MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., April 30, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter 2015 financial results and provided updated guidance for the full year 2015.
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First quarter 2015 highlights:
-- Adjusted EBITDA totaled $57.5 million, an increase of $17.2 million, or
43 percent, year-over-year.
-- Adjusted fully diluted earnings per share (EPS) increased to $0.85, up
52 percent from $0.56 in the first quarter of 2014.
-- Company vacation ownership contract sales (which exclude residential
sales) were $170.0 million, up 9.5 percent year-over-year; North America
vacation ownership contract sales were $156.0 million, up 11 percent
year-over-year.
-- Total company contract sales were $198.4 million, including $28.4
million of residential sales in the Asia Pacific segment.
-- Company adjusted development margin was 21.6 percent and North America
adjusted development margin was 23.7 percent.
-- North America volume per guest (VPG) increased 4.7 percent
year-over-year to $3,640; North America tours increased 5.3 percent
year-over-year.
-- The company completed its acquisition of an operating hotel located in
San Diego, California, for approximately $55 million. The company plans
to begin converting the hotel to vacation ownership inventory later this
year.
-- The company repurchased approximately $51 million of its common stock.
First quarter 2015 net income was $34.1 million, or $1.03 diluted earnings per share, compared to net income of $19.3 million, or $0.54 diluted earnings per share, in the first quarter of 2014. Company development margin was 21.2 percent and North America development margin was 22.7 percent in the first quarter of 2015 compared to 18.5 percent and 20.7 percent, respectively, in the first quarter of 2014.
Non-GAAP financial measures such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-12 of the Financial Schedules that follow.
"I'm extremely pleased with how we started 2015, with first quarter year-over-year growth in tours, VPG and adjusted development margin, all contributing to $57.5 million of Adjusted EBITDA," said Stephen P. Weisz, president and chief executive officer. "With a strong first quarter behind us, we are increasing our Adjusted EBITDA guidance range by $7 million to $222 million to $232 million."
First Quarter 2015 Results
Company Results
Total company contract sales, excluding residential sales, were $170.0 million, $14.7 million higher than the first quarter of last year. Total company contract sales were $198.4 million, a $36.8 million, or 23 percent, increase from $161.6 million in the first quarter of 2014. The increase was driven by $30.5 million of higher contract sales in the company's Asia Pacific segment, including $28.4 million of residential sales, and $9.5 million of higher contract sales in the company's North America segment, partially offset by $3.2 million of lower contract sales in the company's Europe segment.
Adjusted development margin was $33.9 million, a $4.4 million increase from the first quarter of 2014. Adjusted development margin percentage was 21.6 percent in the first quarter of 2015 compared to 19.8 percent in the first quarter of 2014. Development margin was $38.9 million, a $12.2 million increase from the first quarter of 2014. Development margin percentage was 21.2 percent in the first quarter of 2015 compared to 18.5 percent in the first quarter of 2014.
Rental revenues totaled $76.2 million, a $12.7 million increase from the first quarter of 2014, reflecting a 10 percent increase in transient keys and a 6 percent increase in transient rate. Rental revenues, net of expenses, were $16.0 million, a $9.3 million increase from the first quarter of 2014.
Resort management and other services revenues totaled $64.4 million, a $0.9 million increase from the first quarter of 2014. Resort management and other services revenues, net of expenses, were $22.0 million, a $3.4 million, or 18 percent, increase over the first quarter of 2014.
Financing revenues totaled $29.1 million, a $1.6 million decrease from the first quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $18.1 million, a $0.8 million decrease from the first quarter of 2014.
Adjusted EBITDA was $57.5 million in the first quarter of 2015, a $17.2 million, or 43 percent, increase from $40.3 million in the first quarter of 2014.
Segment Results
North America
VPG increased 4.7 percent to $3,640 in the first quarter of 2015 from $3,477 in the first quarter of 2014, driven mainly by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $156.0 million in the first quarter of 2015, an increase of $9.5 million, or more than 6 percent, over the prior year period. Excluding the impact of residential sales in the first quarter of 2014, North America vacation ownership contract sales increased $15.8 million, or 11 percent, over the prior year period.
First quarter 2015 North America segment financial results were $97.7 million, an increase of $18.1 million from the first quarter of 2014. The increase was driven by $8.8 million of higher rental revenues net of expenses, $5.1 million of higher development margin, $3.5 million of higher resort management and other services net of expenses and $2.0 million from a charge in the prior year period in connection with the company's interest in an equity method investment in a joint venture project in its North America segment, partially offset by $1.5 million of lower financing revenues.
Adjusted development margin was $34.4 million, a $4.6 million increase from the prior year quarter. Adjusted development margin percentage was 23.7 percent in the first quarter of 2015 compared to 22.0 percent in the first quarter of 2014. Development margin was $32.2 million, a $5.1 million increase from the first quarter of 2014. Development margin percentage was 22.7 percent in the first quarter of 2015 compared to 20.7 percent in the prior year quarter.
Asia Pacific
Total contract sales in the segment were $37.1 million, an increase of $30.5 million in the first quarter of 2015, reflecting $28.4 million of residential contract sales from the sale of all 18 units at its former Macau location. Segment financial results were $9.4 million, an $8.0 million increase from the first quarter of 2014, reflecting $7.7 million of higher development margin. Excluding the $28.4 million of residential sales, Asia Pacific contract sales were $8.7 million, $2.0 million higher than the first quarter of last year, and adjusted segment results were $3.5 million, a $2.0 million increase from the first quarter of 2014.
Europe
First quarter 2015 contract sales were $5.3 million, a decrease of $3.2 million from the first quarter of 2014. Segment financial results were breakeven, a $1.4 million decrease from the first quarter of 2014 due to lower development margin from lower contract sales.
Share Repurchase Program
During the first quarter of 2015, the company repurchased approximately $51 million of its common stock.
Balance Sheet and Liquidity
On March 27, 2015, cash and cash equivalents totaled $272.2 million. Since the beginning of the year, real estate inventory balances declined $48.3 million to $720.0 million, including $361.2 million of finished goods and $358.8 million of land and infrastructure. The company had $632.6 million in gross debt outstanding at the end of the first quarter of 2015, a decrease of $78.7 million from year-end 2014, consisting primarily of $629.2 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the first quarter of 2015.
As of March 27, 2015, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $94 million of gross vacation ownership notes receivable eligible for securitization.
Outlook
The company is providing the following updated guidance for the full year 2015:
Current Guidance Previous Guidance
---------------- -----------------
Adjusted
EBITDA $222 million to $232 million $215 million to $225 million
Adjusted
fully
diluted
earnings
per share $3.29 to $3.48 $3.16 to $3.35
Adjusted
net income $108 million to $114 million $106 million to $112 million
Company
contract
sales
growth
(excluding
residential) 5 percent to 8 percent 4 percent to 7 percent
Adjusted
company
development
margin 21 percent to 22 percent 21 percent to 22 percent
Adjusted
free cash
flow $145 million to $170 million $135 million to $160 million
Pages A-1 through A-12 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $118 million to $124 million; fully diluted EPS of $3.61 to $3.79; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $135 million to $152 million.
First Quarter 2015 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the updated guidance for full year 2015. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.
An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13604885. The webcast will also be available on the company's website.
About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 58 resorts and approximately 415,000 Owners and Members. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.
Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of April 30, 2015 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Financial Schedules Follow
MARRIOTT VACATIONS WORLDWIDE CORPORATION
FINANCIAL SCHEDULES
QUARTER 1, 2015
TABLE OF CONTENTS
Consolidated Statements of
Income -12 Weeks Ended
March 27, 2015 and March
28, 2014 A-1
North America Segment
Financial Results -12
Weeks Ended March 27,
2015 and March 28, 2014 A-2
Asia Pacific Segment
Financial Results -12
Weeks Ended March 27,
2015 and March 28, 2014 A-3
Europe Segment Financial
Results -12 Weeks Ended
March 27, 2015 and March
28, 2014 A-4
Corporate and Other
Financial Results -12
Weeks Ended March 27,
2015 and March 28, 2014 A-5
Consolidated Contract Sales to Sale of Vacation Ownership
Products and Adjusted Development Margin
(Adjusted Sale of Vacation
Ownership Products Net of
Expenses) -12 Weeks
Ended March 27, 2015 and
March 28, 2014 A-6
North America Contract Sales to Sale of Vacation Ownership
Products and Adjusted Development Margin
(Adjusted Sale of Vacation
Ownership Products Net of
Expenses) -12 Weeks
Ended March 27, 2015 and
March 28, 2014 A-7
EBITDA and Adjusted EBITDA
-12 Weeks Ended March
27, 2015 and March 28,
2014 A-8
2015 Outlook -Adjusted
Net Income and Adjusted
Earnings Per Share -
Diluted, Adjusted EBITDA
and Adjusted Development
Margin A-9
2015 Outlook -Adjusted
Free Cash Flow and
Normalized Adjusted Free
Cash Flow A-10
Non-GAAP Financial
Measures A-11
Consolidated Balance
Sheets A-13
Consolidated Statements of
Cash Flows A-14
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
12 Weeks Ended March 27, 2015 and March 28, 2014
(In thousands, except per share amounts)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 27, 2015 Items March 27, 2015 ** March 28, 2014 Items March 28, 2014 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation
ownership products $183,906 $(28,420) $155,486 $144,850 $ - $144,850
Resort management and
other services 64,417 - 64,417 63,546 - 63,546
Financing 29,052 - 29,052 30,640 - 30,640
Rental 76,199 - 76,199 63,525 - 63,525
Cost reimbursements 101,306 - 101,306 99,386 - 99,386
Total
revenues 454,880 (28,420) 426,460 401,947 - 401,947
------- ------- ------- ------- --- -------
Expenses
Cost of vacation
ownership products 64,962 (21,583) 43,379 46,871 - 46,871
Marketing and sales 79,995 (922) 79,073 71,220 - 71,220
Resort management and
other services 42,409 - 42,409 44,896 200 45,096
Financing 4,905 - 4,905 5,104 - 5,104
Rental 60,158 - 60,158 56,790 - 56,790
General and
administrative 22,777 - 22,777 21,828 - 21,828
Organizational and
separation related 192 (192) - 851 (851) -
Litigation
settlement (262) 262 - - - -
Consumer financing
interest 6,021 - 6,021 6,625 - 6,625
Royalty fee 13,000 - 13,000 13,428 - 13,428
Cost reimbursements 101,306 - 101,306 99,386 - 99,386
Total
expenses 395,463 (22,435) 373,028 366,999 (651) 366,348
------- ------- ------- ------- ---- -------
Gains and other income 887 (887) - 1,233 (1,233) -
Equity in earnings 13 - 13 37 - 37
Interest expense (2,974) - (2,974) (2,147) - (2,147)
Impairment charge on equity investment - - - (2,000) 2,000 -
Income
before
income
taxes 57,343 (6,872) 50,471 32,071 1,418 33,489
Provision for income taxes (23,289) 975 (22,314) (12,763) (621) (13,384)
Net income $34,054 $(5,897) $28,157 $19,308 $797 $20,105
======= ======= ======= ======= ==== =======
Earnings per share - Basic $1.05 $0.87 $0.55 $0.58
===== ===== ===== =====
Earnings per share - Diluted $1.03 $0.85 $0.54 $0.56
===== ===== ===== =====
Basic Shares 32,299 32,299 34,875 34,875
Diluted Shares 33,009 33,009 35,882 35,882
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
Contract Sales March 27, 2015 March 28, 2014
-------------- --------------
Vacation
ownership $169,950 $155,249
Residential
products 28,420 6,326
------ -----
Total
contract
sales $198,370 $161,575
======== ========
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: Earnings per share -Basic and Earnings per share -Diluted are calculated using whole dollars. Beginning with the fourth
quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year
presentation for consistency.
A-2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
12 Weeks Ended March 27, 2015 and March 28, 2014
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 27, 2015 Items March 27, 2015 ** March 28, 2014 Items March 28, 2014 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation ownership
products $141,728 $ - $141,728 $131,342 $ - $131,342
Resort management and
other services 58,575 - 58,575 57,160 - 57,160
Financing 27,056 - 27,056 28,561 - 28,561
Rental 71,715 - 71,715 59,323 - 59,323
Cost reimbursements 92,854 - 92,854 89,943 - 89,943
Total
revenues 391,928 - 391,928 366,329 - 366,329
------- --- ------- ------- --- -------
Expenses
Cost of vacation ownership
products 40,501 - 40,501 41,505 - 41,505
Marketing and sales 69,017 - 69,017 62,687 - 62,687
Resort management and
other services 36,968 - 36,968 39,089 - 39,089
Rental 54,611 - 54,611 51,037 - 51,037
Organizational and
separation related 139 (139) - 17 (17) -
Litigation settlement (262) 262 - - - -
Royalty fee 1,260 - 1,260 1,677 - 1,677
Cost reimbursements 92,854 - 92,854 89,943 - 89,943
Total
expenses 295,088 123 295,211 285,955 (17) 285,938
------- --- ------- ------- --- -------
Gains and other income 880 (880) - 1,242 (1,242) -
Equity in earnings 16 - 16 39 - 39
Impairment charge on equity investment - - - (2,000) 2,000 -
--- --- --- ------ ----- ---
Segment
financial
results $97,736 $(1,003) $96,733 $79,655 $775 $80,430
======= ======= ======= ======= ==== =======
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
Contract Sales March 27, 2015 March 28, 2014
-------------- --------------
Vacation ownership $155,993 $140,177
Residential
products - 6,326
--- -----
Total
contract
sales $155,993 $146,503
======== ========
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and
have recast prior year presentation for consistency.
A-3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
12 Weeks Ended March 27, 2015 and March 28, 2014
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 27, 2015 Items March 27, 2015 ** March 28, 2014 Items March 28, 2014 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation ownership
products $36,278 $(28,420) $7,858 $6,268 $ - $6,268
Resort management and
other services 863 - 863 906 - 906
Financing 1,006 - 1,006 1,057 - 1,057
Rental 2,352 - 2,352 1,975 - 1,975
Cost reimbursements 866 - 866 941 - 941
Total
revenues 41,365 (28,420) 12,945 11,147 - 11,147
------ ------- ------ ------ --- ------
Expenses
Cost of vacation ownership
products 21,996 (21,583) 413 1,453 - 1,453
Marketing and sales 5,557 (922) 4,635 3,778 - 3,778
Resort management and
other services 850 - 850 700 - 700
Rental 2,496 - 2,496 2,596 - 2,596
Royalty fee 157 - 157 177 - 177
Cost reimbursements 866 - 866 941 - 941
Total
expenses 31,922 (22,505) 9,417 9,645 - 9,645
------ ------- ----- ----- --- -----
Gains and other income 3 (3) - (8) 8 -
Equity in losses (3) - (3) (2) - (2)
Segment
financial
results $9,443 $(5,918) $3,525 $1,492 $8 $1,500
====== ======= ====== ====== === ======
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
Contract Sales March 27, 2015 March 28, 2014
-------------- --------------
Vacation ownership $8,659 $6,624
Residential
products 28,420 -
------ ---
Total
contract
sales $37,079 $6,624
======= ======
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: Asia Pacific segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a
portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior
period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and
other services and have recast prior year presentation for consistency.
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
12 Weeks Ended March 27, 2015 and March 28, 2014
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 27, 2015 Items March 27, 2015 ** March 28, 2014 Items March 28, 2014 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation ownership
products $5,900 $ - $5,900 $7,240 $ - $7,240
Resort management and
other services 4,979 - 4,979 5,480 - 5,480
Financing 990 - 990 1,022 - 1,022
Rental 2,132 - 2,132 2,227 - 2,227
Cost reimbursements 7,586 - 7,586 8,502 - 8,502
Total
revenues 21,587 - 21,587 24,471 - 24,471
------ --- ------ ------ --- ------
Expenses
Cost of vacation ownership
products 852 - 852 1,446 - 1,446
Marketing and sales 5,421 - 5,421 4,755 - 4,755
Resort management and
other services 4,591 - 4,591 5,107 200 5,307
Rental 3,051 - 3,051 3,157 - 3,157
Royalty fee 76 - 76 102 - 102
Cost reimbursements 7,586 - 7,586 8,502 - 8,502
Total
expenses 21,577 - 21,577 23,069 200 23,269
------ --- ------ ------ --- ------
Gains and other income 4 (4) - - - -
Segment
financial
results $14 $(4) $10 $1,402 $(200) $1,202
=== === === ====== ===== ======
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
March 27, 2015 March 28, 2014
-------------- --------------
Contract Sales $5,298 $8,448
====== ======
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: Europe segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a
portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior
period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and
other services and have recast prior year presentation for consistency.
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER
12 Weeks Ended March 27, 2015 and March 28, 2014
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 27, 2015 Items March 27, 2015 ** March 28, 2014 Items March 28, 2014 **
-------------- ----- -------------- -------------- ----- --------------
Expenses
Cost of vacation
ownership products $1,613 $ - $1,613 $2,467 $ - $2,467
Financing 4,905 - 4,905 5,104 - 5,104
General and
administrative 22,777 - 22,777 21,828 - 21,828
Organizational and
separation related 53 (53) - 834 (834) -
Consumer Financing
Interest 6,021 - 6,021 6,625 - 6,625
Royalty fee 11,507 - 11,507 11,472 - 11,472
Total
expenses $46,876 $(53) $46,823 $48,330 $(834) $47,496
======= ==== ======= ======= ===== =======
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: Corporate and Other consists of results not specifically attributable to an individual segment, including expenses
incurred to support our financing operations, non-capitalizable development expenses supporting overall company
development, company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements
that we entered into with Marriott International in connection with the spin-off, as well as consumer financing interest
expense.
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
12 Weeks Ended
--------------
March 27, 2015 March 28, 2014
-------------- --------------
Contract sales
Vacation
ownership $169,950 $155,249
Residential
products 28,420 6,326
Total
contract
sales 198,370 161,575
------- -------
Revenue recognition adjustments:
Reportability(1) (1,513) (4,554)
Sales
Reserve(2) (8,367) (7,651)
Other(3) (4,584) (4,519)
Sale of vacation ownership products $183,906 $144,851
======== ========
1 Adjustment for lack of required
downpayment or contract sales in
rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
(In thousands)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended
March 27, 2015 Items Adjustment March 27, 2015 ** March 28, 2014 Items Adjustment March 28, 2014 **
-------------- ----- ---------- -------------- -------------- ----- ---------- --------------
Sale of vacation ownership products $183,906 $(28,420) 1,513 $156,999 $144,850 $ - $4,554 $149,404
Less:
Cost of vacation ownership products 64,962 (21,583) 562 43,941 46,871 - 1,414 48,285
Marketing
and sales 79,995 (922) 105 79,178 71,220 - 374 71,594
Development margin $38,949 $(5,915) $846 $33,880 $26,759 $ - $2,766 $29,525
======= ======= ==== ======= ======= ========= ====== =======
Development margin percentage(1) 21.2% 21.6% 18.5% 19.8%
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative
financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is
calculated using whole dollars.
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
12 Weeks Ended
--------------
March 27, 2015 March 28, 2014
-------------- --------------
Contract
sales
Vacation
ownership $155,993 $140,177
Residential
products - 6,326
Total
contract
sales 155,993 146,503
------- -------
Revenue
recognition
adjustments:
Reportability(1) (3,444) (4,400)
Sales Reserve
(2) (6,334) (6,327)
Other
(3) (4,487) (4,434)
Sale of vacation
ownership products $141,728 $131,342
1 Adjustment for lack of required
downpayment or contract sales in
rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
(In thousands)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended
March 27, 2015 Items Adjustment March 27, 2015 ** March 28, 2014 Items Adjustment March 28, 2014 **
-------------- ----- ---------- -------------- -------------- ----- ---------- --------------
Sale of vacation ownership products $141,728 $ - $3,444 $145,172 $131,342 $ - $4,400 $135,742
Less:
Cost of vacation ownership products 40,501 - 980 41,481 41,505 - 1,376 42,881
Marketing
and sales 69,017 - 324 69,341 62,687 - 414 63,101
Development margin $32,210 $ - $2,140 $34,350 $27,150 $ - $2,610 $29,760
======= ========= ====== ======= ======= ========= ====== =======
Development margin percentage(1) 22.7% 23.7% 20.7% 22.0%
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional
information about our reasons for providing these alternative financial measures and limitations
on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation
ownership products. Development margin percentage is calculated using whole dollars.
A-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EBITDA AND ADJUSTED EBITDA
12 Weeks Ended March 27, 2015 and March 28, 2014
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 27, 2015 Items March 27, 2015 ** March 28, 2014 Items March 28, 2014 **
-------------- ----- -------------- -------------- ----- --------------
Net income $34,054 $(5,897) $28,157 $19,308 $797 $20,105
Interest expense 1 2,974 - 2,974 2,147 - 2,147
Tax provision 23,289 (975) 22,314 12,763 621 13,384
Depreciation and amortization 4,065 - 4,065 4,658 - 4,658
----- --- ----- ----- --- -----
EBITDA
** $64,382 $(6,872) $57,510 $38,876 $1,418 $40,294
======= ======= ======= ======= ====== =======
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
(1) Interest expense excludes consumer financing interest expense.
A-9
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2015 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
(In thousands, except per share amounts)
Fiscal Year 2015 (low) Fiscal Year 2015 (high)
--------------------- ----------------------
Net
income $118 $124
Adjustments to
reconcile Net
income to
Adjusted net
income
Organizational
and separation
related and
other
charges(1) 2 2
Gain on
dispositions
(2) (10) (10)
Bulk sales (3) (6) (6)
Provision for
income taxes on
adjustments to
net income 4 4
--- ---
Adjusted net income** $108 $114
==== ====
Earnings per
share -Diluted
4 $3.61 $3.79
Adjusted earnings
per share -
Diluted**, 4 $3.29 $3.48
Diluted shares4 32.8 32.8
** Denotes non-GAAP financial
measures. Please see pages A-11
and A-12 for additional
information about our reasons for
providing these alternative
financial measures and limitations
on their use.
(1) Organizational and separation
related and other charges
adjustment includes $1.9 million
for organizational and separation
related efforts.
(2) Gain on dispositions adjustment
includes a $0.9 million gain
associated with the sale of a golf
course and adjacent undeveloped
land as well as an estimated gain
on the sale of undeveloped and
partially developed land, an
operating golf course, spa and
clubhouse and related assets, both
in our North America segment.
3 Bulk sales adjustment includes
the net $5.9 million of pre-tax
income associated with the sale of
the 18 units in the Asia Pacific
segment.
4 Earnings per share -Diluted,
Adjusted earnings per share -
Diluted, and Diluted shares
outlook includes the impact of
share repurchase activity only
through April 28, 2015.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2015 ADJUSTED EBITDA OUTLOOK
(In thousands)
Fiscal Year 2015 (low) Fiscal Year 2015 (high)
--------------------- ----------------------
Adjusted net
income ** $108 $114
Interest
expense1 13 13
Tax provision 79 83
Depreciation
and
amortization 22 22
--- ---
Adjusted
EBITDA** $222 $232
==== ====
** Denotes non-GAAP
financial measures. Please
see pages A-11 and A-12
for additional information
about our reasons for
providing these alternative
financial measures and
limitations on their use.
(1) Interest expense
excludes consumer financing
interest expense.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2015 ADJUSTED DEVELOPMENT MARGIN OUTLOOK
Total MVW
---------
Fiscal Year 2015 Fiscal Year 2015
(low) (high)
----------------- -----------------
Development margin(1) 21.1% 22.1%
Adjustments to reconcile
Development margin to
Adjusted development
margin
Revenue
recognition
reportability (0.1%) (0.1%)
Adjusted development margin**, 1 21.0% 22.0%
==== ====
** Denotes non-GAAP financial
measures. Please see pages A-
11 and A-12 for additional
information about our reasons
for providing these alternative
financial measures and
limitations on their use.
(1) Development margin
represents Development margin
dollars divided by Sale of
vacation ownership products
revenues. Development margin is
calculated using whole dollars.
A-10
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2015 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK
(In thousands)
Current Guidance
----------------
Low High Mid-Point Adjustments Normalized
--- ---- --------- ----------- ----------
Adjusted net income ** $108 $114 $111 $ - $111
Adjustments to
reconcile Adjusted
net income to net
cash
provided by operating
activities:
Adjustments for
non-cash
items(1) 73 75 74 - 74
Deferred income
taxes /income
taxes payable 15 17 16 - 16
Net changes in
assets and
liabilities:
Notes
receivable
originations (284) (290) (287) - (287)
Notes
receivable
collections 268 272 270 - 270
Inventory (2) 30 34 32 (42) (2) (10)
Purchase of
operating
hotel for
future
conversion to
inventory(3) (47) (47) (47) 47 (3) -
Liability for
Marriott
Rewards
customer
loyalty
program (26) (22) (24) 24 5 -
Organizational
and separation
related and
other charges (2) (2) (2) 2 6 -
Other working
capital
changes - 1 1 (4) 7 (3)
--- --- ---
Net cash provided by
operating activities 135 152 144 27 171
Capital expenditures
for property and
equipment (excluding
inventory):
New sales centers
4 (20) (18) (19) 19 4 -
Organizational and
separation
related capital
expenditures (5) (5) (5) 5 6 -
Other (32) (30) (31) 11 8 (20)
Decrease in
restricted cash 1 5 3 - 3
Borrowings from
securitization
transactions 300 306 303 (45) 9 258
Repayment of debt related
to securitizations (241) (247) (244) - (244)
---- ---- ---- --- ----
Free cash
flow** 138 163 151 17 168
Adjustments:
Organizational and
separation related
and other charges 7 7 7 (7) 6 -
Adjusted free
cash flow** $145 $170 $158 $10 $168
==== ==== ==== === ====
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative
financial measures and limitations on their use.
(1) Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.
(2) Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).
(3) Represents adjustment for investment in an operating hotel prior to future conversion to inventory.
4 Represents incremental investment in new sales centers, mainly to support new sales distributions.
5 Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016.
6 Represents costs associated with organizational and separation related efforts.
7 Represents normalized other working capital changes.
8 Represents normalized capital expenditures for property and equipment.
9 Represents normalized borrowings from securitization transactions.
A-11
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
In our press release and schedules, and on the related conference
call, we report certain financial measures that are not prescribed
or authorized by United States generally accepted accounting
principles ("GAAP"). We discuss our reasons for reporting these non-
GAAP financial measures below, and the financial schedules reconcile
the most directly comparable GAAP financial measure to each non-
GAAP financial measure that we report (identified by a double
asterisk ("**") on the preceding pages). Although we evaluate and
present these non-GAAP financial measures for the reasons described
below, please be aware that these non-GAAP financial measures have
limitations and should not be considered in isolation or as a
Adjusted Net Income. We evaluate non-GAAP financial measures,
including Adjusted Net Income, Adjusted EBITDA, and Adjusted
Development Margin, that exclude certain items in the 12 weeks ended
March 27, 2015 and March 28, 2014, and exclude gains on a
disposition in the 12 weeks ended March 27, 2015 and March 28, 2014,
because these non-GAAP financial measures allow for period-over-
period comparisons of our on-going core operations before the
impact of certain items and gains. These non-GAAP financial
measures also facilitate our comparison of results from our on-
going core operations before certain items and gains with results
from other vacation ownership companies.
Certain items - 12 weeks ended March 27, 2015. In our Statement of
Income for the 12 weeks ended March 27, 2015, we recorded $6.0
million of net pre-tax items, which included a $28.4 million
adjustment to exclude the bulk sale of 18 units in our Asia Pacific
segment recorded under the "sale of vacation ownership products"
caption, with corresponding adjustments of $21.6 million and $0.9
million to the "Cost of vacation ownership products" and Marketing
and sales" captions, respectively, and $0.2 million of
organizational and separation related costs recorded under the
"Organizational and separation related" caption, partially offset by
a $0.3 million reversal of an accrual associated with a 2014 golf
Certain items - 12 weeks ended March 28, 2014. In our Statement of
Income for the 12 weeks ended March 28, 2014, we recorded $2.7
million of net pre-tax items, which included a $2.0 million
increase in our accrual for remaining costs we expect to incur in
connection with our interest in an equity method investment in a
joint venture project in our North America segment recorded under
the "Impairment charge on equity investment" caption and $0.9
million of organizational and separation related costs recorded
under the "Organizational and separation related" caption, partially
offset by a $0.2 million reversal of a severance accrual in our
Europe segment recorded under the "Resort management and other
Gain on the disposition of a golf course and adjacent undeveloped
land -12 weeks ended March 27, 2015. In our Statement of Income for
the 12 weeks ended March 27, 2015, we recorded a net $0.9 million
gain associated with the sale of a golf course and adjacent
undeveloped land in our North America segment under the "Gains and
other income" caption.
Gain on the disposition of a golf course and adjacent undeveloped
land -12 weeks ended March 28, 2014. In our Statement of Income for
the 12 weeks ended March 28, 2014, we recorded a net $1.2 million
gain associated with the sale of a golf course and adjacent
undeveloped land in our North America segment under the "Gains and
other income" caption.
Adjusted Development Margin (Adjusted Sale of Vacation Ownership
Products Net of Expenses). We evaluate Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) as an
indicator of operating performance. Adjusted Development Margin
adjusts Sale of vacation ownership products revenues for the impact
of revenue reportability, includes corresponding adjustments to Cost
of vacation ownership products expense and Marketing and sales
expense associated with the change in revenues from the Sale of
vacation ownership products, and includes adjustments for certain
items as itemized in the discussion of Adjusted Net Income above. We
evaluate Adjusted Development Margin because it allows for period-
A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA is defined as
earnings, or net income, before interest expense (excluding consumer financing interest expense),
provision for income taxes, depreciation and amortization. For purposes of our EBITDA calculation
(which previously adjusted for consumer financing interest expense), we do not adjust for
consumer financing interest expense because the associated debt is secured by vacation ownership
notes receivable that have been sold to bankruptcy remote special purpose entities and is
generally non-recourse to us. Further, we consider consumer financing interest expense to be an
operating expense of our business.
We consider EBITDA to be an indicator of operating performance, and we use it to measure our
ability to service debt, fund capital expenditures and expand our business. We also use it, as do
analysts, lenders, investors and others, because it excludes certain items that can vary widely
across different industries or among companies within the same industry. For example, interest
expense can be dependent on a company's capital structure, debt levels and credit ratings.
Accordingly, the impact of interest expense on earnings can vary significantly among companies.
The tax positions of companies can also vary because of their differing abilities to take
advantage of tax benefits and because of the tax policies of the jurisdictions in which they
operate. As a result, effective tax rates and provision for income taxes can vary considerably
among companies. EBITDA also excludes depreciation and amortization because companies utilize
productive assets of different ages and use different methods of both acquiring and depreciating
Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for
certain items and gains, as itemized in the discussion of Adjusted Net Income above. We evaluate
Adjusted EBITDA as an indicator of operating performance because it allows for period-over-
period comparisons of our on-going core operations before the impact of certain items and gains.
Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core
operations before the impact of certain items and gains with results from other vacation
ownership companies.
Free Cash Flow. We also evaluate Free Cash Flow as a liquidity measure that provides useful
information to management and investors about the amount of cash provided by operating activities
after capital expenditures for property and equipment, changes in restricted cash, and the
borrowing and repayment activity related to our securitizations. We consider Free Cash Flow to be
a liquidity measure that provides useful information to management and investors about the amount
of cash generated by the business that can be used for strategic opportunities, including
acquisitions and strengthening the balance sheet. Analysis of Free Cash Flow also facilitates
management's comparison of our results with our competitors' results.
Adjusted Free Cash Flow. We also evaluate Adjusted Free Cash Flow, which reflects additional
adjustments for organizational and separation related, litigation, and other cash items, as
referred to in the discussion of Adjusted Net Income above. We evaluate Adjusted Free Cash Flow
as a liquidity measure that provides useful information to management and investors about the
amount of cash provided by operating activities after capital expenditures for property and
equipment, changes in restricted cash, and the borrowing and repayment activity related to our
securitizations, excluding the impact of organizational and separation related, litigation, and
other cash charges. We consider Adjusted Free Cash Flow to be a liquidity measure that provides
useful information to management and investors about the amount of cash generated by the business
that can be used for strategic opportunities, including acquisitions and strengthening the
balance sheet. Analysis of Adjusted Free Cash Flow also facilitates management's comparison of
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
A-13
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
March 27, 2015 January 2, 2015
-------------- ---------------
ASSETS
Cash and cash
equivalents $272,180 $346,515
Restricted cash
(including $29,310
and $34,986 from
VIEs, respectively) 62,016 109,907
Accounts and contracts
receivable (including
$4,132 and $4,992
from VIEs,
respectively) 114,863 109,700
Vacation ownership
notes receivable
(including $675,411
and $750,680 from
VIEs, respectively) 888,193 917,228
Inventory 724,520 772,784
Property and equipment 188,431 147,379
Other 138,666 120,503
Total Assets $2,388,869 $2,524,016
========== ==========
LIABILITIES AND EQUITY
Accounts payable $76,569 $114,079
Advance deposits 63,439 60,192
Accrued liabilities
(including $552 and
$1,088 from VIEs,
respectively) 171,325 165,969
Deferred revenue 27,018 38,818
Payroll and benefits
liability 73,347 93,073
Liability for Marriott
Rewards customer
loyalty program 84,811 89,285
Deferred compensation
liability 44,598 41,677
Mandatorily redeemable
preferred stock of
consolidated
subsidiary 38,856 38,816
Debt (including
$629,220 and $708,031
from VIEs,
respectively) 618,946 696,450
Other 59,960 27,071
Deferred taxes 87,494 78,883
------ ------
Total Liabilities 1,346,363 1,444,313
--------- ---------
Preferred stock -$.01
par value; 2,000,000
shares authorized;
none issued or
outstanding - -
Common stock -$.01 par value; 100,000,000 shares authorized;
36,333,814 and 36,089,513 shares
issued, respectively 363 361
Treasury stock -at
cost; 4,602,258 and
3,996,725 shares,
respectively (277,629) (229,229)
Additional paid-in
capital 1,128,615 1,137,785
Accumulated other
comprehensive income 11,452 17,054
Retained earnings 179,705 153,732
------- -------
Total Equity 1,042,506 1,079,703
Total Liabilities and
Equity $2,388,869 $2,524,016
========== ==========
The abbreviation VIEs above means Variable Interest Entities.
A-14
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
12 weeks ended
--------------
March 27, 2015 March 28, 2014
-------------- --------------
OPERATING ACTIVITIES
Net income $34,054 $19,308
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,065 4,658
Amortization of debt issuance costs 1,267 1,369
Provision for loan losses 8,437 7,470
Share-based compensation 2,643 2,274
Deferred income taxes 8,600 (1,712)
Equity method income (13) (37)
Gain on disposal of property and
equipment, net (887) (1,233)
Non-cash litigation settlement (262) -
Impairment charges on equity investment - 2,000
Net change in assets and liabilities:
Accounts and contracts receivable (4,643) (25,348)
Notes receivable originations (48,946) (44,921)
Notes receivable collections 67,518 71,068
Inventory 44,883 19,617
Purchase of operating hotel for future
conversion to inventory (46,614) -
Other assets (8,096) 2,791
Accounts payable, advance deposits and
accrued liabilities (25,064) (9,483)
Liability for Marriott Rewards customer
loyalty program (4,474) (7,000)
Deferred revenue (11,624) (3,449)
Payroll and benefit liabilities (19,583) (16,348)
Deferred compensation liability 2,921 700
Other liabilities 27,937 26,849
Other, net (50) (284)
Net cash provided by operating activities 32,069 48,289
------ ------
INVESTING ACTIVITIES
Capital expenditures for property and
equipment (excluding inventory) (10,562) (1,056)
Increase in restricted cash 47,103 12,555
Dispositions, net 197 21,796
Net cash provided by investing activities 36,738 33,295
------ ------
FINANCING ACTIVITIES
Repayment of debt related to
securitization transactions (78,811) (80,789)
Proceeds from vacation ownership
inventory arrangement 5,375 -
Repurchase of common stock (51,281) (37,436)
Payment of dividends (8,081) -
Proceeds from stock option exercises 90 468
Payment of withholding taxes on vesting
of restricted stock units (9,061) (4,142)
Other 80 -
Net cash used in financing activities (141,689) (121,899)
-------- --------
Effect of changes in exchange rates on
cash and cash equivalents (1,453) 34
DECREASE IN CASH AND CASH EQUIVALENTS (74,335) (40,281)
CASH AND CASH EQUIVALENTS, beginning of
period 346,515 199,511
CASH AND CASH EQUIVALENTS, end of period $272,180 $159,230
======== ========
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SOURCE Marriott Vacations Worldwide Corporation
