
The provision for loan losses is recorded as an adjustment to sales of vacation ownership intervals in the accompanying consolidated income statements rather than as an adjustment to bad debt expense. ILG records an estimate of uncollectible amounts at the time of the interval sale. The amount of the provision for loan losses recorded within sales of vacation ownership intervals in the accompanying consolidated statement of income was $0.3 million for the year ended December 31, 2014. | |||||||||||
Annual maintenance fees are amounts paid by timeshare owners for maintaining and operating the respective properties, which includes management services, and are recognized on a straight-line basis over the respective annual maintenance period. | |||||||||||
Deferred Revenue in a Business Combination | |||||||||||
When we acquire a business which records deferred revenue on their historical financial statements, we are required to re-measure that deferred revenue as of the acquisition date pursuant to rules related to accounting for business combinations, as described further below. The post-acquisition impact of that remeasurement results in recognizing revenue which solely comprises the cost of the associated legal performance obligation we assumed as part of the acquisition, plus a normal profit margin. At times, this purchase accounting treatment results in lower amounts of revenue recognized in a reporting period following the acquisition than would have otherwise been recognized on a historical basis. | |||||||||||
Multiple-Element Arrangement | |||||||||||
When we enter into multiple-element arrangements, we are required to determine whether the deliverables in these arrangements should be treated as separate units of accounting for revenue recognition purposes and, if so, how the contract price should be allocated to each element. We analyze our contracts upon execution to determine the appropriate revenue recognition accounting treatment. Our determination of whether to recognize revenue for separate deliverables will depend on the terms and specifics of our products and arrangements as well as the nature of changes to our existing products and services, if any. The allocation of contract revenue to the various elements does not change the total revenue recognized from a transaction or arrangement, but may impact the timing of revenue recognition. | |||||||||||
Cash and Cash Equivalents | |||||||||||
Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less. | |||||||||||
Restricted Cash and Cash Equivalents | |||||||||||
Restricted cash and cash equivalents at December 31, 2014 and 2013 primarily includes maintenance fees, escrow deposits received on sales of VOI that are held in escrow until the applicable statutory rescission period has expired, the funds have been released from escrow and the deeding process has begun, as well as amounts held in trust and lock box accounts in connection with certain transactions related to management of vacation rental properties. | |||||||||||
Accounts Receivable | |||||||||||
Accounts receivable are stated at amounts due from customers, principally resort developers, members and managed properties, net of an allowance for doubtful accounts. Accounts receivable outstanding longer than the contractual payment terms are considered past due. ILG determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, ILG's previous loss history, our judgment as to the specific customer's current ability to pay its obligation to ILG and the condition of the general economy. More specifically, ILG's policy for determining its allowance for doubtful accounts consists of both general and specific reserves. The general reserve methodology is distinct for each ILG business based on its historical collection experience and past practice. Predominantly, receivables greater than 120 days past due are applied a general reserve factor, while receivables 180 days or more past due are fully reserved. The determination of when to apply a specific reserve requires judgment and is directly related to the particular customer collection issue identified, such as known liquidity constraints, insolvency concerns or litigation. | |||||||||||
The allowance for bad debt is included within general and administrative expense within our consolidated statements of income. ILG writes off accounts receivable when they become uncollectible once we have exhausted all means of collection. | |||||||||||
Vacation Ownership Inventory | |||||||||||
Inventory is composed of unsold vacation ownership intervals at our Hyatt-branded vacation ownership resorts. This inventory is carried at the lower of cost or market, based on relative sales value or net realizable value, less expected direct selling costs. Cost includes development, real estate, and content costs. Costs are allocated to units sold using the relative sales value method. This method calculates cost of sales as a percentage of projected gross sales using a cost-of-sales percentage, which is determined by dividing inventory cost into total estimated revenue projected for interval sales. Remaining inventory is a pool of costs that will be charged against future revenues. | |||||||||||
It is possible that future changes in our sales strategies or project development plans could have a material effect on the carrying value of inventory. Consequently, we monitor the carrying value of our inventory on a quarterly basis to ensure the inventory is stated at the lower of cost or market. | |||||||||||
Vacation Ownership Mortgages Receivable and Allowance for Loan Losses | |||||||||||
Vacation ownership mortgages receivable consist of loans to eligible customers who purchase vacation ownership interests and choose to finance their purchase. These mortgage receivables are collateralized by the underlying vacation ownership interest, generally bear interest at a fixed rate, have a typical term ranging from 5 - 10 years and are generally made available to customers who make a down payment on the purchase price within established credit guidelines. | |||||||||||
Vacation ownership mortgages receivable are composed of mortgage loans related to our financing of vacation ownership interval sales. Included within our vacation ownership mortgages receivable are originated loans and loans acquired in connection with our acquisition of HVO. | |||||||||||
Acquired loans are segregated between those with deteriorated credit quality at acquisition and those deemed as performing. To make this determination, we consider such factors as credit collection history, past due status, non-accrual status, credit risk ratings, interest rates and the underlying collateral securing the loans. The fair value of acquired loans deemed performing is determined by discounting cash flows, both principal and interest, for the loan pool at market interest rates while giving consideration to anticipated future defaults. The difference between fair value and principal balances due at acquisition date is accreted to interest income, within consolidated revenue, over the estimated life of the loan pool. | |||||||||||
Allowance for Loan Losses | |||||||||||
For originated loans, we record an estimate of uncollectability as a reduction of sales of vacation ownership intervals in the accompanying consolidated statements of income at the time revenue is recognized on a vacation ownership interval sale. We evaluate our originated loan portfolio collectively as they are largely homogeneous, smaller-balance, vacation ownership mortgages receivable. We use a technique referred to as static pool analysis, which tracks uncollectibles over the entire life of those mortgage receivable, as the basis for determining our general reserve requirements on our vacation ownership mortgages receivable. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio, including defaults, aging, and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio. | |||||||||||
We determine our originated vacation ownership mortgages receivable to be nonperforming if either interest or principal is more than 120 days past due. All non-performing loans are placed on non-accrual status and we do not resume interest accrual until the receivable becomes contractually current. We apply payments we receive for vacation ownership notes receivable on non-performing status first to interest, then to principal, and any remainder to fees. | |||||||||||
Loans acquired in connection with a business combination are recorded at their estimated fair value on their purchase date with no carryover of the related allowance for loan losses. Performing acquired loans are subsequently evaluated for any required allowance at each reporting date. An allowance for loan losses on acquired loans is calculated using a similar methodology for originated loans. | |||||||||||
Investments in Unconsolidated Entities | |||||||||||
We consolidate entities under our control, including variable interest entities (VIEs) where we are deemed to be the primary beneficiary as a result of qualitative and/or quantitative characteristics. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be disproportionate to the entity. Investments in unconsolidated affiliates over which we exercise significant influence, but do not control, including joint ventures, are accounted for by the equity method. In addition, our limited partnership investments in which we hold more than a minimal investment are accounted for under the equity method of accounting. | |||||||||||
We assess investments in unconsolidated entities for impairment quarterly to determine whether there is an indication that a loss in value that is other-than-temporary has occurred. If so, we evaluate the carrying value compared to the estimated fair value of the investment. Fair value is based upon internally developed discounted cash flow models, third-party appraisals, or if appropriate, current estimated net sales proceeds from pending offers. If the estimated fair value is less than carrying value, we use our judgment to determine if the decline in value is other-than-temporary. In making this determination, we consider factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, our intent and ability to recover the lost value, and current economic conditions. Impairments that are deemed other-than-temporary are charged to equity in losses from unconsolidated entities in our accompanying consolidated statements of income. | |||||||||||
Property and Equipment | |||||||||||
Property and equipment, including capitalized improvements, are recorded at cost. Repairs and maintenance and any gains or losses on dispositions are included in results of operations. | |||||||||||
Depreciation is recorded on a straight-line basis to allocate the cost of depreciable assets to operations over their estimated useful lives. The following table summarizes depreciable life by asset category. | |||||||||||
Asset Category | Depreciation Period | ||||||||||
Computer equipment | 3 to 5 Years | ||||||||||
Capitalized software (including internally-developed software) | 3 to 7 Years | ||||||||||
Buildings and leasehold improvements | 1 to 40 Years | ||||||||||
Furniture and other equipment | 3 to 10 Years | ||||||||||
In accordance with ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), we capitalize certain qualified costs incurred in connection with the development of internal use software. Capitalization of internal use software costs begins when the preliminary project stage is completed, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. | |||||||||||
Fair Value Measurements | |||||||||||
In accordance with ASC Topic 820, "Fair Value Measurement," ("ASC 820") the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. We categorize assets and liabilities recorded at fair value using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: | |||||||||||
• | Level 1—Observable inputs that reflect quoted prices in active markets | ||||||||||
• | Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable | ||||||||||
• | Level 3—Unobservable inputs in which little or no market data exists, therefore requiring the company to develop its own assumptions | ||||||||||
Our non-financial assets, such as goodwill, intangible assets and long-lived assets, are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs. | |||||||||||
Accounting for Business Combinations | |||||||||||
In accordance with ASC Topic 805, "Business Combinations," when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, noncontrolling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the consolidated statements of income since their respective acquisition dates. | |||||||||||
The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. | |||||||||||
As part of our accounting for business combinations we are required to determine the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other: | |||||||||||
• | The expected use of the asset. | ||||||||||
• | The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate. | ||||||||||
• | Any legal, regulatory, or contractual provisions that may limit the useful life. | ||||||||||
• | Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions. | ||||||||||
• | The effects of obsolescence, demand, competition, and other economic factors. | ||||||||||
• | The level of maintenance expenditures required to obtain the expected future cash flows from the asset. | ||||||||||
If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business. | |||||||||||
Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to: | |||||||||||
• | the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets; | ||||||||||
• | the future expected cash flows from sales of products and services and related contracts and agreements; and | ||||||||||
• | discount and long-term growth rates. | ||||||||||
Unanticipated events and circumstances may occur which could affect the accuracy or validity of our assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes resulting from events that occur after the acquisition date, such as changes in our estimated fair value of the targets that are expected to be achieved, will be recognized in earnings in the period of the change in estimated fair value. | |||||||||||
Additionally, when acquiring a company who has recorded deferred revenue in its historical, pre-acquisition financial statements, we are required as part of purchase accounting to re-measure the deferred revenue as of the acquisition date. Deferred revenue is re-measured to represent solely the cost that relates to the associated legal performance obligation which we assumed as part of the acquisition, plus a normal profit margin representing the level of effort or assumption of risk assumed. Legal performance obligations that simply relate to the passage of time would not result in recognized deferred revenue as there is little to no associated cost. | |||||||||||
Goodwill and Other Intangible Assets | |||||||||||
Goodwill and other intangible assets are significant components of our consolidated balance sheets. Our policies regarding the valuation of intangible assets affect the amount of future amortization and possible impairment charges we may incur. Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as consumer spending habits and general economic trends, and internal factors such as changes in our business strategy and our internal forecasts. | |||||||||||
Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. In accordance with ASC 350, we review the carrying value of goodwill and other intangible assets of each of our reporting units on an annual basis as of October 1, or more frequently upon the occurrence of certain events or substantive changes in circumstances, based on either a qualitative assessment or a two-step impairment test. As of December 31, 2014, upon re-alignment of our operating segments, we identified two reporting units within each of our Exchange and Rental, and Vacation Ownership operating segments as follows: | |||||||||||
OPERATING SEGMENTS | |||||||||||
Exchange and Rental | Vacation Ownership | ||||||||||
Vacation exchange reporting unit | VO management reporting unit | ||||||||||
Vacation rental reporting unit | VO sales and financing reporting unit | ||||||||||
During the year, we monitor the actual performance of our reporting units relative to the fair value assumptions used in our annual impairment test, including potential events and changes in circumstance affecting our key estimates and assumptions. | |||||||||||
Qualitative Assessment | |||||||||||
The qualitative assessment may be elected in any given year pursuant to ASU 2011-08, "Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment" ("ASU 2011-08"). ASU 2011-08 amended the testing of goodwill for impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of a reporting unit. If entities determine, on the basis of qualitative factors, that it is more-likely-than-not (i.e., a likelihood of more than 50 percent) that the fair value of the reporting unit is below the carrying amount, the two-step impairment test would be required. The guidance also provides the option to skip the qualitative assessment in any given year and proceed directly with the two-step impairment test at our discretion. | |||||||||||
Our qualitative assessment is performed for the purpose of assessing whether events or circumstances have occurred in the intervening period between the date of our last two-step impairment test (the "Baseline Valuation") and the date of our current annual impairment test which could adversely affect the comparison of our reporting units' fair value with its carrying amount. Examples of events and circumstances that might indicate that a reporting unit's fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity's operating environment, industry or overall market conditions; reporting unit specific events such as increasing costs, declining financial performance, or loss of key personnel or contracts; or other events such as pending litigation, access to capital in the credit markets or a sustained decrease in ILG's stock price on either an absolute basis or relative to peers. If it is determined, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, we are then required to perform a two-step impairment test on goodwill. | |||||||||||
Two-step Impairment Test | |||||||||||
The first step of the impairment test compares the fair value of each reporting unit with its carrying amount including goodwill. The fair value of each reporting unit is calculated using the average of an income approach and a market comparison approach which utilizes similar companies as the basis for the valuation. If the carrying amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any impairment loss. The impairment loss is determined by comparing the implied fair value of goodwill to the carrying value of goodwill. The implied fair value of goodwill represents the excess of the fair value of the reporting unit over amounts assigned to its net assets. | |||||||||||
The determination of fair value utilizes an evaluation of historical and forecasted operating results and other estimates. Fair value measurements are generally determined through the use of valuation techniques that may include a discounted cash flow approach, which reflects our own assumptions of what market participants would use in pricing the asset or liability. | |||||||||||
Indefinite-Lived Intangible Assets | |||||||||||
Our intangible assets with indefinite lives relate principally to trade names, trademarks and certain resort management contracts. Pursuant to ASC 350, if an intangible asset is determined to have an indefinite useful life, it shall not be amortized until its useful life is determined to no longer be indefinite. Accordingly, we evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events or circumstances continue to support an indefinite useful life. As of December 31, 2014, there have been no changes to the indefinite life determination pertaining to these intangible assets. | |||||||||||
In addition, an intangible asset that is not subject to amortization shall be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss equal to the excess is recorded. However, subsequent to the issuance of ASU 2012-02 in July 2012, entities testing an indefinite-lived intangible asset for impairment have the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the likelihood of the indefinite-lived intangible asset being impaired is below a "more-likely-than-not" threshold (i.e., a likelihood of more than 50 percent), the entity would not need to calculate the fair value of the asset. | |||||||||||
Long-Lived Assets and Intangible Assets with Definite Lives | |||||||||||
We review the carrying value of all long-lived assets, primarily property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset (asset group) may be impaired. In accordance with guidance included within ASC Topic 360, "Property Plant and Equipment," ("ASC 360"), recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (asset group) to future undiscounted cash flows expected to be generated by the asset (asset group). An asset group is the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When estimating future cash flows, we consider: | |||||||||||
• | only the future cash flows that were directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset group; | ||||||||||
• | our own assumptions about our use of the asset group and all available evidence when estimating future cash flows; | ||||||||||
• | potential events and changes in circumstance affecting our key estimates and assumptions; and | ||||||||||
• | the existing service potential of the asset (asset group) at the date tested. | ||||||||||
If an asset (asset group) is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset (asset group) exceeds its fair value. When determining the fair value of the asset (asset group), we consider the highest and best use of the assets from a market-participant perspective. The fair value measurement is generally determined through the use of independent third party appraisals or an expected present value technique, both of which may include a discounted cash flow approach, which reflects our own assumptions of what market participants would utilize to price the asset (asset group). | |||||||||||
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Assets to be abandoned, or from which no further benefit is expected, are written down to zero at the time that the determination is made and the assets are removed entirely from service. | |||||||||||
Advertising | |||||||||||
Advertising and promotional expenditures primarily include printing and postage costs of directories and magazines, promotions, tradeshows, agency fees, and related commissions. Direct-response advertising consists primarily of printing, postage, and freight costs related to our member resort directories. Advertising costs are expensed in the period incurred, except for magazine related costs that are expensed at time of mailing when the advertising takes place, and direct-response advertising, which are amortized ratably over the twelve-month period following the mailing of the directories. | |||||||||||
Advertising expense was $15.6 million, $17.0 million and $16.8 million for the years ended December 31, 2014, 2013 and 2012, respectively, of which $2.1 million, $4.1 million and $4.1 million, respectively, pertained to expenses related to our direct-response advertising. As of December 31, 2014 and 2013, we had $2.4 million and $3.6 million, respectively, of capitalized advertising costs recorded in prepaid expenses and other current assets on our consolidated balance sheets. | |||||||||||
Income Taxes | |||||||||||
ILG accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. ILG records interest on potential income tax contingencies as a component of income tax expense and records interest net of any applicable related income tax benefit. | |||||||||||
Pursuant to ASC Topic 740 "Income Taxes" ("ASC 740"), ILG recognizes liabilities for uncertain tax positions based on the two-step process prescribed by the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settling the uncertain tax position. | |||||||||||
Foreign Currency Translation and Transaction Gains and Losses | |||||||||||
The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses are translated at average rates of exchange during the period. Resulting translation gains or losses are included as a component of accumulated other comprehensive income (loss), a separate component of ILG stockholders' equity. Accumulated other comprehensive income (loss) is solely related to foreign currency translation. Only the accumulated other comprehensive income (loss) exchange rate adjustment related to Venezuela is tax effected as required by the FASB guidance codified in ASC 740 since the earnings in Venezuela are not indefinitely reinvested in that jurisdiction. | |||||||||||
Transaction gains and losses arising from transactions and/or assets and liabilities denominated in a currency other than the functional currency of the entity involved are included in the consolidated statements of income. Operating foreign currency exchange attributable to foreign currency remeasurements of operating assets and liabilities denominated in a currency other than their functional currency, primarily related to Euro denominated value added tax liabilities, resulted in net gains of $0.4 million for the year ended December 31, 2104 and in net losses of $0.1 million for each of the years ended December 31, 2013 and 2012, which is included in general and administrative expenses. Non-operating foreign currency exchange included a net gain of $2.3 million and $0.6 million for the years ended December 31, 2014 and 2013, respectively, and a net loss of $2.2 million for the year ended December 31, 2012, included in other income (expense) in the accompanying consolidated statements of income. | |||||||||||
Stock-Based Compensation | |||||||||||
Stock-based compensation is accounted for under ASC Topic 718, "Compensation—Stock Compensation" ("ASC 718"). Non-cash compensation expense for stock-based awards is measured at fair value on date of grant and recognized over the service period for awards expected to vest. The fair value of restricted stock and restricted stock units ("RSUs") is determined based on the number of shares granted and the quoted price of our common stock on that date, except for RSUs subject to relative total shareholder return performance criteria, which the fair value is based on a Monte Carlo simulation analysis as further discussed in Note 13. We grant awards subject to graded vesting (i.e., portions of the award vest at different times during the vesting period) or to cliff vesting (i.e., all awards vest at the end of the vesting period). Certain RSUs, in addition, are subject to attaining specific performance criteria. For RSUs to be settled in stock, the accounting charge is measured at the grant date fair value and expensed as non-cash compensation over the vesting term using the straight-line basis for service-only awards and the accelerated basis for performance-based awards with graded vesting. For certain cliff vesting awards with performance criteria, we also use anticipated future results in determining the fair value of the award. Such value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line recognition method. The amount of stock-based compensation expense recognized in the consolidated statements of income is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The expense associated with RSU awards to be settled in cash is initially measured at fair value at the grant date and expensed ratably over the vesting term, recording a liability subject to mark-to-market adjustments for changes in the price of the respective common stock as compensation expense. | |||||||||||
Stock-based compensation is recorded within the same line item in our consolidated statements of income as the employee-related compensation of the award recipient, as disclosed in tabular format in Note 13. | |||||||||||
Management must make certain estimates and assumptions regarding stock awards that will ultimately vest, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods for any changes to the estimated forfeiture rate from that previously estimated. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is at least equal to the portion of the grant-date value of the award tranche that is actually vested at that date. Tax benefits resulting from tax deductions in excess of the stock-based compensation expense recognized in the consolidated statements of income are reported as a component of financing cash flows. For the years ended December 31, 2014, 2013 and 2012, gross excess tax benefits from stock-based compensation reported as a component of financing cash flows were $1.9 million, $2.9 million, and $3.0 million, respectively. | |||||||||||
Earnings per Share | |||||||||||
Basic earnings per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings per share attributable to common stockholders is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the assumed exercise of common stock options and the vesting of RSUs using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is antidilutive. The computations of diluted earnings per share available to common stockholders do not include approximately 0.8 million stock options and 0.2 million RSUs for the year ended December 31, 2014, 0.8 million stock options for the year ended December 31, 2013, and 0.9 million stock options and 0.1 million RSUs for the year ended December 31, 2012, as the effect of their inclusion would have been antidilutive to earnings per share. | |||||||||||
In connection with the spin-off, stock options to purchase ILG common stock were granted to non-ILG employees for which there is no future compensation expense to be recognized by ILG. As of December 31, 2014 and 2013, 0.8 million of stock options remained outstanding. | |||||||||||
The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows (in thousands): | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Basic weighted average shares of common stock outstanding | 57,343 | 57,243 | 56,549 | ||||||||
Net effect of common stock equivalents assumed to be vested related to RSUs | 606 | 581 | 685 | ||||||||
Net effect of common stock equivalents assumed to be exercised related to stock options held by non-employees | 4 | 8 | 14 | ||||||||
| | | | | | | | | | | |
Diluted weighted average shares of common stock outstanding | 57,953 | 57,832 | 57,248 | ||||||||
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Certain Risks and Concentrations | |||||||||||
Geographic Risk | |||||||||||
In regards to our Exchange and Rental segment, a substantial percentage of the vacation ownership resorts in the Interval Network are located in Florida, Hawaii, Las Vegas, Mexico and Southern California, while the majority of the revenue from our vacation rental businesses is derived from vacation properties located in Hawaii. In regards to our Vacation Ownership segment, the largest concentration of revenue derived from the management of vacation ownership properties resides in Spain with regard to our VRI Europe business. From an ILG perspective, approximately $211.1 million, $146.6 million and $127.0 million of 2014, 2013 and 2012 revenue, respectively, (excluding pass-through revenue) was generated from travel to properties located in all of these locations, together with vacation ownership management services and sales and financing activities performed in these locations. | |||||||||||
Business Risk | |||||||||||
ILG also depends on relationships with developers and vacation property owners, as well as third party service providers for processing certain fulfillment services. We do not consider our overall business to be dependent on any one of these resort developers, provided, that the loss of a few large developers (particularly those from which Interval receives membership renewal fees directly) could materially impact our business. The loss of one or more of our largest management agreements could materially impact our businesses. | |||||||||||
ILG's business also is subject to certain risks and concentrations including exposure to risks associated with online commerce security and credit card fraud. | |||||||||||
Credit Risk | |||||||||||
ILG is exposed to credit risk in relation to its portfolio of mortgage receivables associated with its vacation ownership business. We offer financing to purchasers of VOIs at our Hyatt-branded vacation ownership resorts and, as a result, ILG bears the risk of default on these loans. Should a purchaser default, ILG has the ability to foreclose and attempt to resell the associated VOI at its own cost to resell. | |||||||||||
Other financial instruments that potentially subject ILG to concentration of credit risk consist primarily of cash and cash equivalents which are maintained with high quality financial institutions. Financial instruments also contain secured loans that are recorded at the time of origination for the principal amount financed and are carried at amortized cost, net of any allowance for credit losses, as further discussed in Note 10. | |||||||||||
Interest Rate Risk | |||||||||||
ILG is exposed to interest rate risk through borrowings under our amended credit agreement which bears interest at variable rates. The interest rate on the amended credit agreement is based on (at our election) either LIBOR plus a predetermined margin that ranges from 1.25% to 2.25%, or the Base Rate as defined in the amended credit agreement plus a predetermined margin that ranges from 0.25% to 1.25%, in each case based on ILG's leverage ratio. | |||||||||||
Recent Accounting Pronouncements | |||||||||||
With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2014 that are of significance, or potential significance, to ILG based on our current operations. The following summary of recent accounting pronouncements is not intended to be an exhaustive description of the respective pronouncement. | |||||||||||
In January 2015, the FASB issued Accounting Standards Update ("ASU") 2015-01, "Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" ("ASU 2015-01"). ASU 2015-01 eliminates from generally accepted accounting principles (GAAP) the concept of extraordinary items as part of the FASB's initiative to reduce complexity in accounting standards (the Simplification Initiative). ASC 225-20 requires a reporting entity to separately classify, present and disclose extraordinary events and transactions if the event or transaction meets both of the following criteria for extraordinary item classification: unusual nature and infrequency of occurrence. If an event or transaction meets the criteria for extraordinary classification, a reporting entity is required to segregate the extraordinary item from the results of ordinary operations and show them separately in the income statement, net of tax, after from income from continuing operations. Under ASU 2015-01, the concept of extraordinary item is eliminated from the ASC Master Glossary and replaced with definitions for infrequency of occurrence and unusual nature. The presentation and disclosure guidance in ASC 225-20 for items that are unusual in nature or incur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The ASU is effective for fiscal years beginning after December 15, 2015 (and interim periods within those fiscal years). A reporting entity may apply the amendments in the ASU prospectively and also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In November 2014, the FASB issued ASU 2014-17, "Business Combinations (Topic 815)—Pushdown Accounting: A Consensus of the FASB Emerging Issues Task Force" ("ASU 2014-17"). ASU 2014-17 provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity's most recent change-in-control event. An election to apply pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle in accordance with ASC 250, "Accounting Changes and Error Corrections." The ASU was effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of the ASU would be a change in accounting principle. On the effective date, we made the election to apply the guidance in the ASU to future change-in-control events. We do not anticipate the adoption of the ASU will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern ("ASU 2014-15")." ASU 2014-15 requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required. The ASU is effective for fiscal years beginning after December 15, 2016 (and interim periods within those fiscal years), with early adoption permitted. The standard allows for either a full retrospective or modified retrospective transition method. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In June 2014, the FASB issued ASU No. 2014-12, "Compensation—Stock Compensation (Topic 718): Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period ("ASU 2014-12")." ASU 2014-12 clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity's satisfaction of a performance target until it becomes probable that the performance target will be met. No new disclosures are required under ASU 2014-12. The ASU is effective for fiscal years beginning after December 15, 2015 (and interim periods within that period), with early adoption permitted. In addition, all entities will have the option of applying the guidance either prospectively (i.e. only to awards granted or modified on or after the effective date of the issue) or retrospectively. Retrospective application would only apply to awards with performance targets outstanding at or after the beginning of the first annual period presented (i.e., the earliest presented comparative period). We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures; however, we will continue to assess through the effective date the future impact, if any, of this new accounting update to our consolidated financial statements. | |||||||||||
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The FASB and the International Accounting Standards Board ("IASB") initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (i) remove inconsistencies and weaknesses in revenue requirements; (ii) provide a more robust framework for addressing revenue issues; (iii) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (iv) provide more useful information to users of financial statements through improved disclosure requirements; and (v) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB amended the FASB Accounting Standards Codification ("Codification") and created a new Topic 606, Revenue from Contracts with Customers. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry specific guidance throughout the Industry Topics of the Codification. Additionally, ASU 2014-09 supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. The ASU is effective for fiscal years beginning after December 15, 2016 (and interim periods within that period); early adoption is not permitted. Given the complexities of this new standard, we are unable to determine, at this time, whether adoption of this standard will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In April 2014, the FASB ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360)" ("ASU 2014-08"). The amendments in ASU 2014-08 change the requirements for reporting and disclosing discontinued operations. Among other items, this new guidance defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and "represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results." The standard states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. The ASU is effective for fiscal years beginning after December 15, 2014 (and interim periods within those fiscal years), with early adoption permitted. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures; however, we will continue to assess through the effective date the future impact, if any, of this new accounting update to our consolidated financial statements. | |||||||||||
In January 2014, the FASB issued ASU No. 2014-04, "Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure" ("ASU 2014-04"). Current US GAAP requires a loan to be reclassified to Other Real Estate Owned ("OREO") upon a troubled debt restructuring that is "in substance a repossession or foreclosure," where the creditor receives "physical possession" of the debtor's assets regardless of whether formal foreclosure proceedings take place. The amendments in ASU 2014-04 clarify when an "in substance a repossession or foreclosure" and "physical possession" has occurred as these terms are not defined in US GAAP, in addition to requiring certain supplementary interim and annual disclosures. The ASU is effective for fiscal years beginning after December 15, 2014 (and interim periods within those fiscal years) and shall be applied prospectively, with early adoption permitted. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures; however, we will continue to assess through the effective date the future impact, if any, of this new accounting update to our consolidated financial statements. | |||||||||||
Adopted Accounting Pronouncements | |||||||||||
In March 2013, the FASB issued ASU 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment ("CTA") upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2013-05"). ASU 2013-05 applies to the release of the CTA into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The adoption of ASU 2013-02 did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02"). ASU 2013-02 adds new disclosure requirements for items reclassified out of accumulated other comprehensive income/loss ("AOCI"), including (1) disaggregating and separately presenting changes in AOCI balances by component and (2) presenting significant items reclassified out of AOCI either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. It does not amend any existing requirements for reporting net income or other comprehensive income in the financial statements. The ASU is effective for fiscal years beginning after December 15, 2012 (and interim periods within those years), and shall be applied prospectively. The adoption of ASU 2013-02 did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In July 2012, the FASB issued ASU 2012-02, "Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" ("ASU 2012-02"). ASU 2012-02 amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. Under the revised guidance, entities testing an indefinite-lived intangible asset for impairment have the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the likelihood of the indefinite-lived intangible asset being impaired is below a "more likely than not" threshold (i.e., a likelihood of more than 50 percent), the entity would not need to calculate the fair value of the asset. The ASU does not revise the requirement to test indefinite-lived intangible assets annually for impairment and does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We adopted this guidance as of October 1, 2012—the date of our 2012 annual impairment test. The adoption of this guidance did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
BUSINESS_COMBINATIONS
BUSINESS COMBINATIONS | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
BUSINESS COMBINATIONS | ||||||||
BUSINESS COMBINATIONS | NOTE 3—BUSINESS COMBINATIONS | |||||||
2014 Business Combination | ||||||||
On October 1, 2014, we completed the acquisition of Hyatt Residential Group, now operating as Hyatt Vacation Ownership or HVO, from wholly-owned subsidiaries of Hyatt Hotels Corporation. In connection with the acquisition, a subsidiary of ILG entered into a global Master License Agreement which provides for an exclusive license for use of the Hyatt® brand with respect to the shared ownership business in exchange for license fees. Additionally, in connection with the acquisition, we have agreed to guarantee up to $36.7 million of the construction loan for the Maui project. The aggregate purchase price was approximately $218 million in cash, which was subject to final adjustment for working capital. | ||||||||
The HVO acquisition is recorded on our consolidated balance sheet as of October 1, 2014 based upon estimated fair values as of such date. The results of operations related to this business are included in our consolidated statements of income since October 1, 2014 and within our Exchange and Rental and Vacation Ownership segments for segment reporting purposes on the basis of its respective business activities. | ||||||||
2013 Business Combinations | ||||||||
During the fourth quarter of 2013 we completed two acquisitions that were not individually significant which were accounted for as business combinations ("2013 acquisitions"). We purchased the European shared ownership resort management business of CLC and all of the equity of Aqua, a Hawaii-based hotel and resort management company, for an aggregate purchase price of $167.2 million. The aggregate purchase price for the 2013 acquisitions consisted of $128.1 million in cash, $7.8 million of accrued additional purchase price, and, as part of the CLC transaction, equity in the form of a noncontrolling interest with a fair value of $31.3 million. The fair value of the noncontrolling interest in VRI Europe was determined based on the total purchase price, less cash consideration paid by ILG. The initial purchase price for the CLC transaction was subject to adjustment for actual results of the business for the year ended December 31, 2013 and working capital excess or deficit on the acquisition date. As of December 31, 2013, we accrued approximately $8.0 million of net additional purchase price consideration related to these items. | ||||||||
These acquisitions are recorded on our consolidated balance sheets as of their respective fourth quarter of 2013 acquisition dates and based upon their estimated fair values at such dates. The results of operations of these acquired businesses are included in our consolidated statements of income since their respective acquisition dates and, for segment reporting purposes, within our Vacation Ownership segment for VRI Europe and Exchange and Rental segment for Aqua. | ||||||||
Contingent Consideration | ||||||||
In connection with the VRI Europe transaction, we had an obligation to transfer additional cash consideration, resulting in incremental noncontrolling interest value in VRI Europe, based on final results of the acquired business for the twelve months ended December 31, 2013. During the second quarter of 2014, the parties reached final agreement resulting in a downward adjustment to the amount of contingent consideration by approximately $1.3 million, net of noncontrolling interest, which was recognized in earnings during that quarter. The final agreed upon liability of $6.5 million was settled in full during the second quarter of 2014. | ||||||||
Additionally, in connection with our fourth quarter 2013 acquisitions, certain amounts related to the purchase consideration paid at closing were deposited into escrow to be held subject to specified future events which could occur over a period ranging from the respective acquisition dates up to 36 months thereafter, as applicable. Pursuant to ASC 805, we consider these escrowed funds to be contingent consideration whereby their release from escrow is subject to future performance. During the second quarter of 2014, the performance related to these escrowed funds was completed and consequently, the escrowed funds were released to the respective third parties and our contingent consideration liability (and corresponding asset representing the prepayment into escrow) was relieved on our consolidated balance sheet as of June 30, 2014. | ||||||||
Purchase Price Allocation | ||||||||
The following table presents the allocation of total purchase price consideration to the assets acquired and liabilities assumed, based on their estimated fair values as of their respective acquisition dates (in thousands): | ||||||||
HVO acquisition | 2013 acquisitions | |||||||
Cash | $ | 16,828 | $ | 1,167 | ||||
Other current assets | 110,956 | 10,233 | ||||||
Goodwill(1) | 22,539 | 34,533 | ||||||
Intangible assets | 61,500 | 131,857 | ||||||
Other noncurrent assets | 47,471 | 15,759 | ||||||
Current liabilities | (26,863 | ) | (11,355 | ) | ||||
Other noncurrent liabilities | (10,910 | ) | (14,946 | ) | ||||
| | | | | | | | |
Net assets acquired | $ | 221,521 | $ | 167,248 | ||||
| | | | | | | | |
| | | | | | | | |
-1 | Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. | |||||||
The purchase price allocated to the fair value of goodwill and identifiable intangible assets associated with the HVO and 2013 acquisitions are as follows (in thousands): | ||||||||
HVO acquisition | Cost | Useful | ||||||
Life (Years) | ||||||||
Goodwill | $ | 22,539 | N/A | |||||
Customer relationships | 38,900 | 22 | ||||||
Resorts management contracts | 22,600 | 22 | ||||||
| | | | | | | | |
Total | $ | 84,039 | ||||||
| | | | | | | | |
| | | | | | | | |
2013 acquisitions | Cost | Useful | ||||||
Life (Years) | ||||||||
Goodwill | $ | 34,533 | N/A | |||||
Trademarks | 3,000 | N/A | ||||||
Resort management contracts (indefinite-lived) | 90,237 | N/A | ||||||
Resort management contracts (definite-lived) | 34,640 | 3 - 30 | ||||||
Other intangibles | 3,980 | 4 - 10 | ||||||
| | | | | | |||
Total | $ | 166,390 | ||||||
| | | | | | |||
| | | | | | |||
In connection with the HVO acquisition we recorded total goodwill of $22.5 million and identifiable intangible assets of $61.5 million, all of which were definite-lived intangible assets, related to HVO's membership base in their Hyatt Residence Club (described in table above as customer relationships) and their resort management contracts. The amortization period, as of the respective acquisition date, for the definite-lived customer relationships and resort management contracts intangible assets noted in the table above is 22 years for each. The valuation of the assets acquired and liabilities assumed in connection with these acquisitions was based on their fair values at the acquisition date. The assets purchased and liabilities assumed for the HVO acquisitions have been reflected in the accompanying consolidated balance sheet as of December 31, 2014. | ||||||||
Additionally, as part of the HVO acquisition, ILG and Hyatt have agreed to make a joint election under Internal Revenue Code Section 338(h)(10), and comparable state and local tax code provisions, and as such ILG will receive a step-up in tax basis in the assets equal to the purchase price paid. In regards to the $22.5 million of HVO related goodwill, all is expected to be deductible for income tax purposes. | ||||||||
In connection with the 2013 acquisitions we recorded total goodwill of $34.5 million and identifiable intangible assets of $131.9 million, of which $93.2 million were indefinite-lived intangible assets and primarily related to management contracts and trademarks. The indefinite-lived resort management contracts were acquired in connection with the VRI Europe transaction and no legal, regulatory, contractual, competitive, economic, or other factors limit, over the foreseeable horizon, the period of time over which these resort management contracts are expected to contribute future cash flows. Of the $34.5 million of goodwill, $20.7 million is expected to be deductible for income tax purposes. The weighted average amortization period, as of the respective acquisition date, for the definite-lived resort management contracts and other intangible assets noted in the table above is 17.5 and 4.9 years, respectively. The valuation of the assets acquired and liabilities assumed in connection with these acquisitions was based on their fair values at the acquisition date. The assets purchased and liabilities assumed for the 2013 acquisitions have been reflected in the accompanying consolidated balance sheet as of December 31, 2013. | ||||||||
Results of Operations | ||||||||
Revenue and earnings before income taxes and noncontrolling interests related to these acquisitions were recognized in our consolidated statements of income totaling $29.4 million and $3.5 million, respectively, for the year ended December 31, 2014 and $12.2 million and $3.1 million, respectively, for the year ended December 31, 2013. Transaction costs, consisting primarily of professional fees, directly related to these acquisitions and expensed as incurred totaled $6.4 million and $2.3 million which are classified within the general and administrative expense line item in our consolidated statements of income for the year ended December 31, 2014 and 2013, respectively. | ||||||||
Pro forma financial information (unaudited) | ||||||||
The following unaudited pro forma financial information presents the consolidated results of ILG and HVO as if the acquisition had occurred on January 1, 2013. The pro forma results presented below for 2014 and 2013 are based on the historical financial statements of ILG and HVO, adjusted to reflect the purchase method of accounting. The pro forma information is not necessarily indicative of the consolidated results of operations that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company. It does not reflect cost savings expected to be realized from the elimination of certain expenses and from synergies expected to be created or the costs to achieve such cost savings or synergies, if any. Income taxes do not reflect the amounts that would have resulted had ILG and HVO filed consolidated income tax returns during the periods presented. Pro forma adjustments are tax-effected at the ILG's estimated statutory tax rate of 38.9% for 2014 and 38.8% for 2013. | ||||||||
For the Year Ended | ||||||||
(in thousands, except per share data | December 31, | December 31, | ||||||
2014 | 2013 | |||||||
Revenue | $ | 696,681 | $ | 591,821 | ||||
Net income attributable to common stockholders | $ | 74,974 | $ | 76,018 | ||||
Earnings per share: | ||||||||
Basic | $ | 1.31 | $ | 1.33 | ||||
Diluted | $ | 1.29 | $ | 1.31 | ||||
The unaudited pro forma financial information for 2014 and 2013 also includes $9.5 million and $3.4 million, respectively, of non-recurring charges related to the HVO acquisition, which are comprised of acquisition-related costs such as professional fees. | ||||||||
GOODWILL_AND_OTHER_INTANGIBLE_
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 4—GOODWILL AND OTHER INTANGIBLE ASSETS | |||||||||||||||||||
Goodwill | ||||||||||||||||||||
Pursuant to FASB guidance as codified within ASC 350, Intangibles—Goodwill and Other ("ASC 350"), goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. | ||||||||||||||||||||
As discussed in Note 15, "Segment Information," ILG reorganized its management reporting structure in the fourth quarter of 2014 resulting in the following two operating and reportable segments: Exchange and Rental and Vacation Ownership. As a result of the change in operating segments, ILG's reporting units were also reorganized. The Exchange and Rental, and Vacation Ownership segments now each contain two reporting units as follows: | ||||||||||||||||||||
OPERATING SEGMENTS | ||||||||||||||||||||
Exchange and Rental | Vacation Ownership | |||||||||||||||||||
Exchange reporting unit | VO management reporting unit | |||||||||||||||||||
Rental reporting unit | VO sales and financing reporting unit | |||||||||||||||||||
In accordance with ASC 350, we reassigned our existing goodwill to these new reporting units utilizing a relative fair value allocation approach as of December 31, 2014. With the assistance of a third party specialist, we allocated goodwill based on their relative fair values as of December 31, 2014 to each new reporting unit as follows (in thousands): | ||||||||||||||||||||
Balance as of December 31, 2014 | ||||||||||||||||||||
Exchange and Rental segment | ||||||||||||||||||||
Exchange reporting unit | $ | 495,748 | ||||||||||||||||||
Rental reporting unit | 20,396 | |||||||||||||||||||
Vacation Ownership segment | ||||||||||||||||||||
VO management reporting unit | 39,160 | |||||||||||||||||||
VO sales and financing reporting unit | 6,946 | |||||||||||||||||||
| | | | | ||||||||||||||||
Total goodwill | $ | 562,250 | ||||||||||||||||||
| | | | | ||||||||||||||||
| | | | | ||||||||||||||||
The following tables present the balance of goodwill by reporting unit, including the changes in carrying amount of goodwill, for the years ended December 31, 2014 and 2013 (in thousands): | ||||||||||||||||||||
Balance as of | Additions | Deductions | Foreign | Goodwill | Balance as of | |||||||||||||||
January 1, | Currency | Impairment | December 31, | |||||||||||||||||
2014 | Translation | 2014 | ||||||||||||||||||
Exchange | $ | 483,462 | $ | 12,286 | $ | — | $ | — | $ | — | $ | 495,748 | ||||||||
Rental | 20,396 | — | — | — | — | 20,396 | ||||||||||||||
VO management | 36,981 | 3,307 | — | (1,128 | ) | — | 39,160 | |||||||||||||
VO sales and financing | — | 6,946 | — | — | — | 6,946 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | $ | 540,839 | $ | 22,539 | $ | — | $ | (1,128 | ) | $ | — | $ | 562,250 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Balance as of | Additions | Deductions | Foreign | Goodwill | Balance as of | |||||||||||||||
January 1, | Currency | Impairment | December 31, | |||||||||||||||||
2013 | Translation | 2013 | ||||||||||||||||||
Exchange | $ | 483,462 | $ | — | $ | — | $ | — | — | $ | 483,462 | |||||||||
Rental | 4,796 | 15,600 | — | — | — | 20,396 | ||||||||||||||
VO management | 17,516 | 18,933 | — | 532 | — | 36,981 | ||||||||||||||
VO sales and financing | — | — | — | — | — | — | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | $ | 505,774 | $ | 34,533 | $ | — | $ | 532 | $ | — | $ | 540,839 | ||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
In connection with the HVO acquisition, we recorded total goodwill of $22.5 million and identifiable intangible assets of $61.5 million, all of which are definite-lived intangible assets, related to HVO's membership base in their Hyatt Residence Club (referred to as customer relationships in following tables) and their resort management contracts. | ||||||||||||||||||||
The $22.5 million increase in goodwill for the year ended December 31, 2014 is a result of goodwill acquired in connection with the acquisition of HVO, together with the associated foreign currency translation of goodwill carried on the books of an ILG entity whose functional currency is not the US dollar. Goodwill is assigned to reporting units of ILG that are expected to benefit from the combination. The amount of goodwill assigned to a reporting unit is determined in a manner similar to how the amount of goodwill recognized in a business combination is determined, while using a reasonable methodology applied in a consistent manner. Based on the expected benefits from the business combination, we have assigned $12.3 million, $3.3 million and $6.9 million of HVO related goodwill to our Exchange, VO management and VO sales and financing reporting units, respectively. | ||||||||||||||||||||
In connection with the 2013 acquisitions, we recorded total goodwill of $34.5 million and identifiable intangible assets of $131.9 million, of which $93.2 million were indefinite-lived intangible assets and primarily related to management contracts and trademarks. The $35.1 million change in goodwill for the year ended December 31, 2013 is a result of goodwill acquired in connection with acquisitions consummated in 2013 together with the associated foreign currency translation of goodwill carried on the books of an ILG entity whose functional currency is not the US dollar. | ||||||||||||||||||||
Goodwill Impairment Tests | ||||||||||||||||||||
ILG tests goodwill and other indefinite-lived intangible assets for impairment annually as of October 1, or more frequently if events or changes in circumstances indicate that the assets might be impaired. Goodwill is tested for impairment based on either a qualitative assessment or a two-step impairment test, as more fully described in Note 2 of these consolidated financial statements. When performing the two-step impairment test, if the carrying amount of a reporting unit's goodwill exceeds its implied fair value, an impairment loss equal to the excess is recorded. | ||||||||||||||||||||
As of December 31, 2014, as a result of the reorganization of our management reporting structure and reporting units (see Note 15), we assessed the carrying value of goodwill pursuant to the two-step impairment approach. The first step of the impairment test concluded the carrying value of each reporting unit did not exceed its fair value; consequently, the second step of the impairment test was not necessary and goodwill was not determined to be impaired. | ||||||||||||||||||||
As of October 1, 2014, prior to the reorganization of our management reporting structure and reporting units, we assessed the carrying value of goodwill and other intangible assets of each of our two reporting units. Goodwill assigned to our then reporting units, Membership and Exchange and Management and Rental, was $483.5 million and $57.4 million, respectively as of October 1, 2014. We performed a qualitative assessment on each of our reporting units for the 2014 annual test and concluded that it was more-likely-than-not that the fair value of each reporting exceeded its carrying value and, therefore, a two-step impairment test was not necessary. | ||||||||||||||||||||
As of October 1, 2013, we assessed the carrying value of goodwill and other intangible assets of each of our two reporting units at that time. Goodwill assigned to the Membership and Exchange, and Management and Rental reporting units as of that date was $483.5 million and $22.3 million, respectively. We elected to bypass the qualitative assessment for the 2013 annual test and performed the first step of the impairment test on both our reporting units. At the conclusion of that impairment test, we concluded that each reporting unit's fair value exceeded its carrying value and, therefore, the second step of the impairment test was not necessary. As of December 31, 2013, we did not identify any triggering events which required an interim impairment test subsequent to our annual impairment test on October 1, 2013. | ||||||||||||||||||||
Accumulated historical goodwill impairment losses as of January 1, 2013 were $34.3 million which related to components within our vacation rental reporting unit. There were no impairments of goodwill for our vacation rental reporting unit during fiscal year 2014 and 2013, and there have been no accumulated historical impairments of goodwill for any of our other reporting units through December 31, 2014. | ||||||||||||||||||||
Other Intangible Assets | ||||||||||||||||||||
As of October 1, 2014, we performed a qualitative assessment on our indefinite-lived intangible assets and concluded that the likelihood of our indefinite-lived intangible assets being impaired was below the more-likely-than-not threshold stipulated in ASU 2012-02 and, therefore, calculating the fair value of these intangible assets was not warranted as of October 1, 2014. | ||||||||||||||||||||
As of October 1, 2013, we elected to bypass the qualitative assessment for the required 2013 annual impairment test with respect to intangible assets with indefinite lives. For the 2013 impairment test we carried out a full impairment test which was comprised of calculating the fair value of these intangible assets and comparing such against their carrying amount. At the conclusion of that impairment test, we determined no impairment was required. | ||||||||||||||||||||
The balance of other intangible assets, net for the years ended December 31, 2014 and 2013 is as follows (in thousands): | ||||||||||||||||||||
December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Intangible assets with indefinite lives | $ | 131,336 | $ | 136,713 | ||||||||||||||||
Intangible assets with definite lives, net | 137,539 | 89,151 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Total intangible assets, net | $ | 268,875 | $ | 225,864 | ||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
The $5.4 million decrease in our indefinite-lived intangible assets during the year ended December 31, 2014 pertains to associated foreign currency translation of intangible assets carried on the books of an ILG entity whose functional currency is not the US dollar. | ||||||||||||||||||||
At December 31, 2014 and 2013, intangible assets with indefinite lives relate to the following (in thousands): | ||||||||||||||||||||
December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Resort management contracts | $ | 87,420 | $ | 92,797 | ||||||||||||||||
Trade names and trademarks | 43,916 | 43,916 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Total | $ | 131,336 | $ | 136,713 | ||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
At December 31, 2014, intangible assets with definite lives relate to the following (in thousands): | ||||||||||||||||||||
Cost | Accumulated | Net | Weighted Average | |||||||||||||||||
Amortization | Remaining | |||||||||||||||||||
Amortization | ||||||||||||||||||||
Life (Years) | ||||||||||||||||||||
Customer relationships | $ | 168,400 | $ | (129,942 | ) | $ | 38,458 | 21.8 | ||||||||||||
Purchase agreements | 75,879 | (75,443 | ) | 436 | 0.9 | |||||||||||||||
Resort management contracts | 129,864 | (36,790 | ) | 93,074 | 13.8 | |||||||||||||||
Technology | 25,076 | (25,076 | ) | — | — | |||||||||||||||
Other | 21,815 | (16,244 | ) | 5,571 | 3.4 | |||||||||||||||
| | | | | | | | | | | | | | |||||||
Total | $ | 421,034 | $ | (283,495 | ) | $ | 137,539 | |||||||||||||
| | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | |||||||
At December 31, 2013, intangible assets with definite lives relate to the following (in thousands): | ||||||||||||||||||||
Cost | Accumulated | Net | Weighted Average | |||||||||||||||||
Amortization | Remaining | |||||||||||||||||||
Amortization | ||||||||||||||||||||
Life (Years) | ||||||||||||||||||||
Customer relationships | $ | 129,500 | $ | (129,500 | ) | $ | — | 0 | ||||||||||||
Purchase agreements | 75,879 | (74,967 | ) | 912 | 1.9 | |||||||||||||||
Resort management contracts | 108,202 | (27,518 | ) | 80,684 | 14.5 | |||||||||||||||
Technology | 25,076 | (25,076 | ) | — | 0 | |||||||||||||||
Other | 21,817 | (14,262 | ) | 7,555 | 3.8 | |||||||||||||||
| | | | | | | | | | | | | | |||||||
Total | $ | 360,474 | $ | (271,323 | ) | $ | 89,151 | |||||||||||||
| | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | |||||||
In accordance with our policy on the recoverability of long-lived assets, as further described in Note 2 of these consolidated financial statements, we review the carrying value of all long-lived assets, primarily property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset (asset group) may be impaired. For the years ended December 31, 2014 and 2013, we did not identify any events or changes in circumstances indicating that the carrying value of a long lived asset (or asset group) may be impaired; accordingly, a recoverability test has not been warranted. | ||||||||||||||||||||
Amortization of intangible assets with definite lives is primarily computed on a straight-line basis. Total amortization expense for intangible assets with definite lives was $12.3 million, $8.1 million and $23.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. Based on the December 31, 2014 balances, amortization expense for the next five years and thereafter is estimated to be as follows (in thousands): | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2015 | $ | 13,927 | ||||||||||||||||||
2016 | 12,659 | |||||||||||||||||||
2017 | 11,384 | |||||||||||||||||||
2018 | 10,766 | |||||||||||||||||||
2019 | 10,032 | |||||||||||||||||||
2020 and thereafter | 78,771 | |||||||||||||||||||
| | | | | ||||||||||||||||
$ | 137,539 | |||||||||||||||||||
| | | | | ||||||||||||||||
| | | | | ||||||||||||||||
INVENTORY
INVENTORY | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
INVENTORY | |||||
INVENTORY | NOTE 5—VACATION OWNERSHIP INVENTORY | ||||
As part of our acquisition of HVO on October 1, 2014, we acquired vacation ownership inventory which primarily consists of unsold vacation ownership intervals that have completed the construction process and are available for sale in their current form. As of December 31, 2014, vacation ownership inventory is comprised of the following (in thousands): | |||||
December 31, | |||||
2014 | |||||
Completed unsold vacation ownership interests | $ | 53,434 | |||
Land held for development | 627 | ||||
| | | | | |
Total inventory | $ | 54,061 | |||
| | | | | |
| | | | | |
VACATION_OWNERSHIP_MORTGAGES_R
VACATION OWNERSHIP MORTGAGES RECEIVABLE | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
VACATION OWNERSHIP MORTGAGES RECEIVABLE | |||||||||||
VACATION OWNERSHIP MORTGAGES RECEIVABLE | NOTE 6—VACATION OWNERSHIP MORTGAGES RECEIVABLE | ||||||||||
Vacation ownership mortgages receivable is comprised of various mortgage loans related to our financing of vacation ownership interval sales. As part of our acquisition of HVO on October 1, 2014, we acquired an existing portfolio of vacation ownership mortgages receivable and determined as of the acquisition date that this acquired loan pool was performing and without evidence of any meaningful credit quality deterioration. Therefore, these loans are accounted for using the contractual cash flows method of recognizing discount accretion based on the acquired loans' contractual cash flows pursuant to ASC 310-20, "Nonrefundable Fees and Other Costs." At acquisition, we recorded these acquired performing loans at fair value, including a credit discount which is accreted as an adjustment to yield over the loan pools' estimate life. | |||||||||||
The fair value of these acquired loans of $37.5 million as of the acquisition date was determined by use of a discounted cash flow approach which calculates a present value of expected future cash flows based on scheduled principal and interest payments over the term of the respective loans, while considering anticipated defaults and early repayments determined based on historical experience. Consequently, the fair value of these acquired loans recorded on our consolidated balance sheet as of the acquisition date embeds an estimate for future loan losses which becomes the historical cost basis for that existing portfolio going forward. Gross contractual cash flows related to these acquired loans as of the acquisition date total $42.8 million, with the difference to fair value of $5.3 million primarily representing estimated contractual cash flows not expected to be collected. | |||||||||||
Originated loans as of December 31, 2014 represent vacation ownership mortgages receivable originated by ILG, or more specifically our Vacation Ownership segment, subsequent to the acquisition of HVO on October 1, 2014. | |||||||||||
Vacation ownership mortgages receivable balances as of December 31, 2014 were as follows: | |||||||||||
December 31, | |||||||||||
2014 | |||||||||||
Acquired vacation ownership mortgages receivables at various stated interest rates with varying payment through 2031 (see below) | $ | 33,953 | |||||||||
Originated vacation ownership mortgages receivables at various stated interest rates with varying payment through 2025 (see below) | 2,896 | ||||||||||
Less allowance for loan losses | (347 | ) | |||||||||
| | | | | |||||||
Net vacation ownership mortgages receivable | $ | 36,502 | |||||||||
| | | | | |||||||
| | | | | |||||||
As of December 31, 2014, the weighted average interest rate on vacation ownership mortgage receivables was 14.0% and the predominant range of stated interest rates on vacation ownership mortgages receivables was 8.24% to 17.90%. | |||||||||||
Vacation ownership mortgages receivables as of December 31, 2014 are scheduled to mature as follows (in thousands): | |||||||||||
Year Ended December 31, | |||||||||||
2015 | $ | ||||||||||
6,135 | |||||||||||
2016 | 5,353 | ||||||||||
2017 | 4,636 | ||||||||||
2018 | 3,795 | ||||||||||
2019 | 3,338 | ||||||||||
2020 and thereafter | 13,592 | ||||||||||
| | | |||||||||
Total | 36,849 | ||||||||||
Less: allowance for losses | -347 | ||||||||||
| | | |||||||||
Net vacation ownership mortgages receivable | $ | ||||||||||
36,502 | |||||||||||
| | | |||||||||
| | | |||||||||
Allowance for Loan Losses | |||||||||||
We assess our vacation ownership mortgages receivable portfolio of loans for collectability on an aggregate basis. Estimates of uncollectability are recorded as provisions in the vacation ownership mortgages receivable allowance for losses as discussed in Note 2 of these consolidated financial statements. As of December 31, 2014, a provision of $0.3 million for uncollectability was recorded to the vacation ownership mortgages receivable allowance for losses related solely to loans originated subsequent to the acquisition of HVO on October 1, 2014 given our acquired loans as of that date were remeasured to fair value using an estimated measure of future default that remained accurate as of December 31, 2014 in all material respects. We consider the provisions to be adequate based on the economic environment and our assessment of the future collectability of the outstanding loans. | |||||||||||
At December 31, 2014, the weighted average FICO score (based upon the loan balance) for borrowers within our acquired and originated loan pools was 701 and 718 respectively. The default rate for our vacation ownership mortgages receivable portfolio of loans (as a percentage of our total outstanding loans) for the period subsequent to our acquisition of HVO was 0.7%. The average estimated rate for all future defaults for our outstanding pool of loans as of December 31, 2014 was 11.2% | |||||||||||
On an ongoing basis, we monitor that credit quality of our vacation ownership mortgages receivable portfolio based on payment activity as follows: | |||||||||||
• | Current—The consumer's note is in good standing as payments and reporting are current per the terms contractually stipulated in the agreement. | ||||||||||
• | Past-due—We consider a vacation ownership mortgage receivable to be past-due based on the contractual terms of each individual financing agreement. | ||||||||||
• | Non-performing—Vacation ownership mortgages receivables are considered non-performing if interest or principal is more than 120 days past due. All non-performing loans are placed on non-accrual status and we do not resume interest accrual until the receivable becomes contractually current. We apply payments we receive for vacation ownership notes receivable on non-performing status first to interest, then to principal, and any remainder to fees. | ||||||||||
Our aged analysis of past-due vacation ownership mortgages receivable, the gross balance of vacation ownership mortgages receivable greater than 90 days past-due, and the gross balance of vacation ownership mortgage receivables on non-performing status as of December 31, 2014 is as follows (in thousands): | |||||||||||
Receivables | Receivables | Receivables on | |||||||||
past due | greater than | non-performing | |||||||||
90 days | status | ||||||||||
past due | |||||||||||
Vacation ownership mortgages receivable | $ | 1,301 | $ | 148 | $ | — | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
INVESTMENTS_IN_UNCONSOLIDATED_
INVESTMENTS IN UNCONSOLIDATED ENTITIES | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
INVESTMENTS IN UNCONSOLIDATED ENTITIES | |||||||
INVESTMENTS IN UNCONSOLIDATED ENTITIES | NOTE 7—INVESTMENTS IN UNCONSOLIDATED ENTITIES | ||||||
Our investments in unconsolidated entities, recorded under the equity method of accounting in accordance with guidance in ASC 323, "Investments—Equity Method and Joint Ventures," primarily consists of an ownership interest in Maui Timeshare Venture, LLC, a joint venture to develop and operate a vacation ownership resort in the state of Hawaii. This joint venture was acquired in connection with our acquisition of HVO and was recorded at fair value on the acquisition date. Our equity income from investments in unconsolidated entities, recorded in equity in earnings from unconsolidated entities in the accompanying consolidated statement of income, was $4.6 million for the year ended December 31, 2014. | |||||||
The ownership percentages and carrying value of our investments in unconsolidated entities as of December 31, 2014 were as follows: | |||||||
Ownership | Carrying | ||||||
Interest | Value | ||||||
(in thousands) | |||||||
Maui Timeshare Venture, LLC | 33.00% | $ | 32,919 | ||||
Other | 25.0% - 43.3% | 567 | |||||
| | | | | | | |
Total | $ | 33,486 | |||||
| | | | | | | |
| | | | | | | |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
PROPERTY AND EQUIPMENT | ||||||||
PROPERTY AND EQUIPMENT | NOTE 8—PROPERTY AND EQUIPMENT | |||||||
Property and equipment, net is as follows (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Computer equipment | $ | 21,389 | $ | 20,084 | ||||
Capitalized software (including internally-developed software) | 97,561 | 84,067 | ||||||
Land, buildings and leasehold improvements | 50,685 | 28,905 | ||||||
Furniture and other equipment | 16,638 | 14,830 | ||||||
Projects in progress | 10,581 | 8,296 | ||||||
| | | | | | | | |
196,854 | 156,182 | |||||||
Less: accumulated depreciation and amortization | (110,253 | ) | (96,626 | ) | ||||
| | | | | | | | |
Total property and equipment, net | $ | 86,601 | $ | 59,556 | ||||
| | | | | | | | |
| | | | | | | | |
Capitalized software, net of accumulated amortization, totaled $34.1 million and $29.0 million at December 31, 2014 and 2013, respectively, and is included in "Property and equipment, net" in the accompanying consolidated balance sheets. Depreciation expense for capitalized software recognized in our consolidated income statement for the years ended December 31, 2014, 2013 and 2012 was $10.1 million, $9.3 million and $8.5 million, respectively. | ||||||||
LONGTERM_DEBT
LONG-TERM DEBT | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
LONG-TERM DEBT | ||||||||
LONG-TERM DEBT | NOTE 9—LONG-TERM DEBT | |||||||
Long-term debt is as follows (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Revolving credit facility (interest rate of 1.92% at December 31, 2014 and 1.67% at December 31, 2013 respectively) | $ | 488,000 | $ | 253,000 | ||||
| | | | | | | | |
Total long-term debt | $ | 488,000 | $ | 253,000 | ||||
| | | | | | | | |
| | | | | | | | |
Credit Facility | ||||||||
In April 2014, we entered into the first amendment to the June 21, 2012 amended and restated credit agreement (collectively, the "Amended Credit Agreement") which increased the revolving credit facility from $500 million to $600 million, extended the maturity of the credit facility to April 8, 2019 and provided for certain other amendments to covenants. The terms related to interest rates and commitment fees remained unchanged. As of December 31, 2014, there was $488 million outstanding. The increase of $235 million as of December 31, 2014 is primarily attributable to incremental borrowings of $220 million to finance our acquisition of HVO. Any principal amounts outstanding under the revolving credit facility are due at maturity. The interest rate on the Amended Credit Agreement is based on (at our election) either LIBOR plus a predetermined margin that ranges from 1.25% to 2.25%, or the Base Rate as defined in the Amended Credit Agreement plus a predetermined margin that ranges from 0.25% to 1.25%, in each case based on our leverage ratio. As of December 31, 2014, the applicable margin was 1.75% per annum for LIBOR revolving loans and 0.75% per annum for Base Rate loans. The Amended Credit Agreement has a commitment fee on undrawn amounts that ranges from 0.25% to 0.375% per annum based on our leverage ratio and as of December 31, 2014 the commitment fee was 0.275%. Interest expense for the years ended December 31, 2014, 2013 and 2012 was $7.1 million, $6.2 million, and $25.6 million, respectively, net of negligible capitalized interest relating to internally-developed software. | ||||||||
Pursuant to the Amended Credit Agreement, all obligations under the revolving credit facility are unconditionally guaranteed by ILG and certain of its subsidiaries. Borrowings are further secured by (1) 100% of the voting equity securities of ILG's U.S. subsidiaries and 65% of the equity in our first-tier foreign subsidiaries and (2) substantially all of our domestic tangible and intangible property. | ||||||||
Restrictions and Covenants | ||||||||
The Amended Credit Agreement has various financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness, incur additional liens, issue redeemable stock and preferred stock, pay dividends or distributions or redeem or repurchase capital stock, prepay, redeem or repurchase debt, make loans and investments, enter into agreements that restrict distributions from our subsidiaries, sell assets and capital stock of our subsidiaries, enter into certain transactions with affiliates and consolidate or merge with or into or sell substantially all of our assets to another person. | ||||||||
The Amended Credit Agreement requires us to meet certain financial covenants regarding the maintenance of a maximum consolidated leverage ratio of consolidated debt, less credit given for a portion of foreign cash, over consolidated Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined. Additionally, we are required to maintain a minimum consolidated interest coverage ratio of consolidated EBITDA over consolidated interest expense. Currently, the maximum consolidated leverage ratio is 3.5x and the minimum consolidated interest coverage ratio is 3.0x. As of December 31, 2014, ILG was in compliance in all material respects with the requirements of all applicable financial and operating covenants, and our consolidated leverage ratio and consolidated interest coverage ratio under the Amended Credit Agreement were 2.88 and 20.69, respectively. | ||||||||
In November 2014, we entered into a second amendment to the Amended Credit Agreement which primarily provides for a second letter of credit issuer and certain other amendments to covenants. Under this amendment, the financial covenants, interest rates, commitment fees and other significant terms remain unchanged. | ||||||||
Extinguishment of Debt | ||||||||
In September 2012, we redeemed all of our $300 million senior notes, issued on August 19, 2008, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, amounting to $314.5 million, at which time the senior notes were no longer deemed to be outstanding and our obligations under the indenture, as previously supplemented, terminated. We funded the redemption through the use of $290 million, drawn on our $500 million revolving credit facility, and cash on hand. The extinguishment of the senior notes resulted in a non-cash, pre-tax loss on extinguishment of debt of $17.9 million during the third quarter of 2012 principally pertaining to the acceleration of the original issue discount and the write-off of the related unamortized deferred debt issuance costs. These losses are presented in a separate line item, loss on extinguishment of debt, within other income (expense) in our consolidated statements of income for the year ended December 31, 2012. | ||||||||
Debt Issuance Costs | ||||||||
In connection with entering into the Amended Credit Agreement in June 2012, we incurred $3.9 million of lender and third-party debt issuance costs and wrote-off the remaining unamortized balance of $0.6 million relating to the original revolving credit and term loan facilities. In connection with entering into the first amendment in April 2014, we carried over $2.5 million of unamortized debt issuance costs pertaining to our June 2012 Amended Credit Agreement and incurred and deferred an additional $1.7 million of debt issuance costs. As of December 31, 2014, total unamortized debt issuance costs were $3.6 million, net of $2.0 million of accumulated amortization. As of December 31, 2013, total debt issuance costs on outstanding debt were $2.7 million, net of $1.2 million of accumulated amortization. Unamortized debt issuance costs are included in other non-current assets in the accompanying consolidated balance sheets and are amortized to interest expense on a straight-line basis through the maturity date of the Amended Credit Agreement. | ||||||||
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
FAIR VALUE MEASUREMENTS | NOTE 10—FAIR VALUE MEASUREMENTS | |||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
The estimated fair value of financial instruments below has been determined using available market information and appropriate valuation methodologies, as applicable. There have been no changes in the methods and significant assumptions used to estimate the fair value of financial instruments during the year ended December 31, 2014, other than items respective to HVO subsequent to its October 1, 2014 acquisition. Our financial instruments are detailed in the following table. | ||||||||||||||
December 31, 2014 | December 31, 2013 | |||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||
Amount | Value | Amount | Value | |||||||||||
(In thousands) | ||||||||||||||
Cash and cash equivalents | $ | 80,493 | $ | 80,493 | $ | 48,462 | $ | 48,462 | ||||||
Restricted cash and cash equivalents | 19,984 | 19,984 | 7,421 | 7,421 | ||||||||||
Loans receivable | 15,896 | 15,896 | — | — | ||||||||||
Vacation ownership mortgages receivable | 37,710 | 37,624 | — | — | ||||||||||
Investment in marketable securities | 11,368 | 11,368 | — | — | ||||||||||
Total debt | (488,000 | ) | (488,000 | ) | (253,000 | ) | (253,000 | ) | ||||||
The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reflected in the accompanying consolidated balance sheets approximate fair value as they are redeemable at par upon notice or maintained with various high-quality financial institutions and have original maturities of three months or less. Under the fair value hierarchy established in ASC 820, cash and cash equivalents and restricted cash and cash equivalents are stated at fair value based on quoted prices in active markets for identical assets (Level 1). | ||||||||||||||
The loan receivable as of December 31, 2014 is presented in our consolidated balance sheet within other non-current assets and pertains to a convertible secured loan to CLC that matures five years subsequent to the funding date with interest payable monthly. The loan was funded in October of 2014. The outstanding loan is to be repaid in full at maturity either in cash or by means of a share option exercisable by ILG, at its sole discretion. The carrying value of the loan receivable approximates fair value through inputs inherent to the originating value of this loan, such as interest rates and ongoing credit risk accounted for through non-recurring adjustments for estimated credit losses as necessary (Level 2). The stated interest rate on this loan is comparable to market rate. Interest is recognized within our "Interest income" line item in our consolidated statement of income for the year ended December 31, 2014. | ||||||||||||||
We estimate the fair value of vacation ownership mortgages receivable using a discounted cash flow model. We believe this is comparable to the model that an independent third party would use in the current market. Our model incorporates default rates, prepayment rates, coupon rates and loan terms respective to the portfolio based on current market assumptions for similar types of arrangements. Based upon the availability of market data, we have classified inputs used in the valuation of our vacation ownership mortgages receivable as Level 3. The primary sensitivity in these assumptions relates to forecasted defaults and projected prepayments which could cause the estimated fair value to vary. | ||||||||||||||
Investments in marketable securities consists of marketable securities (mutual funds) related to a deferred compensation plan that is funded in a Rabbi trust as of December 31, 2014 and classified as other noncurrent assets in the accompanying consolidated balance sheets. This deferred compensation plan was created and funded in connection with the HVO acquisition. Participants in the deferred compensation plan unilaterally determine how their compensation deferrals are invested within the confines of the Rabbi trust which holds the marketable securities. Consequently, management has designated these marketable securities as trading investments, as allowed by applicable accounting guidance, even though there is no intent by ILG to actively buy or sell securities with the objective of generating profits on short-term differences in market prices. These marketable securities are recorded at a fair value of $11.4 million as of December 31, 2014 based on quoted market prices in active markets for identical assets (Level 1). Unrealized trading gains of $0.7 million, and the offsetting employee compensation expense, are included within general and administrative expenses in the accompanying consolidated statements of income for the year ended December 31, 2014. See Note 12 for further discussion in regards to this deferred compensation plan. | ||||||||||||||
The carrying value of the outstanding balance under our $600 million revolving credit facility approximates fair value as of December 31, 2014 and 2013 through inputs inherent to the debt such as variable interest rates and credit risk (Level 2). | ||||||||||||||
The guarantees, surety bonds, and letters of credit represent liabilities that are carried on our balance sheet only when a future related contingent event becomes probable and reasonably estimable. These commitments are in place to facilitate our commercial operations. The related fair value of these liabilities is estimated at the minimum expected cash flows contractually required to satisfy the related liabilities in the future upon occurrence of the applicable contingent events (Level 2). | ||||||||||||||
Fair Value of Contingent Consideration | ||||||||||||||
In connection with the VRI Europe transaction, we had an obligation to transfer additional consideration in the form of cash, resulting in incremental noncontrolling interest value in VRI Europe, based on final results of the acquired business for the twelve months ended December 31, 2013. During the second quarter of 2014, the parties reached final agreement resulting in a downward adjustment to the amount of contingent consideration by approximately $1.3 million, net of noncontrolling interest, which was recognized in earnings during that quarter. The final agreed upon liability of $6.5 million was settled in full during the second quarter of 2014. | ||||||||||||||
Additionally, in connection with our fourth quarter 2013 acquisitions, certain amounts related to the purchase consideration paid at closing were deposited into escrow to be held subject to specified future events which could occur over a period ranging from the respective acquisition dates up to 36 months thereafter, as applicable. Pursuant to ASC 805, we consider these escrowed funds to be contingent consideration whereby their release from escrow is subject to future performance. During the second quarter of 2014, the performance related to these escrowed funds was completed and consequently, the escrowed funds were released to the respective third parties and our contingent consideration liability (and corresponding asset representing the prepayment into escrow) was relieved on our consolidated balance sheet as of June 30, 2014. | ||||||||||||||
EQUITY
EQUITY | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
EQUITY | ||||||||
EQUITY | NOTE 11—EQUITY | |||||||
ILG has 300 million authorized shares of common stock, par value of $.01 per share. At December 31, 2014, there were 59.5 million shares of ILG common stock issued, of which 57.1 million are outstanding with 2.4 million shares held as treasury stock. At December 31, 2013, there were 59.1 million shares of ILG common stock issued, of which 57.4 million were outstanding with 1.7 million shares held as treasury stock. | ||||||||
ILG has 25 million authorized shares of preferred stock, par value $.01 per share, none of which are issued or outstanding as of December 31, 2014 and 2013. The Board of Directors has the authority to issue the preferred stock in one or more series and to establish the rights, preferences, and dividends. | ||||||||
Dividends Declared | ||||||||
In February, May, August and November 2014, our Board of Directors declared quarterly dividend payments of $0.11 per share paid in March, June, September and December 2014, respectively, of $6.3 million each. For the year ended December 31, 2014, we paid $25.2 million in cash dividends. In February 2015, our Board of Directors declared a $0.12 per share dividend payable March 31, 2015 to shareholders of record on March 17, 2015. | ||||||||
In May, August and November 2013, our Board of Directors declared quarterly dividend payments of $0.11 per share paid in June, September and December 2013, respectively, of $6.3 million each. For the year ended December 31, 2013, we paid $18.9 million in cash dividends. | ||||||||
Stockholder Rights Plan | ||||||||
In June 2009, ILG's Board of Directors approved the creation of a Series A Junior Participating Preferred Stock, adopted a stockholders rights plan and declared a dividend of one right for each outstanding share of common stock held by our stockholders of record as of the close of business on June 22, 2009. The rights attach to any additional shares of common stock issued after June 22, 2009. These rights, which trade with the shares of our common stock, currently are not exercisable. Under the rights plan, these rights will be exercisable if a person or group acquires or commences a tender or exchange offer for 15% or more of our common stock. The rights plan provides certain exceptions for acquisitions by Liberty Interactive Corporation (formerly known as Liberty Media Corporation) in accordance with an agreement entered into with ILG in connection with its spin-off from IAC/InterActiveCorp (IAC). If the rights become exercisable, each right will permit its holder, other than the "acquiring person," to purchase from us shares of common stock at a 50% discount to the then prevailing market price. As a result, the rights will cause substantial dilution to a person or group that becomes an "acquiring person" on terms not approved by our Board of Directors. | ||||||||
Share Repurchase Program | ||||||||
Effective August 3, 2011 and June 4, 2014, ILG's Board of Directors authorized a share repurchase program for up to $25.0 million and $20.0 million, respectively, excluding commissions, of our outstanding common stock. Acquired shares of our common stock are held as treasury shares carried at cost on our consolidated financial statements. Common stock repurchases may be conducted in the open market or in privately negotiated transactions. The amount and timing of all repurchase transactions are contingent upon market conditions, applicable legal requirements and other factors. This program may be modified, suspended or terminated by us at any time without notice. | ||||||||
During the year ended December 31, 2014, we repurchased 0.2 million shares of common stock for $4.1 million, including commissions, under the August 2011 repurchase program and 0.5 million shares of common stock for $10.0 million, including commissions, under the June 2014 repurchase program. As of December 31, 2014, the remaining availability for future repurchases of our common stock was $10.0 million. In February 2015, ILG's Board of Directors increased the share repurchase authorization to a total of $25 million. | ||||||||
Accumulated Other Comprehensive Loss | ||||||||
Pursuant to final guidance issued by the FASB in February of 2013, entities are required to disclose additional information about reclassification adjustments within accumulated other comprehensive income/loss, referred to as AOCL, for ILG, including (1) changes in AOCL balances by component and (2) significant items reclassified out of AOCL in the period. For the years ended December 31, 2014, 2013 and 2012, there were no significant items reclassified out of AOCL, and the change in AOCL pertains to current period foreign currency translation adjustments as disclosed in our accompanying consolidated statements of comprehensive income. | ||||||||
Noncontrolling Interests and Redeemable Noncontrolling Interest | ||||||||
Noncontrolling Interest—VRI Europe | ||||||||
In connection with the VRI Europe transaction on November 4, 2013, CLC was issued a noncontrolling interest in VRI Europe representing 24.5% of the business, which was determined based on the purchase price paid by ILG for its 75.5% ownership interest as of the acquisition date. As of December 31, 2014 and 2013, this noncontrolling interest amounts to $33.3 million and $32.7 million, respectively, and is presented on our consolidated balance sheets as a component of equity. The change from December 31, 2013 to December 31, 2014 relates to the recognition of the noncontrolling interest holder's proportional share of VRI Europe's earnings, the translation effect on the foreign currency based amount, and a $0.4 million adjustment related to contingent consideration as discussed in Note 10 to the consolidated financial statements. | ||||||||
The parties have agreed not to transfer their interests in VRI Europe or CLC's related development business for a period of five years from the acquisition. In addition, they have agreed to certain rights of first refusal, and customary drag along and tag along rights, including a right by CLC to drag along ILG's VRI Europe shares in connection with a sale of the entire CLC resort business subject to minimum returns and a preemptive right by ILG. As of December 31, 2014, there have been no changes in ILG's ownership interest percentage in VRI Europe. | ||||||||
Additionally, in connection with this arrangement, ILG and CLC entered into a loan agreement whereby ILG has made available to CLC a convertible secured loan facility of $15.1 million that matures five years subsequent to the funding date with interest payable monthly. The outstanding loan is to be repaid in full at maturity either in cash or by means of a share option exercisable by ILG, at its sole discretion, which would allow for settlement of the loan in CLC's shares of VRI Europe for contractually determined equivalent value. ILG has the right to exercise this share option at any time prior to maturity of the loan; however, the equivalent value for these shares would be measured at a 20% premium to its acquisition date value. We have determined the value of this embedded derivative is not material to warrant bifurcating from the host instrument (loan) at this time. The funding of this loan was subject to certain conditions precedent that were met as of December 31, 2014 and this loan was funded during the fourth quarter of 2014. | ||||||||
Noncontrolling Interest—Hyatt Vacation Ownership | ||||||||
In connection with the HVO acquisition on October 1, 2014, ILG assumed a noncontrolling interest in a joint venture entity, which we fully consolidate, formed for the purpose of developing and selling vacation ownership interests. The fair value of the noncontrolling interests of $3.3 million was determined based on the noncontrolling party's ownership interest applied against the fair value allocated to the respective joint venture entity. As of December 31, 2014, these noncontrolling interests amount to $3.0 million and are presented on our consolidated balance sheet as a component of equity. | ||||||||
Redeemable Noncontrolling Interest | ||||||||
The redeemable noncontrolling interest is presented as temporary equity in the mezzanine section between liabilities and equity on our consolidated balance sheet. This interest represents a noncontrolling ownership in the parent company of our Aston and Aqua businesses. In connection with the acquisition of Aston by ILG in May 2007, a member of senior management of this business purchased an ownership interest at the same per share price as ILG, a portion of which accrues preferred dividends at a rate of 10% per annum, and was granted an additional interest vesting over four and a half years. ILG is party to a fair value put and call arrangement with respect to this individual's holdings whereby this member of management could require ILG to purchase their interest or ILG could acquire such interest at fair value. The fair value of these shares upon exercise of the put or call is equal to their fair market value, determined by negotiation or arbitration, reduced by the accreted value of the preferred interest that was taken by ILG upon the purchase of Aston. The initial value of the preferred interest was equal to the acquisition price of Aston. An additional put right by the holder and call right by ILG would require, upon exercise, the purchase of these non-voting common shares by ILG immediately prior to a registered public offering by Aston, at the public offering price. | ||||||||
This put arrangement is exercisable by the counter-party outside the control of ILG and is accounted for in accordance with the ASC Topic 480, "Distinguishing Liabilities from Equity" ("ASC 480"). Pursuant to this guidance, we are required to adjust the carrying value of this noncontrolling interest, once redeemable, to its maximum redemption amount at each balance sheet date with a corresponding adjustment to retained earnings. Furthermore, if the noncontrolling interest is not currently redeemable yet probable of becoming redeemable, we are required to either (1) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the security will become redeemable, if later) to the earliest redemption date of the instrument using an appropriate methodology, usually the interest method, or (2) recognize changes in the redemption value (for example, fair value) immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. In all periods presented, we elected to use the second approach. | ||||||||
This put and call arrangement became redeemable for the first time in the first quarter of 2013 for a period of 60 days subsequent to the filing of our 2012 Annual Report on Form 10-K and is exercisable annually thereafter. Upon exercise of the put or call, the consideration payable can be denominated in ILG shares, cash or a combination thereof at ILG's option. For the year ended December 31, 2014, no put or call option related to this redeemable noncontrolling interest was exercised. | ||||||||
As of December 31, 2014, the estimated redemption value of this redeemable interest is lower than the current carrying value on our consolidated balance sheet. Consequently, pursuant to the applicable accounting guidance, no adjustment to the balance of this noncontrolling interest was recorded for the year ended December 31, 2014 or any prior period presented. | ||||||||
The balance of the redeemable noncontrolling interest as of December 31, 2014 and 2013 was $0.5 million and $0.4 million, respectively. Changes during the years then ended are as follows (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Balance, beginning of period | $ | 426 | $ | 426 | ||||
Net income attributable to redeemable noncontrolling interest | 31 | — | ||||||
| | | | | | | | |
Balance, end of period | $ | 457 | $ | 426 | ||||
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BENEFIT_PLANS
BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2014 | |
BENEFIT PLANS | |
BENEFIT PLANS | NOTE 12—BENEFIT PLANS |
Under a retirement savings plan sponsored by ILG, qualified under Section 401(k) of the Internal Revenue Code, participating employees may contribute up to 50.0% of their pre-tax earnings, but not more than statutory limits. ILG provides a discretionary match under the ILG plan of fifty cents for each dollar a participant contributed into the plan with a maximum contribution of 3% of a participant's eligible earnings, subject to Internal Revenue Service ("IRS") restrictions. Matching contributions for the ILG plan were approximately $1.8 million, $1.6 million and $1.4 million for the years ended December 31, 2014, 2013 and 2012, respectively. Matching contributions were invested in the same manner as each participant's voluntary contributions in the investment options provided under the plan. | |
During the three years ended December 31, 2014, 2013 and 2012, we also had or participated in various benefit plans, principally defined contribution plans, for non-U.S. employees. Our contributions for these plans were approximately $0.3 million in each of 2014, 2013 and 2012. | |
Effective August 20, 2008, a deferred compensation plan (the "Director Plan") was established to provide non-employee directors of ILG an option to defer director fees on a tax-deferred basis. Participants in the Director Plan are allowed to defer a portion or all of their compensation and are 100% vested in their respective deferrals and earnings. With respect to director fees earned for services performed after the date of such election, participants may choose from receiving cash or stock at the end of the deferral period. ILG has reserved 100,000 shares of common stock for issuance pursuant to this plan, of which 46,758 share units were outstanding at December 31, 2014. ILG does not provide matching or discretionary contributions to participants in the Director Plan. Any deferred compensation elected to be received in stock is included in diluted earnings per share. | |
Effective October 1, 2014, a non-qualified deferred compensation plan (the "DCP") was established to allow certain eligible employees of ILG an option to defer compensation on a tax-deferred basis. The establishment of the DCP was also intended to receive a transfer of deferred compensation liabilities in connection with the acquisition of HVO. Participants in the DCP make an election prior to the first of each year to defer an amount of compensation payable for services to be rendered beginning in the next calendar year, or to receive distributions. Participants are fully vested in all amounts held in their individual accounts. The DCP is fully funded in a Rabbi trust. The Rabbi trust is subject to creditor claims in the event of insolvency, but the assets held in the Rabbi trust are not available for general corporate purposes. Amounts in the Rabbi trust are invested in mutual funds, as selected by participants, which are designated as trading securities and carried at fair value. Subsequent to the acquisition of HVO, there was a net transfer of $10.6 million into the Rabbi trust related to participants acquired with the acquisition. As of December 31, 2014, the fair value of the investments in the Rabbi trust was $11.4 million which is recorded in other non-current assets with the corresponding deferred compensation liability recorded in other long-term liabilities in the consolidated balance sheet. We recorded unrealized gains of $0.7 million in general and administrative expenses related to the investment gains, and a charge to compensation expense related to the increase in deferred compensation liabilities to reflect our exposure of the DCP liability, in the consolidated statement of income for the year ended December 31, 2014. | |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
STOCK-BASED COMPENSATION | |||||||||||
STOCK-BASED COMPENSATION | NOTE 13—STOCK-BASED COMPENSATION | ||||||||||
On May 21, 2013, ILG adopted the Interval Leisure Group, Inc. 2013 Stock and Incentive Plan and stopped granting awards under the ILG 2008 Stock and Annual Incentive Plan ("2008 Incentive Plan"). Both plans provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. RSUs are awards in the form of phantom shares or units, denominated in a hypothetical equivalent number of shares of ILG common stock and with the value of each award equal to the fair value of ILG common stock at the date of grant. Each RSU is subject to service- based vesting, where a specific period of continued employment must pass before an award vests. We grant awards subject to graded vesting (i.e. portions of the award vest at different times during the vesting period) or to cliff vesting (i.e., all awards vest at the end of the vesting period). In addition, certain RSUs are subject to attaining specific performance criteria. | |||||||||||
ILG recognizes non-cash compensation expense for all RSUs held by ILG's employees. For RSUs to be settled in stock, the accounting charge is measured at the grant date as the fair value of ILG common stock and expensed as non- cash compensation over the vesting term using the straight-line basis for service awards and the accelerated basis for performance-based awards with graded vesting. Certain cliff vesting awards contain performance criteria which are tied to anticipated future results of operations in determining the fair value of the award, while other cliff vesting awards with performance criteria are tied to the achievement of certain market conditions. This value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line recognition method. The expense associated with RSU awards to be settled in cash is initially measured at fair value at the grant date and expensed ratably over the vesting term, recording a liability subject to mark-to-market adjustments for changes in the price of the respective common stock, as compensation expense. | |||||||||||
Shares underlying RSUs are not issued or outstanding until vested. In relation to our quarterly dividend, unvested RSUs are credited with dividend equivalents, in the form of additional RSUs, when dividends are paid on our shares of common stock. Such additional RSUs are forfeitable and will have the same vesting dates and will vest under the same terms as the RSUs in respect of which such additional RSUs are credited. Given such dividend equivalents are forfeitable, we do not consider them to be participating securities and, consequently, they are not subject to the two-class method of determining earnings per share. | |||||||||||
Under the ILG 2013 Stock and Incentive Compensation Plan, the maximum aggregate number of shares of common stock reserved for issuance as of adoption is 4.1 million shares, less one share for every share granted under any prior plan after December 31, 2012. As of December 31, 2014, ILG has 2.8 million shares available for future issuance under the 2013 Stock and Incentive Compensation Plan. | |||||||||||
During the first quarter of 2014, 2013 and 2012, the Compensation Committee granted approximately 390,000, 657,000 and 586,000 RSUs, respectively, vesting over three to four years, to certain officers and employees of ILG and its subsidiaries. Of the RSUs granted in 2014, 2013 and 2012, approximately 116,000, 300,000 and 130,000 cliff vest in three years and approximately 84,000, 58,000 and 73,000 of these RSUs, respectively, are subject to performance criteria that could result between 0% and 200% of these awards being earned either based on defined Adjusted EBITDA or relative total shareholder return targets over the respective performance period, as specified in the award document. | |||||||||||
For the 2014, 2013 and 2012 RSUs subject to relative total shareholder return performance criteria, the number of RSUs that may ultimately be awarded depends on whether the market condition is achieved. We used a Monte Carlo simulation analysis to estimate a per unit grant date fair value for these performance based RSUs of $36.90 for 2014, $29.61 for 2013 and $17.34 for 2012. This analysis estimates the total shareholder return ranking of ILG as of the grant date relative to two peer groups approved by the Compensation Committee, over the remaining performance period. The expected volatility of ILG's common stock at the date of grant was estimated based on a historical average volatility rate for the approximate three-year performance period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free interest rate assumption was based on observed interest rates consistent with the approximate three-year performance measurement period. | |||||||||||
Non-cash compensation expense related to RSUs for the years ended December 31, 2014, 2013 and 2012 was $11.4 million, $10.4 million and $10.9 million, respectively. At December 31, 2014, there was approximately $18.8 million of unrecognized compensation cost, net of estimated forfeitures, related to RSUs, which is currently expected to be recognized over a weighted average period of approximately 2.0 years. | |||||||||||
The amount of stock-based compensation expense recognized in the consolidated statements of income is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods for any changes to the estimated forfeiture rate from that previously estimated. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is at least equal to the portion of the grant-date value of the award tranche that is actually vested at that date. | |||||||||||
Non-cash stock-based compensation expense related to equity awards is included in the following line items in the accompanying consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 (in thousands): | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Cost of sales | $ | 724 | $ | 686 | $ | 639 | |||||
Selling and marketing expense | 1,392 | 1,193 | 1,034 | ||||||||
General and administrative expense | 9,247 | 8,549 | 9,258 | ||||||||
| | | | | | | | | | | |
Non-cash compensation expense before income taxes | 11,363 | 10,428 | 10,931 | ||||||||
Income tax benefit | (4,330 | ) | (3,960 | ) | (4,222 | ) | |||||
| | | | | | | | | | | |
Non-cash compensation expense after income taxes | $ | 7,033 | $ | 6,468 | $ | 6,709 | |||||
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The following table summarizes RSU activity during the years ended December 31, 2012, 2013 and 2014: | |||||||||||
Shares | Weighted-Average | ||||||||||
Grant Date | |||||||||||
Fair Value | |||||||||||
(In thousands) | |||||||||||
Non-vested RSUs at December 31, 2011 | 2,098 | $ | 12.22 | ||||||||
Granted | 679 | 13.72 | |||||||||
Vested | (1,156 | ) | 11.49 | ||||||||
Forfeited | (52 | ) | 13.72 | ||||||||
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Non-vested RSUs at December 31, 2012 | 1,569 | 13.29 | |||||||||
Granted | 713 | 20.83 | |||||||||
Vested | (766 | ) | 12.16 | ||||||||
Forfeited | (21 | ) | 17.85 | ||||||||
| | | | | | | | ||||
Non-vested RSUs at December 31, 2013 | 1,495 | 17.33 | |||||||||
Granted | 726 | 23.99 | |||||||||
Vested | (468 | ) | 16.27 | ||||||||
Forfeited | (59 | ) | 24.01 | ||||||||
| | | | | | | | ||||
Non-vested RSUs at December 31, 2014 | 1,694 | $ | 20.23 | ||||||||
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INCOME_TAXES
INCOME TAXES | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
INCOME TAXES | ||||||||||||||||||||
INCOME TAXES | NOTE 14—INCOME TAXES | |||||||||||||||||||
U.S. and foreign earnings from continuing operations before income taxes and noncontrolling interest are as follows (in thousands): | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
U.S. | $ | 100,265 | $ | 112,620 | $ | 55,464 | ||||||||||||||
Foreign | 26,734 | 14,574 | 9,497 | |||||||||||||||||
| | | | | | | | | | | ||||||||||
Total | $ | 126,999 | $ | 127,194 | $ | 64,961 | ||||||||||||||
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The components of the provision for income taxes attributable to continuing operations are as follows (in thousands): | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
Current income tax provision | ||||||||||||||||||||
Federal | $ | 28,671 | $ | 38,832 | $ | 12,016 | ||||||||||||||
State | 5,400 | 3,808 | 2,931 | |||||||||||||||||
Foreign | 3,831 | 4,341 | 2,798 | |||||||||||||||||
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Current income tax provision | 37,902 | 46,981 | 17,745 | |||||||||||||||||
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Deferred income tax provision (benefit) | ||||||||||||||||||||
Federal | 3,609 | (506 | ) | 3,972 | ||||||||||||||||
State | 914 | (1,759 | ) | 1,901 | ||||||||||||||||
Foreign | 2,626 | 696 | 634 | |||||||||||||||||
| | | | | | | | | | | ||||||||||
Deferred income tax provision (benefit) | 7,149 | (1,569 | ) | 6,507 | ||||||||||||||||
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Income tax provision | $ | 45,051 | $ | 45,412 | $ | 24,252 | ||||||||||||||
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ILG records a deferred tax asset, or future tax benefit, based on the amount of non-cash compensation expense recognized in the financial statements for stock-based awards. For income tax purposes, ILG receives a tax deduction equal to the stock price on the vesting date of the stock-based awards. Upon vesting of these awards, the deferred tax assets are reversed, and the difference between the deferred tax asset and the realized income tax benefit creates an excess tax benefit or deficiency that increases or decreases the additional paid-in-capital pool ("APIC pool"). If the amount of future tax deficiencies is greater than the available APIC pool, ILG will record the deficiencies in excess of the APIC pool as income tax expense in its consolidated statements of operations. During 2014, 2013, and 2012 net excess tax benefits associated with stock-based awards of approximately $1.9 million, $2.9 million and $2.6 million, respectively, were recorded as amounts credited to APIC. | ||||||||||||||||||||
The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013 are presented below (in thousands). The valuation allowance is related to items for which it is more likely than not that the tax benefit will not be realized. | ||||||||||||||||||||
December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||
Deferred revenue | $ | 34,278 | $ | 40,607 | ||||||||||||||||
Provision for accrued expenses | 5,666 | 4,539 | ||||||||||||||||||
Non-cash compensation | 6,552 | 5,123 | ||||||||||||||||||
Net operating loss and tax credit carryforwards | 1,534 | 675 | ||||||||||||||||||
Other | 916 | 1,737 | ||||||||||||||||||
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Total deferred tax assets | 48,946 | 52,681 | ||||||||||||||||||
Less valuation allowance | (234 | ) | (666 | ) | ||||||||||||||||
| | | | | | | | |||||||||||||
Net deferred tax assets | 48,712 | 52,015 | ||||||||||||||||||
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Deferred tax liabilities: | ||||||||||||||||||||
Intangible and other assets | (102,594 | ) | (103,986 | ) | ||||||||||||||||
Deferred membership costs | (6,951 | ) | (7,679 | ) | ||||||||||||||||
Property and equipment | (10,270 | ) | (8,297 | ) | ||||||||||||||||
Investments in unconsolidated entities | (2,594 | ) | — | |||||||||||||||||
Installment sales of vacation ownership interests | (1,054 | ) | — | |||||||||||||||||
Other | (1,565 | ) | (972 | ) | ||||||||||||||||
| | | | | | | | |||||||||||||
Total deferred tax liabilities | (125,028 | ) | (120,934 | ) | ||||||||||||||||
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Net deferred tax liability | $ | (76,316 | ) | $ | (68,919 | ) | ||||||||||||||
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At December 31, 2014 and 2013, ILG had foreign NOLs of approximately $7.2 million and $2.0 million, respectively, available to offset future income, virtually all of which can be carried forward indefinitely. The increase in foreign NOLs is primarily attributable to certain new financial reporting standards adopted for foreign statutory purposes in 2014. | ||||||||||||||||||||
A valuation allowance for deferred tax assets is provided when it is more likely than not that certain deferred tax assets will not be realized. Realization is dependent upon the generation of future taxable income or the reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. We consider the history of taxable income in recent years, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies to make this assessment. During 2014, the valuation allowance decreased primarily due to the liquidation of one of ILG's foreign subsidiaries and its related deferred tax asset and valuation allowance for NOL carryforwards that were ultimately not utilized. At December 31, 2014, ILG had a valuation allowance of approximately $0.2 million related to the portion of foreign NOL carryforwards for which, more likely than not, the tax benefit will not be realized. | ||||||||||||||||||||
A reconciliation of total income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes and noncontrolling interest is shown as follows (in thousands, except percentages): | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||
Income tax provision at the federal statutory rate of 35% | $ | 44,450 | 35 | $ | 44,518 | 35 | $ | 22,736 | 35 | |||||||||||
State income taxes, net of effect of federal tax benefit | 4,104 | 3.2 | 1,332 | 1.1 | 3,141 | 4.8 | ||||||||||||||
Foreign income taxed at a different statutory tax rate | (3,048 | ) | (2.4 | ) | (1,240 | ) | (1.0 | ) | (745 | ) | (1.2 | ) | ||||||||
U.S. tax consequences of foreign operations | (47 | ) | (0.0 | ) | 181 | 0.1 | (291 | ) | (0.4 | ) | ||||||||||
Other, net | (408 | ) | (0.3 | ) | 621 | 0.5 | (589 | ) | (0.9 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Income tax provision | $ | 45,051 | 35.5 | $ | 45,412 | 35.7 | $ | 24,252 | 37.3 | |||||||||||
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In accordance with ASC 740, no federal and state income taxes have been provided on permanently reinvested earnings of certain foreign subsidiaries aggregating approximately $80.5 million at December 31, 2014. If, in the future, these earnings are repatriated to the U.S., or if ILG determines such earnings will be repatriated to the U.S. in the foreseeable future, additional tax provisions would be required. Due to complexities in the tax laws and the assumptions that would have to be made, it is not practicable to estimate the amounts of income taxes that would have to be provided. | ||||||||||||||||||||
ASC 740 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows: | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
Balance at beginning of year | $ | 509 | $ | 662 | $ | 870 | ||||||||||||||
Additions for tax positions of prior years | 33 | 1,167 | 37 | |||||||||||||||||
Reductions for tax positions of prior years | — | (1,150 | ) | — | ||||||||||||||||
Settlements | — | — | (97 | ) | ||||||||||||||||
Expiration of applicable statute of limitations | (285 | ) | (170 | ) | (148 | ) | ||||||||||||||
| | | | | | | | | | | ||||||||||
Balance at end of year | $ | 257 | $ | 509 | $ | 662 | ||||||||||||||
| | | | | | | | | | | ||||||||||
| | | | | | | | | | | ||||||||||
As of December 31, 2014, 2013 and 2012, ILG had unrecognized tax benefits of $0.3 million, $0.5 million and $0.7 million, respectively, which if recognized, would favorably affect the effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2014, 2013 and 2012 are $0.1 million, $0.2 million and $0.4 million, respectively, of unrecognized tax benefits related to the acquisition of TPI. In connection with our acquisition of TPI, the former shareholders have agreed to indemnify us for all tax liabilities and related interest and penalties for the pre- acquisition period. The net decrease of $0.2 million in 2014 in unrecognized tax benefits is primarily attributable to the decrease in unrecognized tax benefits associated with the expiration of the statute of limitations related to foreign taxes and certain tax credits, partly offset by other income tax items. The net decrease of $0.2 million in 2013 in unrecognized tax benefits is due principally to a decrease in foreign taxes as a result of the expiration of the statute of limitations partly offset by other income tax items. Additionally, during the first quarter of 2013, the unrecognized tax benefits increased by approximately $1.1 million related to state income tax items. During the fourth quarter of 2013, we received a favorable binding technical advisement issued by a state taxing authority on state income tax items, which allowed us to decrease our unrecognized tax benefits by the $1.1 million. The net decrease of $0.2 million in 2012 in unrecognized tax benefits is due principally to both a decrease in foreign taxes as a result of the expiration of the statute of limitations and settlements with taxing authorities related primarily to certain tax credits, partly offset by other income tax items. | ||||||||||||||||||||
ILG recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. There were no material accruals for interest during 2014, 2013, and 2012. During these periods, interest and penalties decreased by approximately $0.1 million, $0.2 million and $0.2 million, respectively, as a result of the expiration of the statute of limitations related to foreign taxes. At December 31, 2014, 2013 and 2012, ILG has accrued $0.3 million, $0.4 million and $0.6 million, respectively, for the payment of interest and, if applicable, penalties. | ||||||||||||||||||||
ILG believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $0.1 million within twelve months of the current reporting date due primarily to the expiration of the statute of limitations related to foreign taxes and other tax credits. An estimate of other changes in unrecognized tax benefits cannot be made, but is not expected to be significant. | ||||||||||||||||||||
ILG has routinely been under audit by federal, state, local and foreign taxing authorities. These audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay assessments that may result from examination of prior year returns; however, the amount paid upon resolution of issues raised may differ from the amount provided. Differences between the reserves for tax contingencies and the amounts owed by ILG are recorded in the period they become known. Under a tax sharing agreement, IAC indemnifies ILG for all consolidated tax liabilities and related interest and penalties for the pre-spin period. | ||||||||||||||||||||
The statute of limitations for IAC's federal consolidated tax returns for the years 2001 through 2009, which includes our operations from September 24, 2002, our date of acquisition by IAC, until the spin-off in August 2008, expired on July 1, 2014. Various IAC consolidated tax returns that include our operations, filed with state and local jurisdictions, are currently under examination for various tax years beginning with 2006. The IRS is also currently examining ILG's federal consolidated tax return for the period ended December 31, 2012. As of December 31, 2014, no other open tax years are under examination by the IRS or any material state and local jurisdictions. | ||||||||||||||||||||
During 2013, the U.K. Finance Act of 2013 was enacted, which further reduced the U.K. corporate income tax rate to 21%, effective April 1, 2014 and 20%, effective April 1, 2015. The impact of the U.K. rate reduction to 21% and 20%, which reduced our U.K. net deferred tax asset and increased income tax expense, was reflected in the 2013 reporting period. The change in the corporate tax rate initially negatively impacted income tax expense as the future benefit expected to be realized from our U.K. net deferred tax assets decreased; however, going forward, the lower corporate tax rate will decrease income tax expense and favorably impact our effective tax rate. | ||||||||||||||||||||
SEGMENT_INFORMATION
SEGMENT INFORMATION | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SEGMENT INFORMATION | |||||||||||
SEGMENT INFORMATION | NOTE 15—SEGMENT INFORMATION | ||||||||||
Segment Information | |||||||||||
Pursuant to FASB guidance as codified in ASC 280, an operating segment is a component of a public entity (1) that engages in business activities that may earn revenues and incur expenses; (2) for which operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segments and assess its performance; and (3) for which discrete financial information is available. We also considered how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of products or services offered. In the fourth quarter of 2014, as a result of the acquisition of HVO, ILG reorganized its management reporting structure resulting in the following operating and reportable segments: Exchange and Rental, and Vacation Ownership. | |||||||||||
Our Exchange and Rental segment offers access to vacation accommodations and other travel-related transactions and services to leisure travelers, by providing vacation exchange services and vacation rental, working with resort developers and managing vacation properties. Our Vacation Ownership segment engages in the management, sales, marketing, financing, and development of vacation ownership interests and related services to owners and associations. | |||||||||||
ILG provides certain corporate functions that benefit the organization as whole. Such corporate functions include corporate services relating to oversight, accounting, legal, treasury, tax, internal audit, human resources, and certain IT functions. Historically most of these costs have been borne by the Interval business. Beginning in the fourth quarter of 2014, costs relating to such corporate functions that are not directly cross-charged to individual businesses are being allocated to our two operating and reportable segments based on a pre-determined measure of profitability relative to total ILG. All such allocations relate only to general and administrative expenses. The consolidated statements of income are not impacted by this cross-segment allocation. Consequently, for comparative purposes, we have recasted our segment results for 2014, 2013 and 2012 to include such corporate allocations. | |||||||||||
Information on reportable segments and reconciliation to consolidated operating income is presented below. Prior period segment financial information presented has been recast to reflect the reorganized reporting structure (in thousands): | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Exchange and Rental | |||||||||||
Membership revenue | $ | 352,513 | $ | 365,007 | $ | 357,732 | |||||
Rental management revenue | 48,148 | 29,956 | 27,075 | ||||||||
Pass-through revenues | 82,729 | 47,426 | 43,986 | ||||||||
| | | | | | | | | | | |
Total revenues | 483,390 | 442,389 | 428,793 | ||||||||
Cost of sales | 183,868 | 145,562 | 141,153 | ||||||||
| | | | | | | | | | | |
Gross profit | 299,522 | 296,827 | 287,640 | ||||||||
Selling and marketing expense | 58,020 | 53,100 | 53,120 | ||||||||
General and administrative expense | 102,796 | 93,903 | 93,237 | ||||||||
Amortization expense of intangibles | 7,058 | 5,126 | 20,444 | ||||||||
Depreciation expense | 14,683 | 14,134 | 13,185 | ||||||||
| | | | | | | | | | | |
Segment operating income | $ | 116,965 | $ | 130,564 | $ | 107,654 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Vacation Ownership | |||||||||||
Management fee revenue | $ | 92,017 | $ | 41,595 | $ | 27,871 | |||||
Vacation ownership sales and financing revenue | 9,478 | — | — | ||||||||
Pass-through revenue | 29,488 | 17,231 | 16,675 | ||||||||
| | | | | | | | | | | |
Total revenue | 130,983 | 58,826 | 44,546 | ||||||||
Cost of sales | 80,613 | 33,948 | 27,106 | ||||||||
| | | | | | | | | | | |
Gross profit | 50,370 | 24,878 | 17,440 | ||||||||
Selling and marketing expense | 3,595 | 622 | 439 | ||||||||
General and administrative expense | 30,374 | 18,671 | 12,033 | ||||||||
Amortization expense of intangibles | 5,243 | 3,007 | 2,597 | ||||||||
Depreciation expense | 1,029 | 397 | 244 | ||||||||
| | | | | | | | | | | |
Segment operating income | $ | 10,129 | $ | 2,181 | $ | 2,127 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Consolidated | |||||||||||
Revenue | $ | 614,373 | $ | 501,215 | $ | 473,339 | |||||
Cost of sales | 264,481 | 179,510 | 168,259 | ||||||||
| | | | | | | | | | | |
Gross profit | 349,892 | 321,705 | 305,080 | ||||||||
Direct segment operating expenses | 222,798 | 188,960 | 195,299 | ||||||||
| | | | | | | | | | | |
Operating income | $ | 127,094 | $ | 132,745 | $ | 109,781 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Selected financial information by reportable segment is presented below (in thousands): | |||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Total Assets: | |||||||||||
Exchange and Rental | $ | 931,698 | $ | 732,161 | |||||||
Vacation Ownership | 395,921 | 292,458 | |||||||||
| | | | | | | | ||||
Total | $ | 1,327,619 | $ | 1,024,619 | |||||||
| | | | | | | | ||||
| | | | | | | | ||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Capital expenditures | |||||||||||
Exchange and Rental | $ | 18,008 | $ | 14,361 | $ | 14,491 | |||||
Vacation Ownership | 1,079 | 339 | 549 | ||||||||
| | | | | | | | | | | |
Total | $ | 19,087 | $ | 14,700 | $ | 15,040 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Geographic Information | |||||||||||
We conduct operations through offices in the U.S. and 15 other countries. For the years ended December 31, 2014, 2013 and 2012 revenue is sourced from over 100 countries worldwide. Other than the United States and Europe, revenue sourced from any individual country or geographic region did not exceed 10% of consolidated revenue for the years ended December 31, 2014, 2013 and 2012. | |||||||||||
Geographic information on revenue, based on sourcing, and long-lived assets, based on physical location, is presented in the table below (in thousands). Amounts in the proceeding table representing revenue sourced from the United States and Europe versus all other countries for the year ended December 31, 2012 have been reclassified to conform to current period presentation. | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Revenue: | |||||||||||
United States | $ | 483,007 | $ | 404,886 | $ | 385,973 | |||||
Europe | 73,119 | 34,306 | 26,715 | ||||||||
All other countries(1) | 58,247 | 62,023 | 60,651 | ||||||||
| | | | | | | | | | | |
Total | $ | 614,373 | $ | 501,215 | $ | 473,339 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
-1 | Includes countries within the following continents: Africa, Asia, Australia, North America and South America. | ||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Long-lived assets (excluding goodwill and intangible assets): | |||||||||||
United States | $ | 81,291 | $ | 53,056 | |||||||
Europe | 4,884 | 5,812 | |||||||||
All other countries | 426 | 688 | |||||||||
| | | | | | | | ||||
Total | $ | 86,601 | $ | 59,556 | |||||||
| | | | | | | | ||||
| | | | | | | | ||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | NOTE 16—COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||||||
In the ordinary course of business, ILG is a party to various legal proceedings. ILG establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. ILG does not establish reserves for identified legal matters when ILG believes that the likelihood of an unfavorable outcome is not probable. Although management currently believes that an unfavorable resolution of claims against ILG, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of ILG, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. ILG also evaluates other contingent matters, including tax contingencies, to assess the probability and estimated extent of potential loss. See Note 14 for a discussion of income tax contingencies. | |||||||||||||||||||||||
Lease Commitments | |||||||||||||||||||||||
ILG leases office space, computers and equipment used in connection with its operations under various operating leases, many of which contain escalation clauses. We account for leases under ASC Topic 840, "Leases" ("ASC 840"). | |||||||||||||||||||||||
Future minimum payments under operating lease agreements are as follows (in thousands): | |||||||||||||||||||||||
Years Ending December 31, | |||||||||||||||||||||||
2015 | $ | 14,308 | |||||||||||||||||||||
2016 | 12,684 | ||||||||||||||||||||||
2017 | 9,527 | ||||||||||||||||||||||
2018 | 7,868 | ||||||||||||||||||||||
2019 | 6,728 | ||||||||||||||||||||||
Thereafter through 2021 | 9,833 | ||||||||||||||||||||||
| | | | | |||||||||||||||||||
Total | $ | 60,948 | |||||||||||||||||||||
| | | | | |||||||||||||||||||
| | | | | |||||||||||||||||||
Expense charged to operations under these agreements was $12.7 million, $11.1 million and $10.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. Lease expense is recognized on a straight-line basis over the term of the lease, including any option periods, as appropriate. The same lease term is used for lease classification, the amortization period of related leasehold improvements, and the estimation of future lease commitments. | |||||||||||||||||||||||
Other items, such as certain purchase commitments and guarantees are not recognized as liabilities in our consolidated financial statements but are required to be disclosed in the footnotes to the financial statements. These funding commitments could potentially require our performance in the event of demands by third parties or contingent events. The following table summarizes these items, on an undiscounted basis, at December 31, 2014 and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing of principal and interest payments on outstanding borrowings. | |||||||||||||||||||||||
Years Ending December 31, | Total | 2015 | 2016 | 2017 | 2018 | 2019 | Thereafter | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Debt principal | $ | 488,000 | $ | — | $ | — | $ | — | $ | — | $ | 488,000 | $ | — | |||||||||
Debt interest (projected) | 42,583 | 9,970 | 9,997 | 9,969 | 9,970 | 2,677 | — | ||||||||||||||||
Guarantees, surety bonds, and letters of credit | 65,315 | 57,473 | 4,661 | 1,353 | 1,148 | 596 | 84 | ||||||||||||||||
Purchase obligations | 80,044 | 19,609 | 11,626 | 19,717 | 7,772 | 7,320 | 14,000 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Total commitments | $ | 675,942 | $ | 87,052 | $ | 26,284 | $ | 31,039 | $ | 18,890 | $ | 498,593 | $ | 14,084 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2014, guarantees, surety bonds and letters of credit totaled $65.3 million, with the highest annual amount of $57.5 million occurring in year one. The total includes a guarantee by us of up to $36.7 million of the construction loan for the Maui project. The total also includes maximum exposure under guarantees of $17.9 million which primarily relates to our Exchange and Rental segment's rental management agreements, including those with guaranteed dollar amounts, and accommodation leases supporting the segment's management activities that are entered into on behalf of the property owners for which either party generally may terminate such leases upon 60 to 90 days prior written notice to the other party. In addition, certain of our rental management agreements provide that owners receive specified percentages of the rental revenue generated under its management. In these cases, the operating expenses for the rental operations are paid from the revenue generated by the rentals, the owners are then paid their contractual percentages or guaranteed amounts, and our vacation rental business either retain the balance (if any) as its fee or makes up the deficit. Although such deficits are reasonably possible in a few of these agreements, as of December 31, 2014, future amounts are not expected to be significant either individually or in the aggregate. | |||||||||||||||||||||||
Additionally, as of December 31, 2014, our letters of credit totaled $8.3 million and were principally related to our Vacation Ownership sales and financing activities. More specifically, these letter of credits provide alternate assurance on amounts held in escrow which enable our developer entities to access purchaser deposits prior to closings, as well as provide a guarantee of maintenance fees owed by our developer entities during subsidy periods at a particular vacation ownership resort, among other items. | |||||||||||||||||||||||
The purchase obligations primarily relate to future guaranteed purchases of rental inventory, operational support services, marketing related benefits and membership fulfillment benefits. Certain of our vacation rental businesses also enter into agreements, as principal, for services purchased on behalf of property owners for which it is subsequently reimbursed. As such, we are the primary obligor and may be liable for unreimbursed costs. As of December 31, 2014, amounts pending reimbursements are not significant. | |||||||||||||||||||||||
European Union Value Added Tax Matter | |||||||||||||||||||||||
In 2009, the European Court of Justice issued a judgment related to Value Added Tax ("VAT") in Europe against an unrelated party. The judgment affects companies who transact within the European Union ("EU"), specifically providers of vacation interest exchange services, and altered the manner in which the Exchange and Rental segment accounts for VAT on its revenues as well as to which EU country VAT is owed. | |||||||||||||||||||||||
As of December 31, 2014 and December 31, 2013, ILG had an accrual of $2.3 million and $2.9 million, respectively, representing accrued VAT liabilities, net of any VAT reclaim refund receivable related to this matter. The net change of $0.6 million in the accrual from December 31, 2013 primarily relates to a decrease in the change in estimate primarily to update the periods for which the accrued VAT liabilities are due, as well as the effect of foreign currency remeasurements. Changes in estimates resulted in favorable adjustments of $0.7 million, $1.1 million and $1.2 million to our consolidated statements of income for the years ended December 31, 2014, 2013 and 2012, respectively. | |||||||||||||||||||||||
Because of the uncertainty surrounding the ultimate outcome and settlement of these VAT liabilities, it is reasonably possible that future costs to settle these VAT liabilities as of December 31, 2014 may range from $2.3 million up to approximately $3.5 million based on quarter-end exchange rates. ILG believes that the $2.3 million accrual at December 31, 2014 is our best estimate of probable future obligations for the settlement of these VAT liabilities. The difference between the probable and reasonably possible amounts is primarily attributable to the assessment of certain potential penalties. | |||||||||||||||||||||||
SUPPLEMENTAL_CASH_FLOW_INFORMA
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | NOTE 17—SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(In thousands) | |||||||||||
Non-cash financing activity: | |||||||||||
Issuance of noncontrolling interest in connection with an acquisition | $ | — | $ | 31,347 | $ | — | |||||
Cash paid during the period for: | |||||||||||
Interest, net of amounts capitalized | $ | 6,376 | $ | 5,358 | $ | 31,363 | |||||
Income taxes, net of refunds | $ | 48,309 | $ | 42,750 | $ | 25,693 | |||||
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended | |
Dec. 31, 2014 | ||
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | NOTE 18—RELATED PARTY TRANSACTIONS | |
Agreements with Liberty | ||
In connection with the spin-off, ILG entered into a "Spinco Agreement" with Liberty Interactive Corporation, formerly known as Liberty Media Corporation, and assumed from IAC certain rights and obligations relating to post-spin-off governance arrangements and acquisitions, including: | ||
• | subject to specified requirements and so long as Liberty beneficially owns at least 20% of the voting power of our equity securities, Liberty has the ability to nominate up to 20% of our directors, all but one of which shall be independent; | |
• | subject to specified exceptions, Liberty may not acquire beneficial ownership of additional ILG equity securities, or transfer such securities; and | |
• | ILG will provide Liberty information and the opportunity to make a bid in the event of certain types of negotiated transactions involving ILG. | |
As required by the Spinco Agreement, ILG also entered into a registration rights agreement with Liberty at the time of the spin-off. Under the registration rights agreement, Liberty and its permitted transferees (the "Holders") are entitled to three demand registration rights (and unlimited piggyback registration rights) in respect of the shares of ILG common stock received by Liberty as a result of the spin-off and other shares of ILG common stock acquired by Liberty consistent with the Spinco Agreement (collectively, the "Registrable Shares"). The Holders are permitted to exercise their registration rights in connection with certain hedging transactions that they may enter into in respect of the Registrable Shares. ILG is obligated to indemnify the Holders, and each selling Holder is obligated to indemnify ILG, against specified liabilities in connection with misstatements or omissions in any registration statement. | ||
CLC World Resorts and Hotels | ||
Effective November 4, 2013, CLC became a related party of ILG when VRI Europe Limited, a subsidiary of ILG, purchased CLC's European shared ownership resort management business and, in connection with this purchase, issued to CLC a noncontrolling interest in VRI Europe. As part of this arrangement, VRI Europe and CLC entered into a shared services arrangement whereby each party provides certain services to one another at an agreed upon cost. VRI Europe's corresponding income and expense resulting from this shared services arrangement is recorded on a straight-line basis throughout the year. Additionally, we have an ongoing business relationship with CLC as part of their Interval Network affiliation. | ||
During the year ended December 31, 2014, VRI Europe recorded $0.7 million and $3.1 million of income and expense, respectively, in shared services with CLC, which is included within our Vacation Ownership segment. Additionally, we recorded $0.6 million of Exchange and Rental revenue in 2014 related to membership enrollments and sales of marketing materials. As of December 31, 2014, we had a trade payable of $0.1 million due to CLC, and a receivable of $0.5 million due from CLC. | ||
During the year ended December 31, 2013, VRI Europe recorded $0.1 million and $0.5 million of income and expense, respectively, in shared services with CLC, which is included within our Vacation Ownership segment. Additionally, we recorded $0.7 million of Exchange and Rental revenue in 2013 related to membership enrollments and sales of marketing materials. As of December 31, 2013, we had a trade payable of $0.6 million due to CLC, and a receivable of $1.8 million due from CLC. | ||
As of December 31, 2014, we have a loan of $15.1 million due from CLC. The loan is secured and matures five years subsequent to the funding date with interest payable monthly. The outstanding loan is to be repaid in full at maturity either in cash or by means of a share option exercisable by ILG, at its sole discretion, which would allow for settlement of the loan in CLC's shares of VRI Europe for contractually determined equivalent value. The funding of this loan was in October 2014. We recorded interest income of $0.2 million in the consolidated statement of income for the year ended December 31, 2014. | ||
Royal Caribbean Cruises | ||
Royal Caribbean Cruises Ltd. ("RCCL") is a related party of ILG as one of our board members is currently employed at RCCL. Through the travel services we offer, we sell RCCL cruises at either net or published fares. We recognize revenue for such transactions on a net basis. During each of the years ended December 31, 2014 and 2013, we recorded revenue of $0.9 million for such RCCL cruises sold to Interval members and others. As of December 31, 2014 and 2013, we had a trade payable of $1.7 million and $1.4 million, respectively, due to RCCL, relating to net fare transactions, and as of each of the respective year ends, a receivable of $0.1million, for commissions due from RCCL, relating to sales transactions at published fares. | ||
Maui Timeshare Venture and Host Hotels and Resorts | ||
In connection with the acquisition of HVO in October of 2014, we acquired a noncontrolling ownership interest in Maui Timeshare Venture, LLC, a joint venture to develop and operate a vacation ownership resort in the state of Hawaii. Host Hotels and Resorts Inc. controls the majority ownership interest in this joint venture. Consequently, we've determined both entities represent related parties of ILG. | ||
During the year ended December 31, 2014, we recorded revenue of $9.9 million from this joint venture related primarily to resort management and vacation ownership sales and marketing services performed on behalf of the joint venture pursuant to contractual arrangements at market rates. As of December 31, 2014, we had a trade payable of $2.0 million due to the joint venture and a receivable of $1.5 million owed from the joint venture. | ||
QUARTERLY_RESULTS_UNAUDITED
QUARTERLY RESULTS (UNAUDITED) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
QUARTERLY RESULTS (UNAUDITED) | ||||||||||||||
QUARTERLY RESULTS (UNAUDITED) | NOTE 19—QUARTERLY RESULTS (UNAUDITED) | |||||||||||||
Revenue at ILG is influenced by the seasonal nature of travel. The vacation exchange business generally recognize exchange and Getaway revenue based on confirmation of the vacation, with the first quarter generally experiencing higher revenue and the fourth quarter generally experiencing lower revenue. The vacation rental business recognize rental revenue based on occupancy, with the first and third quarters generally generating higher revenue and the second and fourth quarters generally generating lower revenue. The timeshare management part of this business does not experience significant seasonality. | ||||||||||||||
Quarter Ended | ||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||
(In thousands, except for share data) | ||||||||||||||
2014 | ||||||||||||||
Revenue | $ | 157,041 | $ | 143,528 | $ | 146,683 | $ | 167,121 | ||||||
Gross profit | 93,191 | 83,767 | 87,688 | 85,246 | ||||||||||
Operating income | 40,425 | 31,937 | 34,905 | 19,827 | ||||||||||
Net income attributable to common stockholders | 23,175 | 18,360 | 21,295 | 15,560 | ||||||||||
Earnings per share attributable to common stockholders(1): | ||||||||||||||
Basic | 0.41 | 0.32 | 0.37 | 0.27 | ||||||||||
Diluted | 0.41 | 0.32 | 0.37 | 0.27 | ||||||||||
2013 | ||||||||||||||
Revenue(2) | $ | 134,881 | $ | 124,983 | $ | 119,156 | $ | 122,195 | ||||||
Gross profit | 88,505 | 81,562 | 77,165 | 74,473 | ||||||||||
Operating income | 42,789 | 33,471 | 31,378 | 25,107 | ||||||||||
Net income attributable to common stockholders | 25,004 | 20,570 | 17,101 | 18,542 | ||||||||||
Earnings per share attributable to common stockholders(1): | ||||||||||||||
Basic | 0.44 | 0.36 | 0.30 | 0.32 | ||||||||||
Diluted | 0.44 | 0.36 | 0.29 | 0.32 | ||||||||||
-1 | For the years ended December 31, 2014 and 2013, per share amounts for the quarters may not add to the annual amount because of rounding and differences in the average common shares outstanding during each period. | |||||||||||||
-2 | Revenue for the quarter ended June 30, 2013 includes a correction of an immaterial prior period understatement of membership revenue amounting to $4.1 million. | |||||||||||||
Schedule_II_VALUATION_AND_QUAL
Schedule II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Schedule II VALUATION AND QUALIFYING ACCOUNTS | |||||||||||||||||
Schedule II VALUATION AND QUALIFYING ACCOUNTS | |||||||||||||||||
INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES | |||||||||||||||||
VALUATION AND QUALIFYING ACCOUNTS | |||||||||||||||||
Description | Balance at | Charges | Charges | Deductions(1) | Balance at | ||||||||||||
Beginning | (Credits) | (Credits) | End of | ||||||||||||||
of Period | to | to Other | Period | ||||||||||||||
Earnings | Accounts | ||||||||||||||||
(In thousands) | |||||||||||||||||
2014 | |||||||||||||||||
Allowance for doubtful accounts on trade receivables | $ | 290 | $ | 234 | $ | (297 | ) | $ | (34 | ) | $ | 193 | |||||
Allowance for loan losses on mortgages receivable | $ | — | $ | 347 | $ | — | $ | — | $ | 347 | |||||||
Deferred tax valuation allowance | $ | 666 | $ | (47 | ) | $ | (385 | ) | $ | — | $ | 234 | |||||
2013 | |||||||||||||||||
Allowance for doubtful accounts on trade receivables | $ | 409 | $ | 63 | $ | (182 | ) | $ | — | $ | 290 | ||||||
Allowance for loan losses on mortgages receivable | N/A | N/A | N/A | N/A | N/A | ||||||||||||
Deferred tax valuation allowance | $ | 681 | $ | 2 | $ | (17 | ) | — | $ | 666 | |||||||
2012 | |||||||||||||||||
Allowance for doubtful accounts on trade receivables | $ | 302 | $ | 153 | $ | (46 | ) | $ | — | $ | 409 | ||||||
Allowance for loan losses on mortgages receivable | N/A | N/A | N/A | N/A | N/A | ||||||||||||
Deferred tax valuation allowance | $ | 682 | — | $ | (1 | ) | — | $ | 681 | ||||||||
-1 | Write-off of uncollectible accounts receivable. | ||||||||||||||||
SIGNIFICANT_ACCOUNTING_POLICIE1
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SIGNIFICANT ACCOUNTING POLICIES | |||||||||||
Principles of Consolidation | Principles of Consolidation | ||||||||||
The accompanying consolidated financial statements include the accounts of ILG, our wholly-owned subsidiaries, and companies in which we have a controlling interest, including variable interest entities ("VIEs") where we are the primary beneficiary in accordance with consolidation guidance. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. References in these financial statements to net income attributable to common stockholders and ILG stockholders' equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately. | |||||||||||
Accounting Estimates | Accounting Estimates | ||||||||||
ILG's management is required to make certain estimates and assumptions during the preparation of its consolidated financial statements in accordance with generally accepted accounting principles ("GAAP"). These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. | |||||||||||
Significant estimates underlying the accompanying consolidated financial statements include: the recovery of long-lived assets as well as goodwill and other intangible assets; purchase price allocations of business combinations; the determination of deferred income taxes including related valuation allowances; the determination of deferred revenue and membership costs; and the determination of stock-based compensation. In the opinion of ILG's management, the assumptions underlying the historical consolidated financial statements of ILG and its subsidiaries are reasonable. | |||||||||||
Seasonality | Seasonality | ||||||||||
Revenue at ILG is influenced by the seasonal nature of travel. Within our Exchange and Rental segment, our vacation exchange businesses recognize exchange and Getaway revenue based on confirmation of the vacation, with the first quarter generally experiencing higher revenue and the fourth quarter generally experiencing lower revenue. Our vacation rental businesses recognize rental revenue based on occupancy, with the first and third quarters generally generating higher revenue as a result of increased leisure travel to our Hawaii-based managed properties during these periods, and the second and fourth quarters generally generating lower revenue. | |||||||||||
Within our Vacation Ownership segment, our sales and financing business experiences a modest impact from seasonality, with higher sales volumes during the traditional vacation periods, largely the third quarter (summer months). Our vacation ownership management businesses by and large do not experience significant seasonality. | |||||||||||
Revenue Recognition | Revenue Recognition | ||||||||||
Exchange and Rental | |||||||||||
Revenue, net of sales incentives, from membership fees from our Exchange and Rental segment is deferred and recognized over the terms of the applicable memberships, typically ranging from one to five years, on a straight-line basis. When multiple member benefits and services are provided over the term of the membership, revenue is recognized for each separable deliverable ratably over the membership period, as applicable. Generally, memberships are cancelable and refundable on a pro-rata basis, with the exception of our Platinum tier which is non-refundable. Direct costs of acquiring members (primarily commissions) and certain direct fulfillment costs related to deferred membership revenue are also deferred and amortized on a straight-line basis over the terms of the applicable memberships or benefit period, whichever is shorter. The recognition of previously deferred revenue and expense is based on estimates derived from an aggregation of member-level data. | |||||||||||
Revenue from exchange and Getaway transactions is recognized when confirmation of the transaction is provided as the earnings process is complete. Reservation servicing revenue is recognized when service is performed or on a straight-line basis over the applicable service period. All taxable revenue transactions are presented on a net-of-tax basis. | |||||||||||
Revenue from our vacation rental management businesses are comprised of base management fees which are typically either (i) fixed amounts, (ii) amounts based on a percentage of adjusted gross lodging revenue, or (iii) various revenue sharing arrangements with condominium owners based on stated formulas. Base management fees are recognized when earned in accordance with the terms of the contract. Incentive management fees for certain hotels and condominium resorts are generally a percentage of operating profits or improvement in operating profits. We recognize incentive management fees as earned throughout the incentive period based on actual results which are trued-up at the culmination of the incentive period. Service fee revenue is based on the services provided to owners including reservations, sales and marketing, property accounting and information technology services either internally or through third party providers. Service fee revenue is recognized when the service is provided. | |||||||||||
In certain instances we arrange services which are provided directly to property owners. Transactions for these services do not impact our consolidated financial statements as they are not included in our results of operations. Additionally, in most cases we employ on-site personnel to provide services such as housekeeping, maintenance and administration to property owners under our management agreements. For such services, we recognize revenue in an amount equal to the expenses incurred. | |||||||||||
Vacation Ownership | |||||||||||
The Vacation Ownership segment's revenue is derived principally from sales of vacation ownership intervals, fees for timeshare resort and homeowners' association management, and other management related services. Management fees in this segment consist of base management fees, service fees, and annual maintenance fees, as applicable. | |||||||||||
ILG recognizes revenue from sales of vacation ownership intervals in accordance with Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 970, Real Estate—General, and FASB ASC 978, Real Estate—Time-Sharing Activities. The stated sales price of the vacation ownership interests (VOI) is divided into separate revenue components, which include the revenue earned on the sale of the VOI and the revenue earned on the sales incentive given to the customer as motivation to purchase the VOI. ILG offers several types of sales incentives, including Hyatt Gold Passport Points, free bonus week, down payment credits to buyers, and waiver of first year maintenance fees. | |||||||||||
Consolidated VOI sales are recognized and included in revenues after a binding sales contract has been executed, a 10% minimum down payment has been received as a measure of substantiating the purchaser's commitment, the rescission period has expired, and construction is substantially complete. Pursuant to accounting rules for real estate time-sharing transactions, as part of determining when we have met the criteria necessary for revenue recognition we must also take into consideration the fair value of certain incentives provided to the purchaser when assessing the adequacy of the purchaser's initial investment. The agreement for sale generally provides for a down payment and a note secured by a mortgage payable in monthly installments, including interest, over a period of up to 10 years. All payments received prior to the recognition of the sale as revenue are recognized in deferred revenue in the accompanying consolidated balance sheets. Customer deposits relating to contracts cancelled after the applicable rescission period are forfeited and recorded in revenue at the time of forfeiture. | |||||||||||
The provision for loan losses is recorded as an adjustment to sales of vacation ownership intervals in the accompanying consolidated income statements rather than as an adjustment to bad debt expense. ILG records an estimate of uncollectible amounts at the time of the interval sale. The amount of the provision for loan losses recorded within sales of vacation ownership intervals in the accompanying consolidated statement of income was $0.3 million for the year ended December 31, 2014. | |||||||||||
Annual maintenance fees are amounts paid by timeshare owners for maintaining and operating the respective properties, which includes management services, and are recognized on a straight-line basis over the respective annual maintenance period. | |||||||||||
Deferred Revenue in a Business Combination | |||||||||||
When we acquire a business which records deferred revenue on their historical financial statements, we are required to re-measure that deferred revenue as of the acquisition date pursuant to rules related to accounting for business combinations, as described further below. The post-acquisition impact of that remeasurement results in recognizing revenue which solely comprises the cost of the associated legal performance obligation we assumed as part of the acquisition, plus a normal profit margin. At times, this purchase accounting treatment results in lower amounts of revenue recognized in a reporting period following the acquisition than would have otherwise been recognized on a historical basis. | |||||||||||
Multiple-Element Arrangement | |||||||||||
When we enter into multiple-element arrangements, we are required to determine whether the deliverables in these arrangements should be treated as separate units of accounting for revenue recognition purposes and, if so, how the contract price should be allocated to each element. We analyze our contracts upon execution to determine the appropriate revenue recognition accounting treatment. Our determination of whether to recognize revenue for separate deliverables will depend on the terms and specifics of our products and arrangements as well as the nature of changes to our existing products and services, if any. The allocation of contract revenue to the various elements does not change the total revenue recognized from a transaction or arrangement, but may impact the timing of revenue recognition. | |||||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents | ||||||||||
Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less. | |||||||||||
Restricted Cash and Cash Equivalants | Restricted Cash and Cash Equivalents | ||||||||||
Restricted cash and cash equivalents at December 31, 2014 and 2013 primarily includes maintenance fees, escrow deposits received on sales of VOI that are held in escrow until the applicable statutory rescission period has expired, the funds have been released from escrow and the deeding process has begun, as well as amounts held in trust and lock box accounts in connection with certain transactions related to management of vacation rental properties. | |||||||||||
Accounts Receivable | Accounts Receivable | ||||||||||
Accounts receivable are stated at amounts due from customers, principally resort developers, members and managed properties, net of an allowance for doubtful accounts. Accounts receivable outstanding longer than the contractual payment terms are considered past due. ILG determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, ILG's previous loss history, our judgment as to the specific customer's current ability to pay its obligation to ILG and the condition of the general economy. More specifically, ILG's policy for determining its allowance for doubtful accounts consists of both general and specific reserves. The general reserve methodology is distinct for each ILG business based on its historical collection experience and past practice. Predominantly, receivables greater than 120 days past due are applied a general reserve factor, while receivables 180 days or more past due are fully reserved. The determination of when to apply a specific reserve requires judgment and is directly related to the particular customer collection issue identified, such as known liquidity constraints, insolvency concerns or litigation. | |||||||||||
The allowance for bad debt is included within general and administrative expense within our consolidated statements of income. ILG writes off accounts receivable when they become uncollectible once we have exhausted all means of collection. | |||||||||||
Vacation Ownership Inventory | Vacation Ownership Inventory | ||||||||||
Inventory is composed of unsold vacation ownership intervals at our Hyatt-branded vacation ownership resorts. This inventory is carried at the lower of cost or market, based on relative sales value or net realizable value, less expected direct selling costs. Cost includes development, real estate, and content costs. Costs are allocated to units sold using the relative sales value method. This method calculates cost of sales as a percentage of projected gross sales using a cost-of-sales percentage, which is determined by dividing inventory cost into total estimated revenue projected for interval sales. Remaining inventory is a pool of costs that will be charged against future revenues. | |||||||||||
It is possible that future changes in our sales strategies or project development plans could have a material effect on the carrying value of inventory. Consequently, we monitor the carrying value of our inventory on a quarterly basis to ensure the inventory is stated at the lower of cost or market. | |||||||||||
Vacation Ownership Mortgages Receivable and Allowance for Losses | Vacation Ownership Mortgages Receivable and Allowance for Loan Losses | ||||||||||
Vacation ownership mortgages receivable consist of loans to eligible customers who purchase vacation ownership interests and choose to finance their purchase. These mortgage receivables are collateralized by the underlying vacation ownership interest, generally bear interest at a fixed rate, have a typical term ranging from 5 - 10 years and are generally made available to customers who make a down payment on the purchase price within established credit guidelines. | |||||||||||
Vacation ownership mortgages receivable are composed of mortgage loans related to our financing of vacation ownership interval sales. Included within our vacation ownership mortgages receivable are originated loans and loans acquired in connection with our acquisition of HVO. | |||||||||||
Acquired loans are segregated between those with deteriorated credit quality at acquisition and those deemed as performing. To make this determination, we consider such factors as credit collection history, past due status, non-accrual status, credit risk ratings, interest rates and the underlying collateral securing the loans. The fair value of acquired loans deemed performing is determined by discounting cash flows, both principal and interest, for the loan pool at market interest rates while giving consideration to anticipated future defaults. The difference between fair value and principal balances due at acquisition date is accreted to interest income, within consolidated revenue, over the estimated life of the loan pool. | |||||||||||
Allowance for Loan Losses | |||||||||||
For originated loans, we record an estimate of uncollectability as a reduction of sales of vacation ownership intervals in the accompanying consolidated statements of income at the time revenue is recognized on a vacation ownership interval sale. We evaluate our originated loan portfolio collectively as they are largely homogeneous, smaller-balance, vacation ownership mortgages receivable. We use a technique referred to as static pool analysis, which tracks uncollectibles over the entire life of those mortgage receivable, as the basis for determining our general reserve requirements on our vacation ownership mortgages receivable. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio, including defaults, aging, and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio. | |||||||||||
We determine our originated vacation ownership mortgages receivable to be nonperforming if either interest or principal is more than 120 days past due. All non-performing loans are placed on non-accrual status and we do not resume interest accrual until the receivable becomes contractually current. We apply payments we receive for vacation ownership notes receivable on non-performing status first to interest, then to principal, and any remainder to fees. | |||||||||||
Loans acquired in connection with a business combination are recorded at their estimated fair value on their purchase date with no carryover of the related allowance for loan losses. Performing acquired loans are subsequently evaluated for any required allowance at each reporting date. An allowance for loan losses on acquired loans is calculated using a similar methodology for originated loans. | |||||||||||
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities | ||||||||||
We consolidate entities under our control, including variable interest entities (VIEs) where we are deemed to be the primary beneficiary as a result of qualitative and/or quantitative characteristics. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be disproportionate to the entity. Investments in unconsolidated affiliates over which we exercise significant influence, but do not control, including joint ventures, are accounted for by the equity method. In addition, our limited partnership investments in which we hold more than a minimal investment are accounted for under the equity method of accounting. | |||||||||||
We assess investments in unconsolidated entities for impairment quarterly to determine whether there is an indication that a loss in value that is other-than-temporary has occurred. If so, we evaluate the carrying value compared to the estimated fair value of the investment. Fair value is based upon internally developed discounted cash flow models, third-party appraisals, or if appropriate, current estimated net sales proceeds from pending offers. If the estimated fair value is less than carrying value, we use our judgment to determine if the decline in value is other-than-temporary. In making this determination, we consider factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, our intent and ability to recover the lost value, and current economic conditions. Impairments that are deemed other-than-temporary are charged to equity in losses from unconsolidated entities in our accompanying consolidated statements of income. | |||||||||||
Property and Equipment | Property and Equipment | ||||||||||
Property and equipment, including capitalized improvements, are recorded at cost. Repairs and maintenance and any gains or losses on dispositions are included in results of operations. | |||||||||||
Depreciation is recorded on a straight-line basis to allocate the cost of depreciable assets to operations over their estimated useful lives. The following table summarizes depreciable life by asset category. | |||||||||||
Asset Category | Depreciation Period | ||||||||||
Computer equipment | 3 to 5 Years | ||||||||||
Capitalized software (including internally-developed software) | 3 to 7 Years | ||||||||||
Buildings and leasehold improvements | 1 to 40 Years | ||||||||||
Furniture and other equipment | 3 to 10 Years | ||||||||||
In accordance with ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), we capitalize certain qualified costs incurred in connection with the development of internal use software. Capitalization of internal use software costs begins when the preliminary project stage is completed, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. | |||||||||||
Fair Value Measurements | Fair Value Measurements | ||||||||||
In accordance with ASC Topic 820, "Fair Value Measurement," ("ASC 820") the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. We categorize assets and liabilities recorded at fair value using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: | |||||||||||
• | Level 1—Observable inputs that reflect quoted prices in active markets | ||||||||||
• | Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable | ||||||||||
• | Level 3—Unobservable inputs in which little or no market data exists, therefore requiring the company to develop its own assumptions | ||||||||||
Our non-financial assets, such as goodwill, intangible assets and long-lived assets, are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs. | |||||||||||
Accounting for Business Combinations | Accounting for Business Combinations | ||||||||||
In accordance with ASC Topic 805, "Business Combinations," when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, noncontrolling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the consolidated statements of income since their respective acquisition dates. | |||||||||||
The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. | |||||||||||
As part of our accounting for business combinations we are required to determine the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other: | |||||||||||
• | The expected use of the asset. | ||||||||||
• | The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate. | ||||||||||
• | Any legal, regulatory, or contractual provisions that may limit the useful life. | ||||||||||
• | Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions. | ||||||||||
• | The effects of obsolescence, demand, competition, and other economic factors. | ||||||||||
• | The level of maintenance expenditures required to obtain the expected future cash flows from the asset. | ||||||||||
If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business. | |||||||||||
Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to: | |||||||||||
• | the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets; | ||||||||||
• | the future expected cash flows from sales of products and services and related contracts and agreements; and | ||||||||||
• | discount and long-term growth rates. | ||||||||||
Unanticipated events and circumstances may occur which could affect the accuracy or validity of our assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes resulting from events that occur after the acquisition date, such as changes in our estimated fair value of the targets that are expected to be achieved, will be recognized in earnings in the period of the change in estimated fair value. | |||||||||||
Additionally, when acquiring a company who has recorded deferred revenue in its historical, pre-acquisition financial statements, we are required as part of purchase accounting to re-measure the deferred revenue as of the acquisition date. Deferred revenue is re-measured to represent solely the cost that relates to the associated legal performance obligation which we assumed as part of the acquisition, plus a normal profit margin representing the level of effort or assumption of risk assumed. Legal performance obligations that simply relate to the passage of time would not result in recognized deferred revenue as there is little to no associated cost. | |||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets | ||||||||||
Goodwill and other intangible assets are significant components of our consolidated balance sheets. Our policies regarding the valuation of intangible assets affect the amount of future amortization and possible impairment charges we may incur. Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as consumer spending habits and general economic trends, and internal factors such as changes in our business strategy and our internal forecasts. | |||||||||||
Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. In accordance with ASC 350, we review the carrying value of goodwill and other intangible assets of each of our reporting units on an annual basis as of October 1, or more frequently upon the occurrence of certain events or substantive changes in circumstances, based on either a qualitative assessment or a two-step impairment test. As of December 31, 2014, upon re-alignment of our operating segments, we identified two reporting units within each of our Exchange and Rental, and Vacation Ownership operating segments as follows: | |||||||||||
OPERATING SEGMENTS | |||||||||||
Exchange and Rental | Vacation Ownership | ||||||||||
Vacation exchange reporting unit | VO management reporting unit | ||||||||||
Vacation rental reporting unit | VO sales and financing reporting unit | ||||||||||
During the year, we monitor the actual performance of our reporting units relative to the fair value assumptions used in our annual impairment test, including potential events and changes in circumstance affecting our key estimates and assumptions. | |||||||||||
Qualitative Assessment | |||||||||||
The qualitative assessment may be elected in any given year pursuant to ASU 2011-08, "Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment" ("ASU 2011-08"). ASU 2011-08 amended the testing of goodwill for impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of a reporting unit. If entities determine, on the basis of qualitative factors, that it is more-likely-than-not (i.e., a likelihood of more than 50 percent) that the fair value of the reporting unit is below the carrying amount, the two-step impairment test would be required. The guidance also provides the option to skip the qualitative assessment in any given year and proceed directly with the two-step impairment test at our discretion. | |||||||||||
Our qualitative assessment is performed for the purpose of assessing whether events or circumstances have occurred in the intervening period between the date of our last two-step impairment test (the "Baseline Valuation") and the date of our current annual impairment test which could adversely affect the comparison of our reporting units' fair value with its carrying amount. Examples of events and circumstances that might indicate that a reporting unit's fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity's operating environment, industry or overall market conditions; reporting unit specific events such as increasing costs, declining financial performance, or loss of key personnel or contracts; or other events such as pending litigation, access to capital in the credit markets or a sustained decrease in ILG's stock price on either an absolute basis or relative to peers. If it is determined, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, we are then required to perform a two-step impairment test on goodwill. | |||||||||||
Two-step Impairment Test | |||||||||||
The first step of the impairment test compares the fair value of each reporting unit with its carrying amount including goodwill. The fair value of each reporting unit is calculated using the average of an income approach and a market comparison approach which utilizes similar companies as the basis for the valuation. If the carrying amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any impairment loss. The impairment loss is determined by comparing the implied fair value of goodwill to the carrying value of goodwill. The implied fair value of goodwill represents the excess of the fair value of the reporting unit over amounts assigned to its net assets. | |||||||||||
The determination of fair value utilizes an evaluation of historical and forecasted operating results and other estimates. Fair value measurements are generally determined through the use of valuation techniques that may include a discounted cash flow approach, which reflects our own assumptions of what market participants would use in pricing the asset or liability. | |||||||||||
Indefinite-Lived Intangible Assets | |||||||||||
Our intangible assets with indefinite lives relate principally to trade names, trademarks and certain resort management contracts. Pursuant to ASC 350, if an intangible asset is determined to have an indefinite useful life, it shall not be amortized until its useful life is determined to no longer be indefinite. Accordingly, we evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events or circumstances continue to support an indefinite useful life. As of December 31, 2014, there have been no changes to the indefinite life determination pertaining to these intangible assets. | |||||||||||
In addition, an intangible asset that is not subject to amortization shall be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss equal to the excess is recorded. However, subsequent to the issuance of ASU 2012-02 in July 2012, entities testing an indefinite-lived intangible asset for impairment have the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the likelihood of the indefinite-lived intangible asset being impaired is below a "more-likely-than-not" threshold (i.e., a likelihood of more than 50 percent), the entity would not need to calculate the fair value of the asset. | |||||||||||
Long-Lived Assets and Intangible Assets with Definite Lives | Long-Lived Assets and Intangible Assets with Definite Lives | ||||||||||
We review the carrying value of all long-lived assets, primarily property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset (asset group) may be impaired. In accordance with guidance included within ASC Topic 360, "Property Plant and Equipment," ("ASC 360"), recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (asset group) to future undiscounted cash flows expected to be generated by the asset (asset group). An asset group is the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When estimating future cash flows, we consider: | |||||||||||
• | only the future cash flows that were directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset group; | ||||||||||
• | our own assumptions about our use of the asset group and all available evidence when estimating future cash flows; | ||||||||||
• | potential events and changes in circumstance affecting our key estimates and assumptions; and | ||||||||||
• | the existing service potential of the asset (asset group) at the date tested. | ||||||||||
If an asset (asset group) is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset (asset group) exceeds its fair value. When determining the fair value of the asset (asset group), we consider the highest and best use of the assets from a market-participant perspective. The fair value measurement is generally determined through the use of independent third party appraisals or an expected present value technique, both of which may include a discounted cash flow approach, which reflects our own assumptions of what market participants would utilize to price the asset (asset group). | |||||||||||
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Assets to be abandoned, or from which no further benefit is expected, are written down to zero at the time that the determination is made and the assets are removed entirely from service. | |||||||||||
Advertising | Advertising | ||||||||||
Advertising and promotional expenditures primarily include printing and postage costs of directories and magazines, promotions, tradeshows, agency fees, and related commissions. Direct-response advertising consists primarily of printing, postage, and freight costs related to our member resort directories. Advertising costs are expensed in the period incurred, except for magazine related costs that are expensed at time of mailing when the advertising takes place, and direct-response advertising, which are amortized ratably over the twelve-month period following the mailing of the directories. | |||||||||||
Advertising expense was $15.6 million, $17.0 million and $16.8 million for the years ended December 31, 2014, 2013 and 2012, respectively, of which $2.1 million, $4.1 million and $4.1 million, respectively, pertained to expenses related to our direct-response advertising. As of December 31, 2014 and 2013, we had $2.4 million and $3.6 million, respectively, of capitalized advertising costs recorded in prepaid expenses and other current assets on our consolidated balance sheets. | |||||||||||
Income Taxes | Income Taxes | ||||||||||
ILG accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. ILG records interest on potential income tax contingencies as a component of income tax expense and records interest net of any applicable related income tax benefit. | |||||||||||
Pursuant to ASC Topic 740 "Income Taxes" ("ASC 740"), ILG recognizes liabilities for uncertain tax positions based on the two-step process prescribed by the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settling the uncertain tax position. | |||||||||||
Foreign Currency Translation and Transaction Gains and Losses | Foreign Currency Translation and Transaction Gains and Losses | ||||||||||
The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses are translated at average rates of exchange during the period. Resulting translation gains or losses are included as a component of accumulated other comprehensive income (loss), a separate component of ILG stockholders' equity. Accumulated other comprehensive income (loss) is solely related to foreign currency translation. Only the accumulated other comprehensive income (loss) exchange rate adjustment related to Venezuela is tax effected as required by the FASB guidance codified in ASC 740 since the earnings in Venezuela are not indefinitely reinvested in that jurisdiction. | |||||||||||
Transaction gains and losses arising from transactions and/or assets and liabilities denominated in a currency other than the functional currency of the entity involved are included in the consolidated statements of income. Operating foreign currency exchange attributable to foreign currency remeasurements of operating assets and liabilities denominated in a currency other than their functional currency, primarily related to Euro denominated value added tax liabilities, resulted in net gains of $0.4 million for the year ended December 31, 2104 and in net losses of $0.1 million for each of the years ended December 31, 2013 and 2012, which is included in general and administrative expenses. Non-operating foreign currency exchange included a net gain of $2.3 million and $0.6 million for the years ended December 31, 2014 and 2013, respectively, and a net loss of $2.2 million for the year ended December 31, 2012, included in other income (expense) in the accompanying consolidated statements of income. | |||||||||||
Stock-Based Compensation | Stock-Based Compensation | ||||||||||
Stock-based compensation is accounted for under ASC Topic 718, "Compensation—Stock Compensation" ("ASC 718"). Non-cash compensation expense for stock-based awards is measured at fair value on date of grant and recognized over the service period for awards expected to vest. The fair value of restricted stock and restricted stock units ("RSUs") is determined based on the number of shares granted and the quoted price of our common stock on that date, except for RSUs subject to relative total shareholder return performance criteria, which the fair value is based on a Monte Carlo simulation analysis as further discussed in Note 13. We grant awards subject to graded vesting (i.e., portions of the award vest at different times during the vesting period) or to cliff vesting (i.e., all awards vest at the end of the vesting period). Certain RSUs, in addition, are subject to attaining specific performance criteria. For RSUs to be settled in stock, the accounting charge is measured at the grant date fair value and expensed as non-cash compensation over the vesting term using the straight-line basis for service-only awards and the accelerated basis for performance-based awards with graded vesting. For certain cliff vesting awards with performance criteria, we also use anticipated future results in determining the fair value of the award. Such value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line recognition method. The amount of stock-based compensation expense recognized in the consolidated statements of income is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The expense associated with RSU awards to be settled in cash is initially measured at fair value at the grant date and expensed ratably over the vesting term, recording a liability subject to mark-to-market adjustments for changes in the price of the respective common stock as compensation expense. | |||||||||||
Stock-based compensation is recorded within the same line item in our consolidated statements of income as the employee-related compensation of the award recipient, as disclosed in tabular format in Note 13. | |||||||||||
Management must make certain estimates and assumptions regarding stock awards that will ultimately vest, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods for any changes to the estimated forfeiture rate from that previously estimated. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is at least equal to the portion of the grant-date value of the award tranche that is actually vested at that date. Tax benefits resulting from tax deductions in excess of the stock-based compensation expense recognized in the consolidated statements of income are reported as a component of financing cash flows. For the years ended December 31, 2014, 2013 and 2012, gross excess tax benefits from stock-based compensation reported as a component of financing cash flows were $1.9 million, $2.9 million, and $3.0 million, respectively. | |||||||||||
Earnings per Share | Earnings per Share | ||||||||||
Basic earnings per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings per share attributable to common stockholders is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the assumed exercise of common stock options and the vesting of RSUs using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is antidilutive. The computations of diluted earnings per share available to common stockholders do not include approximately 0.8 million stock options and 0.2 million RSUs for the year ended December 31, 2014, 0.8 million stock options for the year ended December 31, 2013, and 0.9 million stock options and 0.1 million RSUs for the year ended December 31, 2012, as the effect of their inclusion would have been antidilutive to earnings per share. | |||||||||||
In connection with the spin-off, stock options to purchase ILG common stock were granted to non-ILG employees for which there is no future compensation expense to be recognized by ILG. As of December 31, 2014 and 2013, 0.8 million of stock options remained outstanding. | |||||||||||
The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows (in thousands): | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Basic weighted average shares of common stock outstanding | 57,343 | 57,243 | 56,549 | ||||||||
Net effect of common stock equivalents assumed to be vested related to RSUs | 606 | 581 | 685 | ||||||||
Net effect of common stock equivalents assumed to be exercised related to stock options held by non-employees | 4 | 8 | 14 | ||||||||
| | | | | | | | | | | |
Diluted weighted average shares of common stock outstanding | 57,953 | 57,832 | 57,248 | ||||||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Certain Risks and Concentrations | Certain Risks and Concentrations | ||||||||||
Geographic Risk | |||||||||||
In regards to our Exchange and Rental segment, a substantial percentage of the vacation ownership resorts in the Interval Network are located in Florida, Hawaii, Las Vegas, Mexico and Southern California, while the majority of the revenue from our vacation rental businesses is derived from vacation properties located in Hawaii. In regards to our Vacation Ownership segment, the largest concentration of revenue derived from the management of vacation ownership properties resides in Spain with regard to our VRI Europe business. From an ILG perspective, approximately $211.1 million, $146.6 million and $127.0 million of 2014, 2013 and 2012 revenue, respectively, (excluding pass-through revenue) was generated from travel to properties located in all of these locations, together with vacation ownership management services and sales and financing activities performed in these locations. | |||||||||||
Business Risk | |||||||||||
ILG also depends on relationships with developers and vacation property owners, as well as third party service providers for processing certain fulfillment services. We do not consider our overall business to be dependent on any one of these resort developers, provided, that the loss of a few large developers (particularly those from which Interval receives membership renewal fees directly) could materially impact our business. The loss of one or more of our largest management agreements could materially impact our businesses. | |||||||||||
ILG's business also is subject to certain risks and concentrations including exposure to risks associated with online commerce security and credit card fraud. | |||||||||||
Credit Risk | |||||||||||
ILG is exposed to credit risk in relation to its portfolio of mortgage receivables associated with its vacation ownership business. We offer financing to purchasers of VOIs at our Hyatt-branded vacation ownership resorts and, as a result, ILG bears the risk of default on these loans. Should a purchaser default, ILG has the ability to foreclose and attempt to resell the associated VOI at its own cost to resell. | |||||||||||
Other financial instruments that potentially subject ILG to concentration of credit risk consist primarily of cash and cash equivalents which are maintained with high quality financial institutions. Financial instruments also contain secured loans that are recorded at the time of origination for the principal amount financed and are carried at amortized cost, net of any allowance for credit losses, as further discussed in Note 10. | |||||||||||
Interest Rate Risk | |||||||||||
ILG is exposed to interest rate risk through borrowings under our amended credit agreement which bears interest at variable rates. The interest rate on the amended credit agreement is based on (at our election) either LIBOR plus a predetermined margin that ranges from 1.25% to 2.25%, or the Base Rate as defined in the amended credit agreement plus a predetermined margin that ranges from 0.25% to 1.25%, in each case based on ILG's leverage ratio. | |||||||||||
Recent Accounting Pronouncements/Adopted Accounting Pronouncements | Recent Accounting Pronouncements | ||||||||||
With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2014 that are of significance, or potential significance, to ILG based on our current operations. The following summary of recent accounting pronouncements is not intended to be an exhaustive description of the respective pronouncement. | |||||||||||
In January 2015, the FASB issued Accounting Standards Update ("ASU") 2015-01, "Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" ("ASU 2015-01"). ASU 2015-01 eliminates from generally accepted accounting principles (GAAP) the concept of extraordinary items as part of the FASB's initiative to reduce complexity in accounting standards (the Simplification Initiative). ASC 225-20 requires a reporting entity to separately classify, present and disclose extraordinary events and transactions if the event or transaction meets both of the following criteria for extraordinary item classification: unusual nature and infrequency of occurrence. If an event or transaction meets the criteria for extraordinary classification, a reporting entity is required to segregate the extraordinary item from the results of ordinary operations and show them separately in the income statement, net of tax, after from income from continuing operations. Under ASU 2015-01, the concept of extraordinary item is eliminated from the ASC Master Glossary and replaced with definitions for infrequency of occurrence and unusual nature. The presentation and disclosure guidance in ASC 225-20 for items that are unusual in nature or incur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The ASU is effective for fiscal years beginning after December 15, 2015 (and interim periods within those fiscal years). A reporting entity may apply the amendments in the ASU prospectively and also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In November 2014, the FASB issued ASU 2014-17, "Business Combinations (Topic 815)—Pushdown Accounting: A Consensus of the FASB Emerging Issues Task Force" ("ASU 2014-17"). ASU 2014-17 provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity's most recent change-in-control event. An election to apply pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle in accordance with ASC 250, "Accounting Changes and Error Corrections." The ASU was effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of the ASU would be a change in accounting principle. On the effective date, we made the election to apply the guidance in the ASU to future change-in-control events. We do not anticipate the adoption of the ASU will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern ("ASU 2014-15")." ASU 2014-15 requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required. The ASU is effective for fiscal years beginning after December 15, 2016 (and interim periods within those fiscal years), with early adoption permitted. The standard allows for either a full retrospective or modified retrospective transition method. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In June 2014, the FASB issued ASU No. 2014-12, "Compensation—Stock Compensation (Topic 718): Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period ("ASU 2014-12")." ASU 2014-12 clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity's satisfaction of a performance target until it becomes probable that the performance target will be met. No new disclosures are required under ASU 2014-12. The ASU is effective for fiscal years beginning after December 15, 2015 (and interim periods within that period), with early adoption permitted. In addition, all entities will have the option of applying the guidance either prospectively (i.e. only to awards granted or modified on or after the effective date of the issue) or retrospectively. Retrospective application would only apply to awards with performance targets outstanding at or after the beginning of the first annual period presented (i.e., the earliest presented comparative period). We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures; however, we will continue to assess through the effective date the future impact, if any, of this new accounting update to our consolidated financial statements. | |||||||||||
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The FASB and the International Accounting Standards Board ("IASB") initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (i) remove inconsistencies and weaknesses in revenue requirements; (ii) provide a more robust framework for addressing revenue issues; (iii) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (iv) provide more useful information to users of financial statements through improved disclosure requirements; and (v) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB amended the FASB Accounting Standards Codification ("Codification") and created a new Topic 606, Revenue from Contracts with Customers. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry specific guidance throughout the Industry Topics of the Codification. Additionally, ASU 2014-09 supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. The ASU is effective for fiscal years beginning after December 15, 2016 (and interim periods within that period); early adoption is not permitted. Given the complexities of this new standard, we are unable to determine, at this time, whether adoption of this standard will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In April 2014, the FASB ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360)" ("ASU 2014-08"). The amendments in ASU 2014-08 change the requirements for reporting and disclosing discontinued operations. Among other items, this new guidance defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and "represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results." The standard states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. The ASU is effective for fiscal years beginning after December 15, 2014 (and interim periods within those fiscal years), with early adoption permitted. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures; however, we will continue to assess through the effective date the future impact, if any, of this new accounting update to our consolidated financial statements. | |||||||||||
In January 2014, the FASB issued ASU No. 2014-04, "Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure" ("ASU 2014-04"). Current US GAAP requires a loan to be reclassified to Other Real Estate Owned ("OREO") upon a troubled debt restructuring that is "in substance a repossession or foreclosure," where the creditor receives "physical possession" of the debtor's assets regardless of whether formal foreclosure proceedings take place. The amendments in ASU 2014-04 clarify when an "in substance a repossession or foreclosure" and "physical possession" has occurred as these terms are not defined in US GAAP, in addition to requiring certain supplementary interim and annual disclosures. The ASU is effective for fiscal years beginning after December 15, 2014 (and interim periods within those fiscal years) and shall be applied prospectively, with early adoption permitted. We do not currently anticipate the adoption of this guidance will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures; however, we will continue to assess through the effective date the future impact, if any, of this new accounting update to our consolidated financial statements. | |||||||||||
Adopted Accounting Pronouncements | |||||||||||
In March 2013, the FASB issued ASU 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment ("CTA") upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2013-05"). ASU 2013-05 applies to the release of the CTA into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The adoption of ASU 2013-02 did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02"). ASU 2013-02 adds new disclosure requirements for items reclassified out of accumulated other comprehensive income/loss ("AOCI"), including (1) disaggregating and separately presenting changes in AOCI balances by component and (2) presenting significant items reclassified out of AOCI either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. It does not amend any existing requirements for reporting net income or other comprehensive income in the financial statements. The ASU is effective for fiscal years beginning after December 15, 2012 (and interim periods within those years), and shall be applied prospectively. The adoption of ASU 2013-02 did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
In July 2012, the FASB issued ASU 2012-02, "Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" ("ASU 2012-02"). ASU 2012-02 amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. Under the revised guidance, entities testing an indefinite-lived intangible asset for impairment have the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the likelihood of the indefinite-lived intangible asset being impaired is below a "more likely than not" threshold (i.e., a likelihood of more than 50 percent), the entity would not need to calculate the fair value of the asset. The ASU does not revise the requirement to test indefinite-lived intangible assets annually for impairment and does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We adopted this guidance as of October 1, 2012—the date of our 2012 annual impairment test. The adoption of this guidance did not have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures. | |||||||||||
SIGNIFICANT_ACCOUNTING_POLICIE2
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SIGNIFICANT ACCOUNTING POLICIES | |||||||||||
Summary of depreciable life by asset category | |||||||||||
Asset Category | Depreciation Period | ||||||||||
Computer equipment | 3 to 5 Years | ||||||||||
Capitalized software (including internally-developed software) | 3 to 7 Years | ||||||||||
Buildings and leasehold improvements | 1 to 40 Years | ||||||||||
Furniture and other equipment | 3 to 10 Years | ||||||||||
Schedule of computation of weighted average common and common equivalent shares | The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows (in thousands): | ||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Basic weighted average shares of common stock outstanding | 57,343 | 57,243 | 56,549 | ||||||||
Net effect of common stock equivalents assumed to be vested related to RSUs | 606 | 581 | 685 | ||||||||
Net effect of common stock equivalents assumed to be exercised related to stock options held by non-employees | 4 | 8 | 14 | ||||||||
| | | | | | | | | | | |
Diluted weighted average shares of common stock outstanding | 57,953 | 57,832 | 57,248 | ||||||||
| | | | | | | | | | | |
| | | | | | | | | | | |
BUSINESS_COMBINATIONS_Tables
BUSINESS COMBINATIONS (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
BUSINESS COMBINATIONS | ||||||||
Schedule of allocation of total acquisition cost to the assets acquired and liabilities assumed, based on their estimated fair values | The following table presents the allocation of total purchase price consideration to the assets acquired and liabilities assumed, based on their estimated fair values as of their respective acquisition dates (in thousands): | |||||||
HVO acquisition | 2013 acquisitions | |||||||
Cash | $ | 16,828 | $ | 1,167 | ||||
Other current assets | 110,956 | 10,233 | ||||||
Goodwill(1) | 22,539 | 34,533 | ||||||
Intangible assets | 61,500 | 131,857 | ||||||
Other noncurrent assets | 47,471 | 15,759 | ||||||
Current liabilities | (26,863 | ) | (11,355 | ) | ||||
Other noncurrent liabilities | (10,910 | ) | (14,946 | ) | ||||
| | | | | | | | |
Net assets acquired | $ | 221,521 | $ | 167,248 | ||||
| | | | | | | | |
| | | | | | | | |
-1 | Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. | |||||||
Schedule of purchase price allocated to the fair value of goodwill and identifiable intangible assets | The purchase price allocated to the fair value of goodwill and identifiable intangible assets associated with the HVO and 2013 acquisitions are as follows (in thousands): | |||||||
HVO acquisition | Cost | Useful | ||||||
Life (Years) | ||||||||
Goodwill | $ | 22,539 | N/A | |||||
Customer relationships | 38,900 | 22 | ||||||
Resorts management contracts | 22,600 | 22 | ||||||
| | | | | | | | |
Total | $ | 84,039 | ||||||
| | | | | | | | |
| | | | | | | | |
2013 acquisitions | Cost | Useful | ||||||
Life (Years) | ||||||||
Goodwill | $ | 34,533 | N/A | |||||
Trademarks | 3,000 | N/A | ||||||
Resort management contracts (indefinite-lived) | 90,237 | N/A | ||||||
Resort management contracts (definite-lived) | 34,640 | 3 - 30 | ||||||
Other intangibles | 3,980 | 4 - 10 | ||||||
| | | | | | |||
Total | $ | 166,390 | ||||||
| | | | | | |||
| | | | | | |||
Schedule of unaudited pro forma financial information | ||||||||
For the Year Ended | ||||||||
(in thousands, except per share data | December 31, | December 31, | ||||||
2014 | 2013 | |||||||
Revenue | $ | 696,681 | $ | 591,821 | ||||
Net income attributable to common stockholders | $ | 74,974 | $ | 76,018 | ||||
Earnings per share: | ||||||||
Basic | $ | 1.31 | $ | 1.33 | ||||
Diluted | $ | 1.29 | $ | 1.31 | ||||
GOODWILL_AND_OTHER_INTANGIBLE_1
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||||||
Schedule of balance of goodwill based on fair value by new reporting unit | With the assistance of a third party specialist, we allocated goodwill based on their relative fair values as of December 31, 2014 to each new reporting unit as follows (in thousands): | |||||||||||||||||||
Balance as of December 31, 2014 | ||||||||||||||||||||
Exchange and Rental segment | ||||||||||||||||||||
Exchange reporting unit | $ | 495,748 | ||||||||||||||||||
Rental reporting unit | 20,396 | |||||||||||||||||||
Vacation Ownership segment | ||||||||||||||||||||
VO management reporting unit | 39,160 | |||||||||||||||||||
VO sales and financing reporting unit | 6,946 | |||||||||||||||||||
| | | | | ||||||||||||||||
Total goodwill | $ | 562,250 | ||||||||||||||||||
| | | | | ||||||||||||||||
| | | | | ||||||||||||||||
Schedule of balance of goodwill by reporting unit | The following tables present the balance of goodwill by reporting unit, including the changes in carrying amount of goodwill, for the years ended December 31, 2014 and 2013 (in thousands): | |||||||||||||||||||
Balance as of | Additions | Deductions | Foreign | Goodwill | Balance as of | |||||||||||||||
January 1, | Currency | Impairment | December 31, | |||||||||||||||||
2014 | Translation | 2014 | ||||||||||||||||||
Exchange | $ | 483,462 | $ | 12,286 | $ | — | $ | — | $ | — | $ | 495,748 | ||||||||
Rental | 20,396 | — | — | — | — | 20,396 | ||||||||||||||
VO management | 36,981 | 3,307 | — | (1,128 | ) | — | 39,160 | |||||||||||||
VO sales and financing | — | 6,946 | — | — | — | 6,946 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | $ | 540,839 | $ | 22,539 | $ | — | $ | (1,128 | ) | $ | — | $ | 562,250 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Balance as of | Additions | Deductions | Foreign | Goodwill | Balance as of | |||||||||||||||
January 1, | Currency | Impairment | December 31, | |||||||||||||||||
2013 | Translation | 2013 | ||||||||||||||||||
Exchange | $ | 483,462 | $ | — | $ | — | $ | — | — | $ | 483,462 | |||||||||
Rental | 4,796 | 15,600 | — | — | — | 20,396 | ||||||||||||||
VO management | 17,516 | 18,933 | — | 532 | — | 36,981 | ||||||||||||||
VO sales and financing | — | — | — | — | — | — | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | $ | 505,774 | $ | 34,533 | $ | — | $ | 532 | $ | — | $ | 540,839 | ||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Schedule of balance of intangible assets, net | The balance of other intangible assets, net for the years ended December 31, 2014 and 2013 is as follows (in thousands): | |||||||||||||||||||
December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Intangible assets with indefinite lives | $ | 131,336 | $ | 136,713 | ||||||||||||||||
Intangible assets with definite lives, net | 137,539 | 89,151 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Total intangible assets, net | $ | 268,875 | $ | 225,864 | ||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
Schedule of intangible assets with indefinite lives | At December 31, 2013, intangible assets with definite lives relate to the following (in thousands): | |||||||||||||||||||
December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Resort management contracts | $ | 87,420 | $ | 92,797 | ||||||||||||||||
Trade names and trademarks | 43,916 | 43,916 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Total | $ | 131,336 | $ | 136,713 | ||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
Schedule of intangible assets with definite lives | At December 31, 2014, intangible assets with definite lives relate to the following (in thousands): | |||||||||||||||||||
Cost | Accumulated | Net | Weighted Average | |||||||||||||||||
Amortization | Remaining | |||||||||||||||||||
Amortization | ||||||||||||||||||||
Life (Years) | ||||||||||||||||||||
Customer relationships | $ | 168,400 | $ | (129,942 | ) | $ | 38,458 | 21.8 | ||||||||||||
Purchase agreements | 75,879 | (75,443 | ) | 436 | 0.9 | |||||||||||||||
Resort management contracts | 129,864 | (36,790 | ) | 93,074 | 13.8 | |||||||||||||||
Technology | 25,076 | (25,076 | ) | — | — | |||||||||||||||
Other | 21,815 | (16,244 | ) | 5,571 | 3.4 | |||||||||||||||
| | | | | | | | | | | | | | |||||||
Total | $ | 421,034 | $ | (283,495 | ) | $ | 137,539 | |||||||||||||
| | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | |||||||
At December 31, 2013, intangible assets with definite lives relate to the following (in thousands): | ||||||||||||||||||||
Cost | Accumulated | Net | Weighted Average | |||||||||||||||||
Amortization | Remaining | |||||||||||||||||||
Amortization | ||||||||||||||||||||
Life (Years) | ||||||||||||||||||||
Customer relationships | $ | 129,500 | $ | (129,500 | ) | $ | — | 0 | ||||||||||||
Purchase agreements | 75,879 | (74,967 | ) | 912 | 1.9 | |||||||||||||||
Resort management contracts | 108,202 | (27,518 | ) | 80,684 | 14.5 | |||||||||||||||
Technology | 25,076 | (25,076 | ) | — | 0 | |||||||||||||||
Other | 21,817 | (14,262 | ) | 7,555 | 3.8 | |||||||||||||||
| | | | | | | | | | | | | | |||||||
Total | $ | 360,474 | $ | (271,323 | ) | $ | 89,151 | |||||||||||||
| | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | |||||||
Schedule of amortization expense of intangible assets with definite lives | Based on the December 31, 2014 balances, amortization expense for the next five years and thereafter is estimated to be as follows (in thousands): | |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2015 | $ | 13,927 | ||||||||||||||||||
2016 | 12,659 | |||||||||||||||||||
2017 | 11,384 | |||||||||||||||||||
2018 | 10,766 | |||||||||||||||||||
2019 | 10,032 | |||||||||||||||||||
2020 and thereafter | 78,771 | |||||||||||||||||||
| | | | | ||||||||||||||||
$ | 137,539 | |||||||||||||||||||
| | | | | ||||||||||||||||
| | | | | ||||||||||||||||
INVENTORY_Tables
INVENTORY (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
INVENTORY | |||||
Schedule of inventory | As of December 31, 2014, vacation ownership inventory is comprised of the following (in thousands): | ||||
December 31, | |||||
2014 | |||||
Completed unsold vacation ownership interests | $ | 53,434 | |||
Land held for development | 627 | ||||
| | | | | |
Total inventory | $ | 54,061 | |||
| | | | | |
| | | | | |
VACATION_OWNERSHIP_MORTGAGES_R1
VACATION OWNERSHIP MORTGAGES RECEIVABLE (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
VACATION OWNERSHIP MORTGAGES RECEIVABLE | |||||||||||
Schedule of mortgages receivable | |||||||||||
December 31, | |||||||||||
2014 | |||||||||||
Acquired vacation ownership mortgages receivables at various stated interest rates with varying payment through 2031 (see below) | $ | 33,953 | |||||||||
Originated vacation ownership mortgages receivables at various stated interest rates with varying payment through 2025 (see below) | 2,896 | ||||||||||
Less allowance for loan losses | (347 | ) | |||||||||
| | | | | |||||||
Net vacation ownership mortgages receivable | $ | 36,502 | |||||||||
| | | | | |||||||
| | | | | |||||||
Schedule to mature mortgages receivables | Vacation ownership mortgages receivables as of December 31, 2014 are scheduled to mature as follows (in thousands): | ||||||||||
Year Ended December 31, | |||||||||||
2015 | $ | ||||||||||
6,135 | |||||||||||
2016 | 5,353 | ||||||||||
2017 | 4,636 | ||||||||||
2018 | 3,795 | ||||||||||
2019 | 3,338 | ||||||||||
2020 and thereafter | 13,592 | ||||||||||
| | | |||||||||
Total | 36,849 | ||||||||||
Less: allowance for losses | -347 | ||||||||||
| | | |||||||||
Net vacation ownership mortgages receivable | $ | ||||||||||
36,502 | |||||||||||
| | | |||||||||
| | | |||||||||
Schedule of past-due and nonaccrual status of mortgages receivable | Our aged analysis of past-due vacation ownership mortgages receivable, the gross balance of vacation ownership mortgages receivable greater than 90 days past-due, and the gross balance of vacation ownership mortgage receivables on non-performing status as of December 31, 2014 is as follows (in thousands): | ||||||||||
Receivables | Receivables | Receivables on | |||||||||
past due | greater than | non-performing | |||||||||
90 days | status | ||||||||||
past due | |||||||||||
Vacation ownership mortgages receivable | $ | 1,301 | $ | 148 | $ | — | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
INVESTMENTS_IN_UNCONSOLIDATED_1
INVESTMENTS IN UNCONSOLIDATED ENTITIES (Tables) | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
INVESTMENTS IN UNCONSOLIDATED ENTITIES | |||||||
Schedule of ownership percentages and carrying value of our investments in unconsolidated entities | The ownership percentages and carrying value of our investments in unconsolidated entities as of December 31, 2014 were as follows: | ||||||
Ownership | Carrying | ||||||
Interest | Value | ||||||
(in thousands) | |||||||
Maui Timeshare Venture, LLC | 33.00% | $ | 32,919 | ||||
Other | 25.0% - 43.3% | 567 | |||||
| | | | | | | |
Total | $ | 33,486 | |||||
| | | | | | | |
| | | | | | | |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
PROPERTY AND EQUIPMENT | ||||||||
Schedule of Property and equipment, net | Property and equipment, net is as follows (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Computer equipment | $ | 21,389 | $ | 20,084 | ||||
Capitalized software (including internally-developed software) | 97,561 | 84,067 | ||||||
Land, buildings and leasehold improvements | 50,685 | 28,905 | ||||||
Furniture and other equipment | 16,638 | 14,830 | ||||||
Projects in progress | 10,581 | 8,296 | ||||||
| | | | | | | | |
196,854 | 156,182 | |||||||
Less: accumulated depreciation and amortization | (110,253 | ) | (96,626 | ) | ||||
| | | | | | | | |
Total property and equipment, net | $ | 86,601 | $ | 59,556 | ||||
| | | | | | | | |
| | | | | | | | |
LONGTERM_DEBT_Tables
LONG-TERM DEBT (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
LONG-TERM DEBT | ||||||||
Schedule of Long-term debt | Long-term debt is as follows (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Revolving credit facility (interest rate of 1.92% at December 31, 2014 and 1.67% at December 31, 2013 respectively) | $ | 488,000 | $ | 253,000 | ||||
| | | | | | | | |
Total long-term debt | $ | 488,000 | $ | 253,000 | ||||
| | | | | | | | |
| | | | | | | | |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
Schedule of estimated fair value of financial instruments | ||||||||||||||
December 31, 2014 | December 31, 2013 | |||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||
Amount | Value | Amount | Value | |||||||||||
(In thousands) | ||||||||||||||
Cash and cash equivalents | $ | 80,493 | $ | 80,493 | $ | 48,462 | $ | 48,462 | ||||||
Restricted cash and cash equivalents | 19,984 | 19,984 | 7,421 | 7,421 | ||||||||||
Loans receivable | 15,896 | 15,896 | — | — | ||||||||||
Vacation ownership mortgages receivable | 37,710 | 37,624 | — | — | ||||||||||
Investment in marketable securities | 11,368 | 11,368 | — | — | ||||||||||
Total debt | (488,000 | ) | (488,000 | ) | (253,000 | ) | (253,000 | ) | ||||||
EQUITY_Tables
EQUITY (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
EQUITY | ||||||||
Schedule of changes in noncontrolling interest | Changes during the years then ended are as follows (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Balance, beginning of period | $ | 426 | $ | 426 | ||||
Net income attributable to redeemable noncontrolling interest | 31 | — | ||||||
| | | | | | | | |
Balance, end of period | $ | 457 | $ | 426 | ||||
| | | | | | | | |
| | | | | | | | |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
STOCK-BASED COMPENSATION | |||||||||||
Schedule of allocation of recognized compensation cost | Non-cash stock-based compensation expense related to equity awards is included in the following line items in the accompanying consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 (in thousands): | ||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Cost of sales | $ | 724 | $ | 686 | $ | 639 | |||||
Selling and marketing expense | 1,392 | 1,193 | 1,034 | ||||||||
General and administrative expense | 9,247 | 8,549 | 9,258 | ||||||||
| | | | | | | | | | | |
Non-cash compensation expense before income taxes | 11,363 | 10,428 | 10,931 | ||||||||
Income tax benefit | (4,330 | ) | (3,960 | ) | (4,222 | ) | |||||
| | | | | | | | | | | |
Non-cash compensation expense after income taxes | $ | 7,033 | $ | 6,468 | $ | 6,709 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Schedule of RSU award activity | |||||||||||
Shares | Weighted-Average | ||||||||||
Grant Date | |||||||||||
Fair Value | |||||||||||
(In thousands) | |||||||||||
Non-vested RSUs at December 31, 2011 | 2,098 | $ | 12.22 | ||||||||
Granted | 679 | 13.72 | |||||||||
Vested | (1,156 | ) | 11.49 | ||||||||
Forfeited | (52 | ) | 13.72 | ||||||||
| | | | | | | | ||||
Non-vested RSUs at December 31, 2012 | 1,569 | 13.29 | |||||||||
Granted | 713 | 20.83 | |||||||||
Vested | (766 | ) | 12.16 | ||||||||
Forfeited | (21 | ) | 17.85 | ||||||||
| | | | | | | | ||||
Non-vested RSUs at December 31, 2013 | 1,495 | 17.33 | |||||||||
Granted | 726 | 23.99 | |||||||||
Vested | (468 | ) | 16.27 | ||||||||
Forfeited | (59 | ) | 24.01 | ||||||||
| | | | | | | | ||||
Non-vested RSUs at December 31, 2014 | 1,694 | $ | 20.23 | ||||||||
| | | | | | | | ||||
| | | | | | | | ||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
INCOME TAXES | ||||||||||||||||||||
Schedule of U.S. and foreign earnings from continuing operations before income taxes and noncontrolling interest | U.S. and foreign earnings from continuing operations before income taxes and noncontrolling interest are as follows (in thousands): | |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
U.S. | $ | 100,265 | $ | 112,620 | $ | 55,464 | ||||||||||||||
Foreign | 26,734 | 14,574 | 9,497 | |||||||||||||||||
| | | | | | | | | | | ||||||||||
Total | $ | 126,999 | $ | 127,194 | $ | 64,961 | ||||||||||||||
| | | | | | | | | | | ||||||||||
| | | | | | | | | | | ||||||||||
Schedule of components of the provision for income taxes attributable to continuing operations | The components of the provision for income taxes attributable to continuing operations are as follows (in thousands): | |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
Current income tax provision | ||||||||||||||||||||
Federal | $ | 28,671 | $ | 38,832 | $ | 12,016 | ||||||||||||||
State | 5,400 | 3,808 | 2,931 | |||||||||||||||||
Foreign | 3,831 | 4,341 | 2,798 | |||||||||||||||||
| | | | | | | | | | | ||||||||||
Current income tax provision | 37,902 | 46,981 | 17,745 | |||||||||||||||||
| | | | | | | | | | | ||||||||||
Deferred income tax provision (benefit) | ||||||||||||||||||||
Federal | 3,609 | (506 | ) | 3,972 | ||||||||||||||||
State | 914 | (1,759 | ) | 1,901 | ||||||||||||||||
Foreign | 2,626 | 696 | 634 | |||||||||||||||||
| | | | | | | | | | | ||||||||||
Deferred income tax provision (benefit) | 7,149 | (1,569 | ) | 6,507 | ||||||||||||||||
| | | | | | | | | | | ||||||||||
Income tax provision | $ | 45,051 | $ | 45,412 | $ | 24,252 | ||||||||||||||
| | | | | | | | | | | ||||||||||
| | | | | | | | | | | ||||||||||
Schedule of the tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities | The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013 are presented below (in thousands). | |||||||||||||||||||
December 31, | ||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||
Deferred revenue | $ | 34,278 | $ | 40,607 | ||||||||||||||||
Provision for accrued expenses | 5,666 | 4,539 | ||||||||||||||||||
Non-cash compensation | 6,552 | 5,123 | ||||||||||||||||||
Net operating loss and tax credit carryforwards | 1,534 | 675 | ||||||||||||||||||
Other | 916 | 1,737 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Total deferred tax assets | 48,946 | 52,681 | ||||||||||||||||||
Less valuation allowance | (234 | ) | (666 | ) | ||||||||||||||||
| | | | | | | | |||||||||||||
Net deferred tax assets | 48,712 | 52,015 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Deferred tax liabilities: | ||||||||||||||||||||
Intangible and other assets | (102,594 | ) | (103,986 | ) | ||||||||||||||||
Deferred membership costs | (6,951 | ) | (7,679 | ) | ||||||||||||||||
Property and equipment | (10,270 | ) | (8,297 | ) | ||||||||||||||||
Investments in unconsolidated entities | (2,594 | ) | — | |||||||||||||||||
Installment sales of vacation ownership interests | (1,054 | ) | — | |||||||||||||||||
Other | (1,565 | ) | (972 | ) | ||||||||||||||||
| | | | | | | | |||||||||||||
Total deferred tax liabilities | (125,028 | ) | (120,934 | ) | ||||||||||||||||
| | | | | | | | |||||||||||||
Net deferred tax liability | $ | (76,316 | ) | $ | (68,919 | ) | ||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
Schedule of reconciliation of total income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes and noncontrolling interest | A reconciliation of total income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes and noncontrolling interest is shown as follows (in thousands, except percentages): | |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||
Income tax provision at the federal statutory rate of 35% | $ | 44,450 | 35 | $ | 44,518 | 35 | $ | 22,736 | 35 | |||||||||||
State income taxes, net of effect of federal tax benefit | 4,104 | 3.2 | 1,332 | 1.1 | 3,141 | 4.8 | ||||||||||||||
Foreign income taxed at a different statutory tax rate | (3,048 | ) | (2.4 | ) | (1,240 | ) | (1.0 | ) | (745 | ) | (1.2 | ) | ||||||||
U.S. tax consequences of foreign operations | (47 | ) | (0.0 | ) | 181 | 0.1 | (291 | ) | (0.4 | ) | ||||||||||
Other, net | (408 | ) | (0.3 | ) | 621 | 0.5 | (589 | ) | (0.9 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Income tax provision | $ | 45,051 | 35.5 | $ | 45,412 | 35.7 | $ | 24,252 | 37.3 | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||
Balance at beginning of year | $ | 509 | $ | 662 | $ | 870 | ||||||||||||||
Additions for tax positions of prior years | 33 | 1,167 | 37 | |||||||||||||||||
Reductions for tax positions of prior years | — | (1,150 | ) | — | ||||||||||||||||
Settlements | — | — | (97 | ) | ||||||||||||||||
Expiration of applicable statute of limitations | (285 | ) | (170 | ) | (148 | ) | ||||||||||||||
| | | | | | | | | | | ||||||||||
Balance at end of year | $ | 257 | $ | 509 | $ | 662 | ||||||||||||||
| | | | | | | | | | | ||||||||||
| | | | | | | | | | | ||||||||||
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SEGMENT INFORMATION | |||||||||||
Schedule of information on reportable segments and reconciliation to consolidated operating income | Information on reportable segments and reconciliation to consolidated operating income is presented below(in thousands): | ||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Exchange and Rental | |||||||||||
Membership revenue | $ | 352,513 | $ | 365,007 | $ | 357,732 | |||||
Rental management revenue | 48,148 | 29,956 | 27,075 | ||||||||
Pass-through revenues | 82,729 | 47,426 | 43,986 | ||||||||
| | | | | | | | | | | |
Total revenues | 483,390 | 442,389 | 428,793 | ||||||||
Cost of sales | 183,868 | 145,562 | 141,153 | ||||||||
| | | | | | | | | | | |
Gross profit | 299,522 | 296,827 | 287,640 | ||||||||
Selling and marketing expense | 58,020 | 53,100 | 53,120 | ||||||||
General and administrative expense | 102,796 | 93,903 | 93,237 | ||||||||
Amortization expense of intangibles | 7,058 | 5,126 | 20,444 | ||||||||
Depreciation expense | 14,683 | 14,134 | 13,185 | ||||||||
| | | | | | | | | | | |
Segment operating income | $ | 116,965 | $ | 130,564 | $ | 107,654 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Vacation Ownership | |||||||||||
Management fee revenue | $ | 92,017 | $ | 41,595 | $ | 27,871 | |||||
Vacation ownership sales and financing revenue | 9,478 | — | — | ||||||||
Pass-through revenue | 29,488 | 17,231 | 16,675 | ||||||||
| | | | | | | | | | | |
Total revenue | 130,983 | 58,826 | 44,546 | ||||||||
Cost of sales | 80,613 | 33,948 | 27,106 | ||||||||
| | | | | | | | | | | |
Gross profit | 50,370 | 24,878 | 17,440 | ||||||||
Selling and marketing expense | 3,595 | 622 | 439 | ||||||||
General and administrative expense | 30,374 | 18,671 | 12,033 | ||||||||
Amortization expense of intangibles | 5,243 | 3,007 | 2,597 | ||||||||
Depreciation expense | 1,029 | 397 | 244 | ||||||||
| | | | | | | | | | | |
Segment operating income | $ | 10,129 | $ | 2,181 | $ | 2,127 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Consolidated | |||||||||||
Revenue | $ | 614,373 | $ | 501,215 | $ | 473,339 | |||||
Cost of sales | 264,481 | 179,510 | 168,259 | ||||||||
| | | | | | | | | | | |
Gross profit | 349,892 | 321,705 | 305,080 | ||||||||
Direct segment operating expenses | 222,798 | 188,960 | 195,299 | ||||||||
| | | | | | | | | | | |
Operating income | $ | 127,094 | $ | 132,745 | $ | 109,781 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Schedule of financial information by reportable segment | Selected financial information by reportable segment is presented below (in thousands): | ||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Total Assets: | |||||||||||
Exchange and Rental | $ | 931,698 | $ | 732,161 | |||||||
Vacation Ownership | 395,921 | 292,458 | |||||||||
| | | | | | | | ||||
Total | $ | 1,327,619 | $ | 1,024,619 | |||||||
| | | | | | | | ||||
| | | | | | | | ||||
Schedule of capital expenditures by reporting segment | |||||||||||
Selected financial information by reportable segment is presented below (in thousands): | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Capital expenditures | |||||||||||
Exchange and Rental | $ | 18,008 | $ | 14,361 | $ | 14,491 | |||||
Vacation Ownership | 1,079 | 339 | 549 | ||||||||
| | | | | | | | | | | |
Total | $ | 19,087 | $ | 14,700 | $ | 15,040 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
Schedule of geographic information on revenue, based on sourcing, and long-lived assets, based on physical location | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Revenue: | |||||||||||
United States | $ | 483,007 | $ | 404,886 | $ | 385,973 | |||||
Europe | 73,119 | 34,306 | 26,715 | ||||||||
All other countries(1) | 58,247 | 62,023 | 60,651 | ||||||||
| | | | | | | | | | | |
Total | $ | 614,373 | $ | 501,215 | $ | 473,339 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
-1 | Includes countries within the following continents: Africa, Asia, Australia, North America and South America. | ||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Long-lived assets (excluding goodwill and intangible assets): | |||||||||||
United States | $ | 81,291 | $ | 53,056 | |||||||
Europe | 4,884 | 5,812 | |||||||||
All other countries | 426 | 688 | |||||||||
| | | | | | | | ||||
Total | $ | 86,601 | $ | 59,556 | |||||||
| | | | | | | | ||||
| | | | | | | | ||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||||||||||||||
Schedule of future minimum payments under operating lease agreements | Future minimum payments under operating lease agreements are as follows (in thousands): | ||||||||||||||||||||||
Years Ending December 31, | |||||||||||||||||||||||
2015 | $ | 14,308 | |||||||||||||||||||||
2016 | 12,684 | ||||||||||||||||||||||
2017 | 9,527 | ||||||||||||||||||||||
2018 | 7,868 | ||||||||||||||||||||||
2019 | 6,728 | ||||||||||||||||||||||
Thereafter through 2021 | 9,833 | ||||||||||||||||||||||
| | | | | |||||||||||||||||||
Total | $ | 60,948 | |||||||||||||||||||||
| | | | | |||||||||||||||||||
| | | | | |||||||||||||||||||
Summary of future periods in which certain purchase commitments and guarantees are expected to be settled in cash and timing of principal and interest payments on outstanding borrowings | |||||||||||||||||||||||
Years Ending December 31, | Total | 2015 | 2016 | 2017 | 2018 | 2019 | Thereafter | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Debt principal | $ | 488,000 | $ | — | $ | — | $ | — | $ | — | $ | 488,000 | $ | — | |||||||||
Debt interest (projected) | 42,583 | 9,970 | 9,997 | 9,969 | 9,970 | 2,677 | — | ||||||||||||||||
Guarantees, surety bonds, and letters of credit | 65,315 | 57,473 | 4,661 | 1,353 | 1,148 | 596 | 84 | ||||||||||||||||
Purchase obligations | 80,044 | 19,609 | 11,626 | 19,717 | 7,772 | 7,320 | 14,000 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Total commitments | $ | 675,942 | $ | 87,052 | $ | 26,284 | $ | 31,039 | $ | 18,890 | $ | 498,593 | $ | 14,084 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
SUPPLEMENTAL_CASH_FLOW_INFORMA1
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||
Schedule of supplemental cash flow information | |||||||||||
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(In thousands) | |||||||||||
Non-cash financing activity: | |||||||||||
Issuance of noncontrolling interest in connection with an acquisition | $ | — | $ | 31,347 | $ | — | |||||
Cash paid during the period for: | |||||||||||
Interest, net of amounts capitalized | $ | 6,376 | $ | 5,358 | $ | 31,363 | |||||
Income taxes, net of refunds | $ | 48,309 | $ | 42,750 | $ | 25,693 | |||||
QUARTERLY_RESULTS_UNAUDITED_Ta
QUARTERLY RESULTS (UNAUDITED) (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
QUARTERLY RESULTS (UNAUDITED) | ||||||||||||||
Schedule of quarterly results | ||||||||||||||
Quarter Ended | ||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||
(In thousands, except for share data) | ||||||||||||||
2014 | ||||||||||||||
Revenue | $ | 157,041 | $ | 143,528 | $ | 146,683 | $ | 167,121 | ||||||
Gross profit | 93,191 | 83,767 | 87,688 | 85,246 | ||||||||||
Operating income | 40,425 | 31,937 | 34,905 | 19,827 | ||||||||||
Net income attributable to common stockholders | 23,175 | 18,360 | 21,295 | 15,560 | ||||||||||
Earnings per share attributable to common stockholders(1): | ||||||||||||||
Basic | 0.41 | 0.32 | 0.37 | 0.27 | ||||||||||
Diluted | 0.41 | 0.32 | 0.37 | 0.27 | ||||||||||
2013 | ||||||||||||||
Revenue(2) | $ | 134,881 | $ | 124,983 | $ | 119,156 | $ | 122,195 | ||||||
Gross profit | 88,505 | 81,562 | 77,165 | 74,473 | ||||||||||
Operating income | 42,789 | 33,471 | 31,378 | 25,107 | ||||||||||
Net income attributable to common stockholders | 25,004 | 20,570 | 17,101 | 18,542 | ||||||||||
Earnings per share attributable to common stockholders(1): | ||||||||||||||
Basic | 0.44 | 0.36 | 0.30 | 0.32 | ||||||||||
Diluted | 0.44 | 0.36 | 0.29 | 0.32 | ||||||||||
-1 | For the years ended December 31, 2014 and 2013, per share amounts for the quarters may not add to the annual amount because of rounding and differences in the average common shares outstanding during each period. | |||||||||||||
-2 | Revenue for the quarter ended June 30, 2013 includes a correction of an immaterial prior period understatement of membership revenue amounting to $4.1 million. | |||||||||||||
ORGANIZATION_AND_BASIS_OF_PRES1
ORGANIZATION AND BASIS OF PRESENTATION (Details) | 1 Months Ended | 12 Months Ended | 0 Months Ended | ||
31-May-08 | Dec. 31, 2014 | Nov. 04, 2013 | Nov. 04, 2013 | Dec. 12, 2013 | |
company | segment | property | |||
ORGANIZATION AND BASIS OF PRESENTATION | |||||
Number of operating segments | 2 | ||||
Definitive agreements | |||||
Number of publicly traded companies formed upon spin-off | 5 | ||||
CLC | VRI Europe Limited | |||||
Definitive agreements | |||||
Equity of VRIE issued as consideration for acquisition (as a percent) | 24.50% | 24.50% | |||
Aqua | Minimum | |||||
Definitive agreements | |||||
Number of properties | 25 |
SIGNIFICANT_ACCOUNTING_POLICIE3
SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 12 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2014 |
Revenue Recognition | |
Minimum down payment received on VOI sales (as a percent) | 0.1 |
Period of mortgage payable to ILG in monthly installments, including interest | 10 years |
Provision for Loan and Lease Losses | $0.30 |
Minimum | |
Revenue Recognition | |
Period of mortgage receivable including interest | 5 years |
Maximum | |
Revenue Recognition | |
Period of mortgage receivable including interest | 10 years |
Exchange And Rental | Minimum | |
Revenue Recognition | |
Terms of the applicable memberships | 1 year |
Exchange And Rental | Maximum | |
Revenue Recognition | |
Terms of the applicable memberships | 5 years |
SIGNIFICANT_ACCOUNTING_POLICIE4
SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 12 Months Ended |
Dec. 31, 2014 | |
Computer equipment | Minimum | |
Property and Equipment | |
Depreciation Period | 3 years |
Computer equipment | Maximum | |
Property and Equipment | |
Depreciation Period | 5 years |
Capitalized software | Minimum | |
Property and Equipment | |
Depreciation Period | 3 years |
Capitalized software | Maximum | |
Property and Equipment | |
Depreciation Period | 7 years |
Buildings and leasehold improvements | Minimum | |
Property and Equipment | |
Depreciation Period | 1 year |
Buildings and leasehold improvements | Maximum | |
Property and Equipment | |
Depreciation Period | 40 years |
Furniture and other equipment | Minimum | |
Property and Equipment | |
Depreciation Period | 3 years |
Furniture and other equipment | Maximum | |
Property and Equipment | |
Depreciation Period | 10 years |
SIGNIFICANT_ACCOUNTING_POLICIE5
SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 0 Months Ended | 12 Months Ended | ||||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Long-Lived Assets and Intangible Assets with Definite Lives | ||||||
Carrying amount of assets to be disposed of | $0 | $0 | ||||
Advertising | ||||||
Amortization period of direct response advertising costs | 12 months | |||||
Advertising expense | 15.6 | 17 | 16.8 | |||
Direct-response advertising expense | 2.1 | 4.1 | 4.1 | |||
Capitalized advertising costs | 2.4 | 3.6 | 2.4 | 3.6 | ||
General and administrative expense | ||||||
Foreign Currency Translation and Transaction Gains and Losses | ||||||
Net gain (loss) from foreign exchange | 0.4 | -0.1 | -0.1 | |||
Other income (expense) | ||||||
Foreign Currency Translation and Transaction Gains and Losses | ||||||
Net gain (loss) from foreign exchange | $2.30 | $0.60 | ($2.20) |
SIGNIFICANT_ACCOUNTING_POLICIE6
SIGNIFICANT ACCOUNTING POLICIES (Details 4) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Stock-Based Compensation | |||
Gross excess tax benefits from stock-based compensation | $1,900 | $2,869 | $3,017 |
SIGNIFICANT_ACCOUNTING_POLICIE7
SIGNIFICANT ACCOUNTING POLICIES (Details 5) | 0 Months Ended | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2012 | Dec. 31, 2013 |
Non-vested RSUs | ||||
Securities not included in the computations of diluted earnings per share | ||||
Securities excluded from computation of diluted earnings per share (in shares) | 0.2 | 0.1 | ||
Stock options | ||||
Securities not included in the computations of diluted earnings per share | ||||
Securities excluded from computation of diluted earnings per share (in shares) | 0.8 | 0.8 | 0.9 | |
Outstanding stock options (in shares) | 0.8 | 0.8 | 0.8 |
SIGNIFICANT_ACCOUNTING_POLICIE8
SIGNIFICANT ACCOUNTING POLICIES (Details 6) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share | |||
Basic weighted average shares of common stock outstanding | 57,343 | 57,243 | 56,549 |
Diluted weighted average shares of common stock outstanding | 57,953 | 57,832 | 57,248 |
Non-vested RSUs | |||
Weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share | |||
Net effect of common stock equivalents (in shares) | 606 | 581 | 685 |
Stock options | |||
Weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share | |||
Net effect of common stock equivalents (in shares) | 4 | 8 | 14 |
SIGNIFICANT_ACCOUNTING_POLICIE9
SIGNIFICANT ACCOUNTING POLICIES (Details 7) (USD $) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Certain Risks and Concentrations | |||
Revenue generated from travel to properties as well as hotel, resort and homeowners association management services performed | $211.10 | $146.60 | $127 |
Revolving credit facility | LIBOR | |||
Certain Risks and Concentrations | |||
Reference rate | LIBOR | ||
Applicable margin (as a percent) | 1.75% | ||
Revolving credit facility | Base rate | |||
Certain Risks and Concentrations | |||
Reference rate | Base Rate | ||
Applicable margin (as a percent) | 0.75% | ||
Minimum | Revolving credit facility | LIBOR | |||
Certain Risks and Concentrations | |||
Applicable margin (as a percent) | 1.25% | ||
Minimum | Revolving credit facility | Base rate | |||
Certain Risks and Concentrations | |||
Applicable margin (as a percent) | 0.25% | ||
Maximum | Revolving credit facility | LIBOR | |||
Certain Risks and Concentrations | |||
Applicable margin (as a percent) | 2.25% | ||
Maximum | Revolving credit facility | Base rate | |||
Certain Risks and Concentrations | |||
Applicable margin (as a percent) | 1.25% |
BUSINESS_COMBINATIONS_Details
BUSINESS COMBINATIONS (Details) (USD $) | 12 Months Ended | 0 Months Ended | 3 Months Ended | ||||
Dec. 31, 2014 | Dec. 31, 2013 | Oct. 01, 2014 | Oct. 02, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | |
item | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Goodwill | $562,250,000 | $540,839,000 | $540,839,000 | $505,774,000 | |||
Revenue | 29,400,000 | 12,200,000 | |||||
Earnings before income taxes and noncontrolling interests | 3,500,000 | 3,100,000 | |||||
Pro forma financial information (unaudited) | |||||||
Percentage of statutory tax rate applicable to pro forma net Income or Loss | 38.90% | 38.80% | |||||
General and administrative expense | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Acquisition related costs | 6,400,000 | 2,300,000 | |||||
Customer relationships | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 21 years 9 months 18 days | ||||||
Resort management contracts | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 13 years 9 months 18 days | 14 years 6 months | |||||
Resort management contracts | Minimum | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 3 years | ||||||
Resort management contracts | Maximum | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 30 years | ||||||
Other intangibles | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 3 years 4 months 24 days | 3 years 9 months 18 days | |||||
Other intangibles | Minimum | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 4 years | ||||||
Other intangibles | Maximum | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 10 years | ||||||
HVO | |||||||
BUSINESS COMBINATIONS | |||||||
Aggregate purchase price | 10,600,000 | ||||||
Agreed amount of guarantee of construction loan for Maui project | 36,700,000 | ||||||
Aggregate purchase price in cash | 218,000,000 | ||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Cash | 16,828,000,000 | ||||||
Other current assets | 110,956,000,000 | ||||||
Goodwill | 22,539,000,000 | ||||||
Intangible assets | 61,500,000,000 | ||||||
Other noncurrent assets | 47,471,000,000 | ||||||
Current liabilities | -26,863,000,000 | ||||||
Other noncurrent liabilities | -10,910,000,000 | ||||||
Net assets acquired | 221,521,000,000 | ||||||
Pro forma financial information (unaudited) | |||||||
Revenue | 696,681,000 | ||||||
Net income attributable to common stockholders | 74,974,000 | ||||||
Earnings per share: | |||||||
Basic | $1.31 | ||||||
Diluted | $1.29 | ||||||
HVO | Non-recurring charges | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Acquisition related costs | 9,500,000 | 3,400,000 | |||||
HVO | Customer relationships | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 38,900,000,000 | ||||||
Useful life | 22 years | ||||||
HVO | Resort management contracts | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 22,600,000,000 | ||||||
Useful life | 22 years | ||||||
HVO | Other intangibles | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 84,039,000,000 | ||||||
2013 Business Combinations | |||||||
BUSINESS COMBINATIONS | |||||||
Number of business acquired | 2 | ||||||
Aggregate purchase price | 167,200,000 | ||||||
Aggregate purchase price in cash | 128,100,000 | ||||||
Additional purchase price accrued | 7,800,000 | 7,800,000 | |||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Cash | 1,167,000 | 1,167,000 | |||||
Other current assets | 10,233,000 | 10,233,000 | |||||
Goodwill | 34,533,000 | 34,533,000 | |||||
Intangible assets | 131,857,000 | 131,857,000 | |||||
Other noncurrent assets | 15,759,000 | 15,759,000 | |||||
Current liabilities | -11,355,000 | -11,355,000 | |||||
Other noncurrent liabilities | -14,946,000 | -14,946,000 | |||||
Net assets acquired | 167,248,000 | 167,248,000 | |||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 166,390,000 | 166,390,000 | |||||
Indefinite-lived intangible assets | 93,200,000 | 93,200,000 | |||||
Goodwill amount expected to be deductible for income tax purpose | 20,700,000 | 20,700,000 | |||||
Pro forma financial information (unaudited) | |||||||
Revenue | 591,821,000 | ||||||
Net income attributable to common stockholders | 76,018,000 | ||||||
Earnings per share: | |||||||
Basic | $1.33 | ||||||
Diluted | $1.31 | ||||||
2013 Business Combinations | Maximum | |||||||
BUSINESS COMBINATIONS | |||||||
Period for payment of contingent consideration | 36 months | ||||||
2013 Business Combinations | Resort management contracts | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 34,640,000 | 34,640,000 | |||||
Weighted average amortization period | 17 years 6 months | ||||||
2013 Business Combinations | Resort management contracts | Minimum | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 30 years | ||||||
2013 Business Combinations | Other intangibles | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 3,980,000 | 3,980,000 | |||||
Weighted average amortization period | 4 years 10 months 24 days | ||||||
2013 Business Combinations | Other intangibles | Minimum | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Useful life | 10 years | ||||||
2013 Business Combinations | Trademarks | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 3,000,000 | 3,000,000 | |||||
2013 Business Combinations | Resort management contracts | |||||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | |||||||
Purchase price allocated to the fair value of goodwill and identifiable intangible assets | 90,237,000 | 90,237,000 | |||||
CLC | |||||||
BUSINESS COMBINATIONS | |||||||
Fair value of equity in aggregate purchase price | 31,300,000 | ||||||
VRI | |||||||
BUSINESS COMBINATIONS | |||||||
Contingent consideration | 6,500,000 | ||||||
VRI Europe | |||||||
BUSINESS COMBINATIONS | |||||||
Contingent consideration net of noncontrolling interest | 1,300,000 | ||||||
Contingent consideration | $6,500,000 |
GOODWILL_AND_OTHER_INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) (USD $) | 12 Months Ended | ||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Oct. 01, 2014 | Oct. 01, 2013 | Dec. 31, 2012 |
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | $540,839 | $505,774 | |||
Additions | 22,539 | 34,533 | |||
Foreign Currency Translation | -1,128 | 532 | |||
Balance at the end of the period | 562,250 | 540,839 | |||
Membership and Exchange Segment | |||||
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | 483,500 | ||||
Balance at the end of the period | 483,500 | ||||
Management and Rental Segment | |||||
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | 57,400 | 22,300 | |||
Balance at the end of the period | 57,400 | 22,300 | |||
Exchange reporting unit | |||||
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | 483,462 | 483,462 | |||
Additions | 12,286 | ||||
Balance at the end of the period | 495,748 | 483,462 | |||
Rental reporting unit | |||||
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | 4,796 | ||||
Additions | 15,600 | ||||
Balance at the end of the period | 20,396 | 20,396 | |||
VO management reporting unit | |||||
Changes in carrying amount of goodwill | |||||
Balance at the beginning of the period | 36,981 | 17,516 | |||
Additions | 3,307 | 18,933 | |||
Foreign Currency Translation | -1,128 | 532 | |||
Balance at the end of the period | 39,160 | 36,981 | |||
VO sales and financing reporting unit | |||||
Changes in carrying amount of goodwill | |||||
Additions | 6,946 | ||||
Balance at the end of the period | $6,946 |
GOODWILL_AND_OTHER_INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) (USD $) | 12 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Oct. 01, 2014 | Oct. 01, 2013 | Jan. 02, 2013 | |
Business acquisition | ||||||
Goodwill acquired during the period | $22,539,000 | $34,533,000 | ||||
Goodwill | 562,250,000 | 540,839,000 | 505,774,000 | |||
HVO | ||||||
Business acquisition | ||||||
Intangible assets | 61,500,000,000 | |||||
Goodwill | 22,539,000,000 | |||||
2013 Business Combinations | ||||||
Business acquisition | ||||||
Changes in the carrying amount of goodwill | 35,100,000 | |||||
Intangible assets | 131,857,000 | |||||
Goodwill | 34,533,000 | |||||
Indefinite-lived intangible assets | 93,200,000 | |||||
Membership and Exchange Segment | ||||||
Business acquisition | ||||||
Goodwill | 483,500,000 | |||||
Management and Rental Segment | ||||||
Business acquisition | ||||||
Goodwill | 57,400,000 | 22,300,000 | ||||
Exchange reporting unit | ||||||
Business acquisition | ||||||
Goodwill acquired during the period | 12,286,000 | |||||
Goodwill | 495,748,000 | 483,462,000 | 483,462,000 | |||
Exchange reporting unit | HVO | ||||||
Business acquisition | ||||||
Goodwill | 12,300,000 | |||||
Rental reporting unit | ||||||
Business acquisition | ||||||
Goodwill acquired during the period | 15,600,000 | |||||
Goodwill | 20,396,000 | 20,396,000 | 4,796,000 | |||
Vacation Ownership | ||||||
Business acquisition | ||||||
Accumulated goodwill impairment losses | 34,300,000 | |||||
Goodwill Impairment | 0 | 0 | ||||
VO management reporting unit | ||||||
Business acquisition | ||||||
Goodwill acquired during the period | 3,307,000 | 18,933,000 | ||||
Goodwill | 39,160,000 | 36,981,000 | 17,516,000 | |||
VO management reporting unit | HVO | ||||||
Business acquisition | ||||||
Goodwill | 3,300,000 | |||||
VO sales and financing reporting unit | ||||||
Business acquisition | ||||||
Goodwill acquired during the period | 6,946,000 | |||||
Goodwill | 6,946,000 | |||||
VO sales and financing reporting unit | HVO | ||||||
Business acquisition | ||||||
Goodwill | $6,900,000 |
GOODWILL_AND_OTHER_INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 3) (USD $) | 12 Months Ended | ||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Oct. 01, 2014 | Oct. 01, 2013 |
segment | |||||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||||
Number of reporting units | 2 | ||||
Goodwill Impairment Tests | |||||
Goodwill | $562,250 | $540,839 | $505,774 | ||
Membership and Exchange Segment | |||||
Goodwill Impairment Tests | |||||
Goodwill | 483,500 | ||||
Management and Rental Segment | |||||
Goodwill Impairment Tests | |||||
Goodwill | $57,400 | $22,300 |
GOODWILL_AND_OTHER_INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 4) (USD $) | 0 Months Ended | 12 Months Ended | |
Oct. 01, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Other intangible assets | |||
Required annual impairment of intangible assets | $0 | ||
Intangibles assets, net | |||
Intangible assets with indefinite lives | 131,336,000 | 136,713,000 | |
Intangible assets with definite lives, net | 137,539,000 | 89,151,000 | |
Total intangible assets, net | 268,875,000 | 225,864,000 | |
Change in indefinite-lived intangible assets | 5,400,000 | ||
Resort management contracts | |||
Intangibles assets, net | |||
Intangible assets with indefinite lives | 87,420,000 | 92,797,000 | |
Trade names and trademarks | |||
Intangibles assets, net | |||
Intangible assets with indefinite lives | $43,916,000 | $43,916,000 |
GOODWILL_AND_OTHER_INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 5) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Other intangible assets | |||
Cost | $421,034 | $360,474 | |
Accumulated Amortization | -283,495 | -271,323 | |
Net | 137,539 | 89,151 | |
Amortization expense for intangible assets | 12,301 | 8,133 | 23,041 |
Amortization of intangible assets | |||
2015 | 13,927 | ||
2016 | 12,659 | ||
2017 | 11,384 | ||
2018 | 10,766 | ||
2019 | 10,032 | ||
2020 and thereafter | 78,771 | ||
Net | 137,539 | 89,151 | |
Customer relationships | |||
Other intangible assets | |||
Cost | 168,400 | 129,500 | |
Accumulated Amortization | -129,942 | -129,500 | |
Net | 38,459 | ||
Weighted Average Remaining Amortization Life | 21 years 9 months 18 days | ||
Amortization of intangible assets | |||
Net | 38,459 | ||
Customer relationships | HVO | |||
Other intangible assets | |||
Weighted Average Remaining Amortization Life | 22 years | ||
Purchase agreements | |||
Other intangible assets | |||
Cost | 75,879 | 75,879 | |
Accumulated Amortization | -75,443 | -74,967 | |
Net | 436 | 912 | |
Weighted Average Remaining Amortization Life | 10 months 24 days | 1 year 10 months 24 days | |
Amortization of intangible assets | |||
Net | 436 | 912 | |
Resort management contracts | |||
Other intangible assets | |||
Cost | 129,864 | 108,202 | |
Accumulated Amortization | -36,790 | -27,518 | |
Net | 93,089 | 80,684 | |
Weighted Average Remaining Amortization Life | 13 years 9 months 18 days | 14 years 6 months | |
Amortization of intangible assets | |||
Net | 93,089 | 80,684 | |
Resort management contracts | HVO | |||
Other intangible assets | |||
Weighted Average Remaining Amortization Life | 22 years | ||
Technology | |||
Other intangible assets | |||
Cost | 25,076 | 25,076 | |
Accumulated Amortization | -25,076 | -25,076 | |
Other intangibles | |||
Other intangible assets | |||
Cost | 21,815 | 21,817 | |
Accumulated Amortization | -16,244 | -14,262 | |
Net | 5,555 | 7,555 | |
Weighted Average Remaining Amortization Life | 3 years 4 months 24 days | 3 years 9 months 18 days | |
Amortization of intangible assets | |||
Net | $5,555 | $7,555 |
INVENTORY_Details
INVENTORY (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
INVENTORY | |
Completed unsold vacation ownership units | $53,434 |
Land held for development | 627 |
Inventory, Net, Total | $54,061 |
VACATION_OWNERSHIP_MORTGAGES_R2
VACATION OWNERSHIP MORTGAGES RECEIVABLE (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
VACATION OWNERSHIP MORTGAGES RECEIVABLE | |
Fair value of acquired loans | $37,500,000 |
Gross contractual cash flow related to acquired loans | 42,800,000 |
Gross contractual cash flow related to acquired loans not expected to be collected | 5,300,000 |
Schedule to mature mortgages receivables | |
2015 | 6,135,000 |
2016 | 5,353,000 |
2017 | 4,636,000 |
2018 | 3,795,000 |
2019 | 3,338,000 |
2020 and thereafter | 13,592,000 |
Total | 36,849,000 |
Less: allowance for losses | -347,000 |
Loans and Leases Receivable, Gross, Consumer, Real Estate, Total | 36,502,000 |
Allowance for Vacation Ownership Mortgage Receivable Losses | |
Weighted-average interest rate on vacation ownership mortgage receivables | 14.00% |
Estimated interest rate | 11.20% |
Interest rate on vacation ownership mortgage receivables, minimum | 8.24% |
Interest rate on vacation ownership mortgage receivables, maximum | 17.90% |
Acquired vacation | |
Schedule to mature mortgages receivables | |
Total | 33,953,000 |
Originated vacation | |
Schedule to mature mortgages receivables | |
Total | $2,896,000 |
HVO | |
Allowance for Vacation Ownership Mortgage Receivable Losses | |
Weighted-average interest rate on vacation ownership mortgage receivables | 0.70% |
Minimum | |
Allowance for Vacation Ownership Mortgage Receivable Losses | |
Mortgage Loans on Real Estate, Number of Loans | 701 |
Maximum | |
Allowance for Vacation Ownership Mortgage Receivable Losses | |
Mortgage Loans on Real Estate, Number of Loans | 718 |
INVESTMENTS_IN_UNCONSOLIDATED_2
INVESTMENTS IN UNCONSOLIDATED ENTITIES (Details) (USD $) | 12 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2014 |
Schedule of Equity Method Investments [Line Items] | |
Income (Loss) from Equity Method Investments | $4,630 |
carrying value of investments in unconsolidated entities | 33,486 |
Maui Timeshare Venture, LLC | |
Schedule of Equity Method Investments [Line Items] | |
carrying value of investments in unconsolidated entities | 32,919 |
Ownership percentages of investments in unconsolidated entities | 33.00% |
Other | |
Schedule of Equity Method Investments [Line Items] | |
carrying value of investments in unconsolidated entities | $567 |
Other | Minimum | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentages of investments in unconsolidated entities | 25.00% |
Other | Maximum | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentages of investments in unconsolidated entities | 43.30% |
PROPERTY_AND_EQUIPMENT_Details
PROPERTY AND EQUIPMENT (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $196,854,000 | $156,182,000 | |
Less: accumulated depreciation and amortization | -110,253,000 | -96,626,000 | |
Total property and equipment, net | 86,601,000 | 59,556,000 | |
Computer equipment | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 21,389,000 | 20,084,000 | |
Capitalized software | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 97,561,000 | 84,067,000 | |
Total property and equipment, net | 34,100,000 | 29,000,000 | |
Capitalized internal software costs | 10,100,000 | 9,300,000 | 8,500,000 |
Land, buildings and leasehold improvements | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 50,685,000 | 28,905,000 | |
Furniture and other equipment | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 16,638,000 | 14,830,000 | |
Projects in progress | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $10,581,000 | $8,296,000 |
LONGTERM_DEBT_Details
LONG-TERM DEBT (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
LONG-TERM DEBT | ||
Total long-term debt | $488,000 | $253,000 |
Revolving credit facility | ||
LONG-TERM DEBT | ||
Stated interest rate (as a percent) | 1.92% | 1.67% |
Total long-term debt | $488,000 | $253,000 |
LONGTERM_DEBT_Details_2
LONG-TERM DEBT (Details 2) (USD $) | 12 Months Ended | 1 Months Ended | 0 Months Ended | 3 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 30, 2014 | Sep. 30, 2012 | Jun. 30, 2012 | Sep. 04, 2012 | Sep. 30, 2012 | Jun. 21, 2012 | |
Senior Secured Credit Facility and Covenants | |||||||||
Amount outstanding | $488,000,000 | $253,000,000 | |||||||
Interest expense | 7,149,000 | 6,172,000 | 25,629,000 | ||||||
Loss on extinguishment of debt | 18,527,000 | ||||||||
Total unamortized debt issuance costs | 3,600,000 | 2,700,000 | |||||||
Accumulated amortization on debt issuance costs | 2,000,000 | 1,200,000 | |||||||
Revolving credit facility | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Principal amount | 600,000,000 | 600,000,000 | 600,000,000 | 500,000,000 | |||||
Amount outstanding | 488,000,000 | 253,000,000 | |||||||
Line of Credit Facility, Increase | 235,000,000 | ||||||||
Commitment fee (as a percent) | 0.28% | ||||||||
Percentage of voting equity securities of the Borrower and its U.S. subsidiaries by which credit facility is secured | 100.00% | ||||||||
Percentage of equity in the first-tier foreign subsidiaries of the Borrower by which credit facility is secured | 65.00% | ||||||||
Extinguishment of debt | 290,000,000 | ||||||||
Lender and third - party debt issuance costs incurred | 1,700,000 | 3,900,000 | |||||||
Revolving credit facility | Actual | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Consolidated leverage ratio of debt over EBITDA | 2.88 | ||||||||
Consolidated interest coverage ratio | 20.69 | ||||||||
Revolving credit facility | Financial covenant | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Consolidated leverage ratio of debt over EBITDA | 3.5 | ||||||||
Consolidated interest coverage ratio | 3 | ||||||||
Revolving credit facility | HVO | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Amount outstanding | 220,000,000 | ||||||||
Revolving credit facility | Minimum | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Commitment fee (as a percent) | 0.25% | ||||||||
Revolving credit facility | Maximum | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Commitment fee (as a percent) | 0.38% | ||||||||
Revolving credit facility | Base rate | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Reference rate | Base Rate | ||||||||
Applicable margin (as a percent) | 0.75% | ||||||||
Revolving credit facility | Base rate | Minimum | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Applicable margin (as a percent) | 0.25% | ||||||||
Revolving credit facility | Base rate | Maximum | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Applicable margin (as a percent) | 1.25% | ||||||||
Revolving credit facility | LIBOR | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Reference rate | LIBOR | ||||||||
Applicable margin (as a percent) | 1.75% | ||||||||
Revolving credit facility | LIBOR | Minimum | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Applicable margin (as a percent) | 1.25% | ||||||||
Revolving credit facility | LIBOR | Maximum | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Applicable margin (as a percent) | 2.25% | ||||||||
Interval Senior Notes | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Extinguishment of debt | 314,500,000 | ||||||||
Write-off of remaining unamortized balance of deferred debt issuance costs | 2,500,000 | ||||||||
Redemption price as a percentage of principal amount | 100.00% | ||||||||
Loss on extinguishment of debt | 17,900,000 | ||||||||
Old revolving credit facility/term loan | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Write-off of remaining unamortized balance of deferred debt issuance costs | 600,000 | ||||||||
Prior term loan | |||||||||
Senior Secured Credit Facility and Covenants | |||||||||
Extinguishment of debt | $300,000,000 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Dec. 31, 2014 | Apr. 30, 2014 | Dec. 31, 2013 | Jun. 21, 2012 |
Fair Value of Financial Instruments | ||||
Restricted cash and cash equivalents | $19,984,000 | $7,421,000 | ||
Revolving credit facility | ||||
Fair Value of Financial Instruments | ||||
Maximum borrowing capacity | 600,000,000 | 600,000,000 | 600,000,000 | 500,000,000 |
Carrying Amount | ||||
Fair Value of Financial Instruments | ||||
Cash and cash equivalents | 80,493,000 | 48,462,000 | ||
Restricted cash and cash equivalents | 19,984,000 | 7,421,000 | ||
Loans receivable | 15,896,000 | |||
Vacation ownership mortagage receivable | 37,710,000 | |||
Investment in marketable securities | 11,368,000 | |||
Total debt | -488,000,000 | -253,000,000 | ||
Fair Value | ||||
Fair Value of Financial Instruments | ||||
Cash and cash equivalents | 80,493,000 | 48,462,000 | ||
Restricted cash and cash equivalents | 19,984,000 | 7,421,000 | ||
Loans receivable | 15,896,000 | |||
Vacation ownership mortagage receivable | 37,624,000 | |||
Investment in marketable securities | 11,368,000 | |||
Total debt | ($488,000,000) | ($253,000,000) |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (USD $) | 12 Months Ended | 3 Months Ended | 12 Months Ended |
Dec. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
HVO | |||
Contingent consideration related to business acquisition | |||
Investment in marketable securities | $11,400,000 | ||
Unrealized trading gains | 700,000 | ||
VRI | |||
Contingent consideration related to business acquisition | |||
Fair value of contingent consideration | 6,500,000 | ||
Decrease in contingent consideration liability | 1,300,000 | ||
2013 Business Combinations | Maximum | |||
Contingent consideration related to business acquisition | |||
Period for payment of contingent consideration | 36 months | ||
Level 1 | |||
Contingent consideration related to business acquisition | |||
Unrealized trading gains | $700,000 |
EQUITY_Details
EQUITY (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 0 Months Ended | ||||||||||||
Jun. 04, 2014 | Feb. 28, 2015 | Feb. 28, 2014 | Dec. 31, 2013 | Nov. 30, 2013 | Sep. 30, 2013 | Aug. 31, 2013 | Jun. 30, 2013 | 31-May-13 | Aug. 31, 2011 | Jun. 30, 2009 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Nov. 04, 2013 | Nov. 04, 2013 | |
series | ||||||||||||||||
EQUITY | ||||||||||||||||
Authorized shares of common stock | 300,000,000 | 300,000,000 | 300,000,000 | |||||||||||||
Par value of common stock (in dollars per share) | $0.01 | $0.01 | $0.01 | |||||||||||||
Shares of common stock issued | 59,124,834 | 59,463,200 | 59,124,834 | |||||||||||||
Shares of common stock outstanding | 57,400,000 | 57,100,000 | 57,400,000 | |||||||||||||
Shares held as treasury stock | 1,697,360 | 2,363,324 | 1,697,360 | |||||||||||||
Authorized shares of preferred stock | 25,000,000 | 25,000,000 | 25,000,000 | |||||||||||||
Par value of preferred stock (in dollars per share) | $0.01 | $0.01 | $0.01 | |||||||||||||
Preferred stock, issued shares | 0 | 0 | 0 | |||||||||||||
Preferred stock, outstanding shares | 0 | 0 | 0 | |||||||||||||
Minimum number of series to issue preferred stock | 1 | |||||||||||||||
Dividends declared per common share (in dollars per share) | $0.12 | $0.11 | $0.11 | $0.11 | $0.44 | $0.33 | $0.50 | |||||||||
Cash dividend paid | $6,300,000 | $6,300,000 | $6,300,000 | $25,243,000 | $18,934,000 | $28,366,000 | ||||||||||
Stockholder Rights Plan | ||||||||||||||||
Rights per common stock share declared as dividend | 1 | |||||||||||||||
Minimum percentage of common stock to be acquired before rights become exercisable | 15.00% | |||||||||||||||
Percentage of discount on prevailing market price of common stock | 50.00% | |||||||||||||||
Noncontrolling Interest | ||||||||||||||||
Stockholders' Equity Attributable to Noncontrolling Interest | 32,708,000 | 36,305,000 | 32,708,000 | |||||||||||||
Share Repurchase Program | ||||||||||||||||
Amount authorized under share repurchase program | 20,000,000 | 25,000,000 | ||||||||||||||
Common stock repurchased | -14,121,000 | |||||||||||||||
Remaining availability for future repurchases of common stock | 10,000,000 | |||||||||||||||
Share repurchase authorization amount | $25 | |||||||||||||||
Repurchase program August 2011 [Member] | ||||||||||||||||
Share Repurchase Program | ||||||||||||||||
Number of shares of common stock repurchased | 200,000 | |||||||||||||||
Common stock repurchased | 4,100,000 | |||||||||||||||
Repurchase program June 2014 [Member] | ||||||||||||||||
Share Repurchase Program | ||||||||||||||||
Number of shares of common stock repurchased | 500,000 | |||||||||||||||
Common stock repurchased | 10,000,000 | |||||||||||||||
VRI Europe Limited | ||||||||||||||||
Changes during the period in redeemable noncontrolling interest | ||||||||||||||||
Foreign currency translation | 400,000 | |||||||||||||||
CLC | ||||||||||||||||
Noncontrolling Interest | ||||||||||||||||
Premium upon exercise of share options to settle loan (as a percent) | 20.00% | |||||||||||||||
CLC | Convertible Debt [Member] | ||||||||||||||||
Noncontrolling Interest | ||||||||||||||||
Convertible secured loan available, subject to certain conditions being met | 15,100,000 | |||||||||||||||
Convertible secured loan maturity period | 5 years | |||||||||||||||
CLC | VRI Europe Limited | ||||||||||||||||
Noncontrolling Interest | ||||||||||||||||
Equity of VRIE issued as consideration for acquisition (as a percent) | 24.50% | 24.50% | ||||||||||||||
Ownership interest ( as a percent) | 75.50% | 75.50% | ||||||||||||||
Stockholders' Equity Attributable to Noncontrolling Interest | $32,700,000 | $33,300,000 | $32,700,000 | |||||||||||||
Period from acquisition during which parties have agreed not to transfer their interests | 5 years |
EQUITY_Details_2
EQUITY (Details 2 ) (USD $) | 12 Months Ended | 3 Months Ended | |
Share data in Millions, unless otherwise specified | Dec. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2012 |
Redeemable Noncontrolling Interest | |||
Adjustment to the redemption value to noncontrolling interest | $0 | ||
Changes during the period in redeemable noncontrolling interest | |||
Balance, beginning of period | 426,000 | 426,000 | |
Net income attributable to redeemable noncontrolling interest | 31,000 | ||
Balance, end of period | $457,000 | $426,000 | |
Aston | Member of senior management | |||
Redeemable Noncontrolling Interest | |||
Rate at which preferred dividends accrue (as a percent) | 10.00% | ||
Additional interest vesting period | 4 years 6 months | ||
Exercisable period of shares subsequent to the filing of entity's annual report on Form 10-K | 60 days | ||
Put or call option exercised (in shares) | 0 |
BENEFIT_PLANS_Details
BENEFIT PLANS (Details) (USD $) | 12 Months Ended | 0 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Oct. 02, 2013 | |
Retirement savings plan qualified under Section 401(k) of the Internal Revenue Code and other various benefit plans | ||||
Employee contribution as maximum percentage of pre-tax earnings | 50.00% | |||
Employer contribution against each dollar contributed by employee (as a percent) | 50.00% | |||
Matching contributions | $1,800,000 | $1,600,000 | $1,400,000 | |
Benefit plan cost, non-US employees | 300,000 | 300,000 | 300,000 | |
Director Plan | ||||
Vesting percentage under deferred compensation plan | 100.00% | |||
Shares of common stock reserved for issuance pursuant to deferred compensation plan | 100,000 | |||
Shares of common stock outstanding that are reserved for issuance under deferred compensation plan | 46,758 | |||
HVO | ||||
Director Plan | ||||
Business Combination, Consideration Transferred | 10,600,000 | |||
Investment in marketable securities | 11,400,000 | |||
Unrealized trading gains | $700,000 | |||
Maximum | ||||
Retirement savings plan qualified under Section 401(k) of the Internal Revenue Code and other various benefit plans | ||||
Employer's maximum contribution of participant's eligible earnings (as a percent) | 3.00% |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 12 Months Ended | 3 Months Ended | 36 Months Ended | 0 Months Ended | ||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | Dec. 31, 2014 | 21-May-13 | |
STOCK-BASED COMPENSATION | ||||||||
Awards granted (in shares) | 726,000 | 713,000 | ||||||
Per unit grant date fair value (in dollars per unit) | $23.99 | $20.83 | $13.72 | |||||
Non-cash compensation expense | $11,363,000 | $10,428,000 | $10,931,000 | |||||
Non-vested RSUs | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Awards granted (in shares) | 679,000 | 390,000,000 | 657,000,000 | 586,000 | ||||
Number of shares granted expected to cliff vest | 116,000 | 300,000 | 130,000 | |||||
Non-cash compensation expense | 11,400,000 | 10,400,000 | 10,900,000 | |||||
Unrecognized compensation expense | ||||||||
Unrecognized compensation cost, net of estimated forfeitures | $18,800,000 | 18,800,000 | ||||||
Weighted average period for recognition of unrecognized compensation expense | 2 years | |||||||
Non-vested RSUs | Minimum | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Award vesting period | 3 years | 3 years | 3 years | |||||
Non-vested RSUs | Maximum | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Award vesting period | 4 years | 4 years | 4 years | |||||
Non-vested RSUs | Performance-based | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Awards granted (in shares) | 84,000 | 58,000 | 73,000 | |||||
Per unit grant date fair value (in dollars per unit) | $36.90 | $29.61 | $17.34 | |||||
Number of peer groups for estimating total shareholder return ranking | 2 | |||||||
The estimated performance period to be considered for historical average volatility rate | 3 years | |||||||
The performance measurement period to be considered for risk free interest rate assumption | 3 years | |||||||
Non-vested RSUs | Performance-based | Minimum | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Award vesting period | 3 years | 3 years | 3 years | |||||
Percentage of target shares which can be earned by the participants (as a percent) | 0.00% | 0.00% | 0.00% | |||||
Non-vested RSUs | Performance-based | Maximum | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Percentage of target shares which can be earned by the participants (as a percent) | 200.00% | |||||||
2013 Stock and Incentive Compensation Plan | ||||||||
STOCK-BASED COMPENSATION | ||||||||
Number of shares of common stock reserved for issuance | 4,100,000 | |||||||
Reduction from common stock reserved for issuance for every share granted under prior plan | 1 | |||||||
Remaining shares available for future issuance | 2,800,000 | 2,800,000 |
STOCKBASED_COMPENSATION_Detail1
STOCK-BASED COMPENSATION (Details 2) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Non-cash stock-based compensation expense | |||
Non-cash compensation expense before income taxes | $11,363 | $10,428 | $10,931 |
Income tax benefit | -4,330 | -3,960 | -4,222 |
Non-cash compensation expense after income taxes | 7,033 | 6,468 | 6,709 |
Cost of sales | |||
Non-cash stock-based compensation expense | |||
Non-cash compensation expense before income taxes | 724 | 686 | 639 |
Selling and marketing expense | |||
Non-cash stock-based compensation expense | |||
Non-cash compensation expense before income taxes | 1,392 | 1,193 | 1,034 |
General and administrative expense | |||
Non-cash stock-based compensation expense | |||
Non-cash compensation expense before income taxes | $9,247 | $8,549 | $9,258 |
STOCKBASED_COMPENSATION_Detail2
STOCK-BASED COMPENSATION (Details 3) (USD $) | 12 Months Ended | 3 Months Ended | ||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | |
Shares | ||||||
Outstanding at the beginning of the period (in shares) | 1,495,000 | 1,569,000 | 2,098,000 | 1,495,000 | 1,569,000 | 2,098,000 |
Granted (in shares) | 726,000 | 713,000 | ||||
Vested (in shares) | -468,000 | -766,000 | -1,156,000 | |||
Forfeited (in shares) | -59,000 | -21,000 | -52,000 | |||
Outstanding at the end of the period (in shares) | 1,694,000 | 1,495,000 | 1,569,000 | |||
Weighted-Average Grant Date Fair Value | ||||||
Outstanding at the beginning of the period (in dollars per share) | $17.33 | $13.29 | $12.22 | 17.33 | 13.29 | 12.22 |
Granted (in dollars per share) | $23.99 | $20.83 | $13.72 | |||
Vested (in dollars per share) | $16.27 | $12.16 | $11.49 | |||
Forfeited (in dollars per share) | $24.01 | $17.85 | $13.72 | |||
Outstanding at the end of the period (in dollars per share) | $20.23 | $17.33 | $13.29 | |||
Non-vested RSUs | ||||||
Shares | ||||||
Granted (in shares) | 679,000 | 390,000,000 | 657,000,000 | 586,000 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Earnings from continuing operations before income taxes and noncontrolling interest | |||
U.S. | $100,265 | $112,620 | $55,464 |
Foreign | 26,734 | 14,574 | 9,497 |
Earnings before income taxes and noncontrolling interests | 126,999 | 127,194 | 64,961 |
Current income tax provision | |||
Federal | 28,671 | 38,832 | 12,016 |
State | 5,400 | 3,808 | 2,931 |
Foreign | 3,831 | 4,341 | 2,798 |
Current income tax provision | 37,902 | 46,981 | 17,745 |
Deferred income tax provision (benefit) | |||
Federal | 3,609 | -506 | 3,972 |
State | 914 | -1,759 | 1,901 |
Foreign | 2,626 | 696 | 634 |
Deferred income tax provision | 7,149 | -1,569 | 6,507 |
Income tax provision | 45,051 | 45,412 | 24,252 |
Net excess tax benefits associated with stock-based awards | 1,883 | 2,864 | 2,554 |
Deferred tax assets: | |||
Deferred revenue | 34,278 | 40,607 | |
Provision for accrued expenses | 5,666 | 4,539 | |
Non-cash compensation | 6,552 | 5,123 | |
Net operating loss and tax credit carryforwards | 1,534 | 675 | |
Other | 916 | 1,737 | |
Total deferred tax assets | 48,946 | 52,681 | |
Less valuation allowance | -234 | -666 | |
Net deferred tax assets | 48,712 | 52,015 | |
Deferred tax liabilities: | |||
Intangible and other assets | -102,594 | -103,986 | |
Deferred membership costs | -6,951 | -7,679 | |
Property and equipment | -10,270 | -8,297 | |
Investments in unconsolidated entities | -2,594 | ||
Installment sales of vacation ownership interest | -1,054 | ||
Other | -1,565 | -972 | |
Total deferred tax liabilities | -125,028 | -120,934 | |
Net deferred tax liability | ($76,316) | ($68,919) |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) (Foreign, USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Foreign | ||
Net operating loss carryforwards | ||
NOLs | $7.20 | $2 |
Valuation allowance related to NOL carryforwards | $0.20 |
INCOME_TAXES_Details_3
INCOME TAXES (Details 3) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | ||
Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | |
Reconciliation of total income tax provision | |||||
Income tax provision at the federal statutory rate of 35% | $44,450,000 | $44,518,000 | $22,736,000 | ||
State income taxes, net of effect of federal tax benefit | 4,104,000 | 1,332,000 | 3,141,000 | ||
Foreign income taxed at a different statutory tax rate | -3,048,000 | -1,240,000 | -745,000 | ||
U.S. tax consequences of foreign operations | -47,000 | 181,000 | -291,000 | ||
Other, net | -408,000 | 621,000 | -589,000 | ||
Income tax provision | 45,051,000 | 45,412,000 | 24,252,000 | ||
Federal statutory rate (as a percent) | 35.00% | 35.00% | 35.00% | ||
Reconciliation of total income tax provision (as a percent) | |||||
Income tax provision at the federal statutory rate of 35% (as a percent) | 35.00% | 35.00% | 35.00% | ||
State income taxes, net of effect of federal tax benefit (as a percent) | 3.20% | 1.10% | 4.80% | ||
Foreign income taxed at a different statutory tax rate (as a percent) | -2.40% | -1.00% | -1.20% | ||
U.S. tax consequences of foreign operations (as a percent) | 0.00% | 0.10% | -0.40% | ||
Other, net (as a percent) | -0.30% | 0.50% | -0.90% | ||
Income tax provision (as a percent) | 35.50% | 35.70% | 37.30% | ||
Additional information related to income taxes | |||||
Federal and state income taxes provided on earnings of certain foreign subsidiaries | 0 | ||||
Aggregate earnings of certain foreign subsidiaries | 80,500,000 | ||||
Unrecognized tax benefits | |||||
Balance at beginning of year | 662,000 | 509,000 | 662,000 | 870,000 | |
Additions for tax positions of prior years | 33,000 | 1,167,000 | 37,000 | ||
Reductions for tax positions of prior years | -1,150,000 | ||||
Settlements | -97,000 | ||||
Expiration of applicable statute of limitations | -285,000 | -170,000 | -148,000 | ||
Balance at end of year | 257,000 | 509,000 | 662,000 | 509,000 | |
Unrecognized tax benefits | |||||
Unrecognized tax benefits, amount | 257,000 | 509,000 | 662,000 | 509,000 | |
Net decrease in unrecognized tax benefits | -200,000 | -200,000 | |||
Unrecognized Tax Benefits, Interest on Income Taxes Accrued | 0 | 0 | 0 | ||
Decrease in unrecognized tax benefits for state income tax items | 1,100,000 | ||||
Decrease in interest and penalties | 100,000 | 200,000 | 200,000 | ||
Accrued interest and penalties | 300,000 | 400,000 | 600,000 | 400,000 | |
Estimated decrease in unrecognized tax benefits within next twelve months | 100,000 | ||||
State taxing authority | |||||
Unrecognized tax benefits | |||||
Net decrease in unrecognized tax benefits | 1,100,000 | ||||
TPI | |||||
Unrecognized tax benefits | |||||
Balance at beginning of year | 200,000 | ||||
Balance at end of year | 100,000 | 400,000 | |||
Unrecognized tax benefits | |||||
Unrecognized Tax Benefits, Decrease Resulting from Acquisition | 200,000 | ||||
Unrecognized tax benefits, amount | $100,000 | $400,000 |
INCOME_TAXES_Details_4
INCOME TAXES (Details 4) (U.K. Finance Act of 2013) | 1 Months Ended | |
Apr. 30, 2015 | Apr. 30, 2014 | |
U.K. Finance Act of 2013 | ||
Income Taxes | ||
U.K. corporate income tax rate (as a percent) | 20.00% | 21.00% |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
segment | |||||||||||
SEGMENT INFORMATION | |||||||||||
Number of operating segments which are also reportable segments | 2 | ||||||||||
SEGMENT INFORMATION | |||||||||||
Total revenues | $167,121 | $146,683 | $143,528 | $157,041 | $122,195 | $119,156 | $124,983 | $134,881 | $614,373 | $501,215 | $473,339 |
Cost of sales | 264,481 | 179,510 | 168,259 | ||||||||
Gross profit | 85,246 | 87,688 | 83,767 | 93,191 | 74,473 | 77,165 | 81,562 | 88,505 | 349,892 | 321,705 | 305,080 |
Selling and marketing expense | 61,615 | 53,722 | 53,559 | ||||||||
General and administrative expense | 133,170 | 112,574 | 105,270 | ||||||||
Amortization expense of intangibles | 12,301 | 8,133 | 23,041 | ||||||||
Depreciation expense | 15,712 | 14,531 | 13,429 | ||||||||
Direct segment operating expenses | 222,798 | 188,960 | 195,299 | ||||||||
Operating income | 19,827 | 34,905 | 31,937 | 40,425 | 25,107 | 31,378 | 33,471 | 42,789 | 127,094 | 132,745 | 109,781 |
Total assets | |||||||||||
Total assets | 1,327,619 | 1,024,619 | 1,327,619 | 1,024,619 | |||||||
Capital expenditures | |||||||||||
Capital expenditures | 19,087 | 14,700 | 15,040 | ||||||||
Exchange And Rental | |||||||||||
SEGMENT INFORMATION | |||||||||||
Membership revenue | 352,521 | 365,007 | 357,732 | ||||||||
Rental management revenue | 48,148 | 29,956 | 27,075 | ||||||||
Pass-through revenue | 82,729 | 47,426 | 43,986 | ||||||||
Total revenues | 483,398 | 442,389 | 428,793 | ||||||||
Cost of sales | 183,876 | 145,562 | 141,153 | ||||||||
Gross profit | 299,522 | 296,827 | 287,640 | ||||||||
Selling and marketing expense | 58,020 | 53,100 | 53,120 | ||||||||
General and administrative expense | 102,796 | 93,903 | 93,237 | ||||||||
Amortization expense of intangibles | 7,058 | 5,126 | 20,444 | ||||||||
Depreciation expense | 14,683 | 14,134 | 13,185 | ||||||||
Operating income | 116,965 | 130,564 | 107,654 | ||||||||
Total assets | |||||||||||
Total assets | 931,698 | 732,161 | 931,698 | 732,161 | |||||||
Capital expenditures | |||||||||||
Capital expenditures | 18,008 | 14,361 | 14,491 | ||||||||
Vacation Ownership | |||||||||||
SEGMENT INFORMATION | |||||||||||
Management fee revenue | 92,148 | 41,595 | 27,871 | ||||||||
Vacation ownership sales and financing revenue | 9,339 | ||||||||||
Pass-through revenue | 29,488 | 17,231 | 16,675 | ||||||||
Total revenues | 130,975 | 58,826 | 44,546 | ||||||||
Cost of sales | 80,605 | 33,948 | 27,106 | ||||||||
Gross profit | 50,370 | 24,878 | 17,440 | ||||||||
Selling and marketing expense | 3,595 | 622 | 439 | ||||||||
General and administrative expense | 30,374 | 18,671 | 12,033 | ||||||||
Amortization expense of intangibles | 5,243 | 3,007 | 2,597 | ||||||||
Depreciation expense | 1,029 | 397 | 244 | ||||||||
Direct segment operating expenses | 10,129 | 2,181 | 2,127 | ||||||||
Total assets | |||||||||||
Total assets | 395,921 | 292,458 | 395,921 | 292,458 | |||||||
Capital expenditures | |||||||||||
Capital expenditures | $1,079 | $339 | $549 |
SEGMENT_INFORMATION_Details_2
SEGMENT INFORMATION (Details 2) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
country | country | ||||||||||
Geographic Information | |||||||||||
Number of other countries in which entity operates | 15 | 15 | |||||||||
Revenue: | |||||||||||
Revenue | $167,121 | $146,683 | $143,528 | $157,041 | $122,195 | $119,156 | $124,983 | $134,881 | $614,373 | $501,215 | $473,339 |
Long-lived assets (excluding goodwill and intangible assets): | |||||||||||
Total long-lived assets | 86,601 | 59,556 | 86,601 | 59,556 | |||||||
Minimum | |||||||||||
Geographic Information | |||||||||||
Number of countries from which revenue is sourced | 100 | 100 | 100 | ||||||||
United States | |||||||||||
Revenue: | |||||||||||
Revenue | 483,007 | 404,886 | 385,973 | ||||||||
Long-lived assets (excluding goodwill and intangible assets): | |||||||||||
Total long-lived assets | 81,291 | 53,056 | 81,291 | 53,056 | |||||||
Europe | |||||||||||
Revenue: | |||||||||||
Revenue | 73,119 | 34,306 | 26,715 | ||||||||
Long-lived assets (excluding goodwill and intangible assets): | |||||||||||
Total long-lived assets | 4,884 | 5,812 | 4,884 | 5,812 | |||||||
All other countries | |||||||||||
Revenue: | |||||||||||
Revenue | 58,247 | 62,023 | 60,651 | ||||||||
Long-lived assets (excluding goodwill and intangible assets): | |||||||||||
Total long-lived assets | $426 | $688 | $426 | $688 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Future minimum payments under operating lease agreements | |||
2015 | $14,308,000 | ||
2016 | 12,684,000 | ||
2017 | 9,527,000 | ||
2018 | 7,868,000 | ||
2019 | 6,728,000 | ||
Thereafter through 2021 | 9,833,000 | ||
Total | 60,948,000 | ||
Expenses under operating lease agreements | |||
Expense charged to operations under operating lease agreements | 12,700,000 | 11,100,000 | 10,800,000 |
Contractual obligations payment schedule | |||
Total | 675,787,000 | ||
2015 | 87,109,000 | ||
2016 | 26,129,000 | ||
2017 | 30,988,000 | ||
2018 | 18,887,000 | ||
2019 | 498,590,000 | ||
Thereafter | 14,084,000 | ||
Debt principal | |||
Contractual obligations payment schedule | |||
Total | 488,000,000 | ||
2019 | 488,000,000 | ||
Debt interest (projected) | |||
Contractual obligations payment schedule | |||
Total | 42,583,000 | ||
2015 | 9,970,000 | ||
2016 | 9,997,000 | ||
2017 | 9,969,000 | ||
2018 | 9,970,000 | ||
2019 | 2,677,000 | ||
Guarantees Surety Bonds Letters of Credit | |||
Contractual obligations payment schedule | |||
Total | 65,160,000 | ||
2015 | 57,530,000 | ||
2016 | 4,506,000 | ||
2017 | 1,302,000 | ||
2018 | 1,145,000 | ||
2019 | 593,000 | ||
Thereafter | 84,000 | ||
Purchase obligations | |||
Contractual obligations payment schedule | |||
Total | 80,044,000 | ||
2015 | 19,609,000 | ||
2016 | 11,626,000 | ||
2017 | 19,717,000 | ||
2018 | 7,772,000 | ||
2019 | 7,320,000 | ||
Thereafter | $14,000,000 |
COMMITMENTS_AND_CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details 2) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and guarantees | |
Amount of guarantees and commitments, year one | 87,109,000 |
Letter of credit outstanding amount | 8,300,000 |
Guarantees Surety Bonds Letters of Credit | |
Commitments and guarantees | |
Guarantees and commitments amount | 65,300,000 |
Amount of guarantees and commitments, year one | 57,500,000 |
Guarantees | |
Commitments and guarantees | |
Guarantees and commitments amount | 17,900,000 |
Guarantees | Minimum | |
Commitments and guarantees | |
Notice period for termination of lease | 60 days |
Guarantees | Maximum | |
Commitments and guarantees | |
Notice period for termination of lease | 90 days |
Guarantees construction loan | |
Commitments and guarantees | |
Guarantees and commitments amount | 36,700,000 |
COMMITMENTS_AND_CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 3) (European Union Value Added Tax Matter, USD $) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
European Union Value Added Tax Matter | |||
COMMITMENTS AND CONTINGENCIES | |||
Accrual of VAT liability | $2.30 | $2.90 | |
Change in estimate of VAT liability | 0.6 | ||
Possible future costs to settle VAT liabilities, lower range | 2.3 | ||
Possible future costs to settle VAT liabilities, higher range | 3.5 | ||
Favorable adjustments to earnings | $0.70 | $1.10 | $1.20 |
SUPPLEMENTAL_CASH_FLOW_INFORMA2
SUPPLEMENTAL CASH FLOW INFORMATION (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Non-cash financing activity: | |||
Issuance of noncontrolling interest in connection with an acquisition | $3,327 | $31,347 | |
Cash paid during the period for: | |||
Interest, net of amounts capitalized | 6,376 | 5,358 | 31,363 |
Income taxes, net of refunds | $48,309 | $42,750 | $25,693 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
RELATED PARTY TRANSACTIONS | |||
Interest income | $412,000 | $362,000 | $1,792,000 |
Liberty Media Corporation | |||
RELATED PARTY TRANSACTIONS | |||
Number of directors nominated by related party that may not be independent | 1 | ||
Number of demand registration rights entitled | 3 | ||
Liberty Media Corporation | Minimum | |||
RELATED PARTY TRANSACTIONS | |||
Percentage of voting power of equity securities of the entity held by related party that is required to nominate up to 20% of the directors | 20.00% | ||
Liberty Media Corporation | Maximum | |||
RELATED PARTY TRANSACTIONS | |||
Directors that can be nominated by the related party (as a percent) | 20.00% | ||
CLC | |||
RELATED PARTY TRANSACTIONS | |||
Revenue from related party | 600,000 | 700,000 | |
Trade payable to related party | 100,000 | 600,000 | |
Receivable from related party | 500,000 | 1,800,000 | |
Loan due | 15,100,000 | ||
Loan maturity period subsequent to funding date | 5 years | ||
Interest income | 200,000 | ||
CLC | VRI Europe Limited | |||
RELATED PARTY TRANSACTIONS | |||
Shared services income | 700,000 | 100,000 | |
Shared services expense | 3,100,000 | 500,000 | |
RCCL | |||
RELATED PARTY TRANSACTIONS | |||
Revenue from related party | 900,000 | ||
Trade payable to related party | 1,700,000 | 1,400,000 | |
Receivable from related party | 100,000 | ||
Maui Timeshare Venture and Host Hotels and Resorts | |||
RELATED PARTY TRANSACTIONS | |||
Revenue from related party | 9,900,000 | ||
Trade payable to related party | 2,000,000 | ||
Receivable from related party | $1,500,000 |
QUARTERLY_RESULTS_UNAUDITED_De
QUARTERLY RESULTS (UNAUDITED) (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
QUARTERLY RESULTS (UNAUDITED) | |||||||||||
Revenue | $167,121 | $146,683 | $143,528 | $157,041 | $122,195 | $119,156 | $124,983 | $134,881 | $614,373 | $501,215 | $473,339 |
Gross profit | 85,246 | 87,688 | 83,767 | 93,191 | 74,473 | 77,165 | 81,562 | 88,505 | 349,892 | 321,705 | 305,080 |
Operating income | 19,827 | 34,905 | 31,937 | 40,425 | 25,107 | 31,378 | 33,471 | 42,789 | 127,094 | 132,745 | 109,781 |
Net income attributable to common stockholders | 15,560 | 21,295 | 18,360 | 23,175 | 18,542 | 17,101 | 20,570 | 25,004 | 78,930 | 81,217 | 40,702 |
Earnings per share attributable to common stockholders: | |||||||||||
Basic (in dollars per share) | $0.27 | $0.37 | $0.32 | $0.41 | $0.32 | $0.30 | $0.36 | $0.44 | $1.38 | $1.42 | $0.72 |
Diluted (in dollars per share) | $0.27 | $0.37 | $0.32 | $0.41 | $0.32 | $0.29 | $0.36 | $0.44 | $1.36 | $1.40 | $0.71 |
Correction Adjustment | Understatement of membership revenue | |||||||||||
QUARTERLY RESULTS (UNAUDITED) | |||||||||||
Membership revenue | $4,100 |
Schedule_II_VALUATION_AND_QUAL1
Schedule II VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 |
Allowance for doubtful accounts on trade receivables | |||
Movement in valuation and qualifying accounts | |||
Balance at Beginning of Period | $409 | $302 | |
Charges to Earnings | 63 | 153 | |
Charges (Credits) to Other Accounts | -182 | -46 | |
Balance at End of Period | 290 | 409 | |
Allowance for loan losses on mortgages receivables | |||
Movement in valuation and qualifying accounts | |||
Charges to Earnings | 347 | ||
Balance at End of Period | 347 | ||
Deferred tax valuation allowance | |||
Movement in valuation and qualifying accounts | |||
Balance at Beginning of Period | 681 | 682 | |
Charges to Earnings | 2 | ||
Charges (Credits) to Other Accounts | -17 | -1 | |
Balance at End of Period | $666 | $681 |