Interval Leisure Group Reports Second Quarter 2011 Results and authorized share repurchase program

Interval Leisure Group (“ILG”)┬áhas announced results for the three months ended June 30, 2011.

SECOND QUARTER 2011 HIGHLIGHTS

– ILG Board of Directors authorized a $25 million share repurchase program

– ILG consolidated revenue increased by 3.9% year over year, driven by a 26.2% increase in Management and Rental segment revenue

– Interval Network new member volume grew by 13.4% year-to-date compared to 2010

– Interval International added 11 new resort affiliations

– Free cash flow of $50.7 million year to date

“Throughout the second quarter, we maintained our commitment to investing in ILG for future success. As such, we have determined that a stock repurchase program is an effective way to utilize our strong balance sheet and demonstrate our confidence in the long-term value of Interval Leisure Group,” said Craig M. Nash, Chairman, President and Chief Executive Officer of Interval Leisure Group. [member]

“During the second quarter, ILG’s total consolidated revenue increased by nearly 4%. The Membership and Exchange segment results reflect continued pressure from increased expenses and inventory mix. However, our new offerings, Platinum membership and Club Interval Gold, gained traction with our members and developer clients. At the same time, the Management and Rental segment reported another quarter of substantial year over year growth,” Nash added. “We are confident that Interval Leisure Group is positioned to strengthen its role as an industry leader and we will continue to strategically deploy capital to invest in the growth of our business.”

Financial Summary & Operating Metrics (in millions, except per share amounts and percentages)

        
                                                               Three Months Ended          Quarter
                                                                    June 30,                Over
                                                                                           Quarter
        Metrics                                              2011             2010         Change
        ----------------------------------------------  -------------  -----------------  -------
        Revenue                                                $105.6             $101.6     3.9%
             Membership and Exchange revenue                    $87.4              $87.2     0.2%
             Management and Rental revenue                      $18.2              $14.4    26.2%
        Gross profit                                            $70.2              $70.1     0.2%
        Net income attributable to common stockholders           $7.5              $11.3  (33.7)%
        Diluted EPS                                             $0.13              $0.20  (35.0)%
        EBITDA*                                                 $34.9              $38.6   (9.6)%
        ----------------------------------------------  -------------  -----------------  -------
        Balance sheet data                               June 30, 2011  December 31, 2010
        ----------------------------------------------  -------------  -----------------
        Cash and cash equivalents                              $210.1             $180.5
        Debt                                                   $348.8             $357.6
        ----------------------------------------------  -------------  -----------------
                                                                Six Months Ended
                                                                    June 30,
        Cash flow data                                       2011             2010
        ----------------------------------------------  -------------  -----------------
        Net cash provided by operating activities               $56.8              $59.3
        Free cash flow*                                         $50.7              $51.1
        ----------------------------------------------  -------------  -----------------

* “EBITDA” and “Free cash flow” are non-GAAP measures as defined by the Securities and Exchange Commission (the “SEC”). Please see “Presentation of Financial Information,” “Glossary of Terms” and “Reconciliations of Non-GAAP Measures” below for an explanation of non-GAAP measures used throughout this release.

Discussion of Results

Second Quarter 2011 Consolidated Operating Results

Consolidated revenue for the second quarter ended June 30, 2011 was $105.6 million, an increase of 3.9% from $101.6 million for the second quarter of 2010. The increase was driven primarily by the incremental revenue contribution from the acquisition of Trading Places International (TPI).

Net income for the three months ended June 30, 2011 was $7.5 million, a decrease of 33.7% from net income of $11.3 million for the same period of 2010. The year over year decline reflects a $6.1 million decrease in Membership and Exchange segment pre-tax income which includes a $2.1 million unfavorable foreign currency exchange related impact. The remaining decrease primarily relates to an increase of $1.0 million in compensation and other employee related costs mostly due to the acquisition of TPI, $0.8 million increase in the cost of Getaway sales due to inventory mix changes, and increases of $0.8 million in depreciation and $0.6 million in IT costs (including non-capitalized IT expenses) predominantly related to the fourth quarter 2010 iServices deployment. These items were partly offset by a reduction in consolidated income tax expense. Diluted earnings per share were $0.13 compared to diluted earnings per share of $0.20 for the same period of 2010.

EBITDA was $34.9 million for the quarter ended June 30, 2011, compared to EBITDA of $38.6 million for the same period of 2010.

Business Segment Results

Membership and Exchange

Membership and Exchange segment revenue for the three months ended June 30, 2011 was $87.4 million, relatively flat with the comparable period in 2010.

For the second quarter of 2011, transaction and membership fee revenue were $47.7 million and $32.5 million, respectively, a decrease of 1.3% and an increase of 0.3% over the same period in 2010.

Total active members at June 30, 2011 of 1.81 million were relatively flat compared to total active members at June 30, 2010. New member enrollments for the first half of 2011 increased by 13.4% compared to the same period last year.

Average revenue per member for the second quarter of 2011 was $45.24, comparable to the second quarter of 2010. During the second quarter of 2011, Interval International affiliated 11 new vacation ownership resorts in 10 international markets.

Membership and Exchange segment EBITDA was $34.3 million in the second quarter, a decline of 10.6% from the segment’s EBITDA of $38.3 million in 2010. Membership and Exchange segment EBITDA reflects a $0.8 million increase in the cost of Getaway sales due to inventory mix changes, lower operating foreign currency net gains of $1.0 million and approximately $0.4 million of higher non-capitalized expenses related to iServices following its implementation in the fourth quarter of 2010.

Management and Rental

Management and Rental segment revenue for the three months ended June 30, 2011, was $18.2 million, including $6.8 million of management fee and rental revenue (defined below). Year-over-year, management fee and rental revenue grew by 57.3%. The improvement was primarily driven by an increase in revenue per available room (“RevPAR”) at Aston and the acquisition of TPI. Aston RevPAR for the quarter ended June 30, 2011 was $95.12 compared to $81.24 for the same period in 2010, resulting from both an 11.6% higher average daily rate (ADR) and a 4.9% improvement in occupancy rates in the second quarter.

In the second quarter of 2011, Management and Rental segment EBITDA was $0.6 million, compared to $0.2 million in the prior year period. Segment EBITDA benefitted from an 11.7% increase in room revenue and the inclusion of TPI, which more than offset an increase of $0.4 million in fees associated with an Aston legal proceeding that settled in July 2011.

To read the full report, please click here. [/member]

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