Ultimate Escapes Reports On Fourth Quarter and 2009 Year End Results

By: Destination Club News
Date: April 16, 2010

Yesterday afternoon, Ultimate Escapes reported on the results of their fourth quarter and 2009 in its entirety via a conference call lasting just over 15 minutes, including prepared remarks from President and Chief Executive Officer Jim Tousignant and Chief Financial Officer Philip Callaghan and questions from listeners. We listened in to provide you insight into the two executives' comments.

"We are really pleased with how 2009 turned out for Ultimate Escapes," began Tousignant. "Back in September, we completed the acquisition of Private Escapes, which at the time was the third largest destination club in the world. Through that acquisition we added 49 new club residences, 18 new club destinations, 49 new club properties, and over 350 new club members, thus greatly strengthening the position in the destination club industry for Ultimate Escapes. At the end of October of 2009, the company also consummated the business combination of Ultimate Escapes Holdings and Secure America Acquisition Corporation, thereby making us a public entity and also the only pure play public luxury destination club in the world. Both sides to that transaction worked diligently to complete the transaction, and as of the end of 2009, we are today the largest luxury destination club as measured by the number of club destinations and a strong number two in the world as measured by number of club members."

Tousignant didn't touch on other portions of the busy fourth quarter of 2009 for Ultimate Escapes, including an agreement with Everlands, a conservation focused destination club that ceased new membership sales early in the year, giving their members and prospective members special membership opportunities. Just months prior, Ultimate Escapes had also reactivated over 300 of their club members who had elected not to pay the one time special assessment early in the year that provided the club with approximately $12 million.

"At the end of 2009, we had 1,214 Ultimate Escapes Club members, which was a 47% increase from the end of 2008," Tousignant continued. "As a result of more members paying membership fees and dues, including assessment fees that were not earned in 2008, Ultimate Escapes revenues grew by 64% from the prior year. Overall, considering the large amount of work involved with the reverse merger and the other transactions of 2009, as well as considering the challenging macroeconomic environment we all faced, we considered 2009 to be a very good year for Ultimate Escapes."

Tousignant would turn the call over to Callaghan to discuss the fourth quarter financials and year end results.

"For the fourth quarter of 2009, the company reported revenue of $12 million, a 100% increase from the $6 million reported in the prior year quarter, primarily due to $3.75 million in member assessment fees earned in the fourth quarter of 2009 that were not earned in the prior year quarter and also due to the increased revenues resulting from the new members added from the Private Escapes acquisition," Callaghan began. "The net loss for the fourth quarter of 2009 was $9.7 million, compared to $4.3 million in the prior year quarter. EBITDA for the fourth quarter of 2009 was a loss of $4.1 million compared with an EBITDA loss of $400,000 in the prior year quarter. Depreciation and amortization expense for the fourth quarter of 2009 was $2.6 million, up 73% from the $1.5 million in the prior year quarter, primarily due to the acquisition of Private Escapes in September of 2009. Interest expense for the fourth quarter of 2009 was $3 million, a 25% increase from the $2.4 million in the prior year quarter, as a result of the Private Escapes acquisition. Excluding $5.3 million of non-cash equity compensation expense resulting from the acceleration of stock options at the closing of the business combination with Secure America in October of 2009 and also excluding a $2.8 million impairment charge on assets held for sale, a $0.5 million lost on sale of property and equipment, and a $1.5 million gain relating to the contingent acquisition consideration in the fourth quarter of 2009, the net loss for the fourth quarter was $2.6 million."

"Moving onto the full year of 2009, the company reported revenues of $37 million, a 64% increase from the prior year, primarily due to a larger base of club members paying dues and fees, including $12 million of assessment fees earned in 2009 that were not earned in 2008, partially offset by a $2.5 million decline in membership annual dues caused by the establishment of an early dues renewal program in 2008, which accelerated revenues into that year. EBITDA for the full year of 2009, was $6.7 million, a $16.3 million increase from the prior year, mainly due to the increased revenue contribution in 2009. Depreciation and amortization expense for 2009 was $5.5 million, up 23% from the prior year, primarily due to the acquisition of Private Escapes in September of 2009. Interest expense for the year of 2009 was $10 million, a 9% increase from the prior year, mainly as a result of the Private Escapes acquisition and the full year of interest related to debt incurred from the acquisition of certain properties in February 2008. The net loss for 2009 was $13 million compared to a net loss of $23.2 million in 2008, excluding $6.6 million of non-cash equity compensation, a $2.8 million impairment charge on assets held for sale, $0.5 million on a loss of sale of property and equipment, and reflecting a $1.5 million gain related to contingent acquisition consideration in 2009, the net loss for 2009 was $4.6 million. As of December 31, 2009, the company had $7.1 million in cash and restricted cash and approximately $123.3 million of debt outstanding on its balance sheet. As of December 31, 2009, the company had a negative working capital of $32.7 million compared to a negative working capital of $8.9 million as of December 31, 2008. The company's debt balance is comprised of $99 million outstanding under its revolving loan, $13.6 million in mortgage loans, and a $10 million non-payable to a shareholder. $3.8 million of the mortgage loans are current and mature at various points in 2010. The revolving loan matures on April 30, 2011, but can be extended at the company's request for two additional one year periods."

As the world's first publicly-traded destination club, Ultimate Escapes has arguably become the most transparent club in the sector as evidenced by the information disclosed by Callaghan. Exclusive Resorts and other leading destination clubs have also made positive steps to provide members additional insight into their operational models, a very beneficial stride for the entire sector.

Check back tomorrow for part two of our coverage of the conference call, where Tousignant responds to questions, including trends within the destination club industry, renewal rates, and the club's property portfolio. In the interim, request a free copy of our Destination Club Guide for more information about the benefits and risks of joining a destination club.