Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 02, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | ILG, Inc. | |
Entity Central Index Key | 1,434,620 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 124,768,184 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues: | ||
Service and membership related | $ 126 | $ 112 |
Sales of vacation ownership products, net | 110 | 9 |
Rental and ancillary services | 107 | 26 |
Consumer financing | 21 | 2 |
Cost reimbursements | 88 | 37 |
Total revenues | 452 | 186 |
Operating costs and expenses: | ||
Cost of service and membership related sales | 32 | 24 |
Cost of vacation ownership product sales | 27 | 6 |
Cost of sales of rental and ancillary services | 78 | 14 |
Cost of consumer financing | 6 | |
Cost reimbursements | 88 | 37 |
Royalty fee expense | 10 | 2 |
Selling and marketing expense | 73 | 17 |
General and administrative expense | 54 | 38 |
Amortization expense of intangibles | 5 | 3 |
Depreciation expense | 15 | 5 |
Total operating costs and expenses | 388 | 146 |
Operating income | 64 | 40 |
Other income (expense): | ||
Interest expense | (5) | (6) |
Other income, net | 10 | 1 |
Equity in earnings from unconsolidated entities | 1 | 1 |
Total other income (expense), net | 6 | (4) |
Earnings before income taxes and noncontrolling interests | 70 | 36 |
Income tax provision | (25) | (13) |
Net income | 45 | 23 |
Net income attributable to noncontrolling interests | (1) | (1) |
Net income attributable to common stockholders | $ 44 | $ 22 |
Earnings per share attributable to common stockholders: | ||
Basic (in dollars per share) | $ 0.36 | $ 0.38 |
Diluted (in dollars per share) | $ 0.35 | $ 0.38 |
Weighted average number of shares of common stock outstanding (in 000's): | ||
Basic (in shares) | 123,998 | 57,619 |
Diluted (in shares) | 125,582 | 57,954 |
Dividends declared per share of common stock (in dollars per share) | $ 0.15 | $ 0.12 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income | $ 45 | $ 23 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustments, net of tax | 6 | (5) |
Total comprehensive income, net of tax | 51 | 18 |
Less: Net income attributable to noncontrolling interests, net of tax | (1) | (1) |
Less: Other comprehensive income (loss) attributable to noncontrolling interests | (1) | |
Total comprehensive loss attributable to noncontrolling interests | (1) | (2) |
Comprehensive income attributable to common stockholders | $ 50 | $ 16 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and cash equivalents | $ 171 | $ 126 |
Restricted cash and cash equivalents (including $14 and $32 in variable interest entities, "VIEs," respectively) | 66 | 114 |
Accounts receivable, net of allowance for doubtful accounts of $0.7 and $0.4, respectively | 122 | 97 |
Vacation ownership mortgages receivable, net of allowance of $2 and $1, respectively (including a net $55 and $59 in VIEs, respectively) | 84 | 87 |
Vacation ownership inventory | 295 | 197 |
Prepaid income taxes | 37 | 47 |
Prepaid expenses | 79 | 49 |
Other current assets (including $3 of interest receivable in VIEs) | 31 | 29 |
Total current assets | 885 | 746 |
Restricted cash and cash equivalents (including $2 in VIEs) | 4 | 4 |
Vacation ownership mortgages receivable, net of allowance of $27 and $21, respectively (including a net $357 and $370 in VIEs, respectively) | 627 | 632 |
Vacation ownership inventory | 134 | 189 |
Investments in unconsolidated entities | 60 | 59 |
Property and equipment, net | 604 | 580 |
Goodwill | 559 | 558 |
Intangible assets, net | 449 | 453 |
Deferred income taxes | 10 | 9 |
Other non-current assets | 72 | 74 |
TOTAL ASSETS | 3,404 | 3,304 |
LIABILITIES: | ||
Accounts payable, trade | 55 | 64 |
Current portion of securitized debt from VIEs | 105 | 111 |
Deferred revenue | 130 | 87 |
Accrued compensation and benefits | 66 | 70 |
Accrued expenses and other current liabilities (including a net $1 of interest payable in VIEs) | 222 | 187 |
Total current liabilities | 578 | 519 |
Long-term debt | 601 | 580 |
Securitized debt from VIEs | 293 | 319 |
Income taxes payable, non-current | 5 | 5 |
Other long-term liabilities | 48 | 47 |
Deferred revenue | 82 | 79 |
Deferred income taxes | 173 | 161 |
Total liabilities | 1,780 | 1,710 |
Redeemable noncontrolling interest | 1 | 1 |
Commitments and contingencies | ||
STOCKHOLDERS' 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; $0.01 par value; issued 134,822,999 and 133,545,864 shares, respectively | 1 | 1 |
Treasury stock— 9,037,627 and 8,878,489 shares at cost, respectively | (139) | (136) |
Additional paid-in capital | 1,263 | 1,262 |
Retained earnings | 517 | 492 |
Accumulated other comprehensive loss | (46) | (52) |
Total ILG stockholders' equity | 1,596 | 1,567 |
Noncontrolling interests | 27 | 26 |
Total equity | 1,623 | 1,593 |
TOTAL LIABILITIES AND EQUITY | $ 3,404 | $ 3,304 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Restricted cash and cash equivalents (including $14 and $32 in variable interest entities, "VIEs," respectively) | $ 66 | $ 114 |
Accounts receivable, allowance | 0.7 | 0.4 |
Vacation ownership mortgages receivable, allowance | 2 | 1 |
Vacation ownership mortgages receivable, net of allowance of $2 and $1, respectively (including a net $55 and $59 in VIEs, respectively) | 84 | 87 |
Other Assets, Current | 31 | 29 |
Restricted cash and cash equivalents (including $2 in VIEs) | 4 | 4 |
Vacation ownership mortgages receivable, allowance | 27 | 21 |
Vacation ownership mortgages receivable, net of allowance of $27 and $21, respectively (including a net $357 and $370 in VIEs, respectively) | 627 | 632 |
Accrued expenses and other current liabilities (including a net $1 of interest payable in VIEs) | $ 222 | $ 187 |
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 | 133,822,999 | 133,545,864 |
Treasury stock, shares | 9,037,627 | 8,878,489 |
Series A Preferred Stock [Member] | ||
Preferred stock, authorized shares | 100,000 | 100,000 |
VIEs | ||
Restricted cash and cash equivalents (including $14 and $32 in variable interest entities, "VIEs," respectively) | $ 14 | $ 32 |
Vacation ownership mortgages receivable, net of allowance of $2 and $1, respectively (including a net $55 and $59 in VIEs, respectively) | 55 | 59 |
Other Assets, Current | 3 | 3 |
Restricted cash and cash equivalents (including $2 in VIEs) | 2 | 2 |
Vacation ownership mortgages receivable, net of allowance of $27 and $21, respectively (including a net $357 and $370 in VIEs, respectively) | 357 | 370 |
Accrued expenses and other current liabilities (including a net $1 of interest payable in VIEs) | $ 1 | $ 1 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - 3 months ended Mar. 31, 2017 - USD ($) $ in Millions | Noncontrolling Interest [Member] | Parent [Member] | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at Dec. 31, 2016 | $ 26 | $ 1,567 | $ 1 | $ (136) | $ 1,262 | $ 492 | $ (52) | $ 1,593 |
Balance (in shares) at Dec. 31, 2016 | 133,545,864 | 8,878,489 | 124,700,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income | 1 | 44 | 44 | $ 45 | ||||
Other comprehensive loss, net of tax | 6 | 6 | 6 | |||||
Non-cash compensation expense | 6 | 6 | 6 | |||||
Issuance of common stock upon vesting of RSUs, net of withholding taxes | (6) | (6) | (6) | |||||
Issuance of common stock upon vesting of RSUs, net of withholding taxes (in shares) | 277,047 | |||||||
Issuance of restricted stock for converted shares in connection with the acquisition of Vistana (in shares) | (2,535) | |||||||
Dividends declared on common stock | (18) | 1 | (19) | (18) | ||||
Dividends declared on common stock (in shares) | 2,623 | |||||||
Treasury stock purchases | (3) | $ (3) | (3) | |||||
Treasury stock purchases (in shares) | 159,138 | |||||||
Balance at Mar. 31, 2017 | $ 27 | $ 1,596 | $ 1 | $ (139) | $ 1,263 | $ 517 | $ (46) | $ 1,623 |
Balance (in shares) at Mar. 31, 2017 | 133,822,999 | 9,037,627 | 124,800,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 45 | $ 23 |
Adjustments to reconcile net income to net cash provided by (used by) operating activities: | ||
Amortization expense of intangibles | 5 | 3 |
Amortization of debt issuance costs | 1 | |
Depreciation expense | 15 | 5 |
Allowance for losses on originated loans | 7 | |
Allowance for impairment on acquired loans | 2 | |
Accretion of mortgages receivable | 2 | |
Non-cash compensation expense | 6 | 3 |
Deferred income taxes | 12 | 1 |
Equity in earnings from unconsolidated entities | (1) | (1) |
Changes in operating assets and liabilities: | ||
Restricted cash | 30 | 5 |
Accounts receivable | (25) | (36) |
Vacation ownership mortgages receivable (originations) | (75) | (6) |
Vacation ownership mortgages receivable (collections) | 69 | 5 |
Vacation ownership inventory (additions) | (59) | |
Vacation ownership inventory (disposals) | 24 | 2 |
Prepaid expenses and other current assets | (32) | (4) |
Prepaid income taxes and income taxes payable | 10 | 12 |
Accounts payable and other current liabilities | 16 | 3 |
Deferred income | 44 | 23 |
Other, net | (8) | 2 |
Net cash provided by (used in) operating activities | 88 | 40 |
Cash flows from investing activities: | ||
Capital expenditures | (22) | (7) |
Investment in unconsolidated entity | (5) | |
Investment in financing receivables | (2) | |
Other | 1 | |
Net cash used in investing activities | (22) | (13) |
Cash flows from financing activities: | ||
Borrowings (payments) on revolving credit facility, net | 20 | (13) |
Payments on securitized debt | (32) | |
Decrease in restricted cash | 18 | |
Purchases of treasury stock | (3) | |
Dividend payments to stockholders | (19) | (7) |
Withholding taxes on vesting of restricted stock units | (4) | (1) |
Net cash provided by (used) in financing activities | (20) | (21) |
Effect of exchange rate changes on cash and cash equivalents | (1) | (2) |
Net increase in cash and cash equivalents | 45 | 4 |
Cash and cash equivalents at beginning of period | 126 | 93 |
Cash and cash equivalents at end of period | 171 | 97 |
Supplemental disclosures of cash flow information: | ||
Interest paid, net of amounts capitalized | 2 | $ 1 |
Income taxes paid, net of refunds | $ 3 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2017 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION Organization ILG, Inc. is a leading provider of professionally delivered vacation experiences and the exclusive global licensee for the Hyatt ® , Sheraton ® and Westin ® brands in vacation ownership. We operate in the following two segments: Vacation Ownership (VO) and Exchange and Rental. Vacation Ownership engages in sales, marketing, financing and development of vacation ownership interests (VOIs); the management of vacation ownership resorts; and related services to owners and associations. The Vacation Ownership operating segment consists of the VOI sales and financing business of Vistana Signature Experiences (Vistana) and Hyatt Vacation Ownership (HVO) as well as the management related lines of business of Vistana, HVO, Vacation Resorts International (VRI), Trading Places International (TPI), and VRI Europe. Exchange and Rental offers access to vacation accommodations and other travel-related transactions and services to members of our programs and other leisure travelers, by providing vacation exchange services and vacation rentals, working with resort developers, homeowners’ associations (HOAs) and operating vacation rental properties. The Exchange and Rental operating segment consists of Interval International (referred to as Interval), the Vistana Signature Network, the Hyatt Residence Club, the TPI exchange business, and Aqua-Aston Holdings, Inc. (Aqua-Aston). ILG was incorporated as a Delaware corporation in May 2008 under the name Interval Leisure Group, Inc. and commenced trading on The NASDAQ Stock Market in August 2008 under the symbol "IILG" and now trades under “ILG.” On May 11, 2016, we acquired the vacation ownership business of Starwood Hotels & Resorts Worldwide, LLC (Starwood), now known as Vistana. In connection with the acquisition, Vistana entered into an exclusive, 80 - year global license agreement with Starwood for the use of the Sheraton ® and Westin ® brands in vacation ownership. The global license agreement may also be extended for two 30 – year terms, subject to meeting certain sales performance tests. Also, Vistana has the non-exclusive license for the existing St. Regis ® and The Luxury Collection ® vacation ownership properties and an affiliation with the Starwood Preferred Guest program. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of ILG’s management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not indicative of the results that may be expected for a full year. Principles of Consolidation The accompanying condensed 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 these condensed 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. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2016 Annual Report on Form 10‑K. Seasonality Revenue at ILG is influenced by the seasonal nature of travel. 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. Our vacation ownership management businesses by and large do not experience significant seasonality, with the exception of our resort operations revenue which tends to be higher in the first quarter. Within our Exchange and Rental segment, we 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. Remaining rental revenue is recognized based on occupancy. For the vacation rental business, the first and third quarters generally generate 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 generate lower revenue. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies were described in Note 2 to our audited consolidated financial statements included in our 2016 Annual Report on Form 10-K. There have been no significant changes in our significant accounting policies for the three months ended March 31, 2017. 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 condensed consolidated financial statements include: · the recovery of long‑lived assets as well as goodwill and other intangible assets; · purchase price allocations of business combinations; · loan loss reserves for vacation ownership mortgages receivable; · accounting for acquired vacation ownership mortgages receivable; · revenue recognition pertaining to sales of vacation ownership products pursuant to the percentage of completion method; · cost of vacation ownership product sales related estimates included in our relative sales value calculation, such as future projected sales revenue and expected project costs to complete; · the accounting for income taxes including deferred income taxes and 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 condensed consolidated financial statements of ILG and its subsidiaries are reasonable. 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 and restricted stock 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 RSUs and restricted shares for the three months ended March 31, 2017 and 0.6 million RSUs for the three months ended March 31, 2016, as the effect of their inclusion would have been antidilutive to earnings per share. 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): Three Months Ended March 31, 2017 2016 Basic weighted average shares of common stock outstanding 123,998 57,619 Net effect of common stock equivalents assumed to be vested related to RSUs and restricted stock 1,584 335 Diluted weighted average shares of common stock outstanding 125,582 57,954 Earnings per share for the three month ended March 31, 2017 and 2016 are as follows (in thousands, except per share data): Three Months Ended March 31, 2017 2016 Net income attributable to common stockholders $ 44,211 $ 22,179 Weighted average number of shares of common stock outstanding: Basic 123,998 57,619 Diluted 125,582 57,954 Earnings per share attributable to common stockholders: Basic $ $ Diluted $ $ Recent Accounting Pronouncements: General With the exception of those discussed below, there are no recent accounting pronouncements or changes in accounting pronouncements since the recent accounting pronouncements described in our 2016 Annual Report on Form 10 K 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 March 2017, the FASB issued ASU No. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities”. The FASB is issuing this ASU to amend the amortization period for certain purchased callable debt securities held at a premium. Prior to the issuance of the ASU, GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently assessing the future impact of this accounting standard update on our consolidated financial statements. In February 2017, the FASB issued ASU No. 2017-05, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. The FASB issued this ASU to clarify the scope of subtopic 610-20, which was issued in May 2014 as part of Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The effective date and transition requirements of these amendments are the same as the effective date and transition requirements of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)". We plan to adopt this standard, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018. We are currently assessing the future impact of this accounting standard update on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350),” to simplify the subsequent measurement of goodwill by eliminating the second step from the goodwill impairment test. An entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The update is effective for annual periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323).” ASU 2017-03 states that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805),” to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by clarifying the definition of a business. The definition of a business affects many areas of accounting including acquisition, disposals, goodwill and consolidation. This amendment covers Phase 1 of a three phase project. The update is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this update should be applied prospectively on or after the effective date. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230).” This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The update is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”) as part of the Board’s initiative to reduce complexity in accounting standards. This ASU eliminates an exception in ASC 740, which prohibits the immediate recognition of income tax consequences of intra-entity asset transfers other than inventory. Under ASU 2016-16, entities will be required to recognize the immediate current and deferred income tax effects of intra-entity asset transfers, which often involve a subsidiary of a company transferring intellectual property to another subsidiary. For public entities, the new guidance will be effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. This ASU’s amendments should be applied on a modified retrospective basis, recognizing the effects in retained earnings as of the beginning of the year of adoption. We are currently assessing the future impact of this accounting standard update on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230).” This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under existing guidance. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” This ASU amends the Board’s guidance on the impairment of financial instruments. The ASU adds to GAAP an impairment model (known as the current expected credit losses model) that is based on an expected losses model rather than an incurred losses model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The ASU is also intended to reduce the complexity of GAAP by decreasing the number of impairment models that entities use to account for debt instruments. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements as we currently apply an expected losses model against our outstanding vacation ownership mortgages receivable. In February 2016, the FASB issued ASU 2016‑02, “Leases (Topic 842)” (“ASU 2016‑02”). ASU 2016‑02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new guidance will be effective for public entities for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption of ASU 2016‑02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the methods and impact of adopting this new standard on our consolidated financial statements. In January 2016, the FASB issued ASU 2016‑01, “Financial Instruments—Overall (Subtopic 825‑10),” which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The amendments in this update are effective for fiscal years beginning after December 31, 2017, including interim periods within those fiscal years. We are currently assessing the future impact of this new accounting standard update on our consolidated financial statements. Recent Accounting Pronouncements: Revenue Recognition In May 2014, the FASB issued ASU 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, 2017 (and interim periods within that period). In periods subsequent to the initial issuance of this ASU, the FASB has issued additional ASU’s clarifying items within Topic 606, as follows: · In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers by one year the effective date of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. · In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”). The amendments in ASU 2016-08 serve to clarify the implementation guidance on principal vs. agent considerations. · In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). The purpose of ASU 2016-10 is to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance (while retaining the related principles for those areas). · In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). The purpose of ASU 2016-12 is to address certain issues identified to improve Topic 606 by enhancing guidance on assessing collectability, presentation of sales taxes and other similar taxes collected from customers, noncash consideration and completed contracts and contract modifications at transition. · In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” which amends certain aspects of the Board’s new revenue standard, ASU 2014-09. This ASU addresses thirteen specific issues pertaining to Topic 606 , Revenue from Contracts with Customers. We are currently in the process of completing our qualitative evaluation of ASU 2014-09, including identifying the potential differences in the timing and/or method of revenue recognition for our contracts and, ultimately, the expected impact on our business processes, systems and controls. As part of this evaluation, we are reviewing customer contracts and applying the five-step model of the new standard to each contact type identified that’s associated to our material revenue streams and will compare the results to our current accounting practices. We currently expect possible areas of impact will include (i) timing adjustments to membership fee revenue resulting from estimating variable consideration, (ii) gross versus net presentation changes which would not impact profitability, (iii) capitalization of certain incremental costs to obtain a contract and (iv) the instances in which we can apply the percentage of completion revenue recognition method when construction of a vacation ownership project is not complete. We continue to evaluate the potential effects of adopting this standard and expect to complete our evaluation from a qualitative perspective during the first half of 2017. Consequently, 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. We plan to adopt this standard, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018. A determination as to whether we will apply the retrospective or modified retrospective adoption method will be made once our qualitative evaluation is complete and we commence quantifying the expected impacts. Adopted Accounting Pronouncements In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810),” to amend the existing guidance issued with ASU 2015-02. This ASU is being issued to amend the consolidation guidance on how a reporting entity, that is the single decision maker of a VIE, should treat indirect interests in the entity held through related parties that are under common control with the reporting entity, when determining whether it is the primary beneficiary of that VIE. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payments Accounting” (“ASU 2016-03”), to simplify the current accounting for Stock Compensation. The areas for simplification in this update involve several aspects of the accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. Instead, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. In accordance with this ASU, during the current period, ILG included a net benefit of $1 million within the income tax provision. In addition, with the adoption of this ASU, we elected to account for forfeitures when they occur, so therefore, effective January 1, 2017, we will no longer estimate the number of awards that are expected to vest. We also elected the prospective transition method for the presentation of excess tax benefits within the statement of cash flows. As such, the excess tax benefits from stock based awards was presented as part of the operating activities within the current period Condensed Consolidated Statements of Cash Flows and the prior period was not adjusted. Overall, the adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In March 2016, the FASB issued ASU 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323)” (“ASU 2016-07”). The amendments in this ASU require, among other items, that an equity method investor add the cost of acquiring an additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting, as well as eliminates certain other existing requirements. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements. |
BUSINESS COMBINATION
BUSINESS COMBINATION | 3 Months Ended |
Mar. 31, 2017 | |
BUSINESS COMBINATION | |
BUSINESS COMBINATION | NOTE 3—BUSINESS COMBINATION On May 11, 2016, we completed the acquisition of Vistana from wholly‑owned subsidiaries of Starwood as discussed in Note 1 to these condensed consolidated financial statements. As part of the acquisition, ILG acquired 100% of the voting equity interests of Vistana and issued approximately 72.4 million shares of ILG common stock to the holders who received Vistana common stock in the spin-off. These shares were valued at $1 billion based on ILG’s closing stock price of $14.24 on May 11, 2016. The Vistana acquisition is recorded on our condensed consolidated balance sheet as of May 11, 2016 based upon estimated fair values as of such date. The results of operations related to this business are included in our condensed consolidated statements of income beginning on May 12, 2016 and within our Exchange and Rental and Vacation Ownership segments for segment reporting purposes on the basis of its respective business activities. Purchase Price Allocation The following table presents the preliminary 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 millions): Preliminary PPA Adjustments to PPA (3) Revised Preliminary PPA (4) Cash $ 45 $ — $ 45 Vacation ownership inventory 221 7 228 Vacation ownership mortgages receivable 712 (19) 693 Other current assets 143 1 144 Intangibles 241 (3) 238 Property plant and equipment 465 (10) 455 Other non-current assets 24 (9) 15 Deferred revenue (60) (4) (64) Securitized debt (154) — (154) Other current liabilities (2) (187) 11 (176) Other non-current liabilities (98) (2) (100) Gain on bargain purchase (1) (197) 34 (163) Net assets acquired $ 1,155 $ 6 $ 1,161 (1) Gain on bargain purchase represents the excess of the fair value of the net tangible and intangible assets acquired over the purchase price. This gain of $163 million is presented within Other income (expense), net, in our consolidated statement of income for the year ended December 31, 2016. The existence of a gain on bargain purchase pertaining to this transaction is principally related to the decrease in our stock price leading up to the acquisition date. (2) Includes a $24 million accrual pertaining to a dividend declared by a subsidiary of Vistana to Starwood prior to our acquisition date which was settled subsequent to the acquisition closing. (3) Represents adjustments to the preliminary purchase price allocation first presented in our June 30, 2016 Form 10-Q resulting from our ongoing activities, including our reassessment of assets acquired and liabilities assumed, with respect to finalizing our purchase price allocation for this acquisition. The larger adjustments primarily pertained to refinements of certain estimates related to the valuation of our mortgages receivable and vacation ownership inventory based on additional information, adjustments to tax related accounts as new information became available, and certain other reclasses between line items. (4) Measurement period is considered closed as of December 31, 2016 for all balance sheet items except those that are tax related, as discussed further below. The purchase price allocated to the fair value of identifiable intangible assets associated with the Vistana acquisition is as follows (in millions): Fair Value Useful Life (years) Resort management contracts $ 118 26 Customer relationships 119 25 Other 1 < 1 Total $ 238 In connection with the Vistana acquisition we recorded identifiable intangible assets of $238 million, all of which were definite-lived intangible assets, related to Vistana’s membership base in their Vistana Signature Network (described in table above as customer relationships) and their resort management contracts. The valuation of the assets acquired and liabilities assumed in connection with this acquisition was based on fair values at the acquisition date. The assets purchased and liabilities assumed for the Vistana acquisition have been reflected in the accompanying condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016. The measurement period with respect to this acquisition was considered closed as of December 31, 2016, with the exception of tax related items which are pending additional analysis of tax attributes and tax returns, which will not be made available until sometime in 2017. Consequently, with respect to tax related items, the purchase price allocation disclosed herein (as well as the related gain on bargain purchase) remains provisional at this time and subject to further adjustment to reflect new information obtained about factors and circumstances that existed as of the acquisition date that if known would have affected the measurement of the amounts recognized as of that date, while the measurement period remains open. Results of operations Related to the Vistana acquisition, revenue and net income of $266 million and $22 million, respectively, were recognized in our condensed consolidated statement of income for the three months ended March 31, 2017. Pro forma financial information (unaudited) The following unaudited pro forma financial information presents the consolidated results of ILG and Vistana as if the acquisition had occurred on January 1, 2015, the beginning of the last full fiscal year prior to the May 11, 2016 acquisition date. The pro forma results presented below for the three months ended March 31, 2016 are based on the historical financial statements of ILG and Vistana, adjusted to reflect the purchase method of accounting, with ILG as accounting acquirer. 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 Vistana filed consolidated income tax returns during the periods presented. Pro forma adjustments are tax -effected at ILG's estimated statutory tax rate of 37.2% for the 2016 period. Three Months Ended March 31, (In millions, except per share data) 2017 2016 Revenue $ 452 $ 431 Net income attributable to common stockholders $ 44 $ 37 Earnings per share: Basic $ 0.36 $ 0.29 Diluted $ 0.35 $ 0.29 |
RESTRICTED CASH
RESTRICTED CASH | 3 Months Ended |
Mar. 31, 2017 | |
RESTRICTED CASH | |
RESTRICTED CASH | NOTE 4—RESTRICTED CASH Restricted cash consists of the following (in millions): March 31, December 31, 2017 2016 Escrow deposits on vacation ownership products $ 38 $ 67 Securitization VIEs 16 34 Other 16 17 Total restricted cash $ 70 $ 118 Restricted cash associated with escrow deposits on vacation ownership products represents amounts that are held in escrow until statutory requirements for release are satisfied, at which time that cash is no longer restricted. Restricted cash of securitization VIEs represents cash held in accounts related to vacation ownership mortgages receivable securitizations, which is generally used to pay down securitized vacation ownership debt in the period following the quarter in which the cash is received. |
VACATION OWNERSHIP MORTGAGES RE
VACATION OWNERSHIP MORTGAGES RECEIVABLE | 3 Months Ended |
Mar. 31, 2017 | |
VACATION OWNERSHIP MORTGAGES RECEIVABLE | |
VACATION OWNERSHIP MORTGAGES RECEIVABLE | NOTE 5—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 acquisitions of HVO and Vistana, we acquired existing portfolios of vacation ownership mortgages receivable. These loans are accounted for using the expected cash flows method of recognizing discount accretion based on the acquired loans’ expected cash flows pursuant to ASC 310-30, “Loans acquired with deteriorated credit quality.” At acquisition, we recorded these acquired loans at fair value, including a credit discount or premium, as applicable, which is accreted as an adjustment to yield over the loans’ estimated life. Originated loans as of March 31, 2017 and December 31, 2016 represent vacation ownership mortgages receivable originated by ILG, or more specifically our Vacation Ownership segment, subsequent to the acquisitions of HVO and Vistana on October 1, 2014 and May 11, 2016, respectively. Vacation ownership mortgages receivable carrying amounts as of March 31, 2017 and December 31, 2016 were as follows (in millions): March 31, December 31, 2017 2016 Securitized Unsecuritized (2) Total Securitized Unsecuritized (2) Total Acquired vacation ownership mortgages receivable (1) $ 398 $ 104 $ 502 $ 419 $ 127 $ 546 Originated vacation ownership mortgages receivable (1) 16 224 240 11 184 195 Less: allowance for impairment on acquired loans — (2) (2) — — — Less: allowance for losses on originated loans (2) (27) (29) (1) (21) (22) Net vacation ownership mortgages receivable $ 412 $ 299 $ 711 $ 429 $ 290 $ 719 (1) At various interest rates with varying payment terms through 2031 for acquired receivables and for originated receivables (2) As of March 31, 2017, $9 million of unsecuritized vacation ownership receivables were not eligible for securitization. Additionally, during the quarter approximately $19 million of unsecuritized receivables as of December 31, 2016 were moved into the 2016 securitized pool, thereby releasing the same amount from restricted cash. The fair value of our acquired loans as of the respective acquisition dates were 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 condensed consolidated balance sheet as of the acquisition date includes an estimate for future loan losses which becomes the historical cost basis for that existing portfolio going forward. As of March 31, 2017 and December 31, 2016, the contractual outstanding balance of the acquired loans, which represents contractually-owed future principal amounts, was $419 million and $466 million, respectively. The table below (in millions) presents a rollforward from December 31, 2016 of the accretable yield (interest income) expected to be earned related to our acquired loans, as well as the amount of non-accretable difference at the end of the period. Nonaccretable difference represents estimated contractually required payments in excess of estimated cash flows expected to be collected. The accretable yield represents the excess of estimated cash flows expected to be collected over the carrying amount of the acquired loans. Three Months Ended Accretable Yield March 31, 2017 Balance, beginning of period $ 157 Accretion (15) Reclassification from nonaccretable difference 1 Balance, end of period $ 143 Nonaccretable difference, end of period balance $ 36 The accretable yield is recognized into interest income (within consolidated revenue) over the estimated life of the acquired loans using the level yield method. The accretable yield may change in future periods due to changes in the anticipated remaining life of the acquired loans, which may alter the amount of future interest income expected to be collected, and changes in expected future principal and interest cash collections which impacts the nonaccretable difference. Vacation ownership mortgages receivable as of March 31, 2017 are scheduled to mature as follows (in millions): Vacation Ownership Mortgages Receivable Acquired Originated Twelve month period ending March 31, Securitized Loans Unsecuritized Loans Securitized Loans Unsecuritized Loans Total 2018 $ 43 $ 12 $ 2 $ 18 $ 75 2019 42 11 1 14 68 2020 42 10 1 15 68 2021 41 10 1 17 69 2022 38 11 2 19 70 2022 and thereafter 116 44 9 141 310 Total 322 98 16 224 660 Plus: net premium on acquired loans (1) 76 6 — — 82 Less: allowance for impairment on acquired loans — (2) — — (2) Less: allowance for losses on originated loans — — (2) (27) (29) Net vacation ownership mortgages receivable $ 398 $ 102 $ 14 $ 197 $ 711 Weighted average stated interest rate as of March 31, 2017 13.4% 13.5% Range of stated interest rates as of March 31, 2017 9.9% to 15.9% 10.9% to 15.9% (1) The difference between the contractual principal amount of acquired loans of $419 million and the net carrying amount of $500 million as of March 31, 2017 is related to the application of ASC 310-30. Collectability We assess our vacation ownership mortgages receivable portfolio of loans for collectability on an aggregate basis. Estimates of uncollectability pertaining to our originated loans are recorded as provisions in the vacation ownership mortgages receivable allowance for loan losses. For originated loans, we record an estimate of uncollectability as a reduction of sales of vacation ownership products in the accompanying condensed consolidated statements of income at the time revenue is recognized on a vacation ownership product sale. We evaluate our originated loan portfolio collectively as it is comprised of 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 mortgages 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. As of March 31, 2017 allowance for loan losses of $29 million for uncollectability was recorded against our vacation ownership mortgages receivable for estimated losses related solely to our originated loans. Our allowance for loan losses as of December 31, 2016 was $22 million; the change in 2017 principally pertains to additional loan loss provision recorded against sales of vacation ownership products on our condensed consolidated income statement during the period. Our acquired loans are remeasured at period end based on expected future cash flows which uses an estimated measure of anticipated defaults. We consider the allowance for loan losses on our originated loans and estimates of defaults used in the remeasurements of our acquired loans to be adequate and based on the economic environment and our assessment of the future collectability of the outstanding loans. We use the origination of the notes by brand (Hyatt, Sheraton, Westin and other) and the FICO scores of the buyers as the primary credit quality indicators to calculate the allowance for loan losses for our originated vacation ownership mortgages receivable, as we believe there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired, supplemented by the FICO scores of the buyers. In addition to quantitatively calculating the allowance based on our static pool analysis, we supplement the process by evaluating certain qualitative data, including the aging of the respective receivables, current default trends by brand and origination year and various macroeconomic indicators. At March 31, 2017 the weighted average FICO score within our consolidated loan pools was 712 based upon the outstanding loan balance at time of origination. The average estimated rate for all future defaults for our consolidated outstanding pool of loans as of March 31, 2017 was 10.4%. Balances of our vacation ownership mortgages receivable by brand and by FICO score (at time of loan origination) were as follows (in millions): As of March 31, 2017 700+ 600-699 <600 No Score (1) Total Hyatt $ 21 $ 14 $ 2 $ 1 $ 38 Sheraton 163 145 13 64 385 Westin 184 89 4 30 307 Other 6 1 - 3 10 Vacation ownership mortgages receivable, gross $ 374 $ 249 $ 19 $ 98 $ 740 (1) Mortgages receivable with no FICO score primarily relate to non-U.S. resident borrowers. On an ongoing basis, we monitor 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. · Delinquent —We consider a vacation ownership mortgage receivable to be delinquent based on the contractual terms of each individual financing agreement. · Non‑performing —Our vacation ownership mortgages receivable are generally considered non‑performing if interest or principal is more than 30 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. In the event of a default, we generally have the right to recover the mortgaged VOIs and consider loans to be in default upon reaching 120 days outstanding. Our aged analysis of delinquent vacation ownership mortgages receivable and the gross balance of vacation ownership mortgages receivable greater than 120 days past‑due as of March 31, 2017 and December 31, 2016 for our originated loans is as follows (in millions): Delinquent Defaulted (1) Receivables Current 30-59 Days 60-89 Days 90-119 Days ≥120 Total Delinquent & Defaulted Originated Loans March 31, 2017 $ 240 $ 232 $ 3 $ 2 $ 1 $ 2 $ 8 December 31, 2016 $ 195 $ 190 $ 2 $ 1 $ 1 $ 1 $ 5 (1) Mortgages receivable equal to or greater than 120 days are considered defaulted and have been fully reserved in our allowance of loan losses for originated loans . |
VACATION OWNERSHIP INVENTORY
VACATION OWNERSHIP INVENTORY | 3 Months Ended |
Mar. 31, 2017 | |
VACATION OWNERSHIP INVENTORY | |
VACATION OWNERSHIP INVENTORY | NOTE 6—VACATION OWNERSHIP INVENTORY Our inventory consists of completed unsold vacation ownership interests, with an operating cycle that generally exceeds twelve months, and vacation ownership projects under construction. On our condensed consolidated balance sheet, completed unsold vacation ownership interests are presented as a current asset, while vacation ownership projects under construction are presented as a non-current asset given this inventory is in the development stage of its operating cycle. As of March 31, 2017 and December 31, 2016, vacation ownership inventory is comprised of the following (in millions): March 31, December 31, 2017 2016 Completed unsold vacation ownership interests (current asset) $ 295 $ 197 Vacation ownership products construction in process (non-current asset) 134 189 Total vacation ownership inventory $ 429 $ 386 The increase in inventory balances as of March 31, 2017 from December 31, 2016 principally pertains to our ongoing development activities, in particular related to The Westin Los Cabos Resort Villas & Spa and The Westin Nanea Ocean Villas. |
INVESTMENTS IN UNCONSOLIDATED E
INVESTMENTS IN UNCONSOLIDATED ENTITIES | 3 Months Ended |
Mar. 31, 2017 | |
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 Hyatt branded vacation ownership resort in Hawaii, and Vistana’s Harborside at Atlantis joint venture, which performs sales, marketing and management services for a vacation ownership resort in the Bahamas. Our equity income from investments in unconsolidated entities, recorded in equity in earnings from unconsolidated entities in the accompanying condensed consolidated statement of income, was $1 million each for the three months ended March 31, 2017 and 2016. Our ownership percentages of the Maui Timeshare Venture and Harborside investments are 33% and 50%, respectively, and ownership percentages of the other investments range from 25% to 50%. The carrying value of our investments in unconsolidated entities as of March 31, 2017 and December 31, 2016 were as follows (in millions): March 31, December 31, 2017 2016 Maui Timeshare Venture, LLC $ 43 $ 42 Harborside at Atlantis joint venture 12 12 Other 5 5 Total $ 60 $ 59 The other line item largely represents our 50% ownership investment in Great Destinations Inc., a fee-for-service, real-estate brokerage firm that specializes in reselling resort timeshare properties on behalf of independent homeowners’ associations. In April 2017, ILG gained the ability to appoint the majority of the Board thereby acquiring control. Consequently, we expect to consolidate the business into our consolidated financial statements as of the date control was obtained. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 8—PROPERTY AND EQUIPMENT Property and equipment, net is as follows (in millions): March 31, December 31, 2017 2016 Computer equipment $ 38 $ 37 Capitalized software (including internally developed software) 154 150 Land, buildings and leasehold improvements 372 368 Land held for development 55 56 Furniture, fixtures and other equipment 54 52 Construction projects in progress 65 47 Other projects in progress 49 37 Less: accumulated depreciation and amortization (183) (167) Total property and equipment, net $ 604 $ 580 Our categorization of property and equipment as of December 31, 2016 presented in the table above contains certain recategorizations for purposes of consistency; specifically, amounts were recategorized from furniture, fixtures and other equipment to other classifications. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS Pursuant to FASB guidance as codified within ASC 350, “Intangibles—Goodwill and Other,” goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. ILG is comprised of two operating and reportable segments: Vacation Ownership and Exchange and Rental, each of which contain two reporting units as follows: OPERATING SEGMENTS Vacation Ownership Exchange and Rental VO management reporting unit Exchange reporting unit VO sales and financing reporting unit Rental reporting unit The following tables present the balance of goodwill by reporting unit, including the changes in carrying amount of goodwill, as of March 31, 2017 and December 31, 2016 (in millions): Foreign Balance as of Currency Goodwill Balance as of January 1, 2017 Additions Deductions Translation Impairment March 31, 2017 VO management $ 35 $ — $ — $ 1 $ — $ 36 VO sales and financing 7 — — — — 7 Exchange 496 — — — — 496 Rental 20 — — — — 20 Total $ 558 $ — $ — $ 1 $ — $ 559 Foreign Balance as of Currency Goodwill Balance as of January 1, 2016 Additions Deductions Translation Impairment December 31, 2016 VO management $ 38 $ — $ — $ (3) $ — $ 35 VO sales and financing 7 — — — — 7 Exchange 496 — — — — 496 Rental 20 — — — — 20 Total $ 561 $ — $ — $ (3) $ — $ 558 Other Intangible Assets The balance of other intangible assets, net as of March 31, 2017 and December 31, 2016 is as follows (in millions): March 31, December 31, 2017 2016 Intangible assets with indefinite lives $ 114 $ 114 Intangible assets with definite lives, net 335 339 Total intangible assets, net $ 449 $ 453 The $4 million decrease in our indefinite‑lived intangible assets during the three months ended March 31, 2017 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 March 31, 2017 and December 31, 2016, intangible assets with indefinite lives relate to the following (in millions): March 31, December 31, 2017 2016 Resort management contracts $ 70 $ 70 Trade names and trademarks 44 44 Total $ 114 $ 114 At March 31, 2017, intangible assets with definite lives relate to the following (in millions): Cost Accumulated Amortization Net Customer relationships $ 287 $ (138) $ 149 Purchase agreements 76 (76) — Resort management contracts 245 (61) 184 Technology 25 (25) — Other 23 (21) 2 $ 656 $ (321) $ 335 At December 31, 2016, intangible assets with definite lives relate to the following (in millions): Accumulated Cost Amortization Net Customer relationships $ 287 $ (137) $ 150 Purchase agreements 76 (76) — Resort management contracts 245 (58) 187 Technology 25 (25) — Other 23 (21) 2 Total $ 656 $ (317) $ 339 In accordance with our policy on the recoverability of long‑lived assets, 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 three months ended March 31, 2017 and the year ended December 31, 2016, 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 was not 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 $5 million and $3 million for the three months ended March 31, 2017 and 2016, respectively. Based on the March 31, 2017 balances, amortization expense for the next five years and thereafter is estimated to be as follows (in millions): Twelve month period ending March 31, 2018 $ 20 2019 20 2020 19 2021 19 2022 16 2023 and thereafter 241 $ 335 |
CONSOLIDATED VARIABLE INTEREST
CONSOLIDATED VARIABLE INTEREST ENTITIES | 3 Months Ended |
Mar. 31, 2017 | |
CONSOLIDATED VARIABLE INTEREST ENTITIES | |
CONSOLIDATED VARIABLE INTEREST ENTITIES | NOTE 10—CONSOLIDATED VARIABLE INTEREST ENTITIES We have variable interests in the entities associated with Vistana’s three outstanding securitization transactions. As these securitizations consist of similar, homogenous loans, they have been aggregated for disclosure purposes. We applied the variable interest model and determined we are the primary beneficiary of these VIEs and, accordingly, these VIEs are consolidated in our results. In making that determination, we evaluated the activities that significantly impact the economics of the VIEs, including the management of the securitized vacation ownership mortgages receivable and any related non-performing loans. We are the servicer of the securitized vacation ownership mortgages receivable. We also have the option, subject to certain limitations, to repurchase or replace vacation ownership mortgages receivable that are in default at their outstanding principal amounts. Historically, Vistana has been able to resell the vacation ownership products underlying the vacation ownership mortgages repurchased or replaced under these provisions without incurring significant losses. We also hold the risk of potential loss (or gain), as we are the last to be paid out by proceeds of the VIEs under the terms of the agreements. As such, we hold both the power to direct the activities of the VIEs and obligation to absorb the losses (or benefits) from the VIEs. The securitization agreements are without recourse to us, except for breaches of representations and warranties with material adverse effect to the holders. We have the right to substitute loans for, or repurchase, defaulted loans at our option, subject to certain limitations. Based on industry practice and Vistana’s past practices, we currently expect that we will exercise this option. The following table shows assets which are collateral for the related obligations of the variable interest entities, included in our condensed consolidated balance sheets (in millions): Vacation Ownership Notes Receivable Securitization (1) March 31, December 31, 2017 2016 Assets Restricted cash $ 16 $ 34 Interest receivable 3 3 Vacation ownership mortgages receivable, net 412 429 Total $ 431 $ 466 Liabilities Interest payable $ 1 $ 1 Securitized debt 398 430 Total $ 399 $ 431 (1) The creditors of these entities do not have general recourse to us. Upon transfer of vacation ownership mortgages receivable, net to the VIEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the VIE creditors. The VIEs utilize trusts which have ownership of cash balances that also have restrictions, the amounts of which are reported in our restricted cash. Our interests in trust assets are subordinate to the interests of third-party investors and, as such, may not be realized by us if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts' debt. Unless we exceed certain triggers related to default levels and collateralization of the securitized pool, we are contractually entitled to receive the excess cash flows (spread between the collections on the mortgages and payment of third party obligations and debt service on the trusts’ debt defined in the securitization agreements) from the VIEs. Such activity totaled $11 million from December 31, 2016 through March 31, 2017. The net cash flows generated by the VIEs are used to repay our securitized debt from VIEs and, excluding any restricted cash balances, are reflected in the operating activities section of our combined statements of cash flows. The repayment of our securitized debt from VIEs is reflected in the financing activities section of our combined statements of cash flows. Refer to Note 13 of these condensed consolidated financial statements for additional discussion on our securitized debt from VIEs . |
ACCRUED LIABILITIES AND OTHER C
ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Mar. 31, 2017 | |
ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES | |
ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES | NOTE 11 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES The following table summarizes the general components of accrued expenses and other current liabilities (in millions): March 31, December 31, 2017 2016 General accrued expenses $ 72 $ 62 Accrued other taxes 21 13 Customer deposits 80 71 Accrued membership related costs 23 18 Accrued construction costs 19 16 Member deposits 7 7 Accrued expenses and other current liabilities $ 222 $ 187 |
DEFERRED REVENUE
DEFERRED REVENUE | 3 Months Ended |
Mar. 31, 2017 | |
DEFERRED REVENUE | |
DEFERRED REVENUE | NOTE 12 — DEFERRED REVENUE The following table summarized the general components of deferred revenue (in millions): March 31, December 31, 2017 2016 Deferred membership-related revenue $ 203 $ 157 Other 9 9 Total $ 212 $ 166 Deferred membership-related revenue primarily relates to membership fees from our Exchange and Rental segment, which are deferred and recognized over the terms of the applicable memberships, typically ranging from one to five years, on a straight-line basis. The increase in deferred membership-related revenue in the first quarter of 2017 pertains to the timing of annual membership renewals. Other deferred revenue pertains primarily to revenue deferred related to percentage of completion accounting, incentives given in connection with a VOI sale, annual maintenance fees collected that are not yet earned, and other items. |
SECURITIZED VACATION OWNERSHIP
SECURITIZED VACATION OWNERSHIP DEBT | 3 Months Ended |
Mar. 31, 2017 | |
SECURITIZED VACATION OWNERSHIP DEBT | |
SECURITIZED VACATION OWNERSHIP DEBT | NOTE 13 — SECURITIZED VACATION OWNERSHIP DEBT As discussed in Note 10, the VIEs associated with the securitization of our VOI mortgages receivable are consolidated in our financial statements. Securitized vacation ownership debt consisted of the following (in millions): March 31, December 31, 2017 2016 2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2025 $ 40 $ 44 2012 securitization, interest rates ranging from 2.00% to 2.76%, maturing 2023 42 46 2016 securitization, interest rates ranging from 2.54% to 2.74%, maturing 2024 320 345 Unamortized debt issuance costs (2016 securitization) (4) (5) Total securitized vacation ownership debt, net of debt issuance costs $ 398 $ 430 On September 20, 2016, we completed a term securitization transaction involving the issuance of $375 million of asset-backed notes. An indirect wholly-owned subsidiary of Vistana issued $346 million of Class A notes and $29 million of Class B notes. The notes are backed by vacation ownership loans and have coupons of 2.54% and 2.74%, respectively, for an overall weighted average coupon of 2.56%. The advance rate for this transaction was 96.5%. Of the $375 million in proceeds from the transaction, approximately $33 million was used to repay the outstanding balance on Vistana’s 2010 securitization and the remainder was used to pay transaction expenses, fund required reserves, pay down a portion of the borrowings outstanding under our $600 million revolving credit facility and for general corporate purposes. In the first quarter of 2017, the VIE purchased approximately $19 million of loans, allowing for the release of the proceeds held in escrow as of December 31, 2016. During the three months ended March 31, 2017, interest expense associated with securitized vacation ownership debt totaled $3 million, and is reflected within consumer financing expenses in our condensed consolidated statements of income. The securitized debt is non-recourse with no contractual minimum repayment amounts throughout its term. The amount of each principal payment is contingent on the cash flows from the underlying vacation ownership notes in a given period. Refer to Note 5—Vacation Ownership Mortgages Receivable for the stated maturities of our securitized vacation ownership notes receivable, which provide an indication of the potential repayment pattern before the impact of any prepayments or defaults. As of the three months ended March 31, 2017, total unamortized debt issuance costs pertaining to the 2016 securitization were $4 million, which is presented as a reduction of securitized debt from VIEs in the accompanying condensed consolidated balance sheet. Unamortized debt issuance costs pertaining to our securitized debt are amortized to interest expense using the effective interest method through the estimated life of the respective debt instruments. |
LONG-TERM DEBT
LONG-TERM DEBT | 3 Months Ended |
Mar. 31, 2017 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE 14—LONG-TERM DEBT Long‑term debt is as follows (in millions): March 31, December 31, 2017 2016 Revolving credit facility (interest rate of 2.74% at March 31, 2017 and interest rate of 2.27% at December 31, 2016) $ 260 $ 240 5.625% senior notes 350 350 Unamortized debt issuance costs (revolving credit facility) (4) (4) Unamortized debt issuance costs (senior notes) (5) (6) Total long-term debt, net of debt issuance costs $ 601 $ 580 Credit Facility On May 17, 2016, we entered into a fifth amendment to the amended credit agreement which extended the maturity of the credit facility through May 17, 2021, and modified requirements with respect to assignments by lenders in connection with the acquisition of Vistana in May of 2016. There were no other material changes under this amendment. As of March 31, 2017, there was $260 million outstanding with $328 million available to be drawn, net of any letters of credit. 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 ranged from 1.25% to 2.5%, or the Base Rate as defined in the amended credit agreement plus a predetermined margin that ranged from 0.25% to 1.5%, in each case based on our consolidated total leverage ratio. At March 31, 2017, 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 ranged from 0.25% to 0.40% per annum based on our leverage ratio and the commitment fee was 0.275% at quarter end. 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. Senior Notes On April 10, 2015, we completed a private offering of $350 million in aggregate principal amount of our 5.625% senior notes due in 2023. As of March 31, 2017, total unamortized debt issuance costs relating to these senior notes were $5 million, which are presented as a direct deduction from the principal amount. Interest on the senior notes is paid semi-annually in arrears on April 15 and October 15 of each year and the senior notes are unsecured and fully and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries that are required to guarantee the amended credit facility. Additionally, the voting stock of the issuer and the subsidiary guarantors is 100% owned by ILG. The senior notes are redeemable from April 15, 2018 at a redemption price starting at 104.219% which declines over time. Restrictions and Covenants The senior notes and amended credit agreement have 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 indenture governing the senior notes restricts our ability to issue additional debt in the event we are not in compliance with the minimum fixed charge coverage ratio of 2.0 to 1.0 and limits restricted payments and investments unless we are in compliance with the minimum fixed charge coverage ratio and the amount is within a bucket that grows with our consolidated net income. We meet the minimum fixed charge coverage ratio as of March 31, 2017. In addition, the amended credit agreement requires us to meet certain financial covenants regarding the maintenance of a maximum consolidated secured leverage ratio of consolidated secured debt, over consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), as defined. We are also required to maintain a minimum consolidated interest coverage ratio of consolidated EBITDA over consolidated interest expense. As of March 31, 2017, the maximum consolidated secured leverage ratio was 3.25x and the minimum consolidated interest coverage ratio was 3.0x. ILG was in compliance in all material respects with the requirements of all applicable financial and operating covenants, and our consolidated secured leverage ratio and consolidated interest coverage ratio under the amended credit agreement were 0.80 and 16.35, respectively. Interest Expense and Debt Issuance Costs Interest expense for the three months ended March 31, 2017 and 2016 was $5 million and $6 million, respectively. Interest expense is net of $2 million of capitalized interest for the three months ended March 31, 2017, primarily relating to our vacation ownership projects under development and internally-developed software. Capitalized interest was a negligible amount for the three months ended March 31, 2016. As of March 31, 2017, total unamortized debt issuance costs were $9 million, net of $5 million of accumulated amortization, incurred in connection with the issuance and various amendments to our amended credit agreement, the issuance of our senior notes in April 2015 and the exchange for registered notes in June 2016. As of December 31, 2016, total unamortized debt issuance costs were $10 million, net of $5 million of accumulated amortization. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2017 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 15—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 three months ended March 31, 2017. Our financial instruments are detailed in the following table. March 31, 2017 December 31, 2016 Carrying Fair Carrying Fair Amount Value Amount Value (In millions) Cash and cash equivalents $ 171 $ 171 $ 126 $ 126 Restricted cash and cash equivalents 70 70 118 118 Financing receivables 19 19 19 19 Vacation ownership mortgages receivable 711 735 719 737 Investments in marketable securities 15 15 14 14 Securitized debt 398 399 430 425 Revolving credit facility (1) (256) (260) (236) (240) Senior notes (1) (345) (358) (344) (361) (1) The carrying value of our revolving credit facility and senior notes as of March 31, 2017 include $4 million and $5 million of unamortized debt issuance costs, respectively, and $4 million and $6 million as of December 31, 2016, which are presented as a direct reduction of the corresponding liability. The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reflected in the accompanying condensed 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 financing receivables as of March 31, 2017 are presented in our condensed consolidated balance sheet within other non‑current assets and principally pertain to a convertible secured loan to CLC that matures October of 2019 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. The carrying value of this financing 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. Interest is recognized within our “Interest income” line item in our condensed consolidated statements of income for the three months ended March 31, 2017 and 2016. 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 consist of marketable securities (mutual funds) related to deferred compensation plans which are funded in a Rabbi trust as of March 31, 2017 and December 31, 2016 and classified as other noncurrent assets in the accompanying condensed consolidated balance sheets. 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 $15 million and $14 million as of March 31, 2017 and December 31, 2016, respectively, based on quoted market prices in active markets for identical assets (Level 1). We recognized a $1 million unrealized trading gain each for the three months ended March 31, 2017 and March 31, 2016. These unrealized trading gains have an accompanying offsetting adjustment to employee compensation expense, and are each included within general and administrative expenses in the accompanying condensed consolidated statement of income. See Note 17 for further discussion in regards to this deferred compensation plan. Our non-public, securitized debt fair value is determined based upon discounted cash flows for the debt using Level 3 inputs such as rates deemed reasonable for the type of debt, prevailing market conditions and the length of maturity for the debt. Borrowings under our senior notes (issued April 2015) and revolving credit facility are carried at historical cost and adjusted for principal payments. The fair value of our senior notes was estimated at March 31, 2017 and December 31, 2016 using an input of quoted prices from an inactive market due to the infrequency at which trades occur on our senior notes (Level 2). The carrying value of the outstanding balance under our revolving credit facility, exclusive of debt issuance costs, approximates fair value as of March 31, 2017 and December 31, 2016 through inputs inherent to the debt such as variable interest rates and credit risk (Level 2). |
EQUITY
EQUITY | 3 Months Ended |
Mar. 31, 2017 | |
EQUITY | |
EQUITY | NOTE 16—EQUITY ILG has 300 million authorized shares of common stock, par value of $0.01 per share. At March 31, 2017, there were 133.8 million shares of ILG common stock issued, of which 124.8 million are outstanding with 9.0 million shares held as treasury stock. At December 31, 2016, there were 133.5 million shares of ILG common stock issued, of which 124.7 million were outstanding with 8.9 million shares held as treasury stock. ILG has 25 million authorized shares of preferred stock, par value of $0.01 per share, none of which are issued or outstanding as of March 31, 2017 and December 31, 2016. 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. In connection with the acquisition of Vistana in May 2016, we issued 72.4 million shares of ILG common stock, valued at $1 billion as of the acquisition date, to the holders who received Vistana common stock in the spin-off from its former parent. Dividend Declared In February 2017, our Board of Directors declared a quarterly dividend payment of $0.15 per share paid in March 2017 of $19 million. In May 2017, our Board of Directors declared a $0.15 per share dividend payable June 20, 2017 to shareholders of record on June 6, 2017. 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 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 In November 2016, the Board authorized repurchases of up to $50 million of ILG common stock, with $49 million available for repurchases as of December 31, 2016. During the three months ended March 31, 2017, we repurchased 159,000 shares of common stock for approximately $3 million, including commissions. The remaining availability for future repurchases of our common stock was $46 million as of March 31, 2017. Acquired shares of our common stock are held as treasury shares carried at cost on our condensed consolidated balance sheets. 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, restrictions under our Tax Matters Agreement with Starwood, and other factors. This program may be modified, suspended or terminated by us at any time without notice. Accumulated Other Comprehensive Loss Entities are required to disclose additional information about reclassification adjustments within accumulated other comprehensive income/loss, referred to as AOCL including (1) changes in AOCL balances by component and (2) significant items reclassified out of AOCL in the period. For the three months ended March 31, 2017, 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 condensed consolidated statements of comprehensive income. Noncontrolling Interests 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 March 31, 2017 and December 31, 2016, this noncontrolling interest amounts to $27 million and $26 million, respectively, and is presented on our condensed consolidated balance sheets as a component of equity. The change from December 31, 2016 to March 31, 2017 relates to the recognition of the noncontrolling interest holder’s proportional share of VRI Europe’s earnings, as well as the translation effect on the foreign currency based amount. 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 achieving minimum returns and a preemptive right by ILG. As of March 31, 2017, there have been no changes in ILG’s ownership interest in VRI Europe. Additionally, in connection with this arrangement, ILG and CLC entered into a loan agreement whereby ILG made available to CLC a convertible secured loan facility of $15 million that matures in October of 2019 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. |
BENEFIT PLANS
BENEFIT PLANS | 3 Months Ended |
Mar. 31, 2017 | |
BENEFIT PLANS | |
BENEFIT PLANS | NOTE 17—BENEFIT PLANS Under retirement savings plans 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 of fifty cents for each dollar a participant contributes into a plan with a maximum contribution of 3% of a participant’s eligible earnings, with employees participating in the safe harbor plan, also receiving a 100% match for the first 1% of the participant’s eligible earnings, subject to Internal Revenue Service (“IRS”) restrictions. Net matching contributions for the ILG plans were $3 million and $1 million for the three months ended March 31, 2017 and 2016, respectively. Matching contributions were invested in the same manner as each participant’s voluntary contributions in the investment options provided under the plans. 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 63,654 share units were outstanding at March 31, 2017. 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 eligible employees of ILG an option to defer compensation on a tax-deferred basis. Participants in the DCP currently include only certain HVO and Vistana employees that participated in similar plans prior to their respective acquisitions. Participants are fully vested in all amounts held in their individual accounts. Participants have only an unsecured claim against ILG for the future payment of the deferred amounts, although payment is indirectly secured through a fully funded 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. As of March 31, 2017, the fair value of the investments in the Rabbi trust was $15 million, which is recorded in other non-current assets with the corresponding deferred compensation liability recorded in other long-term liabilities in the condensed consolidated balance sheets. Unrealized gains or losses are offset by a corresponding adjustment to compensation expense, all within general and administrative expense in our condensed consolidated income statements. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2017 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 18—STOCK‑BASED COMPENSATION On May 21, 2013, ILG adopted the Interval Leisure Group, Inc. 2013 Stock and Incentive Plan which provides 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. As of March 31, 2017, 3 million shares were available for future issuance under the 2013 Stock and Incentive Compensation Plan. The Compensation Committee granted during the first quarter of 2017, 870,000 RSUs generally vesting over three years and during the first quarter of 2016, 750,000 RSUs generally vesting over four years, to certain officers, board of directors and employees of ILG and its subsidiaries. Of these RSUs granted in 2017 and 2016, approximately 229,000 and 140,000, respectively, cliff vest in three years and approximately 213,000 and 105,000, respectively, are subject to performance criteria that could result between 0% and 200% of these awards being earned either based on defined adjusted EBITDA, revenue, or relative total shareholder return targets over the respective performance period, as specified in the award document. For the 2017 and 2016 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 of $28.23 for 2017 and $13.13 for 2016, for these performance based RSUs. 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 and restricted stock for the three months ended March 31, 2017 and 2016 was $6 million and $3 million, respectively. At March 31, 2017, there was approximately $39 million of unrecognized compensation cost related to RSUs and restricted stock, which is currently expected to be recognized over a weighted average period of approximately 2.4 years. The amount of stock‑based compensation expense recognized in the condensed consolidated statements of income for periods prior to January 1, 2017 is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The forfeiture rate was estimated at the grant date based on historical experience. With the adoption of ASU 2016-09 on January 1, 2017, we no longer reduce stock-based compensation by estimated forfeitures. Instead we account for forfeitures when they occur. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is 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 condensed consolidated statements of income for the three months ended March 31, 2017 and 2016 (in millions): Three Months Ended March 31, 2017 2016 Cost of sales $ 1 $ — Selling and marketing expense 1 — General and administrative expense 4 3 Non-cash compensation expense $ 6 $ 3 The following table summarizes RSU activity during the three months ended March 31, 2017: Weighted-Average Grant Date Shares Fair Value (In millions) Non-vested RSUs at January 1, 2017 3 $ 16.71 Granted 1 20.24 Vested (1) 18.18 Forfeited — 32.30 Non-vested RSUs at March 31, 2017 3 $ 17.25 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | NOTE 19—INCOME TAXES ILG calculates its interim income tax provision in accordance with ASC 740, “Income Taxes.” At the end of each interim period, ILG makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year‑to‑date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or the liabilities for uncertain tax positions is recognized in the interim period in which the change occurs. The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or ILG’s tax environment changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax expense in the quarter in which the change occurs. 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. For the three months ended March 31, 2017 and 2016, ILG recorded income tax provisions for continuing operations of $25 million and $13 million, respectively, which represent effective tax rates of 35.9% and 35.7% for the respective periods. These tax rates are higher than the federal statutory rate of 35% due principally to state and local income taxes and other tax items partially offset by foreign income taxed at lower rates. As of March 31, 2017, there were no material changes to ILG’s unrecognized tax benefits and related interest. In connection with the acquisition of Vistana, Starwood and ILG entered into a Tax Matters Agreement. Under the Tax Matters Agreement, Starwood indemnifies ILG for all consolidated tax liabilities and related interest and penalties for the pre-close period. Accordingly, any unrecognized tax benefits for Vistana related to the pre-close period that are the obligation of its former parent have not been recorded. ILG recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. ILG files income tax returns in the U.S. federal jurisdiction and various state, local, and foreign jurisdictions. As of March 31, 2017, no open tax years are currently under examination by the IRS. The U.S. federal statute of limitations for years prior to and including 2012 has closed. ILG’s consolidated state tax return for the open tax years, 2013 through 2015, is currently under examination by the State of Florida. No other tax years are currently under examination in any material state and local jurisdictions. Vistana, by virtue of previously filed consolidated tax returns with Starwood, is under audit by the IRS for several pre-close periods. Vistana is also under audit in Mexico for the tax year ended December 31, 2012. Under the Tax Matters Agreement, Starwood indemnifies ILG for all income tax liabilities and related interest and penalties for the pre-close period. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | NOTE 20—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. ILG is comprised of two operating and reportable segments: Vacation Ownership and Exchange and Rental. Our Vacation Ownership segment engages in the management, sales, marketing, financing, rental and ancillary services, and development of VOIs as well as related services to owners and associations. Our Exchange and Rental segment offers access to vacation accommodations and other travel‑related transactions and services to members of our programs and other leisure travelers, by providing vacation exchange services and vacation rental, working with resort developers, HOAs and operating vacation rental properties. ILG provides certain corporate functions that benefit the organization as a whole. Such corporate functions include corporate services relating to oversight, corporate development, finance and accounting, legal, treasury, tax, internal audit, human resources, and certain IT functions. 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 condensed consolidated statements of income are not impacted by this cross‑segment allocation. Information on reportable segments and reconciliation to consolidated operating income is as follows (in millions): Three Months Ended March 31, 2017 2016 Vacation Ownership: Resort operations revenue $ 58 $ 5 Management fee revenue 30 21 Sales of vacation ownership products, net 110 9 Consumer financing revenue 21 2 Cost reimbursement revenue 62 15 Total revenue 281 52 Cost of service and membership related 13 8 Cost of sales of vacation ownership products 27 6 Cost of rental and ancillary services 52 2 Cost of consumer financing 6 — Cost reimbursements 62 15 Total cost of sales 160 31 Royalty fee expense 10 1 Selling and marketing expense 59 3 General and administrative expense 24 14 Amortization expense of intangibles 2 1 Depreciation expense 10 — Segment operating income $ 16 $ 2 Three Months Ended March 31, 2017 2016 Exchange and Rental: Transaction revenue $ 59 $ 58 Membership fee revenue 35 30 Ancillary member revenue 2 2 Total member revenue 96 90 Club rental revenue 30 3 Other revenue 5 6 Rental management revenue 14 13 Cost reimbursement revenue 26 22 Total Exchange and Rental revenue 171 134 Cost of service and membership related sales 19 16 Cost of sales of rental and ancillary services 26 12 Cost reimbursements 26 22 Total cost of sales 71 50 Royalty fee expense — 1 Selling and marketing expense 14 14 General and administrative expense 30 24 Amortization expense of intangibles 3 2 Depreciation expense 5 5 Segment operating income $ 48 $ 38 Three Months Ended March 31, 2017 2016 Consolidated: Revenue $ 452 $ 186 Cost of sales 231 81 Operating expenses 157 65 Operating income $ 64 $ 40 Selected financial information by reporting segment is presented below (in millions). March 31, December 31, 2017 2016 Total Assets: Vacation Ownership $ 2,286 $ 2,220 Exchange and Rental 1,118 1,084 Total $ 3,404 $ 3,304 Geographic Information We conduct operations through offices in the U.S. and 14 other countries. For the three months ended March 31, 2017 and 2016 revenue is sourced from over 100 countries worldwide. Other than the United States and Europe (for 2016 period), revenue sourced from any individual country or geographic region did not exceed 10% of consolidated revenue for the three months ended March 31, 2017 and 2016. Geographic information on revenue, based on sourcing, and long‑lived assets, based on physical location, is presented in the table below (in millions). Three Months Ended March 31, 2017 2016 Revenue: United States $ 380 $ 156 Europe 16 17 All other countries (1) 56 13 Total $ 452 $ 186 (1) Includes countries within the following continents: Africa, Asia, Australia, North America and South America. March 31, December 31, 2017 2016 Long-lived assets (excluding goodwill and intangible assets): United States $ 479 $ 469 Mexico 122 107 Europe 3 4 Total $ 604 $ 580 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 21—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 19 for a discussion of income tax contingencies. Purchase Obligations and Other Commitments Other items, such as certain purchase commitments and guarantees are not recognized as liabilities in our condensed 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 March 31, 2017 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. Payments Due by Period Up to More than Contractual Obligations Total 1 year 1 ‑ 3 years 3 ‑ 5 years 5 years (Dollars in millions) Debt principal (a) $ 610 $ — $ — $ 260 $ 350 Debt interest (a) 153 23 55 49 26 Purchase obligations and other commitments (b) 82 34 30 18 — Vacation ownership development commitments (c) 11 11 — — — Operating leases 161 21 34 23 83 Total contractual obligations $ 1,017 $ 89 $ 119 $ 350 $ 459 (a) Debt principal and projected debt interest represent principal and interest to be paid on our senior notes and revolving credit facility based on the balance outstanding as of March 31, 2017, exclusive of debt issuance costs. In addition, also included are certain fees associated with our revolving credit facility based on the unused borrowing capacity and outstanding letters of credit balances, if any, as of March 31, 2017. Interest on the revolving credit facility is calculated using the prevailing rates as of March 31, 2017. (b) (c) At March 31, 2017, guarantees, surety bonds and letters of credit totaled $115 million, with the highest annual amount of $78 million occurring in year one. The total includes a guarantee by us of up to $37 million of the construction loan for the Maui project; however, as of March 31, 2017 only a negligible amount of this loan remained outstanding. The total also includes maximum exposure under guarantees of $35 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 March 31, 2017 future amounts are not expected to be material either individually or in the aggregate. Our operating and 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 we are subsequently reimbursed. As such, we are the primary obligor and may be liable for unreimbursed costs. As of March 31, 2017, amounts pending reimbursements are not material. Vacation Ownership Development Commitments With respect to vacation ownership projects under development, we estimate the cost associated with completing the phases of our vacation ownership projects currently in presales and accounted for under the percentage of completion method is approximately $11 million at March 31, 2017. This estimate is based on our current development plans, which remain subject to change, and we expect the phases currently under development will be completed in 2017. Only certain of our vacation ownership projects under development are currently in presales. Letters of Credit Additionally, as of March 31, 2017, our letters of credit totaled $12 million and were principally related to our Vacation Ownership sales and financing activities. More specifically, these letters of credit provide alternate assurance on amounts required to be 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. Litigation On December 5, 2016, individuals and entities who own or owned 107 fractional interests of a total of 372 interests created in the Fifth and Fifty-Fifth Residence Club located within The St. Regis, New York (the “Club”) filed suit against ILG, certain of our subsidiaries, Marriott International Inc. (“Marriott”) and certain of its subsidiaries including Starwood Hotels & Resorts Worldwide LLC (“Starwood”). The case is filed as a mass action in federal court in the Southern District of New York, not as a class action. In response to our request to file a motion to dismiss, the plaintiffs filed an amended complaint on March 6, 2017. Plaintiffs principally challenge the sale of less than all interests offered in the fractional offering plan, the amendment of the plan to include additional units, and the rental of unsold fractional interests by the plan’s sponsor, claiming that alleged acts by us and the other defendants breached the relevant agreements and harmed the value of plaintiffs’ fractional interests. The relief sought includes, among other things, compensatory damages, rescission, disgorgement, attorneys’ fees, and pre- and post-judgment interest. We filed a motion to dismiss the amended complaint on April 21, 2017. We dispute the material allegations in the amended complaint and intend to defend against the action vigorously. Given the early stages of the action and the inherent uncertainties of litigation, we cannot estimate a range of the potential liability, if any, at this time. On February 28, 2017, the owners association for the Club filed a separate suit against us and certain of our subsidiaries in federal court in the Southern District of New York. On March 13, 2017, before it had served the initial complaint, Plaintiff filed an amended complaint that added Marriott and Starwood as defendants and added additional claims. The amended complaint asserts claims against the sponsor of the Club, St. Regis Residence Club, New York, Inc., the Club manager, St. Regis New York Management, Inc., and certain affiliated entities, as well as against Marriott and Starwood, for alleged breach of fiduciary duties principally related to sale and rental practices, tortious interference with the management agreement, alleged breach of the original purchase agreements with certain owners, alleged breach of an unspecified duty of good faith and fair dealing, and seeks certain declaratory relief in connection with the Starpoints conversion program and the exchange program at the Club. In addition to the declaratory relief sought, Plaintiff seeks unspecified actual damages, punitive damages, and disgorgement of payments under the management and purchase agreements, as well as related agreements. We dispute the material allegations in the amended complaint and intend to defend against the action vigorously. Given the early stages of the action and the inherent uncertainties of litigation, we cannot estimate a range of the potential liability, if any, at this time. |
SUPPLEMENTAL GUARANTOR INFORMAT
SUPPLEMENTAL GUARANTOR INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
SUPPLEMENTAL GUARANTOR INFORMATION | |
SUPPLEMENTAL GUARANTOR INFORMATION | NOTE 22— SUPPLEMENTAL GUARANTOR INFORMATION The senior notes are guaranteed by ILG and certain other subsidiaries for which 100% of the voting securities are owned directly or indirectly by ILG (collectively, the “Guarantor Subsidiaries”). These guarantees are full and unconditional and joint and several. The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The indenture governing the senior notes contains covenants that, among other things, limit the ability of Interval Acquisition Corp. (the “Issuer”) and the Guarantor Subsidiaries to pay dividends to us or make distributions, loans or advances to us. The following tables present consolidating financial information as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016 for ILG on a stand‑alone basis, the Issuer on a stand‑alone basis, the combined Guarantor Subsidiaries of ILG (collectively, the “Guarantor Subsidiaries”), the combined non-guarantor subsidiaries of ILG (collectively, the “Non-Guarantor Subsidiaries”) and ILG on a consolidated basis (in millions). Balance Sheet as of March 31, 2017 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Current assets $ 1 $ 3 $ 615 $ 266 $ $ 885 Property and equipment, net 1 - 430 173 604 Goodwill and intangible assets, net - 267 643 98 1,008 Investments in subsidiaries 672 1,356 780 (2,808) - Other assets - - 447 460 907 Total assets $ 674 $ 1,626 $ 2,915 $ 997 $ (2,808) $ 3,404 Current liabilities $ 2 $ 9 $ 387 $ 180 $ $ 578 Other long-term liabilities 275 326 601 Long term debt 601 - - 601 Intercompany liabilities (receivables) / equity (924) 344 896 (316) - Redeemable noncontrolling interest 1 1 ILG stockholders' equity 1,596 672 1,356 780 (2,808) 1,596 Noncontrolling interests 27 27 Total liabilities and equity $ 674 $ 1,626 $ 2,915 $ 997 $ (2,808) $ 3,404 Balance Sheet as of December 31, 2016 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Current assets $ 1 $ 2 $ 491 $ 252 $ $ 746 Property and equipment, net 1 - 420 159 580 Goodwill and intangible assets, net - 267 648 96 1,011 Investments in subsidiaries 619 1,289 390 - (2,298) - Other assets - - 461 506 967 Total assets $ 621 $ 1,558 $ 2,410 $ 1,013 $ (2,298) $ 3,304 Current liabilities $ 1 $ 5 $ 345 $ 168 $ $ 519 Other long-term liabilities 266 345 611 Long term debt 580 580 Intercompany liabilities (receivables) / equity (947) 354 509 84 - Redeemable noncontrolling interest - 1 - 1 ILG stockholders' equity 1,567 619 1,289 390 (2,298) 1,567 Noncontrolling interests - - 26 26 Total liabilities and equity $ 621 $ 1,558 $ 2,410 $ 1,013 $ (2,298) $ 3,304 Statement of Income for the Three Months Ended March 31, 2017 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Revenue $ - $ - $ 379 $ 73 $ $ 452 Operating expenses (2) - (333) (53) (388) Interest (expense) income, net - (6) 2 (1) (5) Other income (expense), net (1) 45 49 17 10 (111) 10 Income tax (provision) benefit 1 2 (17) (11) (25) Equity in earnings from unconsolidated entities - 1 1 Net income 44 45 49 18 (111) 45 Net loss (income) attributable to noncontrolling interests - - - (1) - (1) Net income attributable to common stockholders $ 44 $ 45 $ 49 $ 17 $ (111) $ 44 Statement of Income for the Three Months Ended March 31, 2016 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Revenue $ - $ - $ 160 $ 26 $ - $ 186 Operating expenses (1) - (124) (21) - (146) Interest (expense) income, net - (7) 1 - - (6) Other income (expense), net (1) 23 27 3 1 (53) 1 Income tax (provision) benefit - 3 (14) (2) - (13) Equity in earnings from unconsolidated entities - - 1 - - 1 Net income 22 23 27 4 (53) 23 Net loss (income) attributable to noncontrolling interests - - - (1) - (1) Net income attributable to common stockholders $ 22 $ 23 $ 27 $ 3 $ (53) $ 22 Statement of Cash Flows for the Three Months Ended March 31, 2017 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries ILG Consolidated Cash flows provided by operating activities $ - $ 1 $ 10 $ 77 $ 88 Cash flows used in investing activities - - (17) (5) (22) Cash flows provided by (used in) financing activities - (1) 24 (43) (20) Effect of exchange rate changes on cash and cash equivalents - - - (1) (1) Cash and cash equivalents at beginning of period - - 38 88 126 Cash and cash equivalents at end of period $ - $ - $ 55 $ 116 $ 171 Statement of Cash Flows for the Three Months Ended March 31, 2016 ILG ILG Guarantor Subsidiaries Non-Guarantor Subsidiaries ILG Consolidated Cash flows provided by operating activities $ - $ 1 $ 35 $ 4 $ 40 Cash flows used in investing activities - - (13) - (13) Cash flows used in financing activities - (1) (15) (5) (21) Effect of exchange rate changes on cash and cash equivalents - - - (2) (2) Cash and cash equivalents at beginning of period - - 14 79 93 Cash and cash equivalents at end of period $ - $ - $ 21 $ 76 $ 97 (1) Includes equity in net income of wholly-owned subsidiaries. |
SIGNIFICANT ACCOUNTING POLICI30
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of ILG’s management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not indicative of the results that may be expected for a full year. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed 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 these condensed 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. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2016 Annual Report on Form 10‑K. |
Seasonality | Seasonality Revenue at ILG is influenced by the seasonal nature of travel. 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. Our vacation ownership management businesses by and large do not experience significant seasonality, with the exception of our resort operations revenue which tends to be higher in the first quarter. Within our Exchange and Rental segment, we 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. Remaining rental revenue is recognized based on occupancy. For the vacation rental business, the first and third quarters generally generate 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 generate lower revenue. |
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 condensed consolidated financial statements include: · the recovery of long‑lived assets as well as goodwill and other intangible assets; · purchase price allocations of business combinations; · loan loss reserves for vacation ownership mortgages receivable; · accounting for acquired vacation ownership mortgages receivable; · revenue recognition pertaining to sales of vacation ownership products pursuant to the percentage of completion method; · cost of vacation ownership product sales related estimates included in our relative sales value calculation, such as future projected sales revenue and expected project costs to complete; · the accounting for income taxes including deferred income taxes and 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 condensed consolidated financial statements of ILG and its subsidiaries are reasonable. |
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 and restricted stock 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 RSUs and restricted shares for the three months ended March 31, 2017 and 0.6 million RSUs for the three months ended March 31, 2016, as the effect of their inclusion would have been antidilutive to earnings per share. 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): Three Months Ended March 31, 2017 2016 Basic weighted average shares of common stock outstanding 123,998 57,619 Net effect of common stock equivalents assumed to be vested related to RSUs and restricted stock 1,584 335 Diluted weighted average shares of common stock outstanding 125,582 57,954 Earnings per share for the three month ended March 31, 2017 and 2016 are as follows (in thousands, except per share data): Three Months Ended March 31, 2017 2016 Net income attributable to common stockholders $ 44,211 $ 22,179 Weighted average number of shares of common stock outstanding: Basic 123,998 57,619 Diluted 125,582 57,954 Earnings per share attributable to common stockholders: Basic $ $ Diluted $ $ |
Recent Accounting Pronouncements | Recent Accounting Pronouncements: General With the exception of those discussed below, there are no recent accounting pronouncements or changes in accounting pronouncements since the recent accounting pronouncements described in our 2016 Annual Report on Form 10 K 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 March 2017, the FASB issued ASU No. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities”. The FASB is issuing this ASU to amend the amortization period for certain purchased callable debt securities held at a premium. Prior to the issuance of the ASU, GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently assessing the future impact of this accounting standard update on our consolidated financial statements. In February 2017, the FASB issued ASU No. 2017-05, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. The FASB issued this ASU to clarify the scope of subtopic 610-20, which was issued in May 2014 as part of Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The effective date and transition requirements of these amendments are the same as the effective date and transition requirements of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)". We plan to adopt this standard, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018. We are currently assessing the future impact of this accounting standard update on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350),” to simplify the subsequent measurement of goodwill by eliminating the second step from the goodwill impairment test. An entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The update is effective for annual periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323).” ASU 2017-03 states that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805),” to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by clarifying the definition of a business. The definition of a business affects many areas of accounting including acquisition, disposals, goodwill and consolidation. This amendment covers Phase 1 of a three phase project. The update is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this update should be applied prospectively on or after the effective date. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230).” This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The update is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”) as part of the Board’s initiative to reduce complexity in accounting standards. This ASU eliminates an exception in ASC 740, which prohibits the immediate recognition of income tax consequences of intra-entity asset transfers other than inventory. Under ASU 2016-16, entities will be required to recognize the immediate current and deferred income tax effects of intra-entity asset transfers, which often involve a subsidiary of a company transferring intellectual property to another subsidiary. For public entities, the new guidance will be effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. This ASU’s amendments should be applied on a modified retrospective basis, recognizing the effects in retained earnings as of the beginning of the year of adoption. We are currently assessing the future impact of this accounting standard update on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230).” This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under existing guidance. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326).” This ASU amends the Board’s guidance on the impairment of financial instruments. The ASU adds to GAAP an impairment model (known as the current expected credit losses model) that is based on an expected losses model rather than an incurred losses model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The ASU is also intended to reduce the complexity of GAAP by decreasing the number of impairment models that entities use to account for debt instruments. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements as we currently apply an expected losses model against our outstanding vacation ownership mortgages receivable. In February 2016, the FASB issued ASU 2016‑02, “Leases (Topic 842)” (“ASU 2016‑02”). ASU 2016‑02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new guidance will be effective for public entities for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption of ASU 2016‑02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the methods and impact of adopting this new standard on our consolidated financial statements. In January 2016, the FASB issued ASU 2016‑01, “Financial Instruments—Overall (Subtopic 825‑10),” which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The amendments in this update are effective for fiscal years beginning after December 31, 2017, including interim periods within those fiscal years. We are currently assessing the future impact of this new accounting standard update on our consolidated financial statements. Recent Accounting Pronouncements: Revenue Recognition In May 2014, the FASB issued ASU 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, 2017 (and interim periods within that period). In periods subsequent to the initial issuance of this ASU, the FASB has issued additional ASU’s clarifying items within Topic 606, as follows: · In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers by one year the effective date of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. · In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”). The amendments in ASU 2016-08 serve to clarify the implementation guidance on principal vs. agent considerations. · In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”). The purpose of ASU 2016-10 is to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance (while retaining the related principles for those areas). · In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). The purpose of ASU 2016-12 is to address certain issues identified to improve Topic 606 by enhancing guidance on assessing collectability, presentation of sales taxes and other similar taxes collected from customers, noncash consideration and completed contracts and contract modifications at transition. · In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” which amends certain aspects of the Board’s new revenue standard, ASU 2014-09. This ASU addresses thirteen specific issues pertaining to Topic 606 , Revenue from Contracts with Customers. We are currently in the process of completing our qualitative evaluation of ASU 2014-09, including identifying the potential differences in the timing and/or method of revenue recognition for our contracts and, ultimately, the expected impact on our business processes, systems and controls. As part of this evaluation, we are reviewing customer contracts and applying the five-step model of the new standard to each contact type identified that’s associated to our material revenue streams and will compare the results to our current accounting practices. We currently expect possible areas of impact will include (i) timing adjustments to membership fee revenue resulting from estimating variable consideration, (ii) gross versus net presentation changes which would not impact profitability, (iii) capitalization of certain incremental costs to obtain a contract and (iv) the instances in which we can apply the percentage of completion revenue recognition method when construction of a vacation ownership project is not complete. We continue to evaluate the potential effects of adopting this standard and expect to complete our evaluation from a qualitative perspective during the first half of 2017. Consequently, 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. We plan to adopt this standard, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018. A determination as to whether we will apply the retrospective or modified retrospective adoption method will be made once our qualitative evaluation is complete and we commence quantifying the expected impacts. Adopted Accounting Pronouncements In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810),” to amend the existing guidance issued with ASU 2015-02. This ASU is being issued to amend the consolidation guidance on how a reporting entity, that is the single decision maker of a VIE, should treat indirect interests in the entity held through related parties that are under common control with the reporting entity, when determining whether it is the primary beneficiary of that VIE. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payments Accounting” (“ASU 2016-03”), to simplify the current accounting for Stock Compensation. The areas for simplification in this update involve several aspects of the accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. Instead, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. In accordance with this ASU, during the current period, ILG included a net benefit of $1 million within the income tax provision. In addition, with the adoption of this ASU, we elected to account for forfeitures when they occur, so therefore, effective January 1, 2017, we will no longer estimate the number of awards that are expected to vest. We also elected the prospective transition method for the presentation of excess tax benefits within the statement of cash flows. As such, the excess tax benefits from stock based awards was presented as part of the operating activities within the current period Condensed Consolidated Statements of Cash Flows and the prior period was not adjusted. Overall, the adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In March 2016, the FASB issued ASU 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323)” (“ASU 2016-07”). The amendments in this ASU require, among other items, that an equity method investor add the cost of acquiring an additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting, as well as eliminates certain other existing requirements. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements. |
SIGNIFICANT ACCOUNTING POLICI31
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES | |
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): Three Months Ended March 31, 2017 2016 Basic weighted average shares of common stock outstanding 123,998 57,619 Net effect of common stock equivalents assumed to be vested related to RSUs and restricted stock 1,584 335 Diluted weighted average shares of common stock outstanding 125,582 57,954 |
Schedule of earnings per share | Earnings per share for the three month ended March 31, 2017 and 2016 are as follows (in thousands, except per share data): Three Months Ended March 31, 2017 2016 Net income attributable to common stockholders $ 44,211 $ 22,179 Weighted average number of shares of common stock outstanding: Basic 123,998 57,619 Diluted 125,582 57,954 Earnings per share attributable to common stockholders: Basic $ $ Diluted $ $ |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
BUSINESS COMBINATION | |
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 preliminary 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 millions): Preliminary PPA Adjustments to PPA (3) Revised Preliminary PPA (4) Cash $ 45 $ — $ 45 Vacation ownership inventory 221 7 228 Vacation ownership mortgages receivable 712 (19) 693 Other current assets 143 1 144 Intangibles 241 (3) 238 Property plant and equipment 465 (10) 455 Other non-current assets 24 (9) 15 Deferred revenue (60) (4) (64) Securitized debt (154) — (154) Other current liabilities (2) (187) 11 (176) Other non-current liabilities (98) (2) (100) Gain on bargain purchase (1) (197) 34 (163) Net assets acquired $ 1,155 $ 6 $ 1,161 (1) Gain on bargain purchase represents the excess of the fair value of the net tangible and intangible assets acquired over the purchase price. This gain of $163 million is presented within Other income (expense), net, in our consolidated statement of income for the year ended December 31, 2016. The existence of a gain on bargain purchase pertaining to this transaction is principally related to the decrease in our stock price leading up to the acquisition date. (2) Includes a $24 million accrual pertaining to a dividend declared by a subsidiary of Vistana to Starwood prior to our acquisition date which was settled subsequent to the acquisition closing. (3) Represents adjustments to the preliminary purchase price allocation first presented in our June 30, 2016 Form 10-Q resulting from our ongoing activities, including our reassessment of assets acquired and liabilities assumed, with respect to finalizing our purchase price allocation for this acquisition. The larger adjustments primarily pertained to refinements of certain estimates related to the valuation of our mortgages receivable and vacation ownership inventory based on additional information, adjustments to tax related accounts as new information became available, and certain other reclasses between line items. (4) Measurement period is considered closed as of December 31, 2016 for all balance sheet items except those that are tax related, as discussed further below. |
Schedule of purchase price allocated to the fair value of goodwill and identifiable intangible assets | The purchase price allocated to the fair value of identifiable intangible assets associated with the Vistana acquisition is as follows (in millions): Fair Value Useful Life (years) Resort management contracts $ 118 26 Customer relationships 119 25 Other 1 < 1 Total $ 238 |
Schedule of unaudited pro forma financial information | Three Months Ended March 31, (In millions, except per share data) 2017 2016 Revenue $ 452 $ 431 Net income attributable to common stockholders $ 44 $ 37 Earnings per share: Basic $ 0.36 $ 0.29 Diluted $ 0.35 $ 0.29 |
RESTRICTED CASH (Tables)
RESTRICTED CASH (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
RESTRICTED CASH | |
Schedule of restricted cash | Restricted cash consists of the following (in millions): March 31, December 31, 2017 2016 Escrow deposits on vacation ownership products $ 38 $ 67 Securitization VIEs 16 34 Other 16 17 Total restricted cash $ 70 $ 118 |
VACATION OWNERSHIP MORTGAGES 34
VACATION OWNERSHIP MORTGAGES RECEIVABLE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
VACATION OWNERSHIP MORTGAGES RECEIVABLE | |
Schedule of mortgages receivable | Vacation ownership mortgages receivable carrying amounts as of March 31, 2017 and December 31, 2016 were as follows (in millions): March 31, December 31, 2017 2016 Securitized Unsecuritized (2) Total Securitized Unsecuritized (2) Total Acquired vacation ownership mortgages receivable (1) $ 398 $ 104 $ 502 $ 419 $ 127 $ 546 Originated vacation ownership mortgages receivable (1) 16 224 240 11 184 195 Less: allowance for impairment on acquired loans — (2) (2) — — — Less: allowance for losses on originated loans (2) (27) (29) (1) (21) (22) Net vacation ownership mortgages receivable $ 412 $ 299 $ 711 $ 429 $ 290 $ 719 (1) At various interest rates with varying payment terms through 2031 for acquired receivables and for originated receivables (2) As of March 31, 2017, $9 million of unsecuritized vacation ownership receivables were not eligible for securitization. Additionally, during the quarter approximately $19 million of unsecuritized receivables as of December 31, 2016 were moved into the 2016 securitized pool, thereby releasing the same amount from restricted cash. |
Schedule of changes in accretable yield | Three Months Ended Accretable Yield March 31, 2017 Balance, beginning of period $ 157 Accretion (15) Reclassification from nonaccretable difference 1 Balance, end of period $ 143 Nonaccretable difference, end of period balance $ 36 |
Schedule to mature mortgages receivables | Vacation ownership mortgages receivable as of March 31, 2017 are scheduled to mature as follows (in millions): Vacation Ownership Mortgages Receivable Acquired Originated Twelve month period ending March 31, Securitized Loans Unsecuritized Loans Securitized Loans Unsecuritized Loans Total 2018 $ 43 $ 12 $ 2 $ 18 $ 75 2019 42 11 1 14 68 2020 42 10 1 15 68 2021 41 10 1 17 69 2022 38 11 2 19 70 2022 and thereafter 116 44 9 141 310 Total 322 98 16 224 660 Plus: net premium on acquired loans (1) 76 6 — — 82 Less: allowance for impairment on acquired loans — (2) — — (2) Less: allowance for losses on originated loans — — (2) (27) (29) Net vacation ownership mortgages receivable $ 398 $ 102 $ 14 $ 197 $ 711 Weighted average stated interest rate as of March 31, 2017 13.4% 13.5% Range of stated interest rates as of March 31, 2017 9.9% to 15.9% 10.9% to 15.9% (1) The difference between the contractual principal amount of acquired loans of $419 million and the net carrying amount of $500 million as of March 31, 2017 is related to the application of ASC 310-30. |
Schedule of vacation ownership notes receivable by brand and by FICO score | Balances of our vacation ownership mortgages receivable by brand and by FICO score (at time of loan origination) were as follows (in millions): As of March 31, 2017 700+ 600-699 <600 No Score (1) Total Hyatt $ 21 $ 14 $ 2 $ 1 $ 38 Sheraton 163 145 13 64 385 Westin 184 89 4 30 307 Other 6 1 - 3 10 Vacation ownership mortgages receivable, gross $ 374 $ 249 $ 19 $ 98 $ 740 (1) Mortgages receivable with no FICO score primarily relate to non-U.S. resident borrowers. |
Schedule of past-due and nonaccrual status of mortgages receivable | Our aged analysis of delinquent vacation ownership mortgages receivable and the gross balance of vacation ownership mortgages receivable greater than 120 days past‑due as of March 31, 2017 and December 31, 2016 for our originated loans is as follows (in millions): Delinquent Defaulted (1) Receivables Current 30-59 Days 60-89 Days 90-119 Days ≥120 Total Delinquent & Defaulted Originated Loans March 31, 2017 $ 240 $ 232 $ 3 $ 2 $ 1 $ 2 $ 8 December 31, 2016 $ 195 $ 190 $ 2 $ 1 $ 1 $ 1 $ 5 Mortgages receivable equal to or greater than 120 days are considered defaulted and have been fully reserved in our allowance of loan losses for originated loans |
VACATION OWNERSHIP INVENTORY (T
VACATION OWNERSHIP INVENTORY (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
VACATION OWNERSHIP INVENTORY | |
Schedule of ownership inventory | As of March 31, 2017 and December 31, 2016, vacation ownership inventory is comprised of the following (in millions): March 31, December 31, 2017 2016 Completed unsold vacation ownership interests (current asset) $ 295 $ 197 Vacation ownership products construction in process (non-current asset) 134 189 Total vacation ownership inventory $ 429 $ 386 |
INVESTMENTS IN UNCONSOLIDATED36
INVESTMENTS IN UNCONSOLIDATED ENTITIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
INVESTMENTS IN UNCONSOLIDATED ENTITIES | |
Schedule of carrying value of our investments in unconsolidated entities | The carrying value of our investments in unconsolidated entities as of March 31, 2017 and December 31, 2016 were as follows (in millions): March 31, December 31, 2017 2016 Maui Timeshare Venture, LLC $ 43 $ 42 Harborside at Atlantis joint venture 12 12 Other 5 5 Total $ 60 $ 59 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY AND EQUIPMENT | |
Schedule of Property and equipment, net | Property and equipment, net is as follows (in millions): March 31, December 31, 2017 2016 Computer equipment $ 38 $ 37 Capitalized software (including internally developed software) 154 150 Land, buildings and leasehold improvements 372 368 Land held for development 55 56 Furniture, fixtures and other equipment 54 52 Construction projects in progress 65 47 Other projects in progress 49 37 Less: accumulated depreciation and amortization (183) (167) Total property and equipment, net $ 604 $ 580 |
GOODWILL AND OTHER INTANGIBLE38
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
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, as of March 31, 2017 and December 31, 2016 (in millions): Foreign Balance as of Currency Goodwill Balance as of January 1, 2017 Additions Deductions Translation Impairment March 31, 2017 VO management $ 35 $ — $ — $ 1 $ — $ 36 VO sales and financing 7 — — — — 7 Exchange 496 — — — — 496 Rental 20 — — — — 20 Total $ 558 $ — $ — $ 1 $ — $ 559 Foreign Balance as of Currency Goodwill Balance as of January 1, 2016 Additions Deductions Translation Impairment December 31, 2016 VO management $ 38 $ — $ — $ (3) $ — $ 35 VO sales and financing 7 — — — — 7 Exchange 496 — — — — 496 Rental 20 — — — — 20 Total $ 561 $ — $ — $ (3) $ — $ 558 |
Schedule of balance of intangible assets, net | The balance of other intangible assets, net as of March 31, 2017 and December 31, 2016 is as follows (in millions): March 31, December 31, 2017 2016 Intangible assets with indefinite lives $ 114 $ 114 Intangible assets with definite lives, net 335 339 Total intangible assets, net $ 449 $ 453 |
Schedule of intangible assets with indefinite lives | At March 31, 2017 and December 31, 2016, intangible assets with indefinite lives relate to the following (in millions): March 31, December 31, 2017 2016 Resort management contracts $ 70 $ 70 Trade names and trademarks 44 44 Total $ 114 $ 114 |
Schedule of intangible assets with definite lives | At March 31, 2017, intangible assets with definite lives relate to the following (in millions): Cost Accumulated Amortization Net Customer relationships $ 287 $ (138) $ 149 Purchase agreements 76 (76) — Resort management contracts 245 (61) 184 Technology 25 (25) — Other 23 (21) 2 $ 656 $ (321) $ 335 At December 31, 2016, intangible assets with definite lives relate to the following (in millions): Accumulated Cost Amortization Net Customer relationships $ 287 $ (137) $ 150 Purchase agreements 76 (76) — Resort management contracts 245 (58) 187 Technology 25 (25) — Other 23 (21) 2 Total $ 656 $ (317) $ 339 |
Schedule of amortization expense of intangible assets with definite lives | Based on the March 31, 2017 balances, amortization expense for the next five years and thereafter is estimated to be as follows (in millions): Twelve month period ending March 31, 2018 $ 20 2019 20 2020 19 2021 19 2022 16 2023 and thereafter 241 $ 335 |
CONSOLIDATED VARIABLE INTERES39
CONSOLIDATED VARIABLE INTEREST ENTITIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
CONSOLIDATED VARIABLE INTEREST ENTITIES | |
Schedule of vacation ownership notes receivable securitization | The following table shows assets which are collateral for the related obligations of the variable interest entities, included in our condensed consolidated balance sheets (in millions): Vacation Ownership Notes Receivable Securitization (1) March 31, December 31, 2017 2016 Assets Restricted cash $ 16 $ 34 Interest receivable 3 3 Vacation ownership mortgages receivable, net 412 429 Total $ 431 $ 466 Liabilities Interest payable $ 1 $ 1 Securitized debt 398 430 Total $ 399 $ 431 (1) The creditors of these entities do not have general recourse to us. |
ACCRUED LIABILITIES AND OTHER40
ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES | |
Schedule of general components of accrued liabilities | The following table summarizes the general components of accrued expenses and other current liabilities (in millions): March 31, December 31, 2017 2016 General accrued expenses $ 72 $ 62 Accrued other taxes 21 13 Customer deposits 80 71 Accrued membership related costs 23 18 Accrued construction costs 19 16 Member deposits 7 7 Accrued expenses and other current liabilities $ 222 $ 187 |
DEFERRED REVENUE (Tables)
DEFERRED REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
DEFERRED REVENUE | |
Schedule of general components of deferred revenue | The following table summarized the general components of deferred revenue (in millions): March 31, December 31, 2017 2016 Deferred membership-related revenue $ 203 $ 157 Other 9 9 Total $ 212 $ 166 |
SECURITIZED VACATION OWNERSHI42
SECURITIZED VACATION OWNERSHIP DEBT (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SECURITIZED VACATION OWNERSHIP DEBT | |
Schedule of securitized vacation ownership debt | Securitized vacation ownership debt consisted of the following (in millions): March 31, December 31, 2017 2016 2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2025 $ 40 $ 44 2012 securitization, interest rates ranging from 2.00% to 2.76%, maturing 2023 42 46 2016 securitization, interest rates ranging from 2.54% to 2.74%, maturing 2024 320 345 Unamortized debt issuance costs (2016 securitization) (4) (5) Total securitized vacation ownership debt, net of debt issuance costs $ 398 $ 430 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
LONG-TERM DEBT | |
Schedule of Long-term debt | Long‑term debt is as follows (in millions): March 31, December 31, 2017 2016 Revolving credit facility (interest rate of 2.74% at March 31, 2017 and interest rate of 2.27% at December 31, 2016) $ 260 $ 240 5.625% senior notes 350 350 Unamortized debt issuance costs (revolving credit facility) (4) (4) Unamortized debt issuance costs (senior notes) (5) (6) Total long-term debt, net of debt issuance costs $ 601 $ 580 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
FAIR VALUE MEASUREMENTS | |
Schedule of estimated fair value of financial instruments | March 31, 2017 December 31, 2016 Carrying Fair Carrying Fair Amount Value Amount Value (In millions) Cash and cash equivalents $ 171 $ 171 $ 126 $ 126 Restricted cash and cash equivalents 70 70 118 118 Financing receivables 19 19 19 19 Vacation ownership mortgages receivable 711 735 719 737 Investments in marketable securities 15 15 14 14 Securitized debt 398 399 430 425 Revolving credit facility (1) (256) (260) (236) (240) Senior notes (1) (345) (358) (344) (361) (1) The carrying value of our revolving credit facility and senior notes as of March 31, 2017 include $4 million and $5 million of unamortized debt issuance costs, respectively, and $4 million and $6 million as of December 31, 2016, which are presented as a direct reduction of the corresponding liability. |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 condensed consolidated statements of income for the three months ended March 31, 2017 and 2016 (in millions): Three Months Ended March 31, 2017 2016 Cost of sales $ 1 $ — Selling and marketing expense 1 — General and administrative expense 4 3 Non-cash compensation expense $ 6 $ 3 |
Schedule of RSU award activity | The following table summarizes RSU activity during the three months ended March 31, 2017: Weighted-Average Grant Date Shares Fair Value (In millions) Non-vested RSUs at January 1, 2017 3 $ 16.71 Granted 1 20.24 Vested (1) 18.18 Forfeited — 32.30 Non-vested RSUs at March 31, 2017 3 $ 17.25 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 as follows (in millions): Three Months Ended March 31, 2017 2016 Vacation Ownership: Resort operations revenue $ 58 $ 5 Management fee revenue 30 21 Sales of vacation ownership products, net 110 9 Consumer financing revenue 21 2 Cost reimbursement revenue 62 15 Total revenue 281 52 Cost of service and membership related 13 8 Cost of sales of vacation ownership products 27 6 Cost of rental and ancillary services 52 2 Cost of consumer financing 6 — Cost reimbursements 62 15 Total cost of sales 160 31 Royalty fee expense 10 1 Selling and marketing expense 59 3 General and administrative expense 24 14 Amortization expense of intangibles 2 1 Depreciation expense 10 — Segment operating income $ 16 $ 2 Three Months Ended March 31, 2017 2016 Exchange and Rental: Transaction revenue $ 59 $ 58 Membership fee revenue 35 30 Ancillary member revenue 2 2 Total member revenue 96 90 Club rental revenue 30 3 Other revenue 5 6 Rental management revenue 14 13 Cost reimbursement revenue 26 22 Total Exchange and Rental revenue 171 134 Cost of service and membership related sales 19 16 Cost of sales of rental and ancillary services 26 12 Cost reimbursements 26 22 Total cost of sales 71 50 Royalty fee expense — 1 Selling and marketing expense 14 14 General and administrative expense 30 24 Amortization expense of intangibles 3 2 Depreciation expense 5 5 Segment operating income $ 48 $ 38 Three Months Ended March 31, 2017 2016 Consolidated: Revenue $ 452 $ 186 Cost of sales 231 81 Operating expenses 157 65 Operating income $ 64 $ 40 |
Schedule of financial information by reportable segment | Selected financial information by reporting segment is presented below (in millions). March 31, December 31, 2017 2016 Total Assets: Vacation Ownership $ 2,286 $ 2,220 Exchange and Rental 1,118 1,084 Total $ 3,404 $ 3,304 |
Schedule of geographic information on revenue, based on sourcing, and long-lived assets, based on physical location | Geographic information on revenue, based on sourcing, and long‑lived assets, based on physical location, is presented in the table below (in millions). Three Months Ended March 31, 2017 2016 Revenue: United States $ 380 $ 156 Europe 16 17 All other countries (1) 56 13 Total $ 452 $ 186 (1) Includes countries within the following continents: Africa, Asia, Australia, North America and South America. March 31, December 31, 2017 2016 Long-lived assets (excluding goodwill and intangible assets): United States $ 479 $ 469 Mexico 122 107 Europe 3 4 Total $ 604 $ 580 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Summary of future periods in which such obligations are expected to be settled in cash | The following table summarizes these items, on an undiscounted basis, at March 31, 2017 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. Payments Due by Period Up to More than Contractual Obligations Total 1 year 1 ‑ 3 years 3 ‑ 5 years 5 years (Dollars in millions) Debt principal (a) $ 610 $ — $ — $ 260 $ 350 Debt interest (a) 153 23 55 49 26 Purchase obligations and other commitments (b) 82 34 30 18 — Vacation ownership development commitments (c) 11 11 — — — Operating leases 161 21 34 23 83 Total contractual obligations $ 1,017 $ 89 $ 119 $ 350 $ 459 (a) Debt principal and projected debt interest represent principal and interest to be paid on our senior notes and revolving credit facility based on the balance outstanding as of March 31, 2017, exclusive of debt issuance costs. In addition, also included are certain fees associated with our revolving credit facility based on the unused borrowing capacity and outstanding letters of credit balances, if any, as of March 31, 2017. Interest on the revolving credit facility is calculated using the prevailing rates as of March 31, 2017. (b) (c) |
SUPPLEMENTAL GUARANTOR INFORM48
SUPPLEMENTAL GUARANTOR INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SUPPLEMENTAL GUARANTOR INFORMATION | |
Schedule of condensed consolidating balance sheet | Balance Sheet as of March 31, 2017 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Current assets $ 1 $ 3 $ 615 $ 266 $ $ 885 Property and equipment, net 1 - 430 173 604 Goodwill and intangible assets, net - 267 643 98 1,008 Investments in subsidiaries 672 1,356 780 (2,808) - Other assets - - 447 460 907 Total assets $ 674 $ 1,626 $ 2,915 $ 997 $ (2,808) $ 3,404 Current liabilities $ 2 $ 9 $ 387 $ 180 $ $ 578 Other long-term liabilities 275 326 601 Long term debt 601 - - 601 Intercompany liabilities (receivables) / equity (924) 344 896 (316) - Redeemable noncontrolling interest 1 1 ILG stockholders' equity 1,596 672 1,356 780 (2,808) 1,596 Noncontrolling interests 27 27 Total liabilities and equity $ 674 $ 1,626 $ 2,915 $ 997 $ (2,808) $ 3,404 Balance Sheet as of December 31, 2016 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Current assets $ 1 $ 2 $ 491 $ 252 $ $ 746 Property and equipment, net 1 - 420 159 580 Goodwill and intangible assets, net - 267 648 96 1,011 Investments in subsidiaries 619 1,289 390 - (2,298) - Other assets - - 461 506 967 Total assets $ 621 $ 1,558 $ 2,410 $ 1,013 $ (2,298) $ 3,304 Current liabilities $ 1 $ 5 $ 345 $ 168 $ $ 519 Other long-term liabilities 266 345 611 Long term debt 580 580 Intercompany liabilities (receivables) / equity (947) 354 509 84 - Redeemable noncontrolling interest - 1 - 1 ILG stockholders' equity 1,567 619 1,289 390 (2,298) 1,567 Noncontrolling interests - - 26 26 Total liabilities and equity $ 621 $ 1,558 $ 2,410 $ 1,013 $ (2,298) $ 3,304 |
Schedule of condensed consolidating statement of income | Statement of Income for the Three Months Ended March 31, 2017 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Revenue $ - $ - $ 379 $ 73 $ $ 452 Operating expenses (2) - (333) (53) (388) Interest (expense) income, net - (6) 2 (1) (5) Other income (expense), net (1) 45 49 17 10 (111) 10 Income tax (provision) benefit 1 2 (17) (11) (25) Equity in earnings from unconsolidated entities - 1 1 Net income 44 45 49 18 (111) 45 Net loss (income) attributable to noncontrolling interests - - - (1) - (1) Net income attributable to common stockholders $ 44 $ 45 $ 49 $ 17 $ (111) $ 44 Statement of Income for the Three Months Ended March 31, 2016 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries Total Eliminations ILG Consolidated Revenue $ - $ - $ 160 $ 26 $ - $ 186 Operating expenses (1) - (124) (21) - (146) Interest (expense) income, net - (7) 1 - - (6) Other income (expense), net (1) 23 27 3 1 (53) 1 Income tax (provision) benefit - 3 (14) (2) - (13) Equity in earnings from unconsolidated entities - - 1 - - 1 Net income 22 23 27 4 (53) 23 Net loss (income) attributable to noncontrolling interests - - - (1) - (1) Net income attributable to common stockholders $ 22 $ 23 $ 27 $ 3 $ (53) $ 22 |
Schedule of condensed consolidating statement of cash flows | Statement of Cash Flows for the Three Months Ended March 31, 2017 ILG Interval Acquisition Corp. Guarantor Subsidiaries Non-Guarantor Subsidiaries ILG Consolidated Cash flows provided by operating activities $ - $ 1 $ 10 $ 77 $ 88 Cash flows used in investing activities - - (17) (5) (22) Cash flows provided by (used in) financing activities - (1) 24 (43) (20) Effect of exchange rate changes on cash and cash equivalents - - - (1) (1) Cash and cash equivalents at beginning of period - - 38 88 126 Cash and cash equivalents at end of period $ - $ - $ 55 $ 116 $ 171 Statement of Cash Flows for the Three Months Ended March 31, 2016 ILG ILG Guarantor Subsidiaries Non-Guarantor Subsidiaries ILG Consolidated Cash flows provided by operating activities $ - $ 1 $ 35 $ 4 $ 40 Cash flows used in investing activities - - (13) - (13) Cash flows used in financing activities - (1) (15) (5) (21) Effect of exchange rate changes on cash and cash equivalents - - - (2) (2) Cash and cash equivalents at beginning of period - - 14 79 93 Cash and cash equivalents at end of period $ - $ - $ 21 $ 76 $ 97 Includes equity in net income of wholly-owned subsidiaries |
ORGANIZATION AND BASIS OF PRE49
ORGANIZATION AND BASIS OF PRESENTATION (Details) - item | May 11, 2016 | Mar. 31, 2017 |
Organization | ||
Number of operating segments | 2 | |
Vistana | ||
Organization | ||
Percentage of voting equity interests | 100.00% | |
Global license agreement term | 80 years | |
Number of extended term Of Global License Agreement | 2 | |
Term of Global License Agreement | 30 years |
SIGNIFICANT ACCOUNTING POLICI50
SIGNIFICANT ACCOUNTING POLICIES - Earnings per Share Narrative (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock Options | ||
Securities not included in the computations of diluted earnings per share | ||
Securities excluded from computation of diluted earnings per share (in shares) | 0.6 | |
Restricted Stock Units (RSUs) | ||
Securities not included in the computations of diluted earnings per share | ||
Securities excluded from computation of diluted earnings per share (in shares) | 0.8 |
SIGNIFICANT ACCOUNTING POLICI51
SIGNIFICANT ACCOUNTING POLICIES - Earnings per Share Table (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
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 | 123,998 | 57,619 |
Diluted weighted average shares of common stock outstanding | 125,582 | 57,954 |
Net income attributable to common stockholders | $ 44 | $ 22 |
Weighted average number of shares of common stock outstanding (in 000's): | ||
Basic (in shares) | 123,998 | 57,619 |
Diluted (in shares) | 125,582 | 57,954 |
Earnings per share attributable to common stockholders: | ||
Basic (in dollars per share) | $ 0.36 | $ 0.38 |
Diluted (in dollars per share) | $ 0.35 | $ 0.38 |
Restricted Stock Units (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) | 1,584 | 335 |
SIGNIFICANT ACCOUNTING POLICI52
SIGNIFICANT ACCOUNTING POLICIES - Recent accounting pronouncements (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Recent Accounting Pronouncements | ||
Income tax benefit | $ 25 | $ 13 |
ASU 2016-09 | ||
Recent Accounting Pronouncements | ||
Income tax benefit | (1) | |
ILG | ||
Recent Accounting Pronouncements | ||
Income tax benefit | $ (1) |
BUSINESS COMBINATION (Details)
BUSINESS COMBINATION (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | May 11, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 |
Pro forma financial information (unaudited) | ||||
Federal statutory rate (as a percent) | 35.00% | |||
Vistana | ||||
BUSINESS COMBINATIONS | ||||
Percentage of voting equity interests | 100.00% | |||
Issuance of common stock in connection with the Vistana acquisition (in shares) | 72.4 | |||
Issuance of common stock in connection with the Vistana acquisition | $ 1,000 | |||
Stock price (in dollars per share) | $ 14.24 | |||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | ||||
Cash | $ 45 | $ 45 | $ 45 | |
Vacation ownership inventory | 221 | 228 | 228 | |
Vacation ownership mortgages receivable | 712 | 693 | 693 | |
Other current assets | 143 | 144 | 144 | |
Intangible assets | 241 | 238 | 238 | |
Property plant and equipment | 465 | 455 | 455 | |
Other non-current assets | 24 | 15 | 15 | |
Deferred revenue | (60) | (64) | (64) | |
Securitized debt | (154) | (154) | (154) | |
Other current liabilities | (187) | (176) | (176) | |
Other noncurrent liabilities | (98) | (100) | (100) | |
Gain on bargain purchase | (197) | (163) | (163) | |
Net assets acquired | 1,155 | 1,161 | 1,161 | |
Dividend payments to noncontrolling interest | $ 24 | |||
Adjustments to PPA | ||||
Vacation ownership inventory | 7 | |||
Vacation ownership mortgages receivable | (19) | |||
Other current assets | 1 | |||
Intangibles | (3) | |||
Property plant and equipment | (10) | |||
Other non-current assets | (9) | |||
Deferred revenue | (4) | |||
Other current liabilities | 11 | |||
Other non-current liabilities | (2) | |||
Gain on bargain purchase | 34 | |||
Net assets acquired | 6 | |||
Revenue | 266 | |||
Net income | $ 22 | |||
Pro forma financial information (unaudited) | ||||
Federal statutory rate (as a percent) | 37.20% | |||
Revenue | $ 452 | $ 431 | ||
Net income attributable to common stockholders | $ 44 | $ 37 | ||
Earnings per share: | ||||
Basic | $ 0.36 | $ 0.29 | ||
Diluted | $ 0.35 | $ 0.29 | ||
Vistana | Resort Management Contracts | ||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | ||||
Intangible assets | $ 118 | 118 | ||
Adjustments to PPA | ||||
Useful life | 26 years | |||
Vistana | Customer relationships | ||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | ||||
Intangible assets | $ 119 | 119 | ||
Adjustments to PPA | ||||
Useful life | 25 years | |||
Vistana | Other | ||||
Allocation of total acquisition cost to the assets acquired and liabilities assumed | ||||
Intangible assets | $ 1 | $ 1 | ||
Vistana | Other | Maximum | ||||
Adjustments to PPA | ||||
Useful life | 1 year |
RESTRICTED CASH (Details)
RESTRICTED CASH (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Restricted cash | ||
Escrow deposits on vacation ownership products | $ 38 | $ 67 |
Securitization VIEs | 16 | 34 |
Other | 16 | 17 |
Total restricted cash | $ 70 | $ 118 |
VACATION OWNERSHIP MORTGAGES 55
VACATION OWNERSHIP MORTGAGES RECEIVABLE - Carrying amounts and Accretable yield (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | $ 740 | |
Less: allowance for loan impairment and losses | (29) | $ (22) |
Net vacation ownership mortgages receivable | 711 | 719 |
Accretable yield expected to be collected over the carrying amount | ||
Balance, beginning of period | 157 | |
Accretion | (15) | |
Reclassification between nonaccretable difference | 1 | |
Balance, end of period | 143 | |
Nonaccretable difference, end of period balance | 36 | |
Acquired vacation | ||
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | 502 | 546 |
Less: allowance for loan impairment and losses | (2) | |
Net vacation ownership mortgages receivable | 500 | |
Expected remaining principal payment | 419 | 466 |
Originated vacation | ||
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | 240 | 195 |
Less: allowance for loan impairment and losses | (29) | (22) |
Securitized | ||
Vacation ownership mortgages receivable | ||
Net vacation ownership mortgages receivable | 412 | 429 |
Securitized | Acquired vacation | ||
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | 398 | 419 |
Net vacation ownership mortgages receivable | 398 | |
Securitized | Originated vacation | ||
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | 16 | 11 |
Less: allowance for loan impairment and losses | (2) | (1) |
Net vacation ownership mortgages receivable | 14 | |
Unsecuritized | ||
Vacation ownership mortgages receivable | ||
Net vacation ownership mortgages receivable | 299 | 290 |
Unsecuritized vacation ownership receivables not eligible for securitization | 9 | |
Cash collateral | 19 | |
Unsecuritized | Acquired vacation | ||
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | 104 | 127 |
Less: allowance for loan impairment and losses | (2) | |
Net vacation ownership mortgages receivable | 102 | |
Unsecuritized | Originated vacation | ||
Vacation ownership mortgages receivable | ||
Vacation ownership mortgages receivable | 224 | 184 |
Less: allowance for loan impairment and losses | (27) | $ (21) |
Net vacation ownership mortgages receivable | $ 197 |
VACATION OWNERSHIP MORTGAGES 56
VACATION OWNERSHIP MORTGAGES RECEIVABLE - Schedule of maturities (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Schedule of maturities for vacation ownership mortgages receivable | ||
2,018 | $ 75 | |
2,019 | 68 | |
2,020 | 68 | |
2,021 | 69 | |
2,022 | 70 | |
2022 and thereafter | 310 | |
Total | 740 | |
Plus: net premium on acquired loans | 82 | |
Less: allowance for losses | (29) | $ (22) |
Net vacation ownership mortgages receivable | $ 711 | 719 |
Stated interest rates | 13.40% | |
Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | $ 502 | 546 |
Less: allowance for losses | (2) | |
Net vacation ownership mortgages receivable | $ 500 | |
Stated interest rates | 13.40% | |
Expected remaining principal payment | $ 419 | 466 |
Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | 240 | 195 |
Less: allowance for losses | $ (29) | (22) |
Stated interest rates | 13.50% | |
Minimum | Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Stated interest rates | 9.90% | |
Minimum | Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Stated interest rates | 10.90% | |
Maximum | Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Stated interest rates | 15.90% | |
Maximum | Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Stated interest rates | 15.90% | |
Receivables Acquired with Deteriorated Credit Quality | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | $ 660 | |
Securitized | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Net vacation ownership mortgages receivable | 412 | 429 |
Securitized | Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
2,018 | 43 | |
2,019 | 42 | |
2,020 | 42 | |
2,021 | 41 | |
2,022 | 38 | |
2022 and thereafter | 116 | |
Total | 398 | 419 |
Plus: net premium on acquired loans | 76 | |
Net vacation ownership mortgages receivable | 398 | |
Securitized | Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
2,018 | 2 | |
2,019 | 1 | |
2,020 | 1 | |
2,021 | 1 | |
2,022 | 2 | |
2022 and thereafter | 9 | |
Total | 16 | 11 |
Less: allowance for losses | (2) | (1) |
Net vacation ownership mortgages receivable | $ 14 | |
Stated interest rates | 13.50% | |
Securitized | Receivables Acquired with Deteriorated Credit Quality | Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | $ 322 | |
Securitized | Receivables Acquired with Deteriorated Credit Quality | Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | 16 | |
Unsecuritized | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Net vacation ownership mortgages receivable | 299 | 290 |
Unsecuritized | Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
2,018 | 12 | |
2,019 | 11 | |
2,020 | 10 | |
2,021 | 10 | |
2,022 | 11 | |
2022 and thereafter | 44 | |
Total | 104 | 127 |
Plus: net premium on acquired loans | 6 | |
Less: allowance for losses | (2) | |
Net vacation ownership mortgages receivable | 102 | |
Unsecuritized | Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
2,018 | 18 | |
2,019 | 14 | |
2,020 | 15 | |
2,021 | 17 | |
2,022 | 19 | |
2022 and thereafter | 141 | |
Total | 224 | 184 |
Less: allowance for losses | (27) | $ (21) |
Net vacation ownership mortgages receivable | 197 | |
Unsecuritized | Receivables Acquired with Deteriorated Credit Quality | Acquired vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | 98 | |
Unsecuritized | Receivables Acquired with Deteriorated Credit Quality | Originated vacation | ||
Schedule of maturities for vacation ownership mortgages receivable | ||
Total | $ 224 |
VACATION OWNERSHIP MORTGAGES 57
VACATION OWNERSHIP MORTGAGES RECEIVABLE - Collectabiltity (Details) $ in Millions | Mar. 31, 2017USD ($)item | Dec. 31, 2016USD ($) |
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Allowance for loan losses | $ 29 | $ 22 |
Weighted average FICO score within originated loan pool | item | 712 | |
Average estimated rate of default for all outstanding loans | 10.40% | |
Vacation ownership mortgages receivable, gross | $ 740 | |
Receivables | 84 | 87 |
Greater than 700 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 374 | |
600 to 699 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 249 | |
Less than 600 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 19 | |
No Score | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 98 | |
Westin | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 38 | |
Westin | Greater than 700 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 21 | |
Westin | 600 to 699 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 14 | |
Westin | Less than 600 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 2 | |
Westin | No Score | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 1 | |
Sheraton | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 385 | |
Sheraton | Greater than 700 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 163 | |
Sheraton | 600 to 699 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 145 | |
Sheraton | Less than 600 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 13 | |
Sheraton | No Score | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 64 | |
Hyatt | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 307 | |
Hyatt | Greater than 700 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 184 | |
Hyatt | 600 to 699 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 89 | |
Hyatt | Less than 600 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 4 | |
Hyatt | No Score | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 30 | |
Other | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 10 | |
Other | Greater than 700 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 6 | |
Other | 600 to 699 | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 1 | |
Other | No Score | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Vacation ownership mortgages receivable, gross | 3 | |
Acquired vacation | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Allowance for loan losses | 2 | |
Vacation ownership mortgages receivable, gross | 502 | 546 |
Originated vacation | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Allowance for loan losses | 29 | 22 |
Vacation ownership mortgages receivable, gross | 240 | 195 |
Receivables | 240 | 195 |
Receivables Past Due | 8 | 5 |
Originated vacation | Current | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Receivables current | 232 | 190 |
Originated vacation | 30-59 Days | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Receivables Past Due | 3 | 2 |
Originated vacation | 60-89 Days | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Receivables Past Due | 2 | 1 |
Originated vacation | 90-119 Days | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Receivables Past Due | 1 | 1 |
Originated vacation | Defaulted | ||
Allowance for Vacation Ownership Mortgage Receivable Losses | ||
Receivables Past Due | $ 2 | $ 1 |
VACATION OWNERSHIP INVENTORY (D
VACATION OWNERSHIP INVENTORY (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
VACATION OWNERSHIP INVENTORY | ||
Completed unsold vacation ownership interests (Current asset) | $ 295 | $ 197 |
Vacation ownership products construction in process (non-current asset) | 134 | 189 |
Total vacation ownership inventory | $ 429 | $ 386 |
INVESTMENTS IN UNCONSOLIDATED59
INVESTMENTS IN UNCONSOLIDATED ENTITIES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Carrying value of our investments in unconsolidated entities | |||
Equity income from investments in unconsolidated entities | $ 1 | $ 1 | |
Carrying value of investments in unconsolidated entities | $ 60 | $ 59 | |
Maui Timeshare Venture, LLC | |||
Carrying value of our investments in unconsolidated entities | |||
Ownership percentages of investments in unconsolidated entities | 33.00% | ||
Carrying value of investments in unconsolidated entities | $ 43 | 42 | |
Harborside Investments | |||
Carrying value of our investments in unconsolidated entities | |||
Ownership percentages of investments in unconsolidated entities | 50.00% | ||
Carrying value of investments in unconsolidated entities | $ 12 | 12 | |
Other | |||
Carrying value of our investments in unconsolidated entities | |||
Carrying value of investments in unconsolidated entities | $ 5 | $ 5 | |
Other | Minimum | |||
Carrying value of our investments in unconsolidated entities | |||
Ownership percentages of investments in unconsolidated entities | 25.00% | ||
Other | Maximum | |||
Carrying value of our investments in unconsolidated entities | |||
Ownership percentages of investments in unconsolidated entities | 50.00% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
PROPERTY AND EQUIPMENT | ||
Less: accumulated depreciation and amortization | $ (183) | $ (167) |
Total property and equipment, net | 604 | 580 |
Computer Equipment | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 38 | 37 |
Capitalized Software | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 154 | 150 |
Land, Buildings and Leasehold Improvements | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 372 | 368 |
Land held for development | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 55 | 56 |
Furniture and Other Equipment | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 54 | 52 |
Construction in Progress [Member] | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 65 | 47 |
Other projects in progress | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 49 | $ 37 |
GOODWILL AND OTHER INTANGIBLE61
GOODWILL AND OTHER INTANGIBLE ASSETS - Changes in carrying amount of goodwill (Details) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | |
Goodwill | ||
Number of reporting segments | item | 2 | |
Changes in carrying amount of goodwill | ||
Balance at the beginning of the period | $ 558 | $ 561 |
Foreign Currency Translation | 1 | (3) |
Balance at the end of the period | 559 | 558 |
Exchange reporting unit | ||
Changes in carrying amount of goodwill | ||
Balance at the beginning of the period | 496 | 496 |
Balance at the end of the period | 496 | 496 |
Rental reporting unit | ||
Changes in carrying amount of goodwill | ||
Balance at the beginning of the period | 20 | 20 |
Balance at the end of the period | 20 | 20 |
VO management reporting unit | ||
Changes in carrying amount of goodwill | ||
Balance at the beginning of the period | 35 | 38 |
Foreign Currency Translation | 1 | (3) |
Balance at the end of the period | 36 | 35 |
VO sales and financing reporting unit | ||
Changes in carrying amount of goodwill | ||
Balance at the beginning of the period | 7 | 7 |
Balance at the end of the period | $ 7 | $ 7 |
GOODWILL AND OTHER INTANGIBLE62
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangibles assets, net (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Intangibles assets, net | ||
Intangible assets with indefinite lives | $ 114 | $ 114 |
Intangible assets with definite lives, net | 335 | 339 |
Total intangible assets, net | 449 | 453 |
Change in indefinite-lived intangible assets | (4) | |
Resort Management Contracts | ||
Intangibles assets, net | ||
Intangible assets with indefinite lives | 70 | 70 |
Trade Names and Trademarks | ||
Intangibles assets, net | ||
Intangible assets with indefinite lives | $ 44 | $ 44 |
GOODWILL AND OTHER INTANGIBLE63
GOODWILL AND OTHER INTANGIBLE ASSETS - Itangible assets with definite lives (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Other intangible assets | |||
Cost | $ 656 | $ 656 | |
Accumulated Amortization | (321) | (317) | |
Net | 335 | 339 | |
Amortization expense for intangible assets | 5 | $ 3 | |
Customer relationships | |||
Other intangible assets | |||
Cost | 287 | 287 | |
Accumulated Amortization | (138) | (137) | |
Net | 149 | 150 | |
Purchase Agreements | |||
Other intangible assets | |||
Cost | 76 | 76 | |
Accumulated Amortization | (76) | (76) | |
Resort Management Contracts | |||
Other intangible assets | |||
Cost | 245 | 245 | |
Accumulated Amortization | (61) | (58) | |
Net | 184 | 187 | |
Technology | |||
Other intangible assets | |||
Cost | 25 | 25 | |
Accumulated Amortization | (25) | (25) | |
Other | |||
Other intangible assets | |||
Cost | 23 | 23 | |
Accumulated Amortization | (21) | (21) | |
Net | $ 2 | $ 2 |
GOODWILL AND OTHER INTANGIBLE64
GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization expense for the next five years (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Amortization of intangible assets | ||
2,018 | $ 20 | |
2,019 | 20 | |
2,020 | 19 | |
2,021 | 19 | |
2,022 | 16 | |
2023 and thereafter | 241 | |
Net | $ 335 | $ 339 |
CONSOLIDATED VARIABLE INTERES65
CONSOLIDATED VARIABLE INTEREST ENTITIES (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | |
Assets | ||
Restricted cash and cash equivalents | $ 66 | $ 114 |
Vistana's outstanding securitization transactions | ||
Consolidated variable interest entities | ||
Number of outstanding securitization transactions | item | 3 | |
Excess cash flows | $ 11 | |
Assets | ||
Restricted cash and cash equivalents | 16 | 34 |
Interest receivable | 3 | 3 |
Vacation ownership notes receivable, net | 412 | 429 |
Total | 431 | 466 |
Liabilities | ||
Interest payable | 1 | 1 |
Securitized debt | 398 | 430 |
Total | $ 399 | $ 431 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||
General accrued expenses | $ 72 | $ 62 |
Accrued other taxes | 21 | 13 |
Customer deposits | 80 | 71 |
Accrued membership related costs | 23 | 18 |
Accrued construction costs | 19 | 16 |
Member deposits | 7 | 7 |
Accrued expenses and other current liabilities | $ 222 | $ 187 |
DEFERRED REVENUE (Details)
DEFERRED REVENUE (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Deferred membership-related revenue | $ 203 | $ 157 |
Other | 9 | 9 |
Total | $ 212 | $ 166 |
Minimum | ||
Membership period | 1 year | |
Maximum | ||
Membership period | 5 years |
SECURITIZED VACATION OWNERSHI68
SECURITIZED VACATION OWNERSHIP DEBT (Details) - USD ($) $ in Millions | Sep. 20, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Securitized vacation ownership debt | ||||
Unamortized debt issuance costs | $ (9) | $ (10) | ||
Escrow Deposit | 38 | $ 67 | ||
Interest expense | $ 5 | $ 6 | ||
Revolving Credit Facility | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 2.74% | 2.27% | ||
Unamortized debt issuance costs | $ (4) | $ (4) | ||
Vistana's outstanding securitization transactions | ||||
Securitized vacation ownership debt | ||||
Total securitized vacation ownership debt | 398 | 430 | ||
Securitization of asset backed notes | $ 375 | |||
Overall weighted average coupon rate (in percentage) | 2.56% | |||
Advance rate | 96.50% | |||
Repayment of outstanding balance | 19 | |||
Interest expense | 3 | |||
Vistana's outstanding securitization transactions | Revolving Credit Facility | ||||
Securitized vacation ownership debt | ||||
Maximum borrowing capacity | $ 600 | |||
Vistana's outstanding securitization transactions | 2010 securitization, interest rates ranging from 3.65% to 4.75%, maturing 2021 | ||||
Securitized vacation ownership debt | ||||
Repayment of outstanding balance | 33 | |||
Vistana's outstanding securitization transactions | 2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2025 | ||||
Securitized vacation ownership debt | ||||
Securitized vacation ownership debt | 40 | 44 | ||
Vistana's outstanding securitization transactions | 2012 securitization, interest rates ranging from 2.00% to 2.76%, maturing 2023 | ||||
Securitized vacation ownership debt | ||||
Securitized vacation ownership debt | 42 | 46 | ||
Vistana's outstanding securitization transactions | 2016 securitization, interest rates ranging from 2.54% to 2.74%, maturing 2024 | ||||
Securitized vacation ownership debt | ||||
Securitized vacation ownership debt | 320 | 345 | ||
Unamortized debt issuance costs | $ (4) | $ (5) | ||
Vistana's outstanding securitization transactions | Class A notes | ||||
Securitized vacation ownership debt | ||||
Securitization of asset backed notes | 346 | |||
Vistana's outstanding securitization transactions | Class B notes | ||||
Securitized vacation ownership debt | ||||
Securitization of asset backed notes | $ 29 | |||
Vistana's outstanding securitization transactions | Minimum | 2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2025 | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 3.67% | |||
Vistana's outstanding securitization transactions | Minimum | 2012 securitization, interest rates ranging from 2.00% to 2.76%, maturing 2023 | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 2.00% | |||
Vistana's outstanding securitization transactions | Minimum | 2016 securitization, interest rates ranging from 2.54% to 2.74%, maturing 2024 | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 2.54% | |||
Vistana's outstanding securitization transactions | Maximum | 2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2025 | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 4.82% | |||
Vistana's outstanding securitization transactions | Maximum | 2012 securitization, interest rates ranging from 2.00% to 2.76%, maturing 2023 | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 2.76% | |||
Vistana's outstanding securitization transactions | Maximum | 2016 securitization, interest rates ranging from 2.54% to 2.74%, maturing 2024 | ||||
Securitized vacation ownership debt | ||||
Stated interest rate (as a percent) | 2.74% |
LONG-TERM DEBT - Long term debt
LONG-TERM DEBT - Long term debt table (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | Apr. 10, 2015 |
LONG-TERM DEBT | |||
Unamortized debt issuance costs | $ (9) | $ (10) | |
Total long-term debt, net of unamortized debt issuance costs | 601 | 580 | |
5.625% Senior Notes | |||
LONG-TERM DEBT | |||
5.625% senior notes | 350 | 350 | $ 350 |
Unamortized debt issuance costs | $ (5) | $ (6) | |
Stated interest rate (as a percent) | 5.625% | 5.625% | 5.625% |
Revolving Credit Facility | |||
LONG-TERM DEBT | |||
Revolving credit facility | $ 260 | $ 240 | |
Unamortized debt issuance costs | $ (4) | $ (4) | |
Stated interest rate (as a percent) | 2.74% | 2.27% |
LONG-TERM DEBT - Narrative (Det
LONG-TERM DEBT - Narrative (Details) $ in Millions | 3 Months Ended | |||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | Apr. 10, 2015USD ($) | |
Senior Secured Credit Facility and Covenants | ||||
Unamortized debt issuance costs | $ 9 | $ 10 | ||
Accumulated amortization on debt issuance costs | 5 | 5 | ||
Interest expense | 5 | $ 6 | ||
Interest expense capitalized | $ 2 | |||
Minimum fixed charge coverage ratio | 2 | |||
5.625% Senior Notes | ||||
Senior Secured Credit Facility and Covenants | ||||
Unamortized debt issuance costs | $ 5 | 6 | ||
5.625% senior notes | $ 350 | $ 350 | $ 350 | |
Stated interest rate (as a percent) | 5.625% | 5.625% | 5.625% | |
Redemption price ( as a percent) | 104.219% | |||
Issuer and subsidiary guarantors | 5.625% Senior Notes | ||||
Senior Secured Credit Facility and Covenants | ||||
Ownership interest ( as a percent) | 100.00% | |||
Revolving Credit Facility | ||||
Senior Secured Credit Facility and Covenants | ||||
Amount outstanding | $ 260 | $ 240 | ||
Available to be drawn | $ 328 | |||
Commitment fee (as a percent) | 0.275% | |||
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% | |||
Unamortized debt issuance costs | $ 4 | $ 4 | ||
Stated interest rate (as a percent) | 2.74% | 2.27% | ||
Revolving Credit Facility | Financial Covenant | ||||
Senior Secured Credit Facility and Covenants | ||||
Consolidated leverage ratio of debt over EBITDA | 0.80 | |||
Consolidated interest coverage ratio | 16.35 | |||
Revolving Credit Facility | Minimum | ||||
Senior Secured Credit Facility and Covenants | ||||
Commitment fee (as a percent) | 0.25% | |||
Revolving Credit Facility | Minimum | Financial Covenant | ||||
Senior Secured Credit Facility and Covenants | ||||
Consolidated interest coverage ratio | 3 | |||
Revolving Credit Facility | Maximum | ||||
Senior Secured Credit Facility and Covenants | ||||
Commitment fee (as a percent) | 0.40% | |||
Revolving Credit Facility | Maximum | Financial Covenant | ||||
Senior Secured Credit Facility and Covenants | ||||
Consolidated leverage ratio of debt over EBITDA | 3.25 | |||
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) | 1.50% | |||
Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | ||||
Senior Secured Credit Facility and Covenants | ||||
Reference rate | LIBOR | |||
Applicable margin (as a percent) | 1.75% | |||
Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Minimum | ||||
Senior Secured Credit Facility and Covenants | ||||
Applicable margin (as a percent) | 1.25% | |||
Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Maximum | ||||
Senior Secured Credit Facility and Covenants | ||||
Applicable margin (as a percent) | 2.50% |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Apr. 10, 2015 | |
Fair Value of Financial Instruments | ||||
Restricted cash and cash equivalents | $ 66,000 | $ 114,000 | ||
Debt issuance costs | 9,000 | 10,000 | ||
5.625% Senior Notes | ||||
Fair Value of Financial Instruments | ||||
Senior notes | (350,000) | (350,000) | $ (350,000) | |
Debt issuance costs | 5,000 | 6,000 | ||
Revolving Credit Facility | ||||
Fair Value of Financial Instruments | ||||
Revolving credit facility | (260,000) | (240,000) | ||
Debt issuance costs | 4,000 | 4,000 | ||
HVO | ||||
Fair Value of Financial Instruments | ||||
Investments in marketable securities | 15,000 | 14,000 | ||
Unrealized trading gain | 1,000 | $ 1,000 | ||
Carrying Amount | ||||
Fair Value of Financial Instruments | ||||
Cash and cash equivalents | 171 | 126 | ||
Restricted cash and cash equivalents | 70 | 118 | ||
Financing receivables | 19,000 | 19,000 | ||
Vacation ownership mortgages receivable | 711,000 | 719,000 | ||
Investments in marketable securities | 15,000 | 14,000 | ||
Securitized debt | 398,000 | 430,000 | ||
Revolving credit facility | (256,000) | (236,000) | ||
Senior notes | (345,000) | (344,000) | ||
Carrying Amount | 5.625% Senior Notes | ||||
Fair Value of Financial Instruments | ||||
Debt issuance costs | 5,000 | 6,000 | ||
Carrying Amount | Revolving Credit Facility | ||||
Fair Value of Financial Instruments | ||||
Debt issuance costs | 4,000 | 4,000 | ||
Fair Value | ||||
Fair Value of Financial Instruments | ||||
Cash and cash equivalents | 171 | 126 | ||
Restricted cash and cash equivalents | 70 | 118 | ||
Financing receivables | 19,000 | 19,000 | ||
Vacation ownership mortgages receivable | 735,000 | 737,000 | ||
Investments in marketable securities | 15,000 | 14,000 | ||
Securitized debt | 399,000 | 425,000 | ||
Revolving credit facility | (260,000) | (240,000) | ||
Senior notes | $ (358,000) | $ (361,000) |
EQUITY (Details)
EQUITY (Details) $ / shares in Units, $ in Millions | May 11, 2016USD ($)shares | Nov. 04, 2013USD ($) | May 31, 2017$ / shares | Mar. 31, 2017USD ($)$ / sharesshares | Feb. 28, 2017$ / shares | Jun. 30, 2009shares | Mar. 31, 2017USD ($)item$ / sharesshares | Mar. 31, 2016$ / shares | Dec. 31, 2016USD ($)$ / sharesshares | Nov. 30, 2016USD ($) |
Equity | ||||||||||
Authorized shares of common stock | shares | 300,000,000 | 300,000,000 | 300,000,000 | |||||||
Par value of common stock (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||||
Shares of common stock issued | shares | 133,822,999 | 133,822,999 | 133,545,864 | |||||||
Shares of common stock outstanding | shares | 124,800,000 | 124,800,000 | 124,700,000 | |||||||
Shares held as treasury stock | shares | 9,037,627 | 9,037,627 | 8,878,489 | |||||||
Authorized shares of preferred stock | shares | 25,000,000 | 25,000,000 | 25,000,000 | |||||||
Par value of preferred stock (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||||
Preferred stock, issued shares | shares | 0 | 0 | 0 | |||||||
Preferred stock, outstanding shares | shares | 0 | 0 | 0 | |||||||
Minimum number of series to issue preferred stock | item | 1 | |||||||||
Dividends declared per common share (in dollars per share) | $ / shares | $ 0.15 | $ 0.15 | $ 0.12 | |||||||
Cash dividend paid | $ | $ 19 | |||||||||
Stockholder Rights Plan | ||||||||||
Rights per common stock share declared as dividend | shares | 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% | |||||||||
Equity and Share Repurchase Program | ||||||||||
Common stock repurchased | $ | $ 3 | |||||||||
Cost of shares of common stock repurchased | $ | 3 | |||||||||
Stockholders' Equity Attributable to Noncontrolling Interest | $ | 27 | $ 27 | $ 26 | |||||||
November 2016 Repurchase Program | ||||||||||
Equity and Share Repurchase Program | ||||||||||
Amount authorized under share repurchase program | $ | $ 50 | |||||||||
Number of shares of common stock repurchased | shares | 159,000 | |||||||||
Common stock repurchased | $ | $ 3 | |||||||||
Remaining availability for future repurchases of common stock | $ | 46 | 46 | 49 | |||||||
CLC | ||||||||||
Equity and Share Repurchase Program | ||||||||||
Premium upon exercise of share options to settle loan (as a percent) | 20.00% | |||||||||
CLC | Convertible Secured Loan Facility | ||||||||||
Equity and Share Repurchase Program | ||||||||||
Convertible secured loan available, subject to certain conditions being met | $ | $ 15 | |||||||||
CLC | VRI Europe Limited | ||||||||||
Equity and Share Repurchase Program | ||||||||||
Equity of VRIE issued as consideration for acquisition (as a percent) | 24.50% | |||||||||
Ownership interest ( as a percent) | 75.50% | |||||||||
Stockholders' Equity Attributable to Noncontrolling Interest | $ | $ 27 | $ 27 | $ 26 | |||||||
Period from acquisition during which parties have agreed not to transfer their interests | 5 years | |||||||||
Vistana | ||||||||||
Equity | ||||||||||
Common stock issued (in shares) | shares | 72,400,000 | |||||||||
Common stock value | $ | $ 1,000 | |||||||||
Subsequent Event | ||||||||||
Equity | ||||||||||
Dividends declared per common share (in dollars per share) | $ / shares | $ 0.15 |
BENEFIT PLANS (Details)
BENEFIT PLANS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
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% | |
Net matching contributions | $ 3 | $ 1 |
Deferred compensation plan | ||
Vesting percentage under deferred compensation plan | 100.00% | |
Shares of common stock reserved for issuance pursuant to deferred compensation plan | 100,000 | |
Fair value of investments in the Rabbi Trust | $ 15 | |
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% | |
Vistana | ||
Retirement savings plan qualified under Section 401(k) of the Internal Revenue Code and other various benefit plans | ||
Employer contribution against each dollar contributed by employee (as a percent) | 100.00% | |
Employer's maximum contribution of participant's eligible earnings (as a percent) | 1.00% |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2017USD ($)item$ / sharesshares | Mar. 31, 2016USD ($)$ / sharesshares | |
STOCK-BASED COMPENSATION | ||
Per unit grant date fair value (in dollars per unit) | $ / shares | $ 20.24 | |
Non-cash compensation expense | $ | $ 6 | $ 3 |
Unrecognized compensation expense | ||
Unrecognized compensation cost, net of estimated forfeitures | $ | $ 39 | |
Weighted average period for recognition of unrecognized compensation expense | 2 years 4 months 24 days | |
Restricted Stock Units (RSUs) | ||
STOCK-BASED COMPENSATION | ||
New awards granted (in shares) | 870,000 | 750,000 |
Award vesting period | 3 years | 4 years |
Restricted Stock Units (RSUs) | Cliff vesting | ||
STOCK-BASED COMPENSATION | ||
New awards granted (in shares) | 229,000 | 140,000 |
Award vesting period | 3 years | 3 years |
Restricted Stock Units (RSUs) | Vesting Based on Performance | ||
STOCK-BASED COMPENSATION | ||
New awards granted (in shares) | 213,000 | 105,000 |
Per unit grant date fair value (in dollars per unit) | $ / shares | $ 28.23 | $ 13.13 |
Number of peer groups for estimating total shareholder return ranking | item | 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 | |
Restricted Stock Units (RSUs) | Vesting Based on Performance | Minimum | ||
STOCK-BASED COMPENSATION | ||
Percentage of target shares which can be earned by the participants (as a percent) | 0.00% | 0.00% |
Restricted Stock Units (RSUs) | Vesting Based on Performance | Maximum | ||
STOCK-BASED COMPENSATION | ||
Percentage of target shares which can be earned by the participants (as a percent) | 200.00% | 200.00% |
2013 Stock and Incentive Compensation Plan | ||
STOCK-BASED COMPENSATION | ||
Remaining shares available for future issuance | 3,000,000 |
STOCK-BASED COMPENSATION - Non-
STOCK-BASED COMPENSATION - Non-cash stock-based compensation expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Non-cash stock-based compensation expense | ||
Non-cash compensation expense before income taxes | $ 6 | $ 3 |
Cost of Sales | ||
Non-cash stock-based compensation expense | ||
Non-cash compensation expense before income taxes | 1 | |
Selling and Marketing Expense | ||
Non-cash stock-based compensation expense | ||
Non-cash compensation expense before income taxes | 1 | |
General and Administrative Expense | ||
Non-cash stock-based compensation expense | ||
Non-cash compensation expense before income taxes | $ 4 | $ 3 |
STOCK-BASED COMPENSATION - RSU
STOCK-BASED COMPENSATION - RSU activity (Details) shares in Millions | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Shares | |
Outstanding at the beginning of the period (in shares) | shares | 3 |
Granted (in shares) | shares | 1 |
Vested (in shares) | shares | (1) |
Outstanding at the end of the period (in shares) | shares | 3 |
Weighted-Average Grant Date Fair Value | |
Outstanding at the beginning of the period (in dollars per share) | $ 16.71 |
Granted (in dollars per share) | 20.24 |
Vested (in dollars per share) | 18.18 |
Forfeited (in dollars per share) | 32.30 |
Outstanding at the end of the period (in dollars per share) | $ 17.25 |
INCOME TAXES - (Details)
INCOME TAXES - (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income taxes | ||
Income tax provision | $ 25 | $ 13 |
Effective tax rate (as a percent) | 35.90% | 35.70% |
Federal statutory rate (as a percent) | 35.00% | |
ILG | ||
Income taxes | ||
Income tax provision | $ (1) |
SEGMENT INFORMATION - Reportabl
SEGMENT INFORMATION - Reportable segments (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
SEGMENT INFORMATION | |||
Number of operating segments which are also reportable segments | item | 2 | ||
Sales of vacation ownership products, net | $ 110 | $ 9 | |
Consumer financing revenue | 21 | 2 | |
Cost reimbursement revenue | 88 | 37 | |
Total revenues | 452 | 186 | |
Cost of service and membership related sales | 32 | 24 | |
Cost of sales of vacation ownership products | 27 | 6 | |
Cost of rental and ancillary services | 78 | 14 | |
Cost of consumer financing | 6 | ||
Cost reimbursements | 88 | 37 | |
Total cost of sales | 231 | 81 | |
Royalty fee expense | 10 | 2 | |
Selling and marketing expense | 73 | 17 | |
General and administrative expense | 54 | 38 | |
Amortization expense of intangibles | 5 | 3 | |
Depreciation expense | 15 | 5 | |
Operating expenses | 157 | 65 | |
Operating income | 64 | 40 | |
Total assets | |||
Total assets | 3,404 | $ 3,304 | |
Vacation Ownership | |||
SEGMENT INFORMATION | |||
Resort operations revenue | 58 | 5 | |
Management fee revenue | 30 | 21 | |
Sales of vacation ownership products, net | 110 | 9 | |
Consumer financing revenue | 21 | 2 | |
Cost reimbursement revenue | 62 | 15 | |
Total revenues | 281 | 52 | |
Cost of service and membership related sales | 13 | 8 | |
Cost of sales of vacation ownership products | 27 | 6 | |
Cost of rental and ancillary services | 52 | 2 | |
Cost of consumer financing | 6 | ||
Cost reimbursements | 62 | 15 | |
Total cost of sales | 160 | 31 | |
Royalty fee expense | 10 | 1 | |
Selling and marketing expense | 59 | 3 | |
General and administrative expense | 24 | 14 | |
Amortization expense of intangibles | 2 | 1 | |
Depreciation expense | 10 | ||
Operating income | 16 | 2 | |
Total assets | |||
Total assets | 2,286 | 2,220 | |
Exchange and Rental | |||
SEGMENT INFORMATION | |||
Transaction Revenue | 59 | 58 | |
Membership fee revenue | 35 | 30 | |
Ancillary member revenue | 2 | 2 | |
Total member revenue | 96 | 90 | |
Club rental revenue | 30 | 3 | |
Other revenue | 5 | 6 | |
Rental management revenue | 14 | 13 | |
Cost reimbursement revenue | 26 | 22 | |
Total revenues | 171 | 134 | |
Cost of service and membership related sales | 19 | 16 | |
Cost of sales of vacation ownership products | 26 | 12 | |
Cost reimbursements | 26 | 22 | |
Total cost of sales | 71 | 50 | |
Royalty fee expense | 1 | ||
Selling and marketing expense | 14 | 14 | |
General and administrative expense | 30 | 24 | |
Amortization expense of intangibles | 3 | 2 | |
Depreciation expense | 5 | 5 | |
Operating income | 48 | $ 38 | |
Total assets | |||
Total assets | $ 1,118 | $ 1,084 |
SEGMENT INFORMATION - Geographi
SEGMENT INFORMATION - Geographic Information (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($)item | Dec. 31, 2016USD ($) | |
Geographic Information | |||
Number of other countries in which entity operates | item | 14 | ||
Revenue: | |||
Revenue | $ 452 | $ 186 | |
Long-lived assets (excluding goodwill and intangible assets): | |||
Total long-lived assets | $ 604 | $ 580 | |
Minimum | |||
Geographic Information | |||
Number of countries from which revenue is sourced | item | 100 | 100 | |
UNITED STATES | |||
Revenue: | |||
Revenue | $ 380 | $ 156 | |
Long-lived assets (excluding goodwill and intangible assets): | |||
Total long-lived assets | 479 | 469 | |
Mexico | |||
Long-lived assets (excluding goodwill and intangible assets): | |||
Total long-lived assets | 122 | 107 | |
Europe | |||
Revenue: | |||
Revenue | 16 | 17 | |
Long-lived assets (excluding goodwill and intangible assets): | |||
Total long-lived assets | 3 | $ 4 | |
All Other Countries | |||
Revenue: | |||
Revenue | $ 56 | $ 13 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Lease Commitments (Details) $ in Millions | Mar. 31, 2017USD ($) |
Contractual obligations payment schedule | |
Total | $ 1,017 |
Up to 1 year | 89 |
1 - 3 years | 119 |
3 - 5 years | 350 |
More than 5 years | 459 |
Debt principal | |
Contractual obligations payment schedule | |
Total | 610 |
3 - 5 years | 260 |
More than 5 years | 350 |
Debt interest (projected) | |
Contractual obligations payment schedule | |
Total | 153 |
Up to 1 year | 23 |
1 - 3 years | 55 |
3 - 5 years | 49 |
More than 5 years | 26 |
Purchase obligations and other commitments | |
Contractual obligations payment schedule | |
Total | 82 |
Up to 1 year | 34 |
1 - 3 years | 30 |
3 - 5 years | 18 |
Vacation ownership develoment commitments | |
Contractual obligations payment schedule | |
Total | 11 |
Up to 1 year | 11 |
Operating leases | |
Contractual obligations payment schedule | |
Total | 161 |
Up to 1 year | 21 |
1 - 3 years | 34 |
3 - 5 years | 23 |
More than 5 years | $ 83 |
COMMITMENTS AND CONTINGENCIES81
COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Commitments and Contingencies | |
Amount of guarantees and commitments, year one | $ 89 |
Vacation ownership projects under development | 11 |
Letter of credit outstanding amount | 12 |
Guarantees, surety bonds, and letters of credit | |
Commitments and Contingencies | |
Guarantees and commitments amount | 115 |
Amount of guarantees and commitments, year one | 78 |
Guarantees construction loan | |
Commitments and Contingencies | |
Guarantees and commitments amount | 37 |
Guarantees | |
Commitments and Contingencies | |
Guarantees and commitments amount | $ 35 |
Guarantees | Minimum | |
Commitments and Contingencies | |
Notice period for termination of lease | 60 days |
Guarantees | Maximum | |
Commitments and Contingencies | |
Notice period for termination of lease | 90 days |
SUPPLEMENTAL GUARANTOR INFORM82
SUPPLEMENTAL GUARANTOR INFORMATION - Balance Sheet (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Balance Sheet | ||
Current assets | $ 885 | $ 746 |
Property and equipment, net | 604 | 580 |
Goodwill and intangible assets, net | 1,008 | 1,011 |
Other assets | 907 | 967 |
TOTAL ASSETS | 3,404 | 3,304 |
Current liabilities | 578 | 519 |
Other long term liabilities | 601 | 611 |
Long-term debt | 601 | 580 |
Redeemable noncontrolling interest | 1 | 1 |
ILG stockholders' equity | 1,596 | 1,567 |
Noncontrolling interests | 27 | 26 |
TOTAL LIABILITIES AND EQUITY | 3,404 | 3,304 |
Total Eliminations | ||
Balance Sheet | ||
Investments in subsidiaries | (2,808) | (2,298) |
TOTAL ASSETS | (2,808) | (2,298) |
ILG stockholders' equity | (2,808) | (2,298) |
TOTAL LIABILITIES AND EQUITY | (2,808) | (2,298) |
ILG | ||
Balance Sheet | ||
Current assets | 1 | 1 |
Property and equipment, net | 1 | 1 |
Investments in subsidiaries | 672 | 619 |
TOTAL ASSETS | 674 | 621 |
Current liabilities | 2 | 1 |
Intercompany liabilities (receivables)/equity | (924) | (947) |
ILG stockholders' equity | 1,596 | 1,567 |
TOTAL LIABILITIES AND EQUITY | 674 | 621 |
Interval Acquisition Corp | ||
Balance Sheet | ||
Current assets | 3 | 2 |
Goodwill and intangible assets, net | 267 | 267 |
Investments in subsidiaries | 1,356 | 1,289 |
TOTAL ASSETS | 1,626 | 1,558 |
Current liabilities | 9 | 5 |
Long-term debt | 601 | 580 |
Intercompany liabilities (receivables)/equity | 344 | 354 |
ILG stockholders' equity | 672 | 619 |
TOTAL LIABILITIES AND EQUITY | 1,626 | 1,558 |
Guarantor Subsidiaries | ||
Balance Sheet | ||
Current assets | 615 | 491 |
Property and equipment, net | 430 | 420 |
Goodwill and intangible assets, net | 643 | 648 |
Investments in subsidiaries | 780 | 390 |
Other assets | 447 | 461 |
TOTAL ASSETS | 2,915 | 2,410 |
Current liabilities | 387 | 345 |
Other long term liabilities | 275 | 266 |
Intercompany liabilities (receivables)/equity | 896 | 509 |
Redeemable noncontrolling interest | 1 | 1 |
ILG stockholders' equity | 1,356 | 1,289 |
TOTAL LIABILITIES AND EQUITY | 2,915 | 2,410 |
Non-Guarantor Subsidiaries | ||
Balance Sheet | ||
Current assets | 266 | 252 |
Property and equipment, net | 173 | 159 |
Goodwill and intangible assets, net | 98 | 96 |
Other assets | 460 | 506 |
TOTAL ASSETS | 997 | 1,013 |
Current liabilities | 180 | 168 |
Other long term liabilities | 326 | 345 |
Intercompany liabilities (receivables)/equity | (316) | 84 |
ILG stockholders' equity | 780 | 390 |
Noncontrolling interests | 27 | 26 |
TOTAL LIABILITIES AND EQUITY | $ 997 | $ 1,013 |
SUPPLEMENTAL GUARANTOR INFORM83
SUPPLEMENTAL GUARANTOR INFORMATION - Statement of Income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Income | ||
Revenue | $ 452 | $ 186 |
Operating expenses | (388) | (146) |
Interest (expense) income, net | (5) | (6) |
Other income (expense), net | 10 | 1 |
Income tax benefit (provision) | (25) | (13) |
Equity in earnings from unconsolidated entities | 1 | 1 |
Net income | 45 | 23 |
Net income attributable to noncontrolling interests | (1) | (1) |
Net income attributable to common stockholders | 44 | 22 |
Total Eliminations | ||
Statement of Income | ||
Other income (expense), net | (111) | (53) |
Net income | (111) | (53) |
Net income attributable to common stockholders | (111) | (53) |
ILG | ||
Statement of Income | ||
Operating expenses | (2) | (1) |
Other income (expense), net | 45 | 23 |
Income tax benefit (provision) | 1 | |
Net income | 44 | 22 |
Net income attributable to common stockholders | 44 | 22 |
Interval Acquisition Corp | ||
Statement of Income | ||
Interest (expense) income, net | (6) | (7) |
Other income (expense), net | 49 | 27 |
Income tax benefit (provision) | 2 | 3 |
Net income | 45 | 23 |
Net income attributable to common stockholders | 45 | 23 |
Guarantor Subsidiaries | ||
Statement of Income | ||
Revenue | 379 | 160 |
Operating expenses | (333) | (124) |
Interest (expense) income, net | 2 | 1 |
Other income (expense), net | 17 | 3 |
Income tax benefit (provision) | (17) | (14) |
Equity in earnings from unconsolidated entities | 1 | 1 |
Net income | 49 | 27 |
Net income attributable to common stockholders | 49 | 27 |
Non-Guarantor Subsidiaries | ||
Statement of Income | ||
Revenue | 73 | 26 |
Operating expenses | (53) | (21) |
Interest (expense) income, net | (1) | |
Other income (expense), net | 10 | 1 |
Income tax benefit (provision) | (11) | (2) |
Net income | 18 | 4 |
Net income attributable to noncontrolling interests | (1) | (1) |
Net income attributable to common stockholders | $ 17 | $ 3 |
SUPPLEMENTAL GUARANTOR INFORM84
SUPPLEMENTAL GUARANTOR INFORMATION - Statement of Cash Flows (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Cash Flows | ||
Cash flows provided by (used in) operating activities | $ 88 | $ 40 |
Cash flows provided by (used in) investing activities | (22) | (13) |
Cash flows provided by (used in) financing activities | (20) | (21) |
Effect of exchange rate changes on cash and cash equivalents | (1) | (2) |
Cash and cash equivalents at beginning of period | 126 | 93 |
Cash and cash equivalents at end of period | 171 | 97 |
Interval Acquisition Corp | ||
Statement of Cash Flows | ||
Cash flows provided by (used in) operating activities | 1 | 1 |
Cash flows provided by (used in) financing activities | (1) | (1) |
Guarantor Subsidiaries | ||
Statement of Cash Flows | ||
Cash flows provided by (used in) operating activities | 10 | 35 |
Cash flows provided by (used in) investing activities | (17) | (13) |
Cash flows provided by (used in) financing activities | 24 | (15) |
Cash and cash equivalents at beginning of period | 38 | 14 |
Cash and cash equivalents at end of period | 55 | 21 |
Non-Guarantor Subsidiaries | ||
Statement of Cash Flows | ||
Cash flows provided by (used in) operating activities | 77 | 4 |
Cash flows provided by (used in) investing activities | (5) | |
Cash flows provided by (used in) financing activities | (43) | (5) |
Effect of exchange rate changes on cash and cash equivalents | (1) | (2) |
Cash and cash equivalents at beginning of period | 88 | 79 |
Cash and cash equivalents at end of period | $ 116 | $ 76 |