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Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results

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ORLANDO, Fla., July 23, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2015 financial results and provided updated guidance for the full year 2015.

Marriott Vacations Worldwide Corporation.

Second quarter 2015 highlights:

  • Adjusted fully diluted earnings per share (EPS) increased to $0.91, up 4.6 percent from $0.87 in the second quarter of 2014.
  • Adjusted EBITDA totaled $57.7 million, an increase of $1.0 million, or 2 percent, year-over-year.
  • North America contract sales were $150.6 million, up 3.4 percent year-over-year.
  • North America tours increased 1.2 percent year-over-year.
  • North America volume per guest (VPG) increased 0.6 percent year-over-year to $3,404.
  • Company adjusted development margin was 21.0 percent and North America adjusted development margin was 23.0 percent.
  • The company completed the sale of its undeveloped land in Kauai, Hawaii, for gross cash proceeds of $20 million.
  • During the second quarter of 2015, the company repurchased $15 million of its common stock, bringing total 2015 repurchases through the end of the second quarter to $66.2 million.
  • Subsequent to the end of the second quarter, the company purchased 71 units in The Mayflower Hotel, Autograph Collection in Washington, D.C.

Second quarter 2015 net income was $34.0 million, or $1.05 diluted EPS, compared to net income of $35.3 million, or $1.00 diluted EPS, in the second quarter of 2014. Company development margin was 21.3 percent and North America development margin was 23.6 percent in the second quarter of 2015.

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-19 of the Financial Schedules that follow.

"We're pleased with our solid second quarter financial results, delivering nearly $58 million of Adjusted EBITDA," said Stephen P. Weisz, president and chief executive officer. "Our North America contract sales grew 3.4 percent on continued growth in tour volumes and slightly higher VPG and our company development margin remained in line with our full year expectations. With a strong first half of the year behind us, we are reaffirming Adjusted EBITDA guidance of $222 million to $232 million for full year 2015."

Second Quarter 2015 Results

Company Results

Total company contract sales were $165.9 million, $1.3 million higher than the second quarter of last year. The increase was driven by $5.0 million of higher contract sales in the company's North America segment and $0.7 million of higher contract sales in the company's Asia Pacific segment, partially offset by $4.3 million of lower contract sales in the company's Europe segment.

Adjusted development margin was $32.3 million, a $4.4 million decrease from the second quarter of 2014. Adjusted development margin percentage was 21.0 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014. Development margin was $33.1 million, a $3.8 million decrease from the second quarter of 2014. Development margin percentage was 21.3 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014.

Rental revenues totaled $72.6 million, a $10.8 million increase from the second quarter of 2014, reflecting a 4 percent increase in transient rate and a 6 percent increase in transient keys rented. Rental revenues, net of expenses, were $10.8 million, a $4.0 million increase from the second quarter of 2014.

Resort management and other services revenues totaled $74.1 million, a $0.8 million decrease from the second quarter of 2014. Resort management and other services revenues, net of expenses, were $28.6 million, a $2.1 million, or 8 percent, increase over the second quarter of 2014.

Financing revenues totaled $28.3 million, a $1.5 million decrease from the second quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.0 million, a $1.7 million decrease from the second quarter of 2014.

Adjusted EBITDA was $57.7 million in the second quarter of 2015, a $1.0 million, or 1.7 percent, increase from $56.7 million in the second quarter of 2014.

Segment Results

North America

VPG increased 0.6 percent to $3,404 in the second quarter of 2015 from $3,383 in the second quarter of 2014, driven by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $150.6 million in the second quarter of 2015, an increase of $5.0 million, or 3.4 percent, over the prior year period.

Second quarter 2015 North America segment financial results were $104.6 million, an increase of $2.9 million from the second quarter of 2014. The increase was driven primarily by $8.2 million of higher gains mainly associated with the disposition of the company's property in Kauai, Hawaii, $4.2 million of higher rental revenues net of expenses, $2.1 million of higher resort management and other services revenues net of expenses and $0.8 million related to an impairment charge in the prior year period. These increases were offset partially by $7.5 million of lower litigation settlements due mainly to the settlement of a dispute with a former service provider in the prior year period, $2.0 million of lower development margin, $2.0 million from the reversal of a charge in the prior year period related to the company's interest in an equity method investment in a joint venture project and $1.5 million of lower financing revenues.

Adjusted development margin was $32.3 million, a $3.0 million decrease from the prior year quarter. Adjusted development margin percentage was 23.0 percent in the second quarter of 2015 compared to 26.3 percent in the second quarter of 2014. Development margin was $33.5 million, a $2.0 million decrease from the second quarter of 2014. Development margin percentage was 23.6 percent in the second quarter of 2015 compared to 26.3 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $8.0 million, an increase of $0.7 million in the second quarter of 2015.  Segment financial results were a loss of $0.1 million, a $1.5 million decrease from the second quarter of 2014, reflecting $1.3 million of transaction costs associated with the company's future new resort and sales distribution in Australia.

Europe

Second quarter 2015 contract sales were $7.3 million, a decrease of $4.3 million from the second quarter of 2014. Segment financial results were $3.0 million, a $2.2 million decrease from the second quarter of 2014 due to lower development margin from lower contract sales.

Share Repurchase Program

In total for 2015, through the end of the second quarter, the company repurchased approximately $66.2 million of its common stock.

Balance Sheet and Liquidity

On June 19, 2015, cash and cash equivalents totaled $250.9 million. Since the beginning of the year, real estate inventory balances declined $69.1 million to $699.1 million, including $335.3 million of finished goods and $363.8 million of land and infrastructure. The company had $568.1 million in gross debt outstanding at the end of the second quarter of 2015, a decrease of $143.3 million from year-end 2014, consisting primarily of $564.7 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 second quarter of 2015.

As of June 19, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $207 million of gross vacation ownership notes receivable eligible for securitization into its warehouse credit facility.

Outlook

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



Current Guidance

Previous Guidance

Adjusted free cash flow

$175 million to $200 million

$145 million to $170 million







The company is reaffirming the following guidance for the full year 2015:









Current Guidance



Adjusted EBITDA

$222 million to $232 million



Company contract sales growth (excluding residential)

5 percent to 8 percent



Adjusted company development margin

21 percent to 22 percent



Adjusted net income

$108 million to $114 million



Adjusted fully diluted earnings per share

$3.29 to $3.48



 

Pages A-1 through A-19 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 $114 million to $121 million; fully diluted EPS of $3.49 to $3.70; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $170 million to $185 million.

Second 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 13613029. 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 60 resorts. 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 July 23, 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 2, 2015

TABLE OF CONTENTS

































































Consolidated Statements of Income - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-1

































Consolidated Statements of Income - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-2

































North America Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-3

































North America Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-4

































Asia Pacific Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-5

































Asia Pacific Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-6

































Europe Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-7

































Europe Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-8

































Corporate and Other Financial Results - 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-9

































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 June 19, 2015 and June 20, 2014

 A-10

































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



    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-11

































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 June 19, 2015 and June 20, 2014

 A-12

































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



    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-13

































EBITDA and Adjusted EBITDA - 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-14

































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

 A-15

































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



 A-16

































Non-GAAP Financial Measures



 A-17

































Consolidated Balance Sheets



 A-20

































Consolidated Statements of Cash Flows

 A-21

 

A-1

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

12 Weeks Ended June 19, 2015 and June 20, 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



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues



































Sale of vacation ownership products

$               155,370



$            -



$                       155,370





$               152,562



$            -



$               152,562





Resort management and other services

74,063



-



74,063





74,821



-



74,821





Financing

28,294



-



28,294





29,817



-



29,817





Rental



72,642



-



72,642





61,827



-



61,827





Cost reimbursements

92,458



-



92,458





90,875



-



90,875









Total revenues

422,827



-



422,827





409,902



-



409,902



Expenses



































Cost of vacation ownership products

45,119



-



45,119





43,414



-



43,414





Marketing and sales

77,137



-



77,137





72,227



(287)



71,940





Resort management and other services

45,480



-



45,480





48,308



-



48,308





Financing

6,085



-



6,085





5,438



-



5,438





Rental

61,835



-



61,835





54,991



-



54,991





General and administrative

22,892



-



22,892





23,153



-



23,153





Organizational and separation related

101



(101)



-





1,089



(1,089)



-





Litigation settlement

26



(26)



-





(7,575)



7,575



-





Consumer financing interest

5,248



-



5,248





5,737



-



5,737





Royalty fee

13,431



-



13,431





13,653



-



13,653





Impairment

-



-



-





834



(834)



-





Cost reimbursements

92,458



-



92,458





90,875



-



90,875









Total expenses

369,812



(127)



369,685





352,144



5,365



357,509



Gains and other income

8,625



(8,625)



-





409



(409)



-



Interest Expense

(3,009)



-



(3,009)





(2,601)



-



(2,601)



Equity in earnings

85



-



85





81



-



81



Impairment reversals on equity investment

-



-



-





2,000



(2,000)



-



Other





(1,272)



1,272



-





-



-



-









Income before income taxes

57,444



(7,226)



50,218





57,647



(7,774)



49,873



Provision for income taxes

(23,403)



2,804



(20,599)





(22,344)



3,158



(19,186)



Net income

$                 34,041



$  (4,422)



$                         29,619





$                 35,303



$  (4,616)



$                 30,687













































Earnings per share - Basic

$                     1.07







$                             0.93





$                     1.03







$                     0.89













































Earnings per share - Diluted

$                     1.05







$                             0.91





$                     1.00







$                     0.87













































Basic Shares



31,858







31,858





34,292







34,292



Diluted Shares



32,517







32,517





35,239







35,239





























































As Reported













As Reported



























12 Weeks Ended













12 Weeks Ended











Contract Sales



June 19, 2015













June 20, 2014

























































Vacation ownership

$               165,938













$               164,589















Residential products

-













-

















Total contract sales

$               165,938













$               164,589













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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

CONSOLIDATED STATEMENTS OF INCOME

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands, except per share amounts)



























































As Reported







As Adjusted





As Reported







As Adjusted



















24 Weeks Ended



Certain



24 Weeks Ended





24 Weeks Ended



Certain



24 Weeks Ended



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues



































Sale of vacation ownership products

$               339,276



$(28,420)



$               310,856





$               297,412



$            -



$               297,412





Resort management and other services

138,480



-



138,480





138,367



-



138,367





Financing

57,346



-



57,346





60,457



-



60,457





Rental



148,841



-



148,841





125,352



-



125,352





Cost reimbursements

193,764



-



193,764





190,261



-



190,261









Total revenues

877,707



(28,420)



849,287





811,849



-



811,849



Expenses



































Cost of vacation ownership products

110,081



(21,583)



88,498





90,285



-



90,285





Marketing and sales

157,132



(922)



156,210





143,447



(287)



143,160





Resort management and other services

87,889



-



87,889





93,204



200



93,404





Financing

10,990



-



10,990





10,542



-



10,542





Rental

121,993



-



121,993





111,781



-



111,781





General and administrative

45,669



-



45,669





44,981



-



44,981





Organizational and separation related

293



(293)



-





1,940



(1,940)



-





Litigation settlement

(236)



236



-





(7,575)



7,575



-





Consumer financing interest

11,269



-



11,269





12,362



-



12,362





Royalty fee

26,431



-



26,431





27,081



-



27,081





Impairment

-



-



-





834



(834)



-





Cost reimbursements

193,764



-



193,764





190,261



-



190,261









Total expenses

765,275



(22,562)



742,713





719,143



4,714



723,857



Gains and other income

9,512



(9,512)



-





1,642



(1,642)



-



Interest Expense

(5,983)



-



(5,983)





(4,748)



-



(4,748)



Equity in earnings

98



-



98





118



-



118



Other







(1,272)



1,272



-





-



-



-









Income before income taxes

114,787



(14,098)



100,689





89,718



(6,356)



83,362



Provision for income taxes

(46,692)



3,779



(42,913)





(35,107)



2,537



(32,570)



Net income



$                 68,095



$(10,319)



$                 57,776





$                 54,611



$  (3,819)



$                 50,792













































Earnings per share - Basic

$                     2.12







$                     1.80





$                     1.58







$                     1.47













































Earnings per share - Diluted

$                     2.08







$                     1.76





$                     1.54







$                     1.43













































Basic Shares





32,078







32,078





34,583







34,583



Diluted Shares



32,760







32,760





35,557







35,557





























































As Reported













As Reported



























24 Weeks Ended













24 Weeks Ended











Contract Sales

June 19, 2015













June 20, 2014

























































Vacation ownership

$               335,888













$               319,837















Residential products

28,420













6,326

















Total contract sales

$               364,308













$               326,163













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-3

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 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



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues































Sale of vacation ownership products

$               142,148



$            -



$               142,148





$               134,590



$            -



$               134,590





Resort management and other services

66,194



-



66,194





65,480



-



65,480





Financing

26,354



-



26,354





27,807



-



27,807





Rental

65,756



-



65,756





54,404



-



54,404





Cost reimbursements

84,037



-



84,037





80,642



-



80,642









Total revenues

384,489



-



384,489





362,923



-



362,923



Expenses



































Cost of vacation ownership products

40,834



-



40,834





37,433



-



37,433





Marketing and sales

67,837



-



67,837





61,722



-



61,722





Resort management and other services

39,101



-



39,101





40,527



-



40,527





Rental

55,128



-



55,128





47,985



-



47,985





Organizational and separation related

115



(115)



-





388



(388)



-





Litigation settlement

(108)



108



-





(7,575)



7,575



-





Royalty fee

1,686



-



1,686





1,820



-



1,820





Impairment

-



-



-





834



(834)



-





Cost reimbursements

84,037



-



84,037





80,642



-



80,642









Total expenses

288,630



(7)



288,623





263,776



6,353



270,129



Gains and other income

8,658



(8,658)



-





448



(448)



-



Equity in earnings

86



-



86





81



-



81



Impairment reversals on equity investment

-



-



-





2,000



(2,000)



-









Segment financial results

$               104,603



$  (8,651)



$                 95,952





$               101,676



$  (8,801)



$                 92,875





























































As Reported













As Reported



























12 Weeks Ended













12 Weeks Ended











Contract Sales



June 19, 2015













June 20, 2014

























































Vacation ownership

$               150,605













$               145,597















Residential products

-













-

















Total contract sales

$               150,605













$               145,597













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-4

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)





































































































As Reported







As Adjusted





As Reported







As Adjusted



















24 Weeks Ended



Certain



24 Weeks Ended





24 Weeks Ended



Certain



24 Weeks Ended



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues

































Sale of vacation ownership products

$               283,876



$            -



$               283,876





$               265,932



$            -



$               265,932





Resort management and other services

124,769



-



124,769





122,640



-



122,640





Financing

53,410



-



53,410





56,368



-



56,368





Rental

137,471



-



137,471





113,727



-



113,727





Cost reimbursements

176,891



-



176,891





170,585



-



170,585









Total revenues

776,417



-



776,417





729,252



-



729,252



Expenses

































Cost of vacation ownership products

81,335



-



81,335





78,938



-



78,938





Marketing and sales

136,854



-



136,854





124,409



-



124,409





Resort management and other services

76,069



-



76,069





79,616



-



79,616





Rental

109,739



-



109,739





99,022



-



99,022





Organizational and separation related

254



(254)



-





405



(405)



-





Litigation settlement

(370)



370



-





(7,575)



7,575



-





Royalty fee

2,946



-



2,946





3,497



-



3,497





Impairment

-



-



-





834



(834)



-





Cost reimbursements

176,891



-



176,891





170,585



-



170,585









Total expenses

583,718



116



583,834





549,731



6,336



556,067



Gains and other income

9,538



(9,538)



-





1,690



(1,690)



-



Equity in earnings

102



-



102





120



-



120









Segment financial results

$               202,339



$  (9,654)



$               192,685





$               181,331



$  (8,026)



$               173,305





























































As Reported













As Reported



























24 Weeks Ended













24 Weeks Ended











Contract Sales

June 19, 2015













June 20, 2014

























































Vacation ownership

$               306,598













$               285,774















Residential products

-













6,326

















Total contract sales

$               306,598













$               292,100













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-5

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 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



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues

































Sale of vacation ownership products

$                   7,575



$            -



$                   7,575





$                   7,954



$            -



$                   7,954





Resort management and other services

964



-



964





926



-



926





Financing

1,043



-



1,043





1,047



-



1,047





Rental

1,503



-



1,503





1,581



-



1,581





Cost reimbursements

632



-



632





722



-



722









Total revenues

11,717



-



11,717





12,230



-



12,230



Expenses



































Cost of vacation ownership products

1,803



-



1,803





2,047



-



2,047





Marketing and sales

4,432



-



4,432





4,243



-



4,243





Resort management and other services

655



-



655





642



-



642





Rental

2,794



-



2,794





2,936



-



2,936





Royalty fee

150



-



150





147



-



147





Cost reimbursements

632



-



632





722



-



722









Total expenses

10,466



-



10,466





10,737



-



10,737



Gains and other income

(33)



33



-





-



-



-



Equity in losses

(1)



-



(1)





-



-



-



Other







(1,272)



1,272



-





-



-



-









Segment financial results

$                      (55)



$    1,305



$                   1,250





$                   1,493



$            -



$                   1,493







































































































As Reported













As Reported



























12 Weeks Ended













12 Weeks Ended











Contract Sales



June 19, 2015













June 20, 2014

























































Vacation ownership

$                   7,992













$                   7,337















Residential products

-













-

















Total contract sales

$                   7,992













$                   7,337













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)





































































































As Reported







As Adjusted





As Reported







As Adjusted



















24 Weeks Ended



Certain



24 Weeks Ended





24 Weeks Ended



Certain



24 Weeks Ended



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues



































Sale of vacation ownership products

$                 43,853



$(28,420)



$                 15,433





$                 14,222



$            -



$                 14,222





Resort management and other services

1,827



-



1,827





1,832



-



1,832





Financing

2,049



-



2,049





2,104



-



2,104





Rental

3,855



-



3,855





3,556



-



3,556





Cost reimbursements

1,498



-



1,498





1,663



-



1,663









Total revenues

53,082



(28,420)



24,662





23,377



-



23,377



Expenses

































Cost of vacation ownership products

23,799



(21,583)



2,216





3,500



-



3,500





Marketing and sales

9,989



(922)



9,067





8,021



-



8,021





Resort management and other services

1,505



-



1,505





1,342



-



1,342





Rental

5,290



-



5,290





5,532



-



5,532





Royalty fee

307



-



307





324



-



324





Cost reimbursements

1,498



-



1,498





1,663



-



1,663









Total expenses

42,388



(22,505)



19,883





20,382



-



20,382



Gains and other income

(30)



30



-





(8)



8



-



Equity in losses

(4)



-



(4)





(2)



-



(2)



Other









(1,272)



1,272



-





-



-



-









Segment financial results

$                   9,388



$  (4,613)



$                   4,775





$                   2,985



$           8



$                   2,993







































































































As Reported













As Reported



























24 Weeks Ended













24 Weeks Ended











Contract Sales



June 19, 2015













June 20, 2014

























































Vacation ownership

16,651













13,960















Residential products

28,420













-

















Total contract sales

$                 45,071













$                 13,960













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-7

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 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



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues

































Sale of vacation ownership products

$                   5,647



$            -



$                   5,647





$                 10,018



$            -



$                 10,018





Resort management and other services

6,905



-



6,905





8,415



-



8,415





Financing

897



-



897





963



-



963





Rental



5,383



-



5,383





5,842



-



5,842





Cost reimbursements

7,789



-



7,789





9,511



-



9,511









Total revenues

26,621



-



26,621





34,749



-



34,749



Expenses

































Cost of vacation ownership products

1,233



-



1,233





2,389



-



2,389





Marketing and sales

4,868



-



4,868





6,262



(287)



5,975





Resort management and other services

5,724



-



5,724





7,139



-



7,139





Rental

3,913



-



3,913





4,070



-



4,070





Royalty fee

88



-



88





180



-



180





Cost reimbursements

7,789



-



7,789





9,511



-



9,511









Total expenses

23,615



-



23,615





29,551



(287)



29,264



Gains and other income

-



-



-





(39)



39



-









Segment financial results

$                   3,006



$            -



$                   3,006





$                   5,159



$       326



$                   5,485







































































































As Reported













As Reported



























12 Weeks Ended













12 Weeks Ended



























June 19, 2015













June 20, 2014





















































Contract Sales



$                   7,341













$                 11,655













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-8

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)





































































































As Reported







As Adjusted





As Reported







As Adjusted



















24 Weeks Ended



Certain



24 Weeks Ended





24 Weeks Ended



Certain



24 Weeks Ended



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Revenues































Sale of vacation ownership products

$                 11,547



$            -



$                 11,547





$                 17,258



$            -



$                 17,258





Resort management and other services

11,884



-



11,884





13,895



-



13,895





Financing

1,887



-



1,887





1,985



-



1,985





Rental

7,515



-



7,515





8,069



-



8,069





Cost reimbursements

15,375



-



15,375





18,013



-



18,013









Total revenues

48,208



-



48,208





59,220



-



59,220



Expenses

































Cost of vacation ownership products

2,085



-



2,085





3,835



-



3,835





Marketing and sales

10,289



-



10,289





11,017



(287)



10,730





Resort management and other services

10,315



-



10,315





12,246



200



12,446





Rental

6,964



-



6,964





7,227



-



7,227





Royalty fee

164



-



164





282



-



282





Cost reimbursements

15,375



-



15,375





18,013



-



18,013









Total expenses

45,192



-



45,192





52,620



(87)



52,533



Gains and other income

4



(4)



-





(39)



39



-









Segment financial results

$                   3,020



$         (4)



$                   3,016





$                   6,561



$       126



$                   6,687







































































































As Reported













As Reported



























24 Weeks Ended













24 Weeks Ended



























June 19, 2015













June 20, 2014





















































Contract Sales



$                 12,639













$                 20,103













**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-9

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 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



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Expenses





























Cost of vacation ownership products

$                      1,249



$            -



$                      1,249





$                      1,545



$              -



$                      1,545





Financing

6,085



-



6,085





5,438



-



5,438





General and administrative

22,892



-



22,892





23,153



-



23,153





Organizational and separation related

(14)



14



-





701



(701)



-





Litigation settlement

134



(134)



-





-



-



-





Consumer financing interest

5,248



-



5,248





5,737



-



5,737





Royalty fee

11,507



-



11,507





11,506



-



11,506









Total expenses

$                   47,101



$     (120)



$                   46,981





$                   48,080



$       (701)



$                   47,379

















































































































































As Reported







As Adjusted





As Reported







As Adjusted



















24 Weeks Ended



Certain



24 Weeks Ended





24 Weeks Ended



Certain



24 Weeks Ended



















June 19, 2015



Items



June 19, 2015

**



June 20, 2014



Items



June 20, 2014

**

Expenses





























Cost of vacation ownership products

$                      2,862



$            -



$                      2,862





$                      4,012



$              -



$                      4,012





Financing

10,990



-



10,990





10,542



-



10,542





General and administrative

45,669



-



45,669





44,981



-



44,981





Organizational and separation related

39



(39)



-





1,535



(1,535)



-





Litigation settlement

134



(134)



-





-



-



-





Consumer financing interest

11,269



-



11,269





12,362



-



12,362





Royalty fee

23,014



-



23,014





22,978



-



22,978









Total expenses

$                   93,977



$     (173)



$                   93,804





$                   96,410



$    (1,535)



$                   94,875





**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-10

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)













12 Weeks Ended











June 19, 2015





June 20, 2014



















Contract sales















Vacation ownership



$             165,938





$               164,589



Residential products



-





-





Total contract sales



165,938





164,589



















Revenue recognition adjustments:













Reportability1



1,440





829



Sales Reserve2



(7,179)





(8,047)



Other3



(4,829)





(4,809)

Sale of vacation ownership products



$             155,370





$             152,562



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

 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





June 19, 2015



Items



Adjustment



June 19, 2015

**



June 20, 2014



Items



Adjustment



June 20, 2014

**

Sale of vacation ownership products

$                  155,370



$            -



$              (1,440)



$                  153,930





$                  152,562



$            -



$                 (829)



$                  151,733



Less:





































Cost of vacation ownership products

45,119



-



(464)



44,655





43,414



-



(198)



43,216





Marketing and sales

77,137



-



(157)



76,980





72,227



(287)



(121)



71,819









































Development margin

$                    33,114



$            -



$                 (819)



$                    32,295





$                    36,921



$        287



$                 (510)



$                    36,698

















































































Development margin percentage1

21.3%











21.0%





24.2%











24.2%





**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-11

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)





























24 Weeks Ended











June 19, 2015





June 20, 2014



















Contract sales















Vacation ownership



$               335,888





$               319,837



Residential products



28,420





6,326





Total contract sales



364,308





326,163



















Revenue recognition adjustments:













Reportability1



(73)





(3,725)



Sales Reserve2



(15,546)





(15,698)



Other3



(9,413)





(9,328)

Sale of vacation ownership products



$               339,276





$               297,412



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

 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





24 Weeks Ended



Certain



Reportability



24 Weeks Ended





24 Weeks Ended



Certain



Reportability



24 Weeks Ended





June 19, 2015



Items



Adjustment



June 19, 2015

**



June 20, 2014



Items



Adjustment



June 20, 2014

**

Sale of vacation ownership products

$                  339,276



$   (28,420)



$                     73



$                  310,929





$                  297,412



$            -



$                3,725



$                  301,137



Less:





































Cost of vacation ownership products 

110,081



(21,583)



98



88,596





90,285



-



1,216



91,501





Marketing and sales

157,132



(922)



(52)



156,158





143,447



(287)



253



143,413









































Development margin

$                    72,063



$     (5,915)



$                     27



$                    66,175





$                    63,680



$        287



$                2,256



$                    66,223

















































































Development margin percentage1

21.2%











21.3%





21.4%











22.0%





**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-12

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)





























12 Weeks Ended











June 19, 2015





June 20, 2014



















Contract sales













Vacation ownership



$             150,605





$              145,597



Residential products



-





-





Total contract sales



150,605





145,597



















Revenue recognition adjustments:













Reportability1



1,942





208



Sales Reserve 2



(5,651)





(6,424)



Other 3



(4,748)





(4,791)

Sale of vacation ownership products



$             142,148





$              134,590



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

 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





June 19, 2015



Items



Adjustment



June 19, 2015

**



June 20, 2014



Items



Adjustment



June 20, 2014

**

Sale of vacation ownership products

$                       142,148



$          -



$          (1,942)



$                     140,206





$               134,590



$          -



$             (208)



$               134,382



Less:





































Cost of vacation ownership products

40,834



-



(553)



40,281





37,433



-



(58)



37,375





Marketing and sales

67,837



-



(182)



67,655





61,722



-



(20)



61,702









































Development margin

$                         33,477



$          -



$          (1,207)



$                       32,270





$                 35,435



$          -



$             (130)



$                 35,305

















































































Development margin percentage1

23.6%











23.0%





26.3%











26.3%





**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-13

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)





























24 Weeks Ended











June 19, 2015





June 20, 2014



















Contract sales















Vacation ownership



$           306,598





$             285,774



Residential products



-





6,326





Total contract sales



306,598





292,100



















Revenue recognition adjustments:













Reportability1



(1,502)





(4,192)



Sales Reserve 2



(11,985)





(12,751)



Other 3



(9,235)





(9,225)

Sale of vacation ownership products



$           283,876





$             265,932



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

 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













24 Weeks Ended



Certain



Reportability



24 Weeks Ended





24 Weeks Ended



Certain



Reportability



24 Weeks Ended













June 19, 2015



Items



Adjustment



June 19, 2015

**



June 20, 2014



Items



Adjustment



June 20, 2014

**

Sale of vacation ownership products

$               283,876



$          -



$            1,502



$            285,378





$               265,932



$          -



$         4,192



$               270,124



Less:





































Cost of vacation ownership products 

81,335



-



427



81,762





78,938



-



1,318



80,256





Marketing and sales

136,854



-



142



136,996





124,409



-



394



124,803















































Development margin

$                 65,687



$          -



$               933



$              66,620





$                 62,585



$          -



$         2,480



$                 65,065





























































































Development margin percentage1

23.1%











23.3%





23.5%











24.1%





**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-14

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EBITDA AND ADJUSTED EBITDA

12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 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

















June 19, 2015



Items



June 19, 2015

**

June 20, 2014



Items



June 20, 2014

**













































































Net income

$                 34,041



$  (4,422)



$             29,619



$                 35,303



$ (4,616)



$                 30,687



Interest expense  1

3,009



-



3,009



2,601



-



2,601



Tax provision

23,403



(2,804)



20,599



22,344



(3,158)



19,186



Depreciation and amortization

4,493



-



4,493



4,264



-



4,264









EBITDA **

$                 64,946



$  (7,226)



$             57,720



$                 64,512



$ (7,774)



$                 56,738









































































































































































As Reported







As Adjusted



As Reported







As Adjusted

















24 Weeks Ended



Certain



24 Weeks Ended



24 Weeks Ended



Certain



24 Weeks Ended

















June 19, 2015



Items



June 19, 2015

**

June 20, 2014



Items



June 20, 2014

**













































































Net income

$                 68,095



$(10,319)



$            57,776



$                 54,611



$ (3,819)



$                 50,792



Interest expense  1

5,983



-



5,983



4,748



-



4,748



Tax provision

46,692



(3,779)



42,913



35,107



(2,537)



32,570



Depreciation and amortization

8,558



-



8,558



8,922



-



8,922









EBITDA **

$               129,328



$(14,098)



$          115,230



$               103,388



$ (6,356)



$                 97,032





**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-15

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In millions, except per share amounts)



























Fiscal Year 2015 (low)



Fiscal Year 2015 (high)

Net income





$                                114



$                                  121



Adjustments to reconcile Net income to Adjusted net income













Organizational and separation related and other charges1



7



6





Gain on dispositions 2



(10)



(10)





Bulk sales 3



(6)



(6)





Provision for income taxes on adjustments to net income

3



3







Adjusted net income**



$                                108



$                                  114



















Earnings per share - Diluted 4



$                               3.49



$                                 3.70



Adjusted earnings per share - Diluted**, 4



$                               3.29



$                                 3.48



Diluted shares4



32.7



32.7



**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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 $1.8 million for organizational and separation related efforts and $4 million to $5 million of non-capitalizable transaction costs in our Asia Pacific and North America segments.

2   Gain on dispositions adjustment includes a $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land and an $8.7 million gain on the sale of undeveloped land 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 June 19, 2015.

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED EBITDA OUTLOOK

(In millions)















Fiscal Year 2015 (low)



Fiscal Year 2015 (high)

Adjusted net income **                                                                   



$                                108



$                                  114

Interest expense1                                  



12



12

Tax provision                                                                    



81



85

Depreciation and amortization                                                                    



21



21



Adjusted EBITDA**



$                                222



$                                  232



**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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-17 through A-19 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-16

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In millions)















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



18



20





19





-





19









Net changes in assets and liabilities:





































Notes receivable originations



(293)



(299)





(296)





-





(296)











Notes receivable collections



269



275





272





-





272











Inventory



47



52





50





(60)

6



(10)











Purchase of operating hotel for future conversion to inventory2



(47)



(47)





(47)





47

2



-











Liability for Marriott Rewards customer loyalty program



(21)



(21)





(21)





21

7



-











Organizational and separation related and other charges



(5)



(5)





(5)





5

8



-











Other working capital changes



21



21





21





(6)

9



15





Net cash provided by operating activities



170



185





178





7





185







Capital expenditures for property and equipment (excluding inventory):



































New sales centers 3



(20)



(18)





(19)





19

3



-









Organizational and separation related capital expenditures



(4)



(4)





(4)





4

8



-









Other



(24)



(23)





(24)





4

10



(20)









Investment in operating portion of Surfers Paradise hotel that will be sold 4



(45)



(45)





(45)





45

4



-







Decrease in restricted cash



1



5





3





-





3







Borrowings from securitization transactions



251



258





255





(45)

11



210







Repayment of debt related to securitizations



(244)



(250)





(247)





-





(247)











Free cash flow**



85



108





97





34





131





Adjustments:

































Organizational and separation related and other charges



9



9





9





(9)

7



-







Proceeds from sale of operating portion of Surfers Paradise hotel4



45



45





45





(45)

4



-







Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 5



36



38





37





-





37











Adjusted free cash flow**



$   175



$   200





$           188





$                 (20)





$               168















































**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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 for investment in an operating hotel prior to future conversion to inventory.

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

4  Represents the estimated investment in, as well as the estimated proceeds from the subsequent sale of, the operating portion of the Surfers Paradise hotel.

5  Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2014 and 2015 year ends.   

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

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

8  Represents costs associated with organizational and separation related efforts.

9  Represents normalized other working capital changes.

10  Represents normalized capital expenditures for property and equipment.

11  Represents normalized borrowings from securitization transactions.

 

A-17

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 and net gains in the 12 weeks and 24 weeks ended June 19, 2015 and June 20, 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 and 24 weeks ended June 19, 2015.  In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded $1.4 million of net pre-tax items, which included a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the "Other transaction related" caption, $0.1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption and less than $0.1 million of net litigation related matters recorded under the "Litigation settlement" caption. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $4.6 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, a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the "Other transaction related" caption, $0.3 million of organizational and separation related costs recorded under the "Organizational and separation related" caption and less than $0.1 million of net litigation related matters recorded under the "Litigation settlement" 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 and 24 weeks ended June 20, 2014.  In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $7.4 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the "Litigation settlement" caption and the reversal of a $2.0 million reserve 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 reversals on equity investment" caption, partially offset by $1.1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, a $0.8 million impairment charge associated with a project in our North America segment recorded under the "Impairment" caption and $0.3 million of severance charges in our Europe segment recorded under the "Marketing and sales" caption.  In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $4.7 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the "Litigation settlement" caption and 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, partially offset by $1.9 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, a $0.8 million impairment charge associated with a project in our North America segment recorded under the "Impairment" caption and $0.3 million of severance charges in our Europe segment recorded under the "Marketing and sales" caption. 

 

A-18

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES



































Net gains - 12 weeks and 24 weeks ended June 19, 2015.   In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded an $8.7 million gain associated with the sale of undeveloped land in our North America segment under the "Gains and other income" caption.  In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $9.5 million of net gains associated with the sale of undeveloped land and the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption.



































Net gains - 12 weeks and 24 weeks ended June 20, 2014.   In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $0.4 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the "Gains and other income" caption.  In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $1.6 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded 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.



































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. 

 

A-19

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES





































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-20

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)











(unaudited)







June 19, 2015



January 2, 2015

ASSETS







Cash and cash equivalents

$            250,906



$                346,515

Restricted cash (including $37,017 and $34,986 from VIEs, respectively)

65,559



109,907

Accounts and contracts receivable (including $3,429 and $4,992 from VIEs, respectively)

116,544



109,700

Vacation ownership notes receivable (including $547,158 and $750,680 from VIEs, respectively)

878,858



917,228

Inventory

704,707



772,784

Property and equipment

188,714



147,379

Other 

117,924



127,066

      Total Assets

$         2,323,212



$             2,530,579









LIABILITIES AND EQUITY







Accounts payable

$              80,450



$                114,079

Advance deposits

64,148



60,192

Accrued liabilities (including $1,576 and $1,088 from VIEs, respectively)

137,261



165,969

Deferred revenue

32,845



38,818

Payroll and benefits liability

74,582



93,073

Liability for Marriott Rewards customer loyalty program

79,939



89,285

Deferred compensation liability

46,534



41,677

Mandatorily redeemable preferred stock of consolidated subsidiary

38,895



38,816

Debt (including $564,657 and $708,031 from VIEs, respectively)

561,133



703,013

Other

50,053



27,071

Deferred taxes

96,748



78,883

      Total Liabilities

1,262,588



1,450,876









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

-



-

Common stock - $.01 par value; 100,000,000 shares authorized; 36,346,990 and 36,089,513 shares issued, respectively

363



361

Treasury stock - at cost; 4,814,451 and 3,996,725 shares, respectively

(295,466)



(229,229)

Additional paid-in capital

1,135,143



1,137,785

Accumulated other comprehensive income

14,756



17,054

Retained earnings

205,828



153,732

      Total Equity

1,060,624



1,079,703









      Total Liabilities and Equity

$         2,323,212



$             2,530,579









The abbreviation VIEs above means Variable Interest Entities.







 

                 A-21

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)







24 weeks ended







June 19, 2015



June 20, 2014

 OPERATING ACTIVITIES 









 Net income 



$68,095



$54,611

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











 Depreciation 



8,558



8,922



 Amortization of debt issuance costs 



2,506



2,566



 Provision for loan losses 



15,662



15,603



 Share-based compensation 



6,588



6,180



 Deferred income taxes 



17,850



(5,299)



 Equity method income 



(98)



(118)



 Gain on disposal of property and equipment, net 



(9,512)



(1,642)



 Non-cash litigation settlement 



(262)



-



 Impairment charges 



-



834



 Impairment charges on equity investment 



-



-



 Net change in assets and liabilities: 











Accounts and contracts receivable



(6,068)



(11,822)



Notes receivable originations



(112,060)



(103,908)



Notes receivable collections



132,397



137,460



Inventory



68,629



36,805



Purchase of operating hotel for future conversion to inventory



(46,614)



-



Other assets



8,154



26,546



Accounts payable, advance deposits and accrued liabilities



(66,223)



(55,865)



Liability for Marriott Rewards customer loyalty program



(9,345)



(14,284)



Deferred revenue



(5,955)



(310)



Payroll and benefit liabilities



(18,382)



(14,832)



Deferred compensation liability



4,858



1,882



Other liabilities



18,013



15,397



 Other, net 



1,874



(564)













                 Net cash provided by operating activities 



78,665



98,162

 INVESTING ACTIVITIES 











 Capital expenditures for property and equipment (excluding inventory) 



(15,718)



(3,003)



 Decrease in restricted cash 



43,758



43,958



 Dispositions, net 



20,346



33,169













                 Net cash provided by investing activities 



48,386



74,124

 FINANCING ACTIVITIES 











 Borrowings from securitization transactions 



-



22,638



 Repayment of debt related to securitization transactions 



(143,374)



(130,954)



 Debt issuance costs 



(30)



(140)



 Proceeds from vacation ownership inventory arrangement 



5,375



-



 Repurchase of common stock 



(66,237)



(89,448)



 Payment of dividends 



(8,085)



-



 Proceeds from stock option exercises 



92



968



 Payment of withholding taxes on vesting of restricted stock units 



(9,353)



(5,091)



 Other 



109



-













                 Net cash used in financing activities 



(221,503)



(202,027)















 Effect of changes in exchange rates on cash and cash equivalents 



(1,157)



3













 DECREASE IN CASH AND CASH EQUIVALENTS 



(95,609)



(29,738)













 CASH AND CASH EQUIVALENTS, beginning of period 



346,515



199,511













 CASH AND CASH EQUIVALENTS, end of period 



$250,906



$169,773

 

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/marriott-vacations-worldwide-reports-second-quarter-2015-financial-results-300117283.html

SOURCE Marriott Vacations Worldwide Corporation

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