201504300800PR_NEWS_USPR_____CG93137 20150430T080000-0400 prnewswire.com 20150430 CG93137 1 urn:newsml:prnewswire.com:20150430:CG93137:1 20150430T080000-0400 20150430T080000-0400 MimeType/@FormalName Marriott Vacations Worldwide Reports First Quarter 2015 Financial Results ORLANDO, Fla., April 30, 2015 MARRIOTT-Earnings 201504300800PR_NEWS_USPR_____CG93137.xml Marriott Vacations Worldwide Reports First Quarter 2015 Financial Results

Marriott Vacations Worldwide Reports First Quarter 2015 Financial Results

PR Newswire

ORLANDO, Fla., April 30, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter 2015 financial results and provided updated guidance for the full year 2015.

Marriott Vacations Worldwide Corporation.

First quarter 2015 highlights:

  • Adjusted EBITDA totaled $57.5 million, an increase of $17.2 million, or 43 percent, year-over-year.
  • Adjusted fully diluted earnings per share (EPS) increased to $0.85, up 52 percent from $0.56 in the first quarter of 2014.
  • Company vacation ownership contract sales (which exclude residential sales) were $170.0 million, up 9.5 percent year-over-year; North America vacation ownership contract sales were $156.0 million, up 11 percent year-over-year.
  • Total company contract sales were $198.4 million, including $28.4 million of residential sales in the Asia Pacific segment.
  • Company adjusted development margin was 21.6 percent and North America adjusted development margin was 23.7 percent.
  • North America volume per guest (VPG) increased 4.7 percent year-over-year to $3,640; North America tours increased 5.3 percent year-over-year.
  • The company completed its acquisition of an operating hotel located in San Diego, California, for approximately $55 million. The company plans to begin converting the hotel to vacation ownership inventory later this year.
  • The company repurchased approximately $51 million of its common stock.

First quarter 2015 net income was $34.1 million, or $1.03 diluted earnings per share, compared to net income of $19.3 million, or $0.54 diluted earnings per share, in the first quarter of 2014. Company development margin was 21.2 percent and North America development margin was 22.7 percent in the first quarter of 2015 compared to 18.5 percent and 20.7 percent, respectively, in the first quarter of 2014.

Non-GAAP financial measures such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-12 of the Financial Schedules that follow.

"I'm extremely pleased with how we started 2015, with first quarter year-over-year growth in tours, VPG and adjusted development margin, all contributing to $57.5 million of Adjusted EBITDA," said Stephen P. Weisz, president and chief executive officer. "With a strong first quarter behind us, we are increasing our Adjusted EBITDA guidance range by $7 million to $222 million to $232 million."

First Quarter 2015 Results

Company Results

Total company contract sales, excluding residential sales, were $170.0 million, $14.7 million higher than the first quarter of last year. Total company contract sales were $198.4 million, a $36.8 million, or 23 percent, increase from $161.6 million in the first quarter of 2014. The increase was driven by $30.5 million of higher contract sales in the company's Asia Pacific segment, including $28.4 million of residential sales, and $9.5 million of higher contract sales in the company's North America segment, partially offset by $3.2 million of lower contract sales in the company's Europe segment.

Adjusted development margin was $33.9 million, a $4.4 million increase from the first quarter of 2014. Adjusted development margin percentage was 21.6 percent in the first quarter of 2015 compared to 19.8 percent in the first quarter of 2014. Development margin was $38.9 million, a $12.2 million increase from the first quarter of 2014. Development margin percentage was 21.2 percent in the first quarter of 2015 compared to 18.5 percent in the first quarter of 2014.

Rental revenues totaled $76.2 million, a $12.7 million increase from the first quarter of 2014, reflecting a 10 percent increase in transient keys and a 6 percent increase in transient rate. Rental revenues, net of expenses, were $16.0 million, a $9.3 million increase from the first quarter of 2014.

Resort management and other services revenues totaled $64.4 million, a $0.9 million increase from the first quarter of 2014. Resort management and other services revenues, net of expenses, were $22.0 million, a $3.4 million, or 18 percent, increase over the first quarter of 2014.

Financing revenues totaled $29.1 million, a $1.6 million decrease from the first quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $18.1 million, a $0.8 million decrease from the first quarter of 2014.

Adjusted EBITDA was $57.5 million in the first quarter of 2015, a $17.2 million, or 43 percent, increase from $40.3 million in the first quarter of 2014.

Segment Results

North America

VPG increased 4.7 percent to $3,640 in the first quarter of 2015 from $3,477 in the first quarter of 2014, driven mainly by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $156.0 million in the first quarter of 2015, an increase of $9.5 million, or more than 6 percent, over the prior year period. Excluding the impact of residential sales in the first quarter of 2014, North America vacation ownership contract sales increased $15.8 million, or 11 percent, over the prior year period.

First quarter 2015 North America segment financial results were $97.7 million, an increase of $18.1 million from the first quarter of 2014. The increase was driven by $8.8 million of higher rental revenues net of expenses, $5.1 million of higher development margin, $3.5 million of higher resort management and other services net of expenses and $2.0 million from a charge in the prior year period in connection with the company's interest in an equity method investment in a joint venture project in its North America segment, partially offset by $1.5 million of lower financing revenues.

Adjusted development margin was $34.4 million, a $4.6 million increase from the prior year quarter. Adjusted development margin percentage was 23.7 percent in the first quarter of 2015 compared to 22.0 percent in the first quarter of 2014. Development margin was $32.2 million, a $5.1 million increase from the first quarter of 2014. Development margin percentage was 22.7 percent in the first quarter of 2015 compared to 20.7 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $37.1 million, an increase of $30.5 million in the first quarter of 2015, reflecting $28.4 million of residential contract sales from the sale of all 18 units at its former Macau location. Segment financial results were $9.4 million, an $8.0 million increase from the first quarter of 2014, reflecting $7.7 million of higher development margin. Excluding the $28.4 million of residential sales, Asia Pacific contract sales were $8.7 million, $2.0 million higher than the first quarter of last year, and adjusted segment results were $3.5 million, a $2.0 million increase from the first quarter of 2014.

Europe

First quarter 2015 contract sales were $5.3 million, a decrease of $3.2 million from the first quarter of 2014. Segment financial results were breakeven, a $1.4 million decrease from the first quarter of 2014 due to lower development margin from lower contract sales.

Share Repurchase Program

During the first quarter of 2015, the company repurchased approximately $51 million of its common stock.

Balance Sheet and Liquidity

On March 27, 2015, cash and cash equivalents totaled $272.2 million. Since the beginning of the year, real estate inventory balances declined $48.3 million to $720.0 million, including $361.2 million of finished goods and $358.8 million of land and infrastructure. The company had $632.6 million in gross debt outstanding at the end of the first quarter of 2015, a decrease of $78.7 million from year-end 2014, consisting primarily of $629.2 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the first quarter of 2015.

As of March 27, 2015, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $94 million of gross vacation ownership notes receivable eligible for securitization.

Outlook

The company is providing the following updated guidance for the full year 2015:


Current Guidance

Previous Guidance

Adjusted EBITDA

$222 million to $232 million

$215 million to $225 million

Adjusted fully diluted earnings per share

$3.29 to $3.48

$3.16 to $3.35

Adjusted net income

$108 million to $114 million

$106 million to $112 million

Company contract sales growth (excluding residential)

5 percent to 8 percent

4 percent to 7 percent

Adjusted company development margin

21 percent to 22 percent

21 percent to 22 percent

Adjusted free cash flow          

$145 million to $170 million

$135 million to $160 million

Pages A-1 through A-12 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $118 million to $124 million; fully diluted EPS of $3.61 to $3.79; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $135 million to $152 million.

First Quarter 2015 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the updated guidance for full year 2015. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13604885. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 58 resorts and approximately 415,000 Owners and Members. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of April 30, 2015 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

FINANCIAL SCHEDULES

QUARTER 1, 2015

TABLE OF CONTENTS



Consolidated Statements of Income - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-1



North America Segment Financial Results - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-2



Asia Pacific Segment Financial Results - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-3



Europe Segment Financial Results - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-4



Corporate and Other Financial Results - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-5



Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin


(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-6



North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin


(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-7



EBITDA and Adjusted EBITDA - 12 Weeks Ended March 27, 2015 and March 28, 2014

A-8



2015 Outlook - Adjusted Net Income and Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Development Margin

A-9



2015 Outlook - Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow

A-10



Non-GAAP Financial Measures

A-11



Consolidated Balance Sheets

A-13



Consolidated Statements of Cash Flows

A-14

 

 


A-1


MARRIOTT VACATIONS WORLDWIDE CORPORATION


CONSOLIDATED STATEMENTS OF INCOME


12 Weeks Ended March 27, 2015 and March 28, 2014


(In thousands, except per share amounts)
































As Reported




As Adjusted



As Reported




As Adjusted











12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended











March 27, 2015


Items


March 27, 2015

**


March 28, 2014


Items


March 28, 2014

**


Revenues



















Sale of vacation ownership products

$              183,906


$ (28,420)


$             155,486



$             144,850


$         -


$              144,850




Resort management and other services

64,417


-


64,417



63,546


-


63,546




Financing

29,052


-


29,052



30,640


-


30,640




Rental

76,199


-


76,199



63,525


-


63,525




Cost reimbursements

101,306


-


101,306



99,386


-


99,386








Total revenues

454,880


(28,420)


426,460



401,947


-


401,947



Expenses



















Cost of vacation ownership products

64,962


(21,583)


43,379



46,871


-


46,871




Marketing and sales

79,995


(922)


79,073



71,220


-


71,220




Resort management and other services

42,409


-


42,409



44,896


200


45,096




Financing

4,905


-


4,905



5,104


-


5,104




Rental

60,158


-


60,158



56,790


-


56,790




General and administrative

22,777


-


22,777



21,828


-


21,828




Organizational and separation related


192


(192)


-



851


(851)


-




Litigation settlement


(262)


262


-



-


-


-




Consumer financing interest


6,021


-


6,021



6,625


-


6,625




Royalty fee

13,000


-


13,000



13,428


-


13,428




Cost reimbursements

101,306


-


101,306



99,386


-


99,386








Total expenses

395,463


(22,435)


373,028



366,999


(651)


366,348



Gains and other income

887


(887)


-



1,233


(1,233)


-



Equity in earnings


13


-


13



37


-


37



Interest expense


(2,974)


-


(2,974)



(2,147)


-


(2,147)



Impairment charge on equity investment

-


-


-



(2,000)


2,000


-








Income before income taxes

57,343


(6,872)


50,471



32,071


1,418


33,489



Provision for income taxes

(23,289)


975


(22,314)



(12,763)


(621)


(13,384)



Net income


$                34,054


$   (5,897)


$                28,157



$                19,308


$    797


$ 20,105

























Earnings per share - Basic


$ 1.05




$ 0.87



$ 0.55




$ 0.58

























Earnings per share - Diluted


$ 1.03




$ 0.85



$ 0.54




$ 0.56

























Basic Shares



32,299




32,299



34,875




34,875



Diluted Shares


33,009




33,009



35,882




35,882

































As Reported







As Reported















12 Weeks Ended







12 Weeks Ended







Contract Sales


March 27, 2015







March 28, 2014































Vacation ownership


$              169,950







$              155,249









Residential products


28,420







6,326











Total contract sales


$              198,370







$              161,575






























** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.























NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars. Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

 


A-2


MARRIOTT VACATIONS WORLDWIDE CORPORATION


NORTH AMERICA SEGMENT


12 Weeks Ended March 27, 2015 and March 28, 2014


(In thousands)






















































As Reported




As Adjusted



As Reported




As Adjusted











12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended











March 27, 2015


Items


March 27, 2015

**


March 28, 2014


Items


March 28, 2014

**


Revenues



















Sale of vacation ownership products

$             141,728


$          -


$             141,728



$              131,342


$         -


$              131,342




Resort management and other services

58,575


-


58,575



57,160


-


57,160




Financing

27,056


-


27,056



28,561


-


28,561




Rental

71,715


-


71,715



59,323


-


59,323




Cost reimbursements

92,854


-


92,854



89,943


-


89,943








Total revenues

391,928


-


391,928



366,329


-


366,329



Expenses



















Cost of vacation ownership products

40,501


-


40,501



41,505


-


41,505




Marketing and sales

69,017


-


69,017



62,687


-


62,687




Resort management and other services

36,968


-


36,968



39,089


-


39,089




Rental

54,611


-


54,611



51,037


-


51,037




Organizational and separation related


139


(139)


-



17


(17)


-




Litigation settlement


(262)


262


-



-


-


-




Royalty fee

1,260


-


1,260



1,677


-


1,677




Cost reimbursements

92,854


-


92,854



89,943


-


89,943








Total expenses

295,088


123


295,211



285,955


(17)


285,938



Gains and other income

880


(880)


-



1,242


(1,242)


-



Equity in earnings


16


-


16



39


-


39



Impairment charge on equity investment

-


-


-



(2,000)


2,000


-








Segment financial results


$                97,736


$ (1,003)


$                96,733



$ 79,655


$    775


$                80,430

































As Reported







As Reported















12 Weeks Ended







12 Weeks Ended







Contract Sales


March 27, 2015







March 28, 2014































Vacation ownership


$              155,993







$              140,177









Residential products


-







6,326











Total contract sales


$              155,993







$              146,503






























** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.























NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 


A-3

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

12 Weeks Ended March 27, 2015 and March 28, 2014

(In thousands)



















































As Reported




As Adjusted



As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended










March 27, 2015


Items


March 27, 2015

**


March 28, 2014


Items


March 28, 2014

**

Revenues


















Sale of vacation ownership products

$                36,278


$ (28,420)


$                  7,858



$                  6,268


$         -


$                  6,268



Resort management and other services

863


-


863



906


-


906



Financing

1,006


-


1,006



1,057


-


1,057



Rental

2,352


-


2,352



1,975


-


1,975



Cost reimbursements

866


-


866



941


-


941







Total revenues

41,365


(28,420)


12,945



11,147


-


11,147


Expenses


















Cost of vacation ownership products

21,996


(21,583)


413



1,453


-


1,453



Marketing and sales

5,557


(922)


4,635



3,778


-


3,778



Resort management and other services

850


-


850



700


-


700



Rental

2,496


-


2,496



2,596


-


2,596



Royalty fee

157


-


157



177


-


177



Cost reimbursements

866


-


866



941


-


941







Total expenses

31,922


(22,505)


9,417



9,645


-


9,645


Gains and other income

3


(3)


-



(8)


8


-


Equity in losses


(3)


-


(3)



(2)


-


(2)







Segment financial results


$                  9,443


$   (5,918)


$                  3,525



$                  1,492


$        8


$                  1,500




















































As Reported







As Reported














12 Weeks Ended







12 Weeks Ended






Contract Sales


March 27, 2015







March 28, 2014





























Vacation ownership


$                  8,659







$                  6,624








Residential products


28,420







-










Total contract sales


$                37,079







$                  6,624




























** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.






















NOTE: Asia Pacific segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 


A-4

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

12 Weeks Ended March 27, 2015 and March 28, 2014

(In thousands)



















































As Reported




As Adjusted



As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended










March 27, 2015


Items


March 27, 2015

**


March 28, 2014


Items


March 28, 2014

**

Revenues


















Sale of vacation ownership products

$                  5,900


$         -


$                  5,900



$                  7,240


$         -


$                  7,240



Resort management and other services

4,979


-


4,979



5,480


-


5,480



Financing

990


-


990



1,022


-


1,022



Rental

2,132


-


2,132



2,227


-


2,227



Cost reimbursements

7,586


-


7,586



8,502


-


8,502







Total revenues

21,587


-


21,587



24,471


-


24,471


Expenses


















Cost of vacation ownership products

852


-


852



1,446


-


1,446



Marketing and sales

5,421


-


5,421



4,755


-


4,755



Resort management and other services

4,591


-


4,591



5,107


200


5,307



Rental

3,051


-


3,051



3,157


-


3,157



Royalty fee

76


-


76



102


-


102



Cost reimbursements

7,586


-


7,586



8,502


-


8,502







Total expenses

21,577


-


21,577



23,069


200


23,269


Gains and other income

4


(4)


-



-


-


-







Segment financial results


$ 14


$      (4)


$                       10



$                  1,402


$  (200)


$                  1,202




















































As Reported







As Reported














12 Weeks Ended







12 Weeks Ended














March 27, 2015







March 28, 2014



























Contract Sales


$                  5,298







$                  8,448



























































































** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.






















NOTE: Europe segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

 


A-5

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

12 Weeks Ended March 27, 2015 and March 28, 2014

(In thousands)



















































As Reported




As Adjusted



As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended










March 27, 2015


Items


March 27, 2015

**


March 28, 2014


Items


March 28, 2014

**

Expenses


















Cost of vacation ownership products

$                 1,613


$        -


$                  1,613



$                  2,467


$         -


$                  2,467



Financing

4,905


-


4,905



5,104


-


5,104



General and administrative

22,777


-


22,777



21,828


-


21,828



Organizational and separation related


53


(53)


-



834


(834)


-



Consumer Financing Interest


6,021


-


6,021



6,625


-


6,625



Royalty fee

11,507


-


11,507



11,472


-


11,472







Total expenses

$                46,876


$    (53)


$                46,823



$                48,330


$   (834)


$                47,496
























** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.






















NOTE: Corporate and Other consists of results not specifically attributable to an individual segment, including expenses incurred to support our financing operations, non-capitalizable development expenses supporting overall company development, company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements that we entered into with Marriott International in connection with the spin-off, as well as consumer financing interest expense.

 

A-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)










 

12 Weeks Ended










March 27, 2015



March 28, 2014

Contract sales












Vacation ownership






$                169,950



$               155,249


Residential products






28,420



6,326



Total contract sales






198,370



161,575














Revenue recognition adjustments:











Reportability1






(1,513)



(4,554)


Sales Reserve2






(8,367)



(7,651)


Other3







(4,584)



(4,519)

Sale of vacation ownership products





$                183,906



$               144,851


1 Adjustment for lack of required downpayment or contract sales in rescission period.

2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.

3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

 

 


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)

(In thousands)






































Revenue









Revenue












As Reported




Recognition


As Adjusted



As Reported




Recognition


As Adjusted










12 Weeks Ended


Certain


Reportability


12 Weeks Ended



12 Weeks Ended


Certain


Reportability


12 Weeks Ended










March 27, 2015


Items


Adjustment


March 27, 2015

**


March 28, 2014


Items


Adjustment


March 28, 2014

**

Sale of vacation ownership products


$            183,906


$ (28,420)


1,513


$            156,999



$             144,850


$       -


$         4,554


$            149,404


Less:

























Cost of vacation ownership products

64,962


(21,583)


562


43,941



46,871


-


1,414


48,285



Marketing and sales





79,995


(922)


105


79,178



71,220


-


374


71,594



























Development margin






$              38,949


$ (5,915)


$ 846


$              33,880



$               26,759


$       -


$         2,766


$              29,525

























































Development margin percentage1



21.2%






21.6%



18.5%






19.8%




























** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


























1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 


A-7

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)


























12 Weeks Ended












March 27, 2015



March 28, 2014



Contract sales














Vacation ownership






$          155,993



$          140,177




Residential products






-



6,326





Total contract sales






155,993



146,503



Revenue recognition adjustments:













Reportability1






(3,444)



(4,400)




Sales Reserve 2






(6,334)



(6,327)




Other 3







(4,487)



(4,434)



Sale of vacation ownership products





$          141,728



$          131,342


















1 Adjustment for lack of required downpayment or contract sales in rescission period.

2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.

3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

 

 


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)

(In thousands)














Revenue









Revenue













As Reported




Recognition


As Adjusted



As Reported




Recognition


As Adjusted











12 Weeks Ended


Certain


Reportability


12 Weeks Ended



12 Weeks Ended


Certain


Reportability


12 Weeks Ended











March 27, 2015


Items


Adjustment


March 27, 2015

**


March 28, 2014


Items


Adjustment


March 28, 2014

**


Sale of vacation ownership products


$            141,728


$       -


$         3,444


$            145,172



$            131,342


$       -


$         4,400


$            135,742



Less:


























Cost of vacation ownership products

40,501


-


980


41,481



41,505


-


1,376


42,881




Marketing and sales





69,017


-


324


69,341



62,687


-


414


63,101





























Development margin






$              32,210


$       -


$         2,140


$              34,350



$              27,150


$       -


$         2,610


$              29,760




























































Development margin percentage1



22.7%






23.7%



20.7%






22.0%






























** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


















1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.


















 

 


A-8

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EBITDA AND ADJUSTED EBITDA

12 Weeks Ended March 27, 2015 and March 28, 2014

(In thousands)











As Reported




As Adjusted


As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended


12 Weeks Ended


Certain


12 Weeks Ended










March 27, 2015


Items


March 27, 2015

**

March 28, 2014


Items


March 28, 2014

**









































Net income

$               34,054


$  (5,897)


$                28,157


$                19,308


$    797


$                20,105



Interest expense 1

2,974


-


2,974


2,147


-


2,147



Tax provision

23,289


(975)


22,314


12,763


621


13,384



Depreciation and amortization

4,065


-


4,065


4,658


-


4,658








EBITDA **

$               64,382


$  (6,872)


$                57,510


$                38,876


$ 1,418


$                40,294












































** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.





















1 Interest expense excludes consumer financing interest expense.

 

 


A-9


MARRIOTT VACATIONS WORLDWIDE CORPORATION


2015 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK


(In thousands, except per share amounts)























Fiscal Year 2015 (low)


Fiscal Year 2015 (high)








Net income



$                   118


$             124









Adjustments to reconcile Net income to Adjusted net income














Organizational and separation related and other charges1


2


2










Gain on dispositions 2


(10)


(10)










Bulk sales 3


(6)


(6)










Provision for income taxes on adjustments to net income

4


4











Adjusted net income**


$                   108


$             114
























Earnings per share - Diluted 4


$ 3.61


$ 3.79









Adjusted earnings per share - Diluted**, 4


$ 3.29


$ 3.48









Diluted shares4


32.8


32.8






















** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1 Organizational and separation related and other charges adjustment includes $1.9 million for organizational and separation related efforts.

2 Gain on dispositions adjustment includes a $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land as well as an estimated gain on the sale of undeveloped and partially developed land, an operating golf course, spa and clubhouse and related assets, both in our North America segment.

3 Bulk sales adjustment includes the net $5.9 million of pre-tax income associated with the sale of the 18 units in the Asia Pacific segment.

4 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through April 28, 2015.

 

 



MARRIOTT VACATIONS WORLDWIDE CORPORATION


2015 ADJUSTED EBITDA OUTLOOK


(In thousands)























Fiscal Year 2015 (low)


Fiscal Year 2015 (high)








Adjusted net income **


$                               108


$                                114








Interest expense1


13


13








Tax provision


79


83








Depreciation and amortization


22


22









Adjusted EBITDA**


$                               222


$                                232






















** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1 Interest expense excludes consumer financing interest expense.

 



MARRIOTT VACATIONS WORLDWIDE CORPORATION


2015 ADJUSTED DEVELOPMENT MARGIN OUTLOOK























Total MVW











Fiscal Year 2015 (low)


Fiscal Year 2015 (high)








Development margin1


21.1%


22.1%









Adjustments to reconcile Development margin to Adjusted development margin













Revenue recognition reportability


(0.1%)


(0.1%)











Adjusted development margin**, 1


21.0%


22.0%





































** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1 Development margin represents Development margin dollars divided by Sale of vacation ownership products revenues. Development margin is calculated using whole dollars.

 

 

A-10

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK

(In thousands)


























Current Guidance














Low


High


Mid-Point


Adjustments


Normalized




Adjusted net income **


$  108


$  114


$        111


$                   -


$           111





Adjustments to reconcile Adjusted net income to net cash















provided by operating activities:
















Adjustments for non-cash items1


73


75


74


-


74






Deferred income taxes / income taxes payable


15


17


16


-


16






Net changes in assets and liabilities:

















Notes receivable originations


(284)


(290)


(287)


-


(287)







Notes receivable collections


268


272


270


-


270







Inventory 2


30


34


32


(42)

2

(10)







Purchase of operating hotel for future conversion to inventory3


(47)


(47)


(47)


47

3

-







Liability for Marriott Rewards customer loyalty program


(26)


(22)


(24)


24

5

-







Organizational and separation related and other charges


(2)


(2)


(2)


2

6

-







Other working capital changes


-


1


1


(4)

7

(3)




Net cash provided by operating activities


135


152


144


27


171





Capital expenditures for property and equipment (excluding inventory):
















New sales centers 4


(20)


(18)


(19)


19

4

-






Organizational and separation related capital expenditures


(5)


(5)


(5)


5

6

-






Other



(32)


(30)


(31)


11

8

(20)





Decrease in restricted cash


1


5


3


-


3





Borrowings from securitization transactions


300


306


303


(45)

9

258





Repayment of debt related to securitizations

(241)


(247)


(244)


-


(244)







Free cash flow**


138


163


151


17


168




Adjustments:
















Organizational and separation related and other charges


7


7


7


(7)

6

-







Adjusted free cash flow**


$  145


$  170


$        158


$                 10


$           168






















** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


























1 Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.

2 Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).

3 Represents adjustment for investment in an operating hotel prior to future conversion to inventory.

4 Represents incremental investment in new sales centers, mainly to support new sales distributions.

5 Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016.

6 Represents costs associated with organizational and separation related efforts.

7 Represents normalized other working capital changes.

8 Represents normalized capital expenditures for property and equipment.

9 Represents normalized borrowings from securitization transactions.

 

A-11

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES
















In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP"). We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules reconcile the most directly comparable GAAP financial measure to each non-GAAP financial measure that we report (identified by a double asterisk ("**") on the preceding pages). Although we evaluate and present these non-GAAP financial measures for the reasons described below, please be aware that these non-GAAP financial measures have limitations and should not be considered in isolation or as a substitute for revenues, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and / or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP financial measures we report may not be comparable to those reported by others.
















Adjusted Net Income. We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items in the 12 weeks ended March 27, 2015 and March 28, 2014, and exclude gains on a disposition in the 12 weeks ended March 27, 2015 and March 28, 2014, because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain items and gains. These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain items and gains with results from other vacation ownership companies.
















Certain items - 12 weeks ended March 27, 2015. In our Statement of Income for the 12 weeks ended March 27, 2015, we recorded $6.0 million of net pre-tax items, which included a $28.4 million adjustment to exclude the bulk sale of 18 units in our Asia Pacific segment recorded under the "sale of vacation ownership products" caption, with corresponding adjustments of $21.6 million and $0.9 million to the "Cost of vacation ownership products" and Marketing and sales" captions, respectively, and $0.2 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, partially offset by a $0.3 million reversal of an accrual associated with a 2014 golf course disposition recorded under the "Litigation settlement" caption because actual costs were lower than expected.
















Certain items - 12 weeks ended March 28, 2014. In our Statement of Income for the 12 weeks ended March 28, 2014, we recorded $2.7 million of net pre-tax items, which included a $2.0 million increase in our accrual for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the "Impairment charge on equity investment" caption and $0.9 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, partially offset by a $0.2 million reversal of a severance accrual in our Europe segment recorded under the "Resort management and other services" caption because actual costs were lower than expected.
















Gain on the disposition of a golf course and adjacent undeveloped land - 12 weeks ended March 27, 2015. In our Statement of Income for the 12 weeks ended March 27, 2015, we recorded a net $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption.
















Gain on the disposition of a golf course and adjacent undeveloped land - 12 weeks ended March 28, 2014. In our Statement of Income for the 12 weeks ended March 28, 2014, we recorded a net $1.2 million gain associated with the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption.
















Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses). We evaluate Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) as an indicator of operating performance. Adjusted Development Margin adjusts Sale of vacation ownership products revenues for the impact of revenue reportability, includes corresponding adjustments to Cost of vacation ownership products expense and Marketing and sales expense associated with the change in revenues from the Sale of vacation ownership products, and includes adjustments for certain items as itemized in the discussion of Adjusted Net Income above. We evaluate Adjusted Development Margin because it allows for period-over-period comparisons of our on-going core operations before the impact of revenue reportability and certain items to our Development Margin.

 

A-12

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES



































Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization. For purposes of our EBITDA calculation (which previously adjusted for consumer financing interest expense), we do not adjust for consumer financing interest expense because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us. Further, we consider consumer financing interest expense to be an operating expense of our business.


















We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to service debt, fund capital expenditures and expand our business. We also use it, as do analysts, lenders, investors and others, because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.


Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain items and gains, as itemized in the discussion of Adjusted Net Income above. We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of certain items and gains. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain items and gains with results from other vacation ownership companies.


















Free Cash Flow. We also evaluate Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations. We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Free Cash Flow also facilitates management's comparison of our results with our competitors' results.


















Adjusted Free Cash Flow. We also evaluate Adjusted Free Cash Flow, which reflects additional adjustments for organizational and separation related, litigation, and other cash items, as referred to in the discussion of Adjusted Net Income above. We evaluate Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations, excluding the impact of organizational and separation related, litigation, and other cash charges. We consider Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results.


















Normalized Adjusted Free Cash Flow. We also evaluate Normalized Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, the borrowing and repayment activity related to our securitizations, and adjustments to remove the impact of cash flow items not expected to occur on a regular basis. Adjustments eliminate the impact of excess cash taxes, payments for Marriott Rewards Points issued prior to the Spin-off, payments for organizational and separation related efforts, litigation cash settlements and other working capital changes. We consider Normalized Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Normalized Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results.

 

 

A-13

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)









(unaudited)






March 27, 2015


January 2, 2015


ASSETS





Cash and cash equivalents

$           272,180


$            346,515


Restricted cash (including $29,310 and $34,986 from VIEs, respectively)

62,016


109,907


Accounts and contracts receivable (including $4,132 and $4,992 from VIEs, respectively)

114,863


109,700


Vacation ownership notes receivable (including $675,411 and $750,680 from VIEs, respectively)

888,193


917,228


Inventory

724,520


772,784


Property and equipment

188,431


147,379


Other

138,666


120,503


    Total Assets

$        2,388,869


$        2,524,016








LIABILITIES AND EQUITY





Accounts payable

$             76,569


$           114,079


Advance deposits

63,439


60,192


Accrued liabilities (including $552 and $1,088 from VIEs, respectively)

171,325


165,969


Deferred revenue

27,018


38,818


Payroll and benefits liability

73,347


93,073


Liability for Marriott Rewards customer loyalty program

84,811


89,285


Deferred compensation liability

44,598


41,677


Mandatorily redeemable preferred stock of consolidated subsidiary

38,856


38,816


Debt (including $629,220 and $708,031 from VIEs, respectively)

618,946


696,450


Other

59,960


27,071


Deferred taxes

87,494


78,883


    Total Liabilities

1,346,363


1,444,313








Preferred stock - $.01 par value; 2,000,000 shares authorized; none issued or outstanding

-


-


Common stock - $.01 par value; 100,000,000 shares authorized; 36,333,814 and 36,089,513 shares





issued, respectively

363


361


Treasury stock - at cost; 4,602,258 and 3,996,725 shares, respectively

(277,629)


(229,229)


Additional paid-in capital

1,128,615


1,137,785


Accumulated other comprehensive income

11,452


17,054


Retained earnings

179,705


153,732


    Total Equity

1,042,506


1,079,703








    Total Liabilities and Equity

$        2,388,869


$        2,524,016








The abbreviation VIEs above means Variable Interest Entities.





 

A-14

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




12 weeks ended




March 27, 2015


March 28, 2014

OPERATING ACTIVITIES





Net income


$            34,054


$            19,308

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation


4,065


4,658


Amortization of debt issuance costs


1,267


1,369


Provision for loan losses


8,437


7,470


Share-based compensation


2,643


2,274


Deferred income taxes


8,600


(1,712)


Equity method income


(13)


(37)


Gain on disposal of property and equipment, net


(887)


(1,233)


Non-cash litigation settlement


(262)


-


Impairment charges on equity investment


-


2,000


Net change in assets and liabilities:






Accounts and contracts receivable


(4,643)


(25,348)


Notes receivable originations


(48,946)


(44,921)


Notes receivable collections


67,518


71,068


Inventory


44,883


19,617


Purchase of operating hotel for future conversion to inventory


(46,614)


-


Other assets


(8,096)


2,791


Accounts payable, advance deposits and accrued liabilities


(25,064)


(9,483)


Liability for Marriott Rewards customer loyalty program


(4,474)


(7,000)


Deferred revenue


(11,624)


(3,449)


Payroll and benefit liabilities


(19,583)


(16,348)


Deferred compensation liability


2,921


700


Other liabilities


27,937


26,849


Other, net


(50)


(284)







                Net cash provided by operating activities


32,069


48,289

INVESTING ACTIVITIES






Capital expenditures for property and equipment (excluding inventory)


(10,562)


(1,056)


Increase in restricted cash


47,103


12,555


Dispositions, net


197


21,796

                Net cash provided by investing activities


36,738


33,295

FINANCING ACTIVITIES






Repayment of debt related to securitization transactions


(78,811)


(80,789)


Proceeds from vacation ownership inventory arrangement


5,375


-


Repurchase of common stock


(51,281)


(37,436)


Payment of dividends


(8,081)


-


Proceeds from stock option exercises


90


468


Payment of withholding taxes on vesting of restricted stock units


(9,061)


(4,142)


Other


80


-

                Net cash used in financing activities


(141,689)


(121,899)








Effect of changes in exchange rates on cash and cash equivalents


(1,453)


34







DECREASE IN CASH AND CASH EQUIVALENTS


(74,335)


(40,281)







CASH AND CASH EQUIVALENTS, beginning of period


346,515


199,511







CASH AND CASH EQUIVALENTS, end of period


$          272,180


$          159,230

 

 

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SOURCE Marriott Vacations Worldwide Corporation