MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., July 24, 2014 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2014 financial results and provided updated guidance for the full year 2014.
Highlights for the second quarter of 2014 include:
-- Adjusted EBITDA totaled $57 million, an increase of $9 million, or 20
percent, year-over-year.
-- Company adjusted development margin was 24.2 percent and North America
adjusted development margin was 26.3 percent, an increase of 710 and 680
basis points, respectively, year-over-year.
-- North America volume per guest (VPG) increased 5.3 percent
year-over-year to $3,383.
-- Adjusted fully diluted earnings per share (EPS) were $0.87 compared to
$0.73 in the second quarter of 2013.
-- The company disposed of a parcel of undeveloped land on Singer Island,
Florida for gross cash proceeds of $11 million.
-- In the second quarter of 2014, the company repurchased 936,060 shares of
its common stock under its share repurchase program for approximately
$52 million. Through July 22, 2014, the company has repurchased a total
of nearly 2.5 million shares for a total of $134 million since the
launch of the program in the fourth quarter of 2013.
Second quarter 2014 net income totaled $36 million, or $1.00 per diluted share, compared to net income of $30 million, or $0.85 per diluted share, in the second quarter of 2013. Company development margin increased to 24.2 percent in the second quarter of 2014 from 23.1 percent in the second quarter of 2013; North America development margin for the second quarter increased to 26.3 percent from 20.8 percent last year.
Second quarter 2014 adjusted net income totaled $31 million, a $4 million increase compared to the second quarter of 2013. Second quarter adjusted net income excludes the pre-tax impact of the following:
-- Second quarter 2014: $8 million of income in the company's North America
segment associated with the settlement of a dispute with a former
service provider, the reversal of a $2 million reserve associated with
the company's interest in an equity method investment in a joint venture
project in its North America segment, $1 million of organizational and
separation related costs, $1 million related to a gain from the sale of
a golf course and adjacent undeveloped land and a $1 million non-cash
impairment charge.
-- Second quarter 2013: $9 million related to the impact of extended
rescission periods in the company's Europe segment, a $7 million
increase in an accrual for expected remaining costs associated with the
company's interest in an equity method investment in a joint venture
project in its North America segment offset by a $7 million gain for
cash received in payment of fully reserved receivables associated with
that same project, $2 million of organizational and separation related
costs, and $2 million of severance costs and an impairment charge in the
company's Europe segment. In addition, adjusted development margin for
both periods is adjusted for the impact of revenue reportability, as
necessary.
Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin, are reconciled in the Press Release Schedules that follow. Adjustments are shown and described in further detail on schedules A-1 through A-20. The company now reports consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as used in this release is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted, presented prior to the third quarter of 2013.
"Our second quarter results were strong across the board, with continued growth in VPG, development margin and adjusted EBITDA, as well as improving trends in our tour production," said Stephen P. Weisz, president and chief executive officer. "Adjusted development margin in our key North America segment improved to 26.3 percent, and total company development margin improved to 24.2 percent. After two quarters of solid performance, we are increasing our full year 2014 guidance for adjusted free cash flow, as well as total company and North America adjusted development margin, and raising the lower end of our full year adjusted EBITDA guidance."
Second Quarter 2014 Results
Total company contract sales were $164 million, a $7 million increase from $157 million in the second quarter of 2013, driven by $4 million of higher contract sales in the company's North America segment and $4 million of higher contract sales in the company's Europe segment, offset by $1 million of lower contract sales in the company's Asia Pacific segment.
Adjusted development margin was $37 million, a $12 million increase from the second quarter of 2013. Adjusted development margin percentage increased 7.1 percentage points to 24.2 percent in the second quarter of 2014 from 17.1 percent in the second quarter of 2013. The adjustments are illustrated on schedule A-10. Development margin was $37 million, a $1 million decrease from the second quarter of 2013, as the prior year period benefited from the impact of extended rescission periods in the company's Europe segment. Development margin percentage increased 1.1 percentage points to 24.2 percent in the second quarter of 2014 from 23.1 percent in the second quarter of 2013.
Rental revenues totaled $62 million, a $3 million decrease from the second quarter of 2013. These results reflect a 2 percent increase in transient keys rented as well as a 3 percent increase in average transient rate, offset by $5 million of lower plus points revenue. Rental revenues, net of expenses, were $7 million, a $2 million decrease from the second quarter of 2013.
Resort management and other services revenues totaled $70 million, a $6 million increase from the second quarter of 2013. Resort management and other services revenues, net of expenses, were $24 million, a $6 million increase over the second quarter of 2013.
Adjusted EBITDA was $57 million in the second quarter of 2014, a $9 million increase from $48 million in the second quarter of 2013.
Segment Results
North America
VPG increased 5.3 percent to $3,383 in the second quarter of 2014 from $3,211 in the second quarter of 2013, driven mainly by higher pricing. North America vacation ownership contract sales were $146 million in the second quarter of 2014, an increase of $5 million over the prior year period.
Second quarter 2014 North America segment financial results were $101 million, an increase of $17 million, or 20 percent, year-over-year. The increase was primarily driven by $8 million of higher development margin, $8 million from the settlement of a dispute with a former service provider, $5 million of higher resort management and other services revenues net of expenses, the reversal of a $2 million charge related to the company's interest in an equity method investment in a joint venture project and $2 million of lower royalty fees. These increases were partially offset by $3 million of lower rental revenues net of expenses, $3 million of lower financing revenues, $1 million of lower other revenues net of expenses and $1 million of organizational and separation related charges.
Development margin was $36 million, an $8 million increase from the second quarter of 2013. Development margin percentage increased to 26.3 percent in the second quarter of 2014 as compared to 20.8 percent in the prior year quarter. Excluding the impact of revenue reportability, adjusted development margin was $36 million, an $11 million increase from the prior year quarter. Adjusted development margin percentage increased to 26.3 percent in the second quarter of 2014 from 19.5 percent in the second quarter of 2013. The impact of revenue reportability is illustrated on schedule A-12.
Asia Pacific
Asia Pacific contract sales declined $1 million to $7 million in the second quarter of 2014. Segment financial results were $2 million, flat to the second quarter of 2013.
Europe
Second quarter 2014 contract sales improved $4 million to $11 million. Segment financial results were $6 million, $5 million below the second quarter of 2013. Adjusting for the $9 million impact related to extended rescission periods in the prior year comparable period, segment financial results increased $4 million.
Organizational and Separation Plan
During the second quarter of 2014, the company incurred $1 million of costs in connection with its continued organizational and separation related efforts. Remaining spending for these efforts of approximately $4 million to $6 million is expected to be incurred by the end of 2014.
These costs primarily relate to establishing the company's own information technology systems and services, independent accounts payable functions and the reorganization of existing human resources and information technology organizations to support the company's stand-alone public company needs. Once completed, these efforts are expected to generate approximately $15 million to $20 million of annualized savings, of which approximately $12 million has been realized cumulatively to date, including roughly $2 million reflected in the company's 2014 financial results.
Dispositions
As part of its strategy to dispose of excess land and inventory, the company completed the sale of a parcel of undeveloped land on Singer Island, Florida in May 2014, resulting in $11 million of gross cash proceeds and an estimated gain of less than $1 million.
Share Repurchase Program
During the second quarter of 2014, the company repurchased 936,060 shares of its common stock at an average price of $55.56 per share for a total of approximately $52 million. Through July 22, 2014, the company has repurchased a total of nearly 2.5 million shares of its common stock for a total of $134 million since the launch of the program on October 20, 2013.
Balance Sheet and Liquidity
On June 20, 2014, cash and cash equivalents totaled $170 million. Since the end of 2013, real estate inventory balances declined $44 million to $820 million, including $446 million of finished goods, $40 million of work-in-process and $334 million of land and infrastructure. The company had $570 million in debt outstanding at the end of the second quarter of 2014, a decrease of $108 million from year-end 2013, including $566 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 the second quarter of 2014.
In June, the company completed a securitization of a pool of approximately $23.8 million of primarily highly-seasoned vacation ownership notes receivable that the company had previously classified as not being eligible for securitization, at a weighted average interest rate of 6.25 percent and an advance rate of 95 percent. This transaction generated approximately $22.5 million of net cash proceeds to the company after transaction costs and cash reserves, which are available for general corporate purposes.
As of June 20, 2014, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and had approximately $170 million of gross vacation ownership notes receivable eligible for securitization.
Outlook
For the full year 2014, the company is updating guidance as reflected in the chart below.
Current Guidance Previous Guidance
---------------- -----------------
Adjusted free cash flow $190 million to $205 million $145 million to $160 million
Adjusted fully diluted earnings per share $2.64 to $2.82 $2.42 to $2.68
Adjusted EBITDA $190 million to $200 million $185 million to $200 million
Adjusted net income $93 million to $99 million $87 million to $96 million
Adjusted development margin:
Company 21.0 percent to 22.0 percent 20.0 percent to 21.0 percent
North America 23.0 percent to 24.0 percent 22.0 percent to 23.0 percent
Contract sales growth (excluding residential):
Company 1 percent to 3 percent 5 percent to 8 percent
North America flat to 2 percent 4 percent to 7 percent
Schedules A-1 through A-20 reconcile the non-GAAP financial measures set forth above to the following full year 2014 expected GAAP results: reported net income of $95 million to $101 million; reported company development margin of 20.5 percent to 21.5 percent; reported North America development margin of 22.8 percent to 23.8 percent; and net cash provided by operating activities of $189 million to $201 million.
Second Quarter 2014 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. EDT today to discuss these results. 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 13586548. 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. In late 2011, Marriott Vacations Worldwide was established as an independent, public company focusing primarily on vacation ownership experiences. 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. Marriott Vacations Worldwide offers a diverse portfolio of quality products, programs and management expertise with more than 60 resorts and approximately 420,000 Owners and Members. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. 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, organizational and separation related efforts, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions; the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of July 24, 2014 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
PRESS RELEASE SCHEDULES
QUARTER 2, 2014
TABLE OF CONTENTS
Consolidated Statements of Operations - 12 Weeks Ended June 20, 2014 and June 14, 2013 A-1
Consolidated Statements of Operations - 24 Weeks Ended June 20, 2014 and June 14, 2013 A-2
North America Segment Financial Results - 12 Weeks Ended June 20, 2014 and June 14, 2013 A-3
North America Segment Financial Results - 24 Weeks Ended June 20, 2014 and June 14, 2013 A-4
Asia Pacific Segment Financial Results - 12 Weeks Ended June 20, 2014 and June 14, 2013 A-5
Asia Pacific Segment Financial Results - 24 Weeks Ended June 20, 2014 and June 14, 2013 A-6
Europe Segment Financial Results - 12 Weeks Ended June 20, 2014 and June 14, 2013 A-7
Europe Segment Financial Results - 24 Weeks Ended June 20, 2014 and June 14, 2013 A-8
Corporate and Other Financial Results - 12 Weeks and 24 Weeks Ended June 20, 2014 and June 14, 2013 A-9
Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended June 20, 2014 and June 14, 2013 A-10
Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 20, 2014 and June 14, 2013 A-11
North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended June 20, 2014 and June 14, 2013 A-12
North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 20, 2014 and June 14, 2013 A-13
EBITDA and Adjusted EBITDA - 12 Weeks and 24 Weeks Ended June 20, 2014 and June 14, 2013 A-14
Adjusted Net Income and Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Development Margin - 2014 Outlook A-15
2014 Adjusted Free Cash Flow Outlook A-16
2014 Normalized Adjusted Free Cash Flow Outlook A-17
Non-GAAP Financial Measures A-18
Interim Consolidated Balance Sheets A-21
Interim Consolidated Statements of Cash Flows A-22
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
12 Weeks Ended June 20, 2014 and June 14, 2013
(In millions, except per share amounts)
As Reported As Adjusted As Reported Europe As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain Rescission 12 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ------------- ------------- ------- ---------- -------------
Revenues
Sale of vacation
ownership products $152 $ - $152 $169 $ - $(17) $152
Resort management and
other services 70 - 70 64 - - 64
Financing 29 - 29 32 - - 32
Rental 62 - 62 65 - - 65
Other 6 - 6 6 - - 6
Cost reimbursements 91 - 91 85 - - 85
410 - 410 421 - (17) 404
Total revenues
Expenses
Cost of vacation
ownership products 43 - 43 57 - (6) 51
Marketing and sales 72 - 72 74 (1) (2) 71
Resort management and
other services 46 - 46 46 - - 46
Financing 6 - 6 6 - - 6
Rental 55 - 55 56 - - 56
Other 3 - 3 2 - - 2
General and
administrative 23 - 23 22 - - 22
Organizational and
separation related 1 (1) - 2 (2) - -
Litigation
settlement (8) 8 - - - - -
Consumer Financing
Interest 5 - 5 7 - - 7
Royalty fee 14 - 14 15 - - 15
Impairment 1 (1) - 1 (1) - -
Cost reimbursements 91 - 91 85 - - 85
352 6 358 373 (4) (8) 361
Total expenses
Gains and other income 1 (1) - - - - -
Interest Expense 3 - 3 4 - - 4
Impairment reversals on equity investment 2 (2) - - - - -
58 (9) 49 44 4 (9) 39
Income before
income taxes
Provision for income taxes (22) 4 (18) (14) (1) 3 (12)
Net income $36 $(5) $31 $30 $3 $(6) $27
=== === === === === === ===
Earnings per share - Basic $1.03 $0.89 $0.87 $0.76
===== ===== ===== =====
Earnings per share - Diluted $1.00 $0.87 $0.85 $0.73
===== ===== ===== =====
Basic Shares 34.3 34.3 35.4 35.4
Diluted Shares 35.2 35.2 36.6 36.6
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
Contract Sales June 20, 2014 June 14, 2013
------------- -------------
$164 $156
Vacation ownership
- 1
Residential
products
$164 $157
Total contract
sales
** Denotes non-GAAP financial
measures. Please see schedules A-
18 through A-20 for additional
information about our reasons for
providing these alternative
financial measures and
limitations on their use.
NOTE: We now report in Resort
management and other services
certain external exchange company
results previously included in
Other and have recast prior year
presentation for consistency.
A-2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
24 Weeks Ended June 20, 2014 and June 14, 2013
(In millions, except per share amounts)
As Reported As Adjusted As Reported Europe As Adjusted
24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain Rescission 24 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ------------- ------------- ------- ---------- -------------
Revenues
Sale of vacation
ownership products $297 $ - $297 $310 $ - $(18) $292
Resort management and
other services 130 - 130 123 - - 123
Financing 60 - 60 65 - - 65
Rental 126 - 126 128 - - 128
Other 8 - 8 9 - - 9
Cost reimbursements 191 - 191 176 - - 176
812 - 812 811 - (18) 793
Total revenues
Expenses
Cost of vacation
ownership products 90 - 90 101 - (6) 95
Marketing and sales 143 - 143 148 (2) (2) 144
Resort management and
other services 88 - 88 89 - - 89
Financing 11 - 11 11 - - 11
Rental 112 - 112 112 - - 112
Other 5 - 5 5 - - 5
General and
administrative 45 - 45 43 - - 43
Organizational and
separation related 2 (2) - 3 (3) - -
Litigation
settlement (8) 8 - (1) 1 - -
Consumer Financing
Interest 12 - 12 15 - - 15
Royalty fee 27 - 27 28 - - 28
Impairment 1 (1) - 1 (1) - -
Cost reimbursements 191 - 191 176 - - 176
719 5 724 731 (5) (8) 718
Total expenses
Gains and other income 2 (2) - 1 - - 1
Interest Expense 5 - 5 7 - - 7
Impairment reversals on equity investment - - - - - - -
90 (7) 83 74 5 (10) 69
Income before
income taxes
Provision for income taxes (35) 3 (32) (25) (1) 3 (23)
Net income $55 $(4) $51 $49 $4 $(7) $46
=== === === === === === ===
Earnings per share - Basic $1.58 $1.47 $1.40 $1.32
===== ===== ===== =====
Earnings per share - Diluted $1.54 $1.43 $1.35 $1.27
===== ===== ===== =====
Basic Shares 34.6 34.6 35.3 35.3
Diluted Shares 35.6 35.6 36.6 36.6
As Reported As Reported
24 Weeks Ended 24 Weeks Ended
Contract Sales June 20, 2014 June 14, 2013
------------- -------------
$320 $312
Vacation ownership
6 1
Residential
products
$326 $313
Total contract
sales
** Denotes non-GAAP financial
measures. Please see schedules A-18
through A-20 for additional
information about our reasons for
providing these alternative
financial measures and limitations
on their use.
NOTE: We have restated 2013 first
quarter Sale of vacation ownership
products revenue, Income before
income taxes, Net income, Earnings
per share -Basic, and Earnings per
share -Diluted to correct prior
period misstatements. Earnings per
share -Basic and Earnings per share
-Diluted are calculated using whole
dollars. We now report in Resort
management and other services
certain external exchange company
results previously included in Other
and have recast prior year
presentation for consistency.
A-3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
12 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges June 14, 2013 **
------------- ------- ------------- ------------- ------- -------------
Revenues
Sale of vacation
ownership products $135 $ - $135 $136 $ - $136
Resort management and
other services 60 - 60 55 - 55
Financing 27 - 27 30 - 30
Rental 54 - 54 57 - 57
Other 6 - 6 6 - 6
Cost reimbursements 81 - 81 75 - 75
363 - 363 359 - 359
Total revenues
Expenses
Cost of vacation
ownership products 37 - 37 46 - 46
Marketing and sales 62 - 62 62 - 62
Resort management and
other services 39 - 39 39 - 39
Rental 48 - 48 48 - 48
Other 3 - 3 2 - 2
Organizational and
separation related 1 (1) - - - -
Litigation
settlement (8) 8 - - - -
Royalty fee 1 - 1 3 - 3
Impairment 1 (1) - - - -
Cost reimbursements 81 - 81 75 - 75
265 6 271 275 - 275
Total expenses
Gains and other income 1 (1) - - - -
Impairment reversals on equity investment 2 (2) - - - -
--- --- --- --- --- ---
$101 $(9) $92 $84 $ - $84
Segment financial
results
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
Contract Sales June 20, 2014 June 14, 2013
------------- -------------
$146 $141
Vacation ownership
- 1
Residential
products
$146 $142
Total contract
sales
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our
reasons for providing these alternative financial measures and limitations on their use.
NOTE: We now report in Resort management and other services certain external exchange company results previously included in
Other and have recast prior year presentation for consistency.
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
24 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges June 14, 2013 **
------------- ------- ------------- ------------- ------- -------------
Revenues
Sale of vacation
ownership products $266 $ - $266 $262 $ - $262
Resort management and
other services 114 - 114 108 - 108
Financing 56 - 56 61 - 61
Rental 114 - 114 116 - 116
Other 8 - 8 9 - 9
Cost reimbursements 171 - 171 156 - 156
729 - 729 712 - 712
Total revenues
Expenses
Cost of vacation
ownership products 79 - 79 86 - 86
Marketing and sales 124 - 124 126 - 126
Resort management and
other services 75 - 75 76 - 76
Rental 99 - 99 99 - 99
Other 5 - 5 5 - 5
Organizational and
separation related 1 (1) - - - -
Litigation
settlement (8) 8 - (1) 1 -
Royalty fee 3 - 3 4 - 4
Impairment 1 (1) - - - -
Cost reimbursements 171 - 171 156 - 156
550 6 556 551 1 552
Total expenses
Gains and other income 2 (2) - 1 - 1
Impairment reversals on equity investment - - - - - -
--- --- --- --- --- ---
$181 $(8) $173 $162 $(1) $161
Segment
financial
results
As Reported As Reported
24 Weeks Ended 24 Weeks Ended
Contract Sales June 20, 2014 June 14, 2013
------------- -------------
$286 $284
Vacation ownership
6 1
Residential
products
$292 $285
Total contract
sales
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our
reasons for providing these alternative financial measures and limitations on their use.
NOTE: We now report in Resort management and other services certain external exchange company results previously included in
Other and have recast prior year presentation for consistency.
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
12 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges June 14, 2013 **
------------- ------- ------------- ------------- ------- -------------
Revenues
Sale of vacation
ownership
products $8 $ - $8 $8 $ - $8
Resort management
and other
services 1 - 1 1 - 1
Financing 1 - 1 1 - 1
Rental 2 - 2 2 - 2
Cost
reimbursements - - - 2 - 2
12 - 12 14 - 14
Total revenues
Expenses
Cost of vacation
ownership
products 2 - 2 1 - 1
Marketing and
sales 4 - 4 5 - 5
Resort management
and other
services - - - - - -
Rental 3 - 3 3 - 3
Royalty fee 1 - 1 1 - 1
Cost
reimbursements - - - 2 - 2
10 - 10 12 - 12
Total expenses
$2 $ - $2 $2 $ - $2
Segment
financial
results
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
June 20, 2014 June 14, 2013
------------- -------------
Contract Sales $7 $8
=== ===
** Denotes non-GAAP financial
measures. Please see schedules A-18
through A-20 for additional
information about our reasons for
providing these alternative financial
measures and limitations on their use.
NOTE: Asia Pacific segment revenues and
expenses for the twelve weeks ended
June 14, 2013 have been restated to
reclassify a portion of Cost
reimbursements from the Asia Pacific
segment to the Europe segment to
correct certain immaterial prior
period errors.
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
24 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges June 14, 2013 **
------------- ------- ------------- ------------- ------- -------------
Revenues
Sale of vacation
ownership
products $14 $ - $14 $16 $ - $16
Resort management
and other
services 2 - 2 2 - 2
Financing 2 - 2 2 - 2
Rental 4 - 4 4 - 4
Cost
reimbursements 2 - 2 4 - 4
24 - 24 28 - 28
Total revenues
Expenses
Cost of vacation
ownership
products 3 - 3 3 - 3
Marketing and
sales 8 - 8 9 - 9
Resort management
and other
services 1 - 1 1 - 1
Rental 6 - 6 5 - 5
Royalty fee 1 - 1 1 - 1
Cost
reimbursements 2 - 2 4 - 4
21 - 21 23 - 23
Total expenses
$3 $ - $3 $5 $ - $5
Segment
financial
results
As Reported As Reported
24 Weeks Ended 24 Weeks Ended
June 20, 2014 June 14, 2013
------------- -------------
Contract Sales $14 $17
=== ===
** Denotes non-GAAP financial
measures. Please see schedules A-18
through A-20 for additional
information about our reasons for
providing these alternative financial
measures and limitations on their use.
NOTE: Asia Pacific segment revenues and
expenses for the twenty four weeks
ended June 20, 2014 (related to the
twelve weeks ended March 28, 2014) and
June 14, 2013 have been restated to
reclassify a portion of Cost
reimbursements from the Asia Pacific
segment to the Europe segment to
correct certain immaterial prior
period errors.
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
12 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported Europe As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain Rescission 12 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ------------- ------------- ------- ---------- -------------
Revenues
Sale of vacation
ownership products $9 $ - $9 $25 $ - $(17) $8
Resort management and
other services 9 - 9 8 - - 8
Financing 1 - 1 1 - - 1
Rental 6 - 6 6 - - 6
Cost reimbursements 10 - 10 8 - - 8
35 - 35 48 - (17) 31
Total revenues
Expenses
Cost of vacation
ownership products 2 - 2 9 - (6) 3
Marketing and sales 6 - 6 7 (1) (2) 4
Resort management and
other services 7 - 7 7 - - 7
Rental 4 - 4 5 - - 5
Impairment - - - 1 (1) - -
Cost reimbursements 10 - 10 8 - - 8
29 - 29 37 (2) (8) 27
Total expenses
$6 $ - $6 $11 $2 $(9) $4
Segment
financial
results
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
June 20, 2014 June 14, 2013
------------- -------------
Contract Sales $11 $7
=== ===
** Denotes non-GAAP financial
measures. Please see schedules A-18
through A-20 for additional
information about our reasons for
providing these alternative financial
measures and limitations on their use.
NOTE: Europe segment revenues and
expenses for the twelve weeks ended
June 14, 2013 have been restated to
reclassify a portion of Cost
reimbursements from the Asia Pacific
segment to the Europe segment to
correct certain immaterial prior
period errors.
A-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
24 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported Europe As Adjusted
24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain Rescission 24 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ------------- ------------- ------- ---------- -------------
Revenues
Sale of vacation
ownership products $17 $ - $17 $32 $ - $(18) $14
Resort management and
other services 14 - 14 13 - - 13
Financing 2 - 2 2 - - 2
Rental 8 - 8 8 - - 8
Cost reimbursements 18 - 18 16 - - 16
59 - 59 71 - (18) 53
Total revenues
Expenses
Cost of vacation
ownership products 4 - 4 9 - (6) 3
Marketing and sales 11 - 11 13 (2) (2) 9
Resort management and
other services 12 - 12 12 - - 12
Rental 7 - 7 8 - - 8
Impairment - - - 1 (1) - -
Cost reimbursements 18 - 18 16 - - 16
52 - 52 59 (3) (8) 48
Total expenses
$7 $ - $7 $12 $3 $(10) $5
Segment
financial
results
As Reported As Reported
24 Weeks Ended 24 Weeks Ended
June 20, 2014 June 14, 2013
------------- -------------
Contract Sales $20 $11
=== ===
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: Europe segment revenues and expenses for the twenty four weeks ended June 20, 2014 (related to the twelve weeks ended March 28,
2014) and June 14, 2013 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe
segment to correct certain immaterial prior period errors. In addition, Europe segment first quarter Sale of vacation ownership products
revenue and Segment financial results have been restated to correct prior period misstatements.
A-9
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER
12 Weeks and 24 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges June 14, 2013 **
------------- ------- ------------- ------------- ------- -------------
Expenses
Cost of vacation
ownership products $2 $ - $2 $1 $ - $1
Financing 6 - 6 6 - 6
General and
administrative 23 - 23 22 - 22
Organizational and
separation related - - - 2 (2) -
Royalty fee 12 - 12 11 - 11
$48 $ - $48 $49 $(2) $47
Total expenses
As Reported As Adjusted As Reported As Adjusted
24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges June 14, 2013 **
------------- ------- ------------- ------------- ------- -------------
Expenses
Cost of vacation
ownership products $4 $ - $4 $3 $ - $3
Financing 11 - 11 11 - 11
General and
administrative 45 - 45 43 - 43
Organizational and
separation related 1 (1) - 3 (3) -
Consumer Financing
Interest 12 - 12 15 - 15
Royalty fee 23 - 23 23 - 23
$96 $(1) $95 $98 $(3) $95
Total expenses
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our
reasons for providing these alternative financial measures and limitations on their use.
NOTE: Corporate and Other consists of results not specifically attributable to an individual segment, including expenses in
support of our financing operations, non-capitalizable development expenses supporting overall company development,
company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements that we
entered into with Marriott International, Inc. in connection with the spin-off, as well as consumer financing interest
expense. Beginning with the fourth quarter of 2013 we no longer report Interest expense in Corporate and Other and have
recast prior year information for consistency.
A-10
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
12 Weeks Ended
--------------
June 20, 2014 June 14, 2013
------------- -------------
Contract sales $164 $157
Revenue recognition adjustments:
Reportability(1) - 8
Europe rescission adjustment(2) - 17
Sales Reserve(3) (8) (9)
Other4 (4) (4)
Sale of vacation ownership products $152 $169
==== ====
(1) Adjustment for lack of
required downpayment or contract
sales in rescission period.
(2) Adjustment to eliminate the
impact of extended rescission
periods in our Europe segment.
Please see schedule A-19 for
additional information.
(3) Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
4 Adjustment represents sales
incentives for plus points that
will ultimately be recognized upon
usage or expiration as rental
revenues rather than revenues from
the Sale of vacation ownership
products.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Rescission Reportability 12 Weeks Ended
June 20, 2014 Charges Adjustment June 20, 2014 ** June 14, 2013 Charges Adjustment Adjustment June 14, 2013 **
------------- ------- ---------- ------------- ------------- ------- ---------- ---------- -------------
Sale of vacation ownership products $152 $ - $ - $152 $169 $ - $(17) $(8) $144
Less:
Cost of vacation
ownership products 43 - - 43 57 - (6) (3) 48
Marketing and sales 72 - - 72 74 (1) (2) - 71
Development margin $37 $ - $ - $37 $38 $1 $(9) $(5) $25
=== ================ ========================= === === === === === ===
24.2% 24.2% 23.1% 17.1%
Development margin
percentage(1)
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial
measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole
dollars.
A-11
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
24 Weeks Ended
--------------
June 20, 2014 June 14, 2013
------------- -------------
$326 $313
Contract sales
Revenue recognition adjustments:
(4) 5
Reportability(1)
- 18
Europe rescission
adjustment(2)
(16) (18)
Sales Reserve(3)
(9) (8)
Other4
$297 $310
Sale of vacation ownership products
(1) Adjustment for lack of required
downpayment or contract sales in
rescission period.
(2) Adjustment to eliminate the
impact of extended rescission
periods in our Europe segment.
Please see schedule A-19 for
additional information.
3 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
4 Adjustment represents sales
incentives for plus points that
will ultimately be recognized upon
usage or expiration as rental
revenues rather than revenues from
the Sale of vacation ownership
products.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted
24 Weeks Ended Certain Reportability 24 Weeks Ended 24 Weeks Ended Certain Rescission Reportability 24 Weeks Ended
June 20, 2014 Charges Adjustment June 20, 2014 ** June 14, 2013 Charges Adjustment Adjustment June 14, 2013 **
------------- ------- ---------- ------------- ------------- ------- ---------- ---------- -------------
Sale of vacation ownership products $297 $ - $4 $301 $310 $ - $(18) $(5) $287
Less:
Cost of vacation
ownership products 90 - 1 91 101 - (6) (2) 93
Marketing and sales 143 - - 143 148 (2) (2) - 144
Development margin $64 $ - $3 $67 $61 $2 $(10) $(3) $50
=== ================ === === === === ==== === ===
21.4% 22.0% 19.8% 17.4%
Development margin
percentage(1)
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial
measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole
dollars.
NOTE: We have restated 2013 first quarter Sale of vacation ownership products, Development margin and Development margin percentage to correct prior period misstatements.
A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
12 Weeks Ended
--------------
June 20, 2014 June 14, 2013
------------- -------------
$146 $142
Contract sales
Revenue recognition adjustments:
Reportability(1) - 5
Sales Reserve (2) (7) (7)
Other (3) (4) (4)
$135 $136
Sale of vacation ownership products
(1) Adjustment for lack of required
downpayment or contract sales in
rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment represents sales
incentives for plus points that
will ultimately be recognized upon
usage or expiration as rental
revenues rather than revenues from
the Sale of vacation ownership
products.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended
June 20, 2014 Charges Adjustment June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ---------- ------------- ------------- ------- ---------- -------------
Sale of vacation ownership products $135 $ - $ - $135 $136 $ - $(5) $131
Less:
Cost of vacation
ownership products 37 - - 37 46 - (2) 44
Marketing and sales 62 - - 62 62 - - 62
Development margin $36 $ - $ - $36 $28 $ - $(3) $25
=== ==================== =============================== === === ================ === ===
26.3% 26.3% 20.8% 19.5%
Development margin
percentage(1)
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative
financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated
using whole dollars.
A-13
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
24 Weeks Ended
--------------
June 20, 2014 June 14, 2013
------------- -------------
$292 $285
Contract sales
Revenue recognition adjustments:
(4) -
Reportability(1)
(13) (15)
Sales Reserve (2)
(9) (8)
Other (3)
$266 $262
Sale of vacation ownership products
(1) Adjustment for lack of required
downpayment or contract sales in
rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment represents sales
incentives for plus points that
will ultimately be recognized upon
usage or expiration as rental
revenues rather than revenues from
the Sale of vacation ownership
products.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
24 Weeks Ended Certain Reportability 24 Weeks Ended 24 Weeks Ended Certain Reportability 24 Weeks Ended
June 20, 2014 Charges Adjustment June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ---------- ------------- ------------- ------- ---------- -------------
Sale of vacation ownership products $266 $ - $4 $270 $262 $ - $ - $262
Less:
Cost of vacation
ownership products 79 - 1 80 86 - - 86
Marketing and sales 124 - - 124 126 - - 126
Development margin $63 $ - $3 $66 $50 $ - $ - $50
=== ======================== === === === ================ ================== ===
23.5% 24.1% 19.1% 19.1%
Development margin
percentage(1)
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative
financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated
using whole dollars.
A-14
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EBITDA AND ADJUSTED EBITDA
12 Weeks and 24 Weeks Ended June 20, 2014 and June 14, 2013
($ in millions)
As Reported As Adjusted As Reported Europe As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain Rescission 12 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ------------- ------------- ------- ---------- -------------
Net income $36 $(5) $31 $30 $3 $(6) $27
Interest expense 3 - 3 4 - - 4
Tax provision 22 (4) 18 14 1 (3) 12
Depreciation and amortization 5 - 5 5 - - 5
--- --- --- --- --- --- ---
$66 $(9) $57 $53 $4 $(9) $48
EBITDA **
As Reported As Adjusted As Reported Europe As Adjusted
24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain Rescission 24 Weeks Ended
June 20, 2014 Charges June 20, 2014 ** June 14, 2013 Charges Adjustment June 14, 2013 **
------------- ------- ------------- ------------- ------- ---------- -------------
Net income $55 $(4) $51 $49 $4 $(7) $46
Interest expense 5 - 5 7 - - 7
Tax provision 35 (3) 32 25 1 (3) 23
Depreciation and amortization 9 - 9 11 - - 11
--- --- --- --- --- --- ---
$104 $(7) $97 $92 $5 $(10) $87
EBITDA **
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
NOTE: We now report consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as
presented in these schedules is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted presented prior to the
third quarter of 2013. In addition, we have restated 2013 first quarter Net income to correct prior period misstatements.
A-15
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 ADJUSTED NET INCOME AND ADJUSTED
EARNINGS PER SHARE -DILUTED OUTLOOK
(In millions, except per share amounts)
Fiscal Year 2014 Fiscal Year 2014
(low) (high)
----------------- -----------------
$95 $101
Net income
Adjustments to
reconcile Net
income to
Adjusted net
income
(1) (1)
Organizational
and separation
related and
other
charges(1)
(2) (2)
Gain on
disposition
(2)
1 1
Provision for
income taxes on
adjustments to
net income
$93 $99
Adjusted
net
income**
$2.72 $2.90
Earnings per share
-Diluted (3)
$2.64 $2.82
Adjusted earnings
per share -
Diluted**, 3
35.1 35.1
Diluted shares3
** Denotes non-GAAP financial
measures. Please see schedules 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 $5 million for
organizational and separation
related efforts, $1 million for an
impairment charge in our North
America segment, and $1 million for
restructuring /severance costs in
our Europe segment, offset by $8
million associated with the
settlement of a dispute with a
former service provider in our North
America segment.
(2) Gain on disposition adjustment
includes the gain on the sale of a
golf course and adjacent undeveloped
land 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
July 22, 2014.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 ADJUSTED EBITDA OUTLOOK
(In millions)
Fiscal Year 2014 Fiscal Year 2014
(low) (high)
----------------- -----------------
$93 $99
Adjusted net
income **
12 12
Interest
expense1
66 70
Tax provision
19 19
Depreciation
and
amortization
$190 $200
Adjusted
EBITDA**
** Denotes non-GAAP financial
measures. Please see
schedules 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
2014 ADJUSTED DEVELOPMENT MARGIN OUTLOOK
Total MVW North America
--------- -------------
Fiscal Year 2014 Fiscal Year 2014 Fiscal Year 2014 Fiscal Year 2014
(low) (high) (low) (high)
----------------- ----------------- ----------------- -----------------
20.5% 21.5% 22.8% 23.8%
Development margin(1)
Adjustments to reconcile
Development margin to
Adjusted development
margin
0.1% 0.1% 0.0% 0.0%
Other charges(2)
0.4% 0.4% 0.2% 0.2%
Revenue
recognition
reportability
21.0% 22.0% 23.0% 24.0%
Adjusted
development
margin**, 1
** Denotes non-GAAP financial
measures. Please see schedules 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.
2 Other charges adjustment
includes $1 million for
restructuring /severance costs
in our Europe segment recorded
under the "Marketing and sales"
caption.
A - 16
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 ADJUSTED FREE CASH FLOW OUTLOOK
(In millions)
Fiscal Year 2014 (low) Fiscal Year 2014 (high)
--------------------- ----------------------
Adjusted net income ** $93 $99
Adjustments to reconcile Adjusted net income to
net cash
provided by operating activities:
Adjustments for non-cash items(1) 68 69
Deferred income taxes /income taxes
payable 10 12
Net changes in assets and liabilities:
Notes receivable originations (273) (270)
Notes receivable collections 285 287
Inventory 34 36
Liability for Marriott Rewards
customer loyalty program (32) (31)
Organizational and separation
related and other charges 1 1
Other working capital changes 3 (2)
Net cash provided by operating activities 189 201
Capital expenditures for property and equipment
(excluding inventory)
Organizational and separation related
capital expenditures (3) (3)
Other (23) (23)
Increase in restricted cash - -
Borrowings from securitization transactions 245 250
Repayment of debt related to securitizations (220) (222)
---- ----
Free cash flow** 188 203
Add:
Organizational and separation related and other
charges 2 2
--- ---
Adjusted free cash flow** $190 $205
==== ====
** Denotes non-GAAP financial measures. Please see
schedules 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, impairment activity, and
share-based compensation.
NOTE: We now include borrowings from securitization
transactions and repayment of debt related to
securitizations in our free cash flow. As a result, free
cash flow as presented in this schedule is equivalent to
the non-GAAP financial measure adjusted free cash flow
presented prior to the fourth quarter of 2013, and adjusted
free cash flow presented in this schedule is equivalent to
the non-GAAP financial measure adjusted free cash flow, as
adjusted presented prior to the fourth quarter of 2013.
A-17
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK
(In millions)
Current Guidance
----------------
Low High Mid-Point Adjustments Normalized
--- ---- --------- ----------- ----------
Adjusted net income ** $93 $99 $96 $ - $96
Adjustments to reconcile
Adjusted net income to
net cash
provided by operating
activities:
Adjustments for non-
cash items(1) 68 69 69 - 69
Deferred income taxes
/income taxes
payable 10 12 11 (1) (2) 10
Net changes in assets
and liabilities:
Notes receivable
originations (273) (270) (272) - (272)
Notes receivable
collections 285 287 286 - 286
Inventory 34 36 35 (35) (3) -
Liability for
Marriott Rewards
customer loyalty
program (32) (31) (32) 32 4 -
Organizational and separation related
and other charges 1 1 1 (1) 5 -
Other working
capital changes 3 (2) 1 (11) 6 (10)
--- --- ---
Net cash provided by
operating activities 189 201 195 (16) 179
Capital expenditures
for property and
equipment (excluding
inventory)
Organizational and
separation related
capital expenditures (3) (3) (3) 3 5 -
Other (23) (23) (23) 5 7 (18)
Increase in restricted
cash - - - - -
Borrowings from
securitization
transactions 245 250 248 (35) 8 213
Repayment of debt related to
securitizations (220) (222) (221) - (221)
---- ---- ---- --- ----
Free cash flow** 188 203 196 (43) 153
Add:
Organizational and
separation related
and other charges 2 2 2 (2) -
--- --- --- ---
Adjusted free cash
flow** $190 $205 $198 $(45) $153
==== ==== ==== ==== ====
** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional
information about our reasons for providing these alternative financial measures and limitations
on their use.
NOTE: We now include borrowings from securitization transactions and repayment of debt related to
securitizations in our free cash flow. As a result, free cash flow as presented in this schedule
is equivalent to the non-GAAP financial measure adjusted free cash flow presented prior to the
fourth quarter of 2013, and adjusted free cash flow presented in this schedule is equivalent to
the non-GAAP financial measure adjusted free cash flow, as adjusted presented prior to the
fourth quarter of 2013.
(1) Includes depreciation, amortization of debt issuance costs, provision for loan losses,
impairment activity, and share-based compensation.
(2) Represents cash taxes slightly lower than tax provision.
(3) Represents adjustment to align real estate inventory spending with real estate inventory
costs (i.e., product costs).
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 (efforts
projected to be completed in 2014), impairment activity, and restructuring /severance costs in
our Europe segment, offset by the settlement of a dispute with a former service provider.
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 press release 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
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 12 weeks and 24 weeks ended June 20, 2014 and June 14, 2013,
exclude the gain on the disposition of a golf course and adjacent undeveloped land
in the 12 weeks and 24 weeks ended June 20, 2014, and exclude adjustments related to
the extension of rescission periods in our Europe segment ("Europe Rescission
Adjustments") in the 12 weeks and 24 weeks ended June 14, 2013, 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
Certain Charges - 12 weeks and 24 weeks ended June 20, 2014. In our Statement of
Operations for the 12 weeks ended June 20, 2014, we recorded $8 million of net pre-
tax income, which included $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 and the reversal of a $2 million reserve for
remaining costs we expect to incur in connection with our interest in an equity
method investment in a joint venture project in our North America segment recorded
under the "Impairment reversals on equity investment" caption, partially offset by
$1 million of organizational and separation related costs recorded under the
"Organizational and separation related" caption and a $1 million impairment charge
associated with a project in our North America segment recorded under the
Certain Charges - 12 weeks and 24 weeks ended June 14, 2013. In our Statement of
Operations for the 12 weeks ended June 14, 2013, we recorded $4 million of net pre-
tax charges, which included a $7 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
reversals on equity investment" caption, $2 million of organizational and separation
related costs recorded under the "Organizational and separation related" caption, $1
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
A-19
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Gain on the disposition of a golf course and adjacent undeveloped land -12 weeks and
24 weeks ended June 20, 2014. In our Statement of Operations for the 12 weeks
ended June 20, 2014, we recorded a net $1 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. In our Statement of Operations for the 24 weeks
ended June 20, 2014, we recorded a net $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.
Europe Rescission Adjustments - 12 weeks and 24 weeks ended June 14, 2013. 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
12 weeks ended June 14, 2013. In our
Statement of Operations for the 12
weeks ended June 14, 2013, we
recorded after-tax Europe
Rescission Adjustments of $6
million, which included a $17
million pre-tax increase in Sale of
vacation ownership products
revenues, pre-tax increases of $6
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
$3 million increase in the Provision
for income taxes associated with the
change in Income before income
taxes.
24 weeks ended June 14, 2013. In our
Statement of Operations for the 24
weeks ended June 14, 2013, we
recorded after-tax Europe
Rescission Adjustments of $7
million, which included an $18
million pre-tax increase in Sale of
vacation ownership products
revenues, pre-tax increases of $6
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
$3 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
A-20
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.
Beginning with the third quarter of 2013, we report consumer financing interest expense separately from
all other interest expense. As a result, adjusted EBITDA as presented in these schedules is equivalent
to the non-GAAP financial measure adjusted EBITDA, as adjusted presented prior to the third quarter of
2013.
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
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. We now include borrowings from securitization transactions and repayment of
debt related to securitizations in our free cash flow. As a result, free cash flow as presented in this
schedule is equivalent to the non-GAAP financial measure adjusted free cash flow presented prior to the
fourth quarter of 2013, and adjusted free cash flow presented in this schedule is equivalent to the non-
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
A-21
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(Unaudited) January 3,
June 20, 2014 2014
------------- ----
ASSETS
Cash
and
cash
equivalents $170 $200
Restricted
cash
(including
$21
and
$34
from
VIEs,
respectively) 42 86
Accounts
and
contracts
receivable
(including
$4
and
$5
from
VIEs,
respectively) 121 109
Vacation
ownership
notes
receivable
(including
$621
and
$719
from
VIEs,
respectively) 920 970
Inventory 826 870
Property
and
equipment 215 254
Other 116 143
Total
Assets $2,410 $2,632
====== ======
LIABILITIES AND EQUITY
Accounts
payable $75 $129
Advance
deposits 55 48
Accrued
liabilities
(including
$0
and
$1
from
VIEs,
respectively) 168 185
Deferred
revenue 19 19
Payroll
and
benefits
liability 67 82
Liability
for
Marriott
Rewards
customer
loyalty
program 100 114
Deferred
compensation
liability 39 37
Mandatorily
redeemable
preferred
stock
of
consolidated
subsidiary 40 40
Debt
(including
$566
and
$674
from
VIEs,
respectively) 570 678
Other 45 31
Deferred
taxes 58 60
--- ---
Total
Liabilities 1,236 1,423
----- -----
Preferred
stock or
- outstanding
$.01
par
value;
2,000,000
shares
authorized;
none
issued - -
Common stock -$.01 par value; 100,000,000
shares authorized; 35,878,433 and 35,637,765
shares issued, respectively
- -
Treasury
stock
-at
cost;
2,175,224and
505,023
shares,
respectively (115) (26)
Additional
paid-
in
capital 1,129 1,130
Accumulated
other
comprehensive
income 23 23
Retained
earnings 137 82
--- ---
Total
Equity 1,174 1,209
Total
Liabilities
and
Equity $2,410 $2,632
====== ======
The abbreviation VIEs above means Variable
Interest Entities.
A-22
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
24 weeks ended
--------------
June 20, 2014 June 14, 2013
------------- -------------
OPERATING ACTIVITIES
Net income $55 $49
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9 11
Amortization of debt issuance costs 3 3
Provision for loan losses 15 18
Share-based compensation 6 6
Gain on disposal of property and
equipment, net (2) (1)
Deferred income taxes (5) (1)
Impairment charges 1 1
Net change in assets and liabilities:
Accounts and contracts receivable (12) (1)
Notes receivable originations (104) (100)
Notes receivable collections 137 148
Inventory 37 22
Other assets 27 -
Accounts payable, advance deposits and
accrued liabilities (56) (83)
Liability for Marriott Rewards customer
loyalty program (14) (25)
Deferred revenue - (10)
Payroll and benefit liabilities (15) (7)
Deferred compensation liability 2 (8)
Other liabilities 15 12
Other, net (1) -
Net cash provided by operating activities 98 34
--- ---
INVESTING ACTIVITIES
Capital expenditures for property and
equipment (excluding inventory) (3) (7)
Decrease in restricted cash 44 4
Dispositions, net 33 3
Net cash provided by investing activities 74 -
--- ---
FINANCING ACTIVITIES
Borrowings from securitization
transactions 23 111
Repayment of debt related to
securitization transactions (131) (142)
Borrowings on Revolving Corporate Credit
Facility - 25
Repayment of Revolving Corporate Credit
Facility - (25)
Purchase of treasury stock (89) 2
Proceeds from stock option exercises 1 -
Payment of withholding taxes on vesting of
restricted stock units (6) (4)
Net cash used in financing activities (202) (33)
---- ---
Effect of changes in exchange rates on
cash and cash equivalents - -
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (30) 1
CASH AND CASH EQUIVALENTS, beginning of
period 200 103
CASH AND CASH EQUIVALENTS, end of period $170 $104
==== ====
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SOURCE Marriott Vacations Worldwide Corporation
