MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., Feb. 26, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2014 financial results and provided its outlook for 2015. Due to the company's reporting calendar, fourth quarter and full year 2013 financial results included the impact of an additional week compared to 2014.
Fourth quarter 2014 highlights:
-- Adjusted EBITDA totaled $49 million, an increase of $11 million, or 28
percent, year-over-year.
-- Company contract sales were $215 million and North America contract
sales were $189 million.
-- Company adjusted development margin was 21.4 percent and North America
adjusted development margin was 23.5 percent.
-- North America volume per guest (VPG) increased 5 percent year-over-year
to $3,255.
-- Adjusted fully diluted earnings per share (EPS) increased to $0.69
compared to $0.32 in the fourth quarter of 2013.
-- The company completed the sale of partially developed land, an operating
golf course and related assets in Kauai, Hawaii and the sale of
partially developed land, an operating golf course, spa and clubhouse
and related facilities, in Abaco, Bahamas for aggregate gross cash
proceeds of $50 million.
-- The company entered into commitments to purchase inventory at future
dates in Miami, San Diego and the Big Island of Hawaii.
-- The company repurchased 1,033,705 shares of its common stock at an
average price of $66.21 per share for a total of over $68.4 million.
-- Subsequent to the end of the fourth quarter, the company entered into an
asset light transaction with a third party which will develop the
remaining units at the company's resort on Marco Island, Florida, and
sell the completed units to the company.
Fourth quarter 2014 net income was $1 million, or $0.01 diluted earnings per share, compared to net income of $6 million, or $0.15 diluted earnings per share, in the fourth quarter of 2013. Company development margin was 19.8 percent and North America development margin was 22.6 percent in the fourth quarter of 2014 compared to 23.3 percent and 26.0 percent, respectively, in the fourth quarter of 2013.
Full year 2014 highlights:
-- Adjusted EBITDA totaled $200 million, an increase of $25 million, or 14
percent, year-over-year.
-- Company adjusted development margin was 22.0 percent and North America
adjusted development margin was 24.3 percent.
-- North America VPG increased 6 percent to $3,386.
-- Adjusted fully diluted EPS increased 27 percent to $2.93 compared to
$2.31 in 2013.
-- The company generated adjusted free cash flow of $284 million.
Full year 2014 net income totaled $81 million, or $2.33 diluted earnings per share, compared to reported net income of $80 million in 2013, or $2.18 diluted earnings per share. Company development margin in 2014 was 20.9 percent compared to 21.2 percent in 2013. North America development margin was 23.4 percent in 2014 compared to 22.1 percent in the prior year. Net cash provided by operating activities was $291 million for 2014.
Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-20 of the Financial Schedules that follow.
2015 Outlook highlights:
-- Adjusted EBITDA of $215 million to $225 million.
-- Adjusted fully diluted EPS of $3.16 to $3.35.
-- Company contract sales growth (excluding residential) of 4 percent to 7
percent.
-- Adjusted company development margin of 21 percent to 22 percent.
-- Adjusted free cash flow of $135 million to $160 million.
Pages A-1 through A-20 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 $111 million to $117 million; fully diluted EPS of $3.31 to $3.49; company development margin of 20.8 percent to 21.8 percent; and net cash provided by operating activities of $107 million to $123 million.
"2014 was a great year for Marriott Vacations Worldwide, with adjusted EBITDA of $200 million, adjusted free cash flow of nearly $300 million and over $210 million of capital returned to our shareholders. In addition, we delivered development margin of over 20 percent and disposed of more than $80 million of excess land and inventory," said Stephen P. Weisz, president and chief executive officer. "With progress toward adding new destinations and sales distributions while delivering strong free cash flow, I am very excited about what the future holds for Marriott Vacations Worldwide in 2015 and beyond."
Fourth Quarter 2014 Results
Company Results
Total company contract sales were $215 million, a $2 million, or 1 percent, increase from $213 million in the fourth quarter of 2013. Excluding the impact of the extra week in 2013, total company contract sales increased $14 million, or 7 percent, driven by $18 million, or 10 percent, of higher vacation ownership contract sales in the company's North America segment, partially offset by $4 million of lower residential contract sales in the company's North America segment.
Adjusted development margin was $44 million, a $1 million decrease from the fourth quarter of 2013 primarily because the prior year period benefited from $4 million of higher favorable product cost true-up activity. Adjusted development margin percentage was 21.4 percent in the fourth quarter of 2014 compared to 22.9 percent in the fourth quarter of 2013. Development margin was $39 million, an $8 million decrease from the fourth quarter of 2013. Development margin percentage was 19.8 percent in the fourth quarter of 2014 compared to 23.3 percent in the fourth quarter of 2013.
Rental revenues totaled $73 million, a $4 million increase from the fourth quarter of 2013, reflecting a 7 percent increase in transient rate. Rental revenues, net of expenses, were $1 million, a $14 million increase from the fourth quarter of 2013.
Resort management and other services revenues totaled $89 million, unchanged from the fourth quarter of 2013. Resort management and other services revenues, net of expenses, were $31 million, a $5 million, or 18 percent, increase over the fourth quarter of 2013.
Financing revenues totaled $39 million, a $5 million decrease from the fourth quarter of 2013. Financing revenues, net of expenses and consumer financing interest expense, were $23 million, a $3 million decrease from the fourth quarter of 2013.
Adjusted EBITDA was $49 million in the fourth quarter of 2014, an $11 million, or 28 percent, increase from $38 million in the fourth quarter of 2013.
Segment Results
North America
VPG increased 5 percent to $3,255 in the fourth quarter of 2014 from $3,103 in the fourth quarter of 2013, driven mainly by an increase in the average number of points purchased per contract and higher pricing. North America vacation ownership contract sales were $186 million in the fourth quarter of 2014, an increase of $7 million, or 4 percent, over the prior year period. Excluding the impact of the extra week in 2013, North America contract sales increased $18 million, or 10 percent, from the fourth quarter of 2013.
Fourth quarter 2014 North America segment financial results were $83 million, a decrease of $10 million from the fourth quarter of 2013. The decrease was primarily driven by a $24 million non-cash charge related to the disposition of partially developed land, an operating golf course, spa and clubhouse and related facilities at its former resort in Abaco, Bahamas and settlement of related litigation, $6 million of lower development margin and $5 million of lower financing revenues. These decreases were offset partially by $15 million of higher rental revenues net of expenses, $5 million of higher resort management and other services revenues net of expenses and a $3 million gain related to the disposition of property in Kauai, Hawaii.
Adjusted development margin was $43 million, a $1 million decrease from the prior year quarter, as the prior year period benefited from favorable product cost true-up activity. Adjusted development margin percentage was 23.5 percent in the fourth quarter of 2014 compared to 25.4 percent in the fourth quarter of 2013. Development margin was $40 million, a $6 million decrease from the fourth quarter of 2013. Development margin percentage was 22.6 percent in the fourth quarter of 2014 compared to 26.0 percent in the prior year quarter.
Asia Pacific
Asia Pacific contract sales decreased $1 million to $12 million in the fourth quarter of 2014, and were unchanged after adjusting for the additional week in 2013. Segment financial results were $4 million, a $1 million increase from the fourth quarter of 2013.
Europe
Fourth quarter 2014 contract sales were $14 million, unchanged from the fourth quarter of 2013. Segment financial results were $3 million, a $4 million increase from the fourth quarter of 2013 due primarily to a $5 million litigation settlement in the fourth quarter of 2013.
Full Year 2014 Results
For the full year, total company contract sales were $713 million, up $19 million, or 3 percent, from $694 million in 2013. Excluding the impact of the extra week in 2013, total company contract sales increased $29 million, or 4 percent, driven by $20 million, or 3 percent, of higher contract sales in the company's North America segment on a 6 percent increase in VPG to $3,386, and $11 million of higher contract sales in the company's Europe segment. These increases were partially offset by $3 million of lower contract sales in the company's Asia Pacific segment. Full year 2014 adjusted development margin increased to 22.0 percent in 2014 from 19.8 percent in 2013.
Adjusted EBITDA in 2014 totaled $200 million, at the high end of the company's guidance range of $190 million to $200 million, and $25 million higher than 2013. Full year 2014 adjusted free cash flow increased $109 million over 2013 to $284 million compared to the company's guidance range of $230 million to $245 million. Adjusted net income in 2014 totaled $101 million compared to the company's guidance range of $93 million to $99 million, an increase of $16 million over 2013. Full year 2014 adjusted fully diluted EPS was $2.93 compared to the company's guidance range of $2.67 to $2.84, and $0.62 higher than 2013.
Share Repurchase Program
During the fourth quarter of 2014, the company repurchased 1,033,705 shares of its common stock at an average price of $66.21 per share for a total of over $68.4 million.
Balance Sheet and Liquidity
On January 2, 2015, cash and cash equivalents totaled $347 million. Since the beginning of the year, real estate inventory balances declined $96 million to $768 million, including $413 million of finished goods and $355 million of land and infrastructure. The company had $711 million in debt outstanding at the end of the fourth quarter of 2014, an increase of $33 million from year-end 2013, consisting primarily of $708 million in non-recourse securitized notes. In addition, $40 million of mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of 2014.
In October, the company completed a securitization of $250 million of vacation ownership notes receivable at a weighted average interest rate of 2.29 percent and an advance rate of 96 percent. This transaction generated approximately $240 million of gross cash proceeds. Net cash proceeds to the company after transaction costs and cash reserves were $236 million, which are available for general corporate purposes.
As of January 2, 2015, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $25 million of gross vacation ownership notes receivable eligible for securitization.
Outlook
The company is providing the following guidance for the full year 2015:
Adjusted EBITDA $215 million to $225 million
Adjusted fully diluted earnings
per share $3.16 to $3.35
Adjusted net income $106 million to $112 million
Company contract sales growth
(excluding residential) 4 percent to 7 percent
Adjusted company development
margin 21 percent to 22 percent
Adjusted free cash flow $135 million to $160 million
Pages A-1 through A-20 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 $111 million to $117 million; fully diluted EPS of $3.31 to $3.49; company development margin of 20.8 percent to 21.8 percent; and net cash provided by operating activities of $107 million to $123 million.
Fourth Quarter and Full Year 2014 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. EST today to discuss these results as well as its outlook for 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 13599388. 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 February 26, 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 4, 2014
TABLE OF CONTENTS
Consolidated Statements of
Income -16 Weeks Ended January
2, 2015 and 17 Weeks Ended
January 3, 2014 A-1
Consolidated Statements of
Income -52 Weeks Ended January
2, 2015 and 53 Weeks Ended
January 3, 2014 A-2
North America Segment Financial
Results -16 Weeks Ended
January 2, 2015 and 17 Weeks
Ended January 3, 2014 A-3
North America Segment Financial
Results -52 Weeks Ended
January 2, 2015 and 53 Weeks
Ended January 3, 2014 A-4
Asia Pacific Segment Financial
Results -16 Weeks Ended
January 2, 2015 and 17 Weeks
Ended January 3, 2014 A-5
Asia Pacific Segment Financial
Results -52 Weeks Ended
January 2, 2015 and 53 Weeks
Ended January 3, 2014 A-6
Europe Segment Financial Results
-16 Weeks Ended January 2,
2015 and 17 Weeks Ended January
3, 2014 A-7
Europe Segment Financial Results
-52 Weeks Ended January 2,
2015 and 53 Weeks Ended January
3, 2014 A-8
Corporate and Other Financial
Results -16 Weeks and 52 Weeks
Ended January 2, 2015, and 17
Weeks and 53 Weeks Ended
January 3, 2014 A-9
Consolidated Contract Sales to
Sale of Vacation Ownership
Products and Adjusted
Development Margin A-10
(Adjusted Sale of Vacation Ownership Products Net
of Expenses) -16 Weeks Ended January 2, 2015
and 17 Weeks Ended January 3, 2014
Consolidated Contract Sales to
Sale of Vacation Ownership
Products and Adjusted
Development Margin A-11
(Adjusted Sale of Vacation Ownership Products Net
of Expenses) -52 Weeks Ended January 2, 2015
and 53 Weeks Ended January 3, 2014
North America Contract Sales to
Sale of Vacation Ownership
Products and Adjusted
Development Margin A-12
(Adjusted Sale of Vacation Ownership Products Net
of Expenses) -16 Weeks Ended January 2, 2015
and 17 Weeks Ended January 3, 2014
North America Contract Sales to
Sale of Vacation Ownership
Products and Adjusted
Development Margin A-13
(Adjusted Sale of Vacation Ownership Products Net
of Expenses) -52 Weeks Ended January 2, 2015
and 53 Weeks Ended January 3, 2014
EBITDA and Adjusted EBITDA -16
Weeks and 52 Weeks Ended
January 2, 2015 and 17 Weeks
and 53 Weeks Ended January 3,
2014 A-14
2014 Adjusted Free Cash Flow A-15
2015 Outlook -Adjusted Net
Income and Adjusted Earnings
Per Share -Diluted, Adjusted
EBITDA and Adjusted Development
Margin A-16
2015 Outlook -Adjusted Free
Cash Flow and Normalized
Adjusted Free Cash Flow A-17
Non-GAAP Financial Measures A-18
Consolidated Balance Sheets A-21
Consolidated Statements of Cash
Flows A-22
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
16 Weeks Ended January 2, 2015 and 17 Weeks Ended January 3, 2014
(In millions, except per share amounts)
As Reported As Adjusted As Reported Europe As Adjusted
16 Weeks Ended Certain 16 Weeks Ended 17 Weeks Ended Certain Rescission 17 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------- ---------------
Revenues
Sale of vacation
ownership products $195 $ - $195 $200 $ - $(1) $199
Resort management and
other services 89 - 89 89 - - 89
Financing 39 - 39 44 - - 44
Rental 73 - 73 69 - - 69
Cost reimbursements 115 - 115 125 - - 125
Total
revenues 511 - 511 527 - (1) 526
--- --- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 58 - 58 57 - - 57
Marketing and sales 98 - 98 96 - - 96
Resort management and
other services 58 - 58 63 - - 63
Financing 8 - 8 9 - - 9
Rental 72 - 72 82 - - 82
General and
administrative 32 - 32 33 - - 33
Organizational and
separation related - - - 5 (5) - -
Litigation
settlement 24 (24) - 5 (5) - -
Consumer financing
interest 8 - 8 9 - - 9
Royalty fee 19 - 19 21 - - 21
Cost reimbursements 115 - 115 125 - - 125
Total
expenses 492 (24) 468 505 (10) - 495
--- --- --- --- --- --- ---
Gains and other income 3 (3) - - - - -
Interest expense (4) - (4) (4) - - (4)
Impairment charges on equity investment - - - (1) 1 - -
Income
before
income
taxes 18 21 39 17 11 (1) 27
Provision for income taxes (17) 1 (16) (11) (3) (1) (15)
Net income $1 $22 $23 $6 $8 $(2) $12
=== === === === === === ===
Earnings per share - Basic $0.02 $0.71 $0.16 $0.34
===== ===== ===== =====
Earnings per share - Diluted $0.01 $0.69 $0.15 $0.32
===== ===== ===== =====
Basic Shares 32.5 32.5 35.4 35.4
Diluted Shares 33.4 33.4 36.6 36.6
As Reported As Reported
16 Weeks Ended 17 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales
Vacation
ownership $212 $206
Residential
products 3 7
--- ---
Total
contract
sales $215 $213
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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
52 Weeks Ended January 2, 2015 and 53 Weeks Ended January 3, 2014
(In millions, except per share amounts)
As Reported As Adjusted As Reported As Adjusted
Europe
Rescission
52 Weeks Ended Certain 52 Weeks Ended 53 Weeks Ended Certain 53 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------- ---------------
Revenues
Sale of vacation
ownership products $648 $ - $648 $672 $ - $(21) $651
Resort management and
other services 298 - 298 290 - - 290
Financing 129 - 129 141 - - 141
Rental 264 - 264 262 - - 262
Cost reimbursements 397 - 397 385 - - 385
Total
revenues 1,736 - 1,736 1,750 - (21) 1,729
----- --- ----- ----- --- --- -----
Expenses
Cost of vacation
ownership products 197 - 197 214 - (7) 207
Marketing and sales 315 - 315 316 (2) (2) 312
Resort management and
other services 199 - 199 206 - - 206
Financing 24 - 24 25 - - 25
Rental 238 - 238 251 - - 251
General and
administrative 99 - 99 99 - - 99
Organizational and
separation related 3 (3) - 12 (12) - -
Litigation
settlement 19 (19) - 4 (4) - -
Consumer financing
interest 26 - 26 31 - - 31
Royalty fee 60 - 60 62 - - 62
Impairment 1 (1) - 1 (1) - -
Cost reimbursements 397 - 397 385 - - 385
Total
expenses 1,578 (23) 1,555 1,606 (19) (9) 1,578
----- --- ----- ----- --- --- -----
Gains and other income 5 (5) - 1 - - 1
Interest expense (12) - (12) (13) - - (13)
Impairment charges on equity investment - - - (1) 1 - -
Income
before
income
taxes 151 18 169 131 20 (12) 139
Provision for income taxes (70) 2 (68) (51) (5) 2 (54)
Net income $81 $20 $101 $80 $15 $(10) $85
=== === ==== === === ==== ===
Earnings per share - Basic $2.40 $3.01 $2.25 $2.40
===== ===== ===== =====
Earnings per share - Diluted $2.33 $2.93 $2.18 $2.31
===== ===== ===== =====
Basic Shares 33.7 33.7 35.4 35.4
Diluted Shares 34.6 34.6 36.6 36.6
As Reported As Reported
52 Weeks Ended 53 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales
Vacation
ownership $699 $679
Residential
products 14 15
--- ---
Total
contract
sales $713 $694
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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
16 Weeks Ended January 2, 2015 and 17 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported As Adjusted
16 Weeks Ended Certain 16 Weeks Ended 17 Weeks Ended Certain 17 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------------
Revenues
Sale of vacation ownership
products $174 $ - $174 $176 $ - $176
Resort management and
other services 79 - 79 79 - 79
Financing 36 - 36 41 - 41
Rental 65 - 65 61 - 61
Cost reimbursements 102 - 102 111 - 111
Total
revenues 456 - 456 468 - 468
--- --- --- --- --- ---
Expenses
Cost of vacation ownership
products 50 - 50 47 - 47
Marketing and sales 84 - 84 83 - 83
Resort management and
other services 50 - 50 55 - 55
Rental 63 - 63 74 - 74
Litigation settlement 24 (24) - - - -
Royalty fee 3 - 3 4 - 4
Cost reimbursements 102 - 102 111 - 111
Total
expenses 376 (24) 352 374 - 374
--- --- --- --- --- ---
Gains and other income 3 (3) - - - -
Impairment charges on equity investment - - - (1) 1 -
--- --- --- --- --- ---
Segment
financial
results $83 $21 $104 $93 $1 $94
=== === ==== === === ===
As Reported As Reported
16 Weeks Ended 17 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales
Vacation ownership $186 $179
Residential
products 3 7
--- ---
Total
contract
sales $189 $186
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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
52 Weeks Ended January 2, 2015 and 53 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported As Adjusted
52 Weeks Ended Certain 52 Weeks Ended 53 Weeks Ended Certain 53 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------------
Revenues
Sale of vacation ownership
products $578 $ - $578 $583 $ - $583
Resort management and
other services 263 - 263 255 - 255
Financing 120 - 120 132 - 132
Rental 234 - 234 233 - 233
Cost reimbursements 354 - 354 342 - 342
Total
revenues 1,549 - 1,549 1,545 - 1,545
----- --- ----- ----- --- -----
Expenses
Cost of vacation ownership
products 170 - 170 184 - 184
Marketing and sales 272 - 272 270 - 270
Resort management and
other services 169 - 169 176 - 176
Rental 209 - 209 222 - 222
Organizational and
separation related 1 (1) - - - -
Litigation settlement 19 (19) - (1) 1 -
Royalty fee 9 - 9 10 - 10
Impairment 1 (1) - - - -
Cost reimbursements 354 - 354 342 - 342
Total
expenses 1,204 (21) 1,183 1,203 1 1,204
----- --- ----- ----- --- -----
Gains and other income 5 (5) - 1 - 1
Impairment charges on equity investment - - - (1) 1 -
--- --- --- --- --- ---
Segment
financial
results $350 $16 $366 $342 $ - $342
==== === ==== ==== === ====
As Reported As Reported
52 Weeks Ended 53 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales
Vacation ownership $620 $608
Residential products 14 15
--- ---
Total
contract
sales $634 $623
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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
16 Weeks Ended January 2, 2015 and 17 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported As Adjusted
16 Weeks Ended Certain 16 Weeks Ended 17 Weeks Ended Certain 17 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------------
Revenues
Sale of vacation
ownership products $13 $ - $13 $11 $ - $11
Resort management and
other services 1 - 1 1 - 1
Financing 2 - 2 2 - 2
Rental 3 - 3 2 - 2
Cost reimbursements 1 - 1 2 - 2
Total
revenues 20 - 20 18 - 18
--- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 2 - 2 3 - 3
Marketing and sales 7 - 7 6 - 6
Resort management and
other services 1 - 1 - - -
Rental 5 - 5 4 - 4
Cost reimbursements 1 - 1 2 - 2
Total
expenses 16 - 16 15 - 15
--- --- --- --- --- ---
Equity in earnings - - - - - -
--- --- --- --- --- ---
Segment
financial
results $4 $ - $4 $3 $ - $3
=== === === === === ===
As Reported As Reported
16 Weeks Ended 17 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales $12 $13
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 seventeen weeks ended January 3, 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.
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
52 Weeks Ended January 2, 2015 and 53 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported As Adjusted
52 Weeks Ended Certain 52 Weeks Ended 53 Weeks Ended Certain 53 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------------
Revenues
Sale of vacation
ownership products $35 $ - $35 $34 $ - $34
Resort management and
other services 4 - 4 4 - 4
Financing 5 - 5 5 - 5
Rental 8 - 8 7 - 7
Cost reimbursements 3 - 3 7 - 7
Total
revenues 55 - 55 57 - 57
--- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 8 - 8 7 - 7
Marketing and sales 19 - 19 20 - 20
Resort management and
other services 3 - 3 2 - 2
Rental 13 - 13 12 - 12
Royalty fee 1 - 1 1 - 1
Cost reimbursements 3 - 3 7 - 7
Total
expenses 47 - 47 49 - 49
--- --- --- --- --- ---
Equity in earnings - - - - - -
Segment
financial
results $8 $ - $8 $8 $ - $8
=== === === === === ===
As Reported As Reported
52 Weeks Ended 53 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales $34 $37
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 fifty two weeks ended January 2, 2015 (related to the twelve weeks
ended March 28, 2014) and the fifty three weeks ended January 3, 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.
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
16 Weeks Ended January 2, 2015 and 17 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported As Adjusted
Europe
Rescission
16 Weeks Ended Certain 16 Weeks Ended 17 Weeks Ended Certain 17 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------- ---------------
Revenues
Sale of vacation ownership
products $8 $ - $8 $13 $ - $(1) $12
Resort management and
other services 9 - 9 9 - - 9
Financing 1 - 1 1 - - 1
Rental 5 - 5 6 - - 6
Cost reimbursements 12 - 12 12 - - 12
Total
revenues 35 - 35 41 - (1) 40
--- --- --- --- --- --- ---
Expenses
Cost of vacation ownership
products 2 - 2 5 - - 5
Marketing and sales 7 - 7 7 - - 7
Resort management and
other services 7 - 7 8 - - 8
Rental 4 - 4 4 - - 4
Litigation settlement - - - 5 (5) - -
Royalty fee - - - 1 - - 1
Cost reimbursements 12 - 12 12 - - 12
Total
expenses 32 - 32 42 (5) - 37
--- --- --- --- --- --- ---
Segment
financial
results $3 $ - $3 $(1) $5 $(1) $3
=== === === === === === ===
As Reported As Reported
16 Weeks Ended 17 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales $14 $14
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 seventeen weeks ended January 3, 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-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
52 Weeks Ended January 2, 2015 and 53 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported
Europe
Rescission
As Adjusted
53 Weeks Ended
52 Weeks Ended Certain 52 Weeks Ended 53 Weeks Ended Certain
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------- ---------------
Revenues
Sale of vacation ownership
products $35 $ - $35 $55 $ - $(21) $34
Resort management and
other services 31 - 31 31 - - 31
Financing 4 - 4 4 - - 4
Rental 22 - 22 22 - - 22
Cost reimbursements 40 - 40 36 - - 36
Total
revenues 132 - 132 148 - (21) 127
--- --- --- --- --- --- ---
Expenses
Cost of vacation ownership
products 9 - 9 16 - (7) 9
Marketing and sales 24 - 24 26 (2) (2) 22
Resort management and
other services 27 - 27 28 - - 28
Rental 16 - 16 17 - - 17
Litigation settlement - - - 5 (5) - -
Royalty fee - - - 1 - - 1
Impairment - - - 1 (1) - -
Cost reimbursements 40 - 40 36 - - 36
Total
expenses 116 - 116 130 (8) (9) 113
--- --- --- --- --- --- ---
Segment
financial
results $16 $ - $16 $18 $8 $(12) $14
=== === === === === ==== ===
As Reported As Reported
52 Weeks Ended 53 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract Sales $45 $34
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 fifty two weeks ended January 2, 2015 (related to the twelve weeks ended March 28,
2014) and the fifty three weeks ended January 3, 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
16 Weeks and 52 Weeks Ended January 2, 2015 and 17 Weeks and 53 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported As Adjusted
16 Weeks Ended Certain 16 Weeks Ended 17 Weeks Ended Certain 17 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------------
Expenses
Cost of vacation
ownership products $4 $ - $4 $2 $ - $2
Financing 8 - 8 9 - 9
General and
administrative 32 - 32 33 - 33
Organizational and
separation related - - - 5 (5) -
Consumer financing
interest 8 8 9 9
Royalty fee 16 - 16 16 - 16
Total
expenses $68 $ - $68 $74 $(5) $69
=== === === === === ===
As Reported As Adjusted As Reported As Adjusted
52 Weeks Ended Certain 52 Weeks Ended 53 Weeks Ended Certain 53 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------------
Expenses
Cost of vacation
ownership products $10 $ - $10 $7 $ - $7
Financing 24 - 24 25 - 25
General and
administrative 99 - 99 99 - 99
Organizational and
separation related 2 (2) - 12 (12) -
Consumer financing
interest 26 - 26 31 - 31
Royalty fee 50 - 50 50 - 50
Total
expenses $211 $(2) $209 $224 $(12) $212
==== === ==== ==== ==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 millions)
16 Weeks Ended 17 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract sales
Vacation
ownership $212 $206
Residential products 3 7
Total
contract
sales 215 213
--- ---
Revenue recognition adjustments:
Reportability 1 (7) 1
Europe
rescission
adjustment(2) - 1
Sales
Reserve(3) (9) (10)
Other4 (4) (5)
Sale of vacation ownership products $195 $200
==== ====
(1) Adjustment for lack of
required downpayment or contract
sales in rescission period.
(2) Adjustment to eliminate the
impact of extended rescission
periods in our Europe segment.
Please see page A-19 for
additional information.
3 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
4 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted
16 Weeks Ended Certain Reportability 16 Weeks Ended 17 Weeks Ended Certain Rescission Reportability 17 Weeks Ended
January 2, 2015 Charges Adjustment January 2, 2015 ** January 3, 2014 Charges Adjustment Adjustment January 3, 2014 **
--------------- ------- ---------- --------------- --------------- ------- ---------- ---------- ---------------
Sale of vacation ownership products $195 $ - $7 $202 $200 $ - $(1) $(1) $198
Less:
Cost of vacation ownership products 58 - 2 60 57 - - - 57
Marketing and sales 98 - - 98 96 - - - 96
Development margin $39 $ - $5 $44 $47 $ - $(1) $(1) $45
=== === === === === === === === ===
Development margin percentage(1) 19.8% 21.4% 23.3% 22.9%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 millions)
52 Weeks Ended 53 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract sales
Vacation
ownership $699 $679
Residential
products 14 15
Total
contract
sales 713 694
--- ---
Revenue recognition adjustments:
Reportability 1 (15) 9
Europe
rescission
adjustment(2) - 21
Sales
Reserve(3) (32) (36)
Other4 (18) (16)
Sale of vacation ownership products $648 $672
==== ====
(1) Adjustment for lack of
required downpayment or contract
sales in rescission period.
(2) Adjustment to eliminate the
impact of extended rescission
periods in our Europe segment.
Please see page A-19 for
additional information.
3 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
4 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted
52 Weeks Ended Reportability 52 Weeks Ended 53 Weeks Ended Certain Rescission Reportability 53 Weeks Ended
January 2, 2015 Adjustment January 2, 2015 ** January 3, 2014 Charges Adjustment Adjustment January 3, 2014 **
--------------- ---------- --------------- --------------- ------- ---------- ---------- ---------------
Sale of vacation ownership products $648 $15 $663 $672 $ - $(21) $(9) $642
Less:
Cost of vacation ownership products 197 4 201 214 - (7) (3) 204
Marketing and sales 315 1 316 316 (2) (2) (1) 311
Development margin $136 $10 $146 $142 $2 $(12) $(5) $127
==== === ==== ==== === ==== === ====
Development margin percentage(1) 20.9% 22.0% 21.2% 19.8%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 millions)
16 Weeks Ended 17 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract sales
Vacation
ownership $186 $179
Residential
products 3 7
Total
contract
sales 189 186
--- ---
Revenue recognition adjustments:
Reportability 1 (5) 3
Sales Reserve
(2) (6) (8)
Other
(3) (4) (5)
Sale of vacation ownership products $174 $176
==== ====
(1) Adjustment for lack of
required downpayment or contract
sales in rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
16 Weeks Ended Certain Reportability 16 Weeks Ended 17 Weeks Ended Certain Reportability 17 Weeks Ended
January 2, 2015 Charges Adjustment January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- ---------- --------------- --------------- ------- ---------- ---------------
Sale of vacation ownership products $174 $ - $5 $179 $176 $ - $(3) $173
Less:
Cost of vacation ownership products 50 - 2 52 47 - (1) 46
Marketing and sales 84 - - 84 83 - - 83
Development margin $40 $ - $3 $43 $46 $ - $(2) $44
=== ============== === === === ============== === ===
Development margin percentage(1) 22.6% 23.5% 26.0% 25.4%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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 millions)
52 Weeks Ended 53 Weeks Ended
January 2, 2015 January 3, 2014
--------------- ---------------
Contract sales
Vacation
ownership $620 $608
Residential
products 14 15
Total
contract
sales 634 623
--- ---
Revenue recognition adjustments:
Reportability 1 (13) 5
Sales Reserve
(2) (25) (29)
Other
(3) (18) (16)
Sale of vacation ownership products $578 $583
==== ====
(1) Adjustment for lack of
required downpayment or contract
sales in rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
52 Weeks Ended Certain Reportability 52 Weeks Ended 53 Weeks Ended Certain Reportability 53 Weeks Ended
January 2, 2015 Charges Adjustment January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- ---------- --------------- --------------- ------- ---------- ---------------
Sale of vacation ownership products $578 $ - $13 $591 $583 $ - $(5) $578
Less:
Cost of vacation ownership products 170 - 4 174 184 - (2) 182
Marketing and sales 272 - 1 273 270 - - 270
Development margin $136 $ - $8 $144 $129 $ - $(3) $126
==== ============== === ==== ==== ============== === ====
Development margin percentage(1) 23.4% 24.3% 22.1% 21.8%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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
16 Weeks and 52 Weeks Ended January 2, 2015 and 17 Weeks and 53 Weeks Ended January 3, 2014
(In millions)
As Reported As Adjusted As Reported Europe As Adjusted
16 Weeks Ended Certain 16 Weeks Ended 17 Weeks Ended Certain Rescission 17 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------- ---------------
Net income $1 $22 $23 $6 $8 $(2) $12
Interest expense1 4 - 4 4 - - 4
Tax provision 17 (1) 16 11 3 1 15
Depreciation and amortization 6 - 6 7 - - 7
--- --- --- --- --- --- ---
EBITDA
** $28 $21 $49 $28 $11 $(1) $38
=== === === === === === ===
As Reported As Adjusted As Reported Europe As Adjusted
52 Weeks Ended Certain 52 Weeks Ended 53 Weeks Ended Certain Rescission 53 Weeks Ended
January 2, 2015 Charges January 2, 2015 ** January 3, 2014 Charges Adjustment January 3, 2014 **
--------------- ------- --------------- --------------- ------- ---------- ---------------
Net income $81 $20 $101 $80 $15 $(10) $85
Interest expense1 12 - 12 13 - - 13
Tax provision 70 (2) 68 51 5 (2) 54
Depreciation and amortization 19 - 19 23 - - 23
--- --- --- --- --- --- ---
EBITDA
** $182 $18 $200 $167 $20 $(12) $175
==== === ==== ==== === ==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 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
2014 ADJUSTED FREE CASH FLOW
(In millions)
2014
----
Adjusted net income ** $101
Adjustments to reconcile Adjusted net income to net cash
provided by operating activities:
Adjustments for non-cash items(1) 68
Deferred income taxes / income taxes payable (8)
Net changes in assets and liabilities:
Notes receivable originations (268)
Notes receivable collections 287
Inventory 82
Liability for Marriott Rewards customer
loyalty program (25)
Organizational and separation related,
litigation, and other charges 4
Other working capital changes 50
---
Net cash provided by operating activities 291
Capital expenditures for property and equipment (excluding
inventory)
Organizational and separation related capital
expenditures (3)
Other (12)
Increase in restricted cash (24)
Borrowings from securitization transactions 263
Repayment of debt related to securitizations (230)
-----
Free cash flow** 285
Add:
Organizational and separation related, litigation and other charges (1)
---
Adjusted free cash flow** $284
====
** Denotes non-GAAP financial
measures. Please see pages A-18
through A-20 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.
A-16
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 $111 $117
Adjustments to reconcile Net income to
Adjusted net income
Organizational and separation
related and other charges(1) 2 2
Gain on disposition (2) (9) (9)
Provision for income taxes on adjustments
to net income 2 2
--- ---
Adjusted net income** $106 $112
==== ====
Earnings per share - Diluted (3) $3.31 $3.49
Adjusted earnings per share -
Diluted**, 3 $3.16 $3.35
Diluted shares 3 33.6 33.6
** Denotes non-GAAP financial
measures. Please see pages A-18
through A-20 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 $2 million for
organizational and separation
related efforts.
(2) Gain on disposition
adjustment includes an estimated
gain on the sale of undeveloped
and partially developed land, an
operating golf course, spa and
clubhouse and related assets in
our North America segment.
3 Earnings per share -
Diluted, Adjusted earnings per
share -Diluted, and Diluted
shares outlook includes the impact
of share repurchase activity only
through February 25, 2015.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2015 ADJUSTED EBITDA OUTLOOK
(In millions)
Fiscal Year 2015 (low) Fiscal Year 2015
(high)
--------------------- ----------------
Adjusted net income ** $106 $112
Interest expense1 12 12
Tax provision 78 82
Depreciation and amortization 19 19
--- ---
Adjusted EBITDA** $215 $225
================
** Denotes non-GAAP
financial measures. Please
see pages A-18 through A-
20 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) 20.8% 21.8%
Adjustments to
reconcile Development
margin to Adjusted
development margin
Revenue
recognition
reportability 0.2% 0.2%
--- ---
Adjusted
development
margin**, 1 21.0% 22.0%
==== ====
** Denotes non-GAAP financial
measures. Please see pages A-
18 through A-20 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-17
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 ** $106 $112 $109 $ - $109
Adjustments to
reconcile Adjusted
net income to net
cash
provided by operating
activities:
Adjustments for
non-cash
items(1) 68 70 69 - 69
Deferred income
taxes /income
taxes payable 10 12 11 - 11
Net changes in
assets and
liabilities:
Notes
receivable
originations (282) (290) (286) - (286)
Notes
receivable
collections 258 260 259 - 259
Inventory
(2) (20) (15) (18) 8 (2) (10)
Liability for
Marriott
Rewards
customer
loyalty
program (25) (23) (24) 24 4 -
Organizational
and separation
related and
other charges (5) (5) (5) 5 5 -
Other
working
capital
changes (3) 2 (1) (2) 6 (3)
--- --- --- --- ---
Net cash provided by
operating activities 107 123 114 35 149
Capital expenditures for
property and equipment
(excluding inventory)
New sales
centers (3) (21) (20) (21) 21 (3) -
Organizational and
separation related
capital
expenditures (3) (3) (3) 3 5 -
Other (29) (29) (29) 9 7 (20)
Decrease in
restricted cash 3 3 3 - 3
Borrowings from
securitization
transactions 295 310 303 (45) 8 258
Repayment of debt
related to
securitizations (225) (232) (229) - (229)
---- ---- ---- --- ----
Free cash
flow** 127 152 138 23 161
Adjustments:
Organizational and
separation related
and other charges 8 8 8 (8) 5 -
--- --- --- ---
Adjusted free
cash flow** $135 $160 $146 $15 $161
==== ==== ==== === ====
** Denotes non-GAAP financial
measures. Please see pages A-18
through A-20 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). 2015
Inventory includes an 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 payment for Marriott
Rewards Points issued prior to the
Spin-off. Liability to be fully
paid in 2016.
5 Represents costs associated with
organizational and separation
related efforts.
6 Represents normalized other
working capital changes.
7 Represents normalized capital
expenditures for property and
equipment.
8 Represents normalized borrowings
from securitization transactions.
A-18
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 charges incurred in
the 16 weeks and 52 weeks ended
January 2, 2015 and the 17 weeks and
53 weeks ended January 3, 2014,
exclude gains on dispositions in the
16 weeks and 52 weeks ended January 2,
2015, and exclude adjustments related
to the extension of rescission periods
in our Europe segment discussed below
("Europe Rescission Adjustments") in
the 17 weeks and 53 weeks ended
January 3, 2014, because these non-
GAAP financial measures allow for
period-over-period comparisons of
our on-going core operations before
the impact of certain charges, gains
and Europe Rescission Adjustments.
These non-GAAP financial measures
also facilitate our comparison of
results from our on-going core
operations before certain charges,
gains and Europe Rescission
Adjustments with results from other
vacation ownership companies.
Certain Charges - 16 weeks and 52
weeks ended January 2, 2015. In our
Statement of Income for the 16 weeks
ended January 2, 2015, we recorded $24
million of pre-tax charges which
consisted of a non-cash loss
associated with the disposition of
partially developed land, an operating
golf course, spa and clubhouse and
related facilities at a former resort
in our North America segment and
settlement of related litigation under
the "Litigation settlement" caption.
In our Statement of Income for the 52
weeks ended January 2, 2015, we
recorded $23 million of net pre-tax
charges, which included a $24 million
non-cash loss associated with the
disposition of partially developed
land, an operating golf course, spa
and clubhouse and related facilities
at a former resort in our North
America segment and settlement of
related litigation under the
"Litigation settlement" caption, $3
million of organizational and
separation related costs recorded
under the "Organizational and
separation related" caption, a $3
million litigation settlement in our
North America segment recorded under
the "Litigation settlement" caption,
and a $1 million impairment charge
associated with a project in our North
America segment recorded under the
"Impairment" caption, partially offset
by $8 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.
Certain Charges - 17 weeks and 53
weeks ended January 3, 2014. In our
Statement of Income for the 17 weeks
ended January 3, 2014, we recorded $11
million of pre-tax charges, which
included $5 million of organizational
and separation related costs recorded
under the "Organizational and
separation related" caption, $5
million for a litigation settlement in
our Europe segment recorded under the
"Litigation settlement" caption, and a
$1 million increase in our accrual for
remaining costs we expected 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
charges on equity investment" caption.
In our Statement of Income for the 53
weeks ended January 3, 2014, we
recorded $20 million of pre-tax
charges, which included $12 million of
organizational and separation related
costs recorded under the
"Organizational and separation
related" caption, an $8 million
increase in our accrual for remaining
costs we expected 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
charges on equity investment" caption,
$5 million for a litigation settlement
in our Europe segment recorded under
the "Litigation settlement" caption,
$2 million of severance costs in our
Europe segment recorded under the
"Marketing and sales" caption, and a
$1 million pre-tax non-cash
impairment charge related to a leased
golf course at a project in our Europe
segment recorded under the
"Impairment" caption, partially offset
by a $7 million gain for cash received
in payment of fully reserved
receivables in connection with an
equity method investment in a joint
venture project in our North America
segment recorded under the "Impairment
charges on equity investment" caption,
and a $1 million reversal of a
previously recorded litigation
settlement related to a project in our
North America segment, based upon an
agreement to settle the matter for an
amount less than our accrual, recorded
under the "Litigation settlement"
caption.
Gain on dispositions -16 weeks and 52
weeks ended January 2, 2015. In our
Statement of Income for the 16 weeks
ended January 2, 2015, we recorded a
$3 million gain associated with the
sale of undeveloped and partially
developed land, an operating golf
course and related assets in our North
America segment under the "Gains and
other income" caption. In our
Statement of Income for the 52 weeks
ended January 2, 2015, we recorded $5
million of gains, which included a $3
million gain associated with the sale
of undeveloped and partially developed
land, an operating golf course and
related assets in our North America
segment and a $2 million gain
associated with the sale of a golf
course and adjacent undeveloped land
in our North America segment, both
recorded under the "Gains and other
income" caption.
A-19
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Europe Rescission Adjustments. In the second quarter of 2013,
during the course of an internal review of certain sales
documentation processes related to the sale of certain vacation
ownership interests in properties associated with our Europe
segment, we determined that the documentation we provided for
certain sales of vacation ownership products was not strictly
compliant. As a result, in accordance with applicable European
regulation, the period of time during which purchasers of such
interests may rescind their purchases was extended. We record
revenues from the sale of vacation ownership products once the
rescission period has ended. Originally, we recorded revenues
from these sales of vacation ownership products based on the
rescission periods in effect assuming compliant documentation
had been provided to the purchasers, rather than the extended
periods. As a result, we recognized revenue in incorrect
periods between fiscal years 2010 and 2013 and misstated
revenues in our previously filed consolidated financial
statements. We provided compliant documentation to purchasers
for whom the extended rescission period had not yet expired. As
compliant documentation was subsequently provided as part of the
corrective actions we took, the extended rescission period for
most of the purchases at issue ended during the second quarter
of 2013. To better reflect our on-going core operations and
allow for period-over-period comparisons, we have excluded the
impact associated with the extended rescission periods in our
adjusted financial measures.
17 weeks ended January 3, 2014. In our Statement of Income for
the 17 weeks ended January 3, 2014, we recorded after-tax Europe
Rescission Adjustments of $2 million, which included a $1 million
pre-tax increase in Sale of vacation ownership products revenues
and a $1 million decrease in the Provision for income taxes
associated with the change in Income before income taxes.
53 weeks ended January 3, 2014. In our Statement of Income for
the 53 weeks ended January 3, 2014, we recorded after-tax Europe
Rescission Adjustments of $10 million, which included a $21
million pre-tax increase in Sale of vacation ownership products
revenues, pre-tax increases of $7 million and $2 million in Cost
of vacation ownership products expense and Marketing and sales
expense, respectively, associated with the change in revenues
from the Sale of vacation ownership products, and a $2 million
increase in the Provision for income taxes associated with the
change in Income before income taxes.
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 charges and Europe
Rescission Adjustments 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, certain charges and Europe Rescission Adjustments
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.
A-20
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA. We also evaluate Adjusted
EBITDA, which reflects additional
adjustments for certain charges, gains and
Europe Rescission Adjustments, 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 charges, gains
and Europe Rescission Adjustments.
Together, EBITDA and Adjusted EBITDA
facilitate our comparison of results from
our on-going core operations before the
impact of certain charges, gains and Europe
Rescission Adjustments 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 charges, 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-21
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
Fiscal Year-End 2014 and 2013
(In millions, except per share amounts)
January 2, January 3,
2015 2014
---- ----
ASSETS
Cash and cash
equivalents $347 $200
Restricted cash
(including $35 and
$34 from VIEs,
respectively) 110 86
Accounts and contracts
receivable (including
$5 and $5 from VIEs,
respectively) 110 109
Vacation ownership
notes receivable
(including $751 and
$719 from VIEs,
respectively) 917 970
Inventory 773 870
Property and equipment 147 254
Other 136 143
--- ---
Total Assets $2,540 $2,632
====== ======
LIABILITIES AND EQUITY
Accounts payable $114 $129
Advance deposits 60 48
Accrued liabilities
(including $1 and $1
from VIEs,
respectively) 166 185
Deferred revenue 39 19
Payroll and benefits
liability 93 82
Liability for Marriott
Rewards customer
loyalty program 89 114
Deferred compensation
liability 42 37
Mandatorily redeemable
preferred stock of
consolidated
subsidiary 40 40
Debt (including $708
and $674 from VIEs,
respectively) 711 678
Other 27 31
Deferred taxes 79 60
--- ---
Total Liabilities 1,460 1,423
----- -----
Preferred stock -$.01
par value; 2,000,000
shares authorized;
none issued or
outstanding - -
Common stock -$.01 par value; 100,000,000 shares authorized;
36,089,513 and 35,637,765 shares
issued, respectively - -
Treasury stock -at
cost; 3,996,725 and
505,023 shares,
respectively (229) (26)
Additional paid-in
capital 1,137 1,130
Accumulated other
comprehensive income 17 23
Retained earnings 155 82
--- ---
Total Equity 1,080 1,209
----- -----
Total Liabilities and
Equity $2,540 $2,632
====== ======
The abbreviation VIEs above means Variable Interest
Entities.
A-22
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years 2014 and 2013
(In millions)
2014 2013
---- ----
OPERATING ACTIVITIES
Net income $81 $80
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 19 23
Amortization of debt issuance costs 5 6
Provision for loan losses 30 36
Share-based compensation 13 12
Gain on disposal of property and
equipment, net (5) (1)
Non-cash litigation settlement 24 -
Deferred income taxes 19 18
Impairment charges 1 1
Impairment charges on equity
investment - 1
Net change in assets and
liabilities:
Accounts and contracts receivable (1) (8)
Notes receivable originations (268) (260)
Notes receivable collections 287 310
Inventory 82 34
Other assets 9 (7)
Accounts payable, advance deposits
and accrued liabilities (11) (16)
Liability for Marriott Rewards
customer loyalty program (25) (45)
Deferred revenue 18 (13)
Payroll and benefit liabilities 9 -
Deferred compensation liability 5 (8)
Other liabilities (3) (3)
Other, net 2 2
Net cash provided by operating
activities 291 162
--- ---
INVESTING ACTIVITIES
Capital expenditures for property
and equipment (excluding
inventory) (15) (22)
Increase in restricted cash (24) (17)
Dispositions, net 82 3
Net cash provided by (used in)
investing activities 43 (36)
--- ---
FINANCING ACTIVITIES
Borrowings from securitization
transactions 263 361
Repayment of debt related to
securitization transactions (230) (361)
Borrowings on Revolving Corporate
Credit Facility - 25
Repayment of Revolving Corporate
Credit Facility - (25)
Debt issuance costs (7) (5)
Repurchase of common stock (203) (26)
Payment of dividends (8) -
Proceeds from stock option
exercises 3 4
Excess tax benefits from share-
based compensation 5 3
Payment of withholding taxes on
vesting of restricted stock units (8) (5)
Net cash used in financing activities (185) (29)
==== ===
Effect of changes in exchange rates
on cash and cash equivalents (2) -
INCREASE IN CASH AND CASH EQUIVALENTS 147 97
CASH AND CASH EQUIVALENTS, beginning of
period 200 103
--- ---
CASH AND CASH EQUIVALENTS, end of
period $347 $200
==== ====
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SOURCE Marriott Vacations Worldwide Corporation
