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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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