ORLANDO, Fla., July 23, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2015 financial results and provided updated guidance for the full year 2015.
http://photos.prnewswire.com/prnvar/20130702/CG40568LOGO
Second quarter 2015 highlights:
-- Adjusted fully diluted earnings per share (EPS) increased to $0.91, up 4.6 percent from $0.87 in the second quarter of 2014. -- Adjusted EBITDA totaled $57.7 million, an increase of $1.0 million, or 2 percent, year-over-year. -- North America contract sales were $150.6 million, up 3.4 percent year-over-year. -- North America tours increased 1.2 percent year-over-year. -- North America volume per guest (VPG) increased 0.6 percent year-over-year to $3,404. -- Company adjusted development margin was 21.0 percent and North America adjusted development margin was 23.0 percent. -- The company completed the sale of its undeveloped land in Kauai, Hawaii, for gross cash proceeds of $20 million. -- During the second quarter of 2015, the company repurchased $15 million of its common stock, bringing total 2015 repurchases through the end of the second quarter to $66.2 million. -- Subsequent to the end of the second quarter, the company purchased 71 units in The Mayflower Hotel, Autograph Collection in Washington, D.C.
Second quarter 2015 net income was $34.0 million, or $1.05 diluted EPS, compared to net income of $35.3 million, or $1.00 diluted EPS, in the second quarter of 2014. Company development margin was 21.3 percent and North America development margin was 23.6 percent in the second quarter of 2015.
Non-GAAP financial measures such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-19 of the Financial Schedules that follow.
"We're pleased with our solid second quarter financial results, delivering nearly $58 million of Adjusted EBITDA," said Stephen P. Weisz, president and chief executive officer. "Our North America contract sales grew 3.4 percent on continued growth in tour volumes and slightly higher VPG and our company development margin remained in line with our full year expectations. With a strong first half of the year behind us, we are reaffirming Adjusted EBITDA guidance of $222 million to $232 million for full year 2015."
Second Quarter 2015 Results
Company Results
Total company contract sales were $165.9 million, $1.3 million higher than the second quarter of last year. The increase was driven by $5.0 million of higher contract sales in the company's North America segment and $0.7 million of higher contract sales in the company's Asia Pacific segment, partially offset by $4.3 million of lower contract sales in the company's Europe segment.
Adjusted development margin was $32.3 million, a $4.4 million decrease from the second quarter of 2014. Adjusted development margin percentage was 21.0 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014. Development margin was $33.1 million, a $3.8 million decrease from the second quarter of 2014. Development margin percentage was 21.3 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014.
Rental revenues totaled $72.6 million, a $10.8 million increase from the second quarter of 2014, reflecting a 4 percent increase in transient rate and a 6 percent increase in transient keys rented. Rental revenues, net of expenses, were $10.8 million, a $4.0 million increase from the second quarter of 2014.
Resort management and other services revenues totaled $74.1 million, a $0.8 million decrease from the second quarter of 2014. Resort management and other services revenues, net of expenses, were $28.6 million, a $2.1 million, or 8 percent, increase over the second quarter of 2014.
Financing revenues totaled $28.3 million, a $1.5 million decrease from the second quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.0 million, a $1.7 million decrease from the second quarter of 2014.
Adjusted EBITDA was $57.7 million in the second quarter of 2015, a $1.0 million, or 1.7 percent, increase from $56.7 million in the second quarter of 2014.
Segment Results
North America
VPG increased 0.6 percent to $3,404 in the second quarter of 2015 from $3,383 in the second quarter of 2014, driven by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $150.6 million in the second quarter of 2015, an increase of $5.0 million, or 3.4 percent, over the prior year period.
Second quarter 2015 North America segment financial results were $104.6 million, an increase of $2.9 million from the second quarter of 2014. The increase was driven primarily by $8.2 million of higher gains mainly associated with the disposition of the company's property in Kauai, Hawaii, $4.2 million of higher rental revenues net of expenses, $2.1 million of higher resort management and other services revenues net of expenses and $0.8 million related to an impairment charge in the prior year period. These increases were offset partially by $7.5 million of lower litigation settlements due mainly to the settlement of a dispute with a former service provider in the prior year period, $2.0 million of lower development margin, $2.0 million from the reversal of a charge in the prior year period related to the company's interest in an equity method investment in a joint venture project and $1.5 million of lower financing revenues.
Adjusted development margin was $32.3 million, a $3.0 million decrease from the prior year quarter. Adjusted development margin percentage was 23.0 percent in the second quarter of 2015 compared to 26.3 percent in the second quarter of 2014. Development margin was $33.5 million, a $2.0 million decrease from the second quarter of 2014. Development margin percentage was 23.6 percent in the second quarter of 2015 compared to 26.3 percent in the prior year quarter.
Asia Pacific
Total contract sales in the segment were $8.0 million, an increase of $0.7 million in the second quarter of 2015. Segment financial results were a loss of $0.1 million, a $1.5 million decrease from the second quarter of 2014, reflecting $1.3 million of transaction costs associated with the company's future new resort and sales distribution in Australia.
Europe
Second quarter 2015 contract sales were $7.3 million, a decrease of $4.3 million from the second quarter of 2014. Segment financial results were $3.0 million, a $2.2 million decrease from the second quarter of 2014 due to lower development margin from lower contract sales.
Share Repurchase Program
In total for 2015, through the end of the second quarter, the company repurchased approximately $66.2 million of its common stock.
Balance Sheet and Liquidity
On June 19, 2015, cash and cash equivalents totaled $250.9 million. Since the beginning of the year, real estate inventory balances declined $69.1 million to $699.1 million, including $335.3 million of finished goods and $363.8 million of land and infrastructure. The company had $568.1 million in gross debt outstanding at the end of the second quarter of 2015, a decrease of $143.3 million from year-end 2014, consisting primarily of $564.7 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the second quarter of 2015.
As of June 19, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $207 million of gross vacation ownership notes receivable eligible for securitization into its warehouse credit facility.
Outlook
The company is providing the following updated guidance for the full year 2015:
Current Guidance Previous Guidance ---------------- ----------------- Adjusted free cash flow $175 million to $200 million $145 million to $170 million The company is reaffirming the following guidance for the full year 2015: Current Guidance ---------------- Adjusted EBITDA $222 million to $232 million Company contract sales growth (excluding residential) 5 percent to 8 percent Adjusted company development margin 21 percent to 22 percent Adjusted net income $108 million to $114 million Adjusted fully diluted earnings per share $3.29 to $3.48
Pages A-1 through A-19 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $114 million to $121 million; fully diluted EPS of $3.49 to $3.70; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $170 million to $185 million.
Second Quarter 2015 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the updated guidance for full year 2015. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.
An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13613029. The webcast will also be available on the company's website.
About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 60 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.
Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of July 23, 2015 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Financial Schedules Follow
MARRIOTT VACATIONS WORLDWIDE CORPORATION FINANCIAL SCHEDULES QUARTER 2, 2015 TABLE OF CONTENTS Consolidated Statements of Income - 12 Weeks Ended June 19, 2015 and June 20, 2014 A-1 Consolidated Statements of Income - 24 Weeks Ended June 19, 2015 and June 20, 2014 A-2 North America Segment Financial Results -12 Weeks Ended June 19, 2015 and June 20, 2014 A-3 North America Segment Financial Results -24 Weeks Ended June 19, 2015 and June 20, 2014 A-4 Asia Pacific Segment Financial Results -12 Weeks Ended June 19, 2015 and June 20, 2014 A-5 Asia Pacific Segment Financial Results -24 Weeks Ended June 19, 2015 and June 20, 2014 A-6 Europe Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014 A-7 Europe Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014 A-8 Corporate and Other Financial Results -12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014 A-9 Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) -12 Weeks Ended June 19, 2015 and June 20, 2014 A-10 Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) -24 Weeks Ended June 19, 2015 and June 20, 2014 A-11 North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) -12 Weeks Ended June 19, 2015 and June 20, 2014 A-12 North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) -24 Weeks Ended June 19, 2015 and June 20, 2014 A-13 EBITDA and Adjusted EBITDA -12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014 A-14 2015 Outlook -Adjusted Net Income and Adjusted Earnings Per Share -Diluted, Adjusted EBITDA and Adjusted Development Margin A-15 2015 Outlook - Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow A-16 Non-GAAP Financial Measures A-17 Consolidated Balance Sheets A-20 Consolidated Statements of Cash Flows A-21
A-1 MARRIOTT VACATIONS WORLDWIDE CORPORATION CONSOLIDATED STATEMENTS OF INCOME 12 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands, except per share amounts) As Reported As Adjusted As Reported As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $155,370 $ - $155,370 $152,562 $ - $152,562 Resort management and other services 74,063 - 74,063 74,821 - 74,821 Financing 28,294 - 28,294 29,817 - 29,817 Rental 72,642 - 72,642 61,827 - 61,827 Cost reimbursements 92,458 - 92,458 90,875 - 90,875 Total revenues 422,827 - 422,827 409,902 - 409,902 ------- --- ------- ------- --- ------- Expenses Cost of vacation ownership products 45,119 - 45,119 43,414 - 43,414 Marketing and sales 77,137 - 77,137 72,227 (287) 71,940 Resort management and other services 45,480 - 45,480 48,308 - 48,308 Financing 6,085 - 6,085 5,438 - 5,438 Rental 61,835 - 61,835 54,991 - 54,991 General and administrative 22,892 - 22,892 23,153 - 23,153 Organizational and separation related 101 (101) - 1,089 (1,089) - Litigation settlement 26 (26) - (7,575) 7,575 - Consumer financing interest 5,248 - 5,248 5,737 - 5,737 Royalty fee 13,431 - 13,431 13,653 - 13,653 Impairment - - - 834 (834) - Cost reimbursements 92,458 - 92,458 90,875 - 90,875 Total expenses 369,812 (127) 369,685 352,144 5,365 357,509 ------- ---- ------- ------- ----- ------- Gains and other income 8,625 (8,625) - 409 (409) - Interest Expense (3,009) - (3,009) (2,601) - (2,601) Equity in earnings 85 - 85 81 - 81 Impairment reversals on equity investment - - - 2,000 (2,000) - Other (1,272) 1,272 - - - - Income before income taxes 57,444 (7,226) 50,218 57,647 (7,774) 49,873 Provision for income taxes (23,403) 2,804 (20,599) (22,344) 3,158 (19,186) Net income $34,041 $(4,422) $29,619 $35,303 $(4,616) $30,687 ======= ======= ======= ======= ======= ======= Earnings per share - Basic $1.07 $0.93 $1.03 $0.89 ===== ===== ===== ===== Earnings per share - Diluted $1.05 $0.91 $1.00 $0.87 ===== ===== ===== ===== Basic Shares 31,858 31,858 34,292 34,292 Diluted Shares 32,517 32,517 35,239 35,239 As Reported As Reported 12 Weeks Ended 12 Weeks Ended Contract Sales June 19, 2015 June 20, 2014 ------------- ------------- Vacation ownership $165,938 $164,589 Residential products - - --- --- Total contract sales $165,938 $164,589 ======== ========
** Denotes non-GAAP financial measures. Please see pages A- 17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars. Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-2 MARRIOTT VACATIONS WORLDWIDE CORPORATION CONSOLIDATED STATEMENTS OF INCOME 24 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands, except per share amounts) As Reported As Adjusted As Reported As Adjusted 24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $339,276 $(28,420) $310,856 $297,412 $ - $297,412 Resort management and other services 138,480 - 138,480 138,367 - 138,367 Financing 57,346 - 57,346 60,457 - 60,457 Rental 148,841 - 148,841 125,352 - 125,352 Cost reimbursements 193,764 - 193,764 190,261 - 190,261 Total revenues 877,707 (28,420) 849,287 811,849 - 811,849 ------- ------- ------- ------- --- ------- Expenses Cost of vacation ownership products 110,081 (21,583) 88,498 90,285 - 90,285 Marketing and sales 157,132 (922) 156,210 143,447 (287) 143,160 Resort management and other services 87,889 - 87,889 93,204 200 93,404 Financing 10,990 - 10,990 10,542 - 10,542 Rental 121,993 - 121,993 111,781 - 111,781 General and administrative 45,669 - 45,669 44,981 - 44,981 Organizational and separation related 293 (293) - 1,940 (1,940) - Litigation settlement (236) 236 - (7,575) 7,575 - Consumer financing interest 11,269 - 11,269 12,362 - 12,362 Royalty fee 26,431 - 26,431 27,081 - 27,081 Impairment - - - 834 (834) - Cost reimbursements 193,764 - 193,764 190,261 - 190,261 Total expenses 765,275 (22,562) 742,713 719,143 4,714 723,857 ------- ------- ------- ------- ----- ------- Gains and other income 9,512 (9,512) - 1,642 (1,642) - Interest Expense (5,983) - (5,983) (4,748) - (4,748) Equity in earnings 98 - 98 118 - 118 Other (1,272) 1,272 - - - - Income before income taxes 114,787 (14,098) 100,689 89,718 (6,356) 83,362 Provision for income taxes (46,692) 3,779 (42,913) (35,107) 2,537 (32,570) Net income $68,095 $(10,319) $57,776 $54,611 $(3,819) $50,792 ======= ======== ======= ======= ======= ======= Earnings per share - Basic $2.12 $1.80 $1.58 $1.47 ===== ===== ===== ===== Earnings per share - Diluted $2.08 $1.76 $1.54 $1.43 ===== ===== ===== ===== Basic Shares 32,078 32,078 34,583 34,583 Diluted Shares 32,760 32,760 35,557 35,557 As Reported As Reported 24 Weeks Ended 24 Weeks Ended Contract Sales June 19, 2015 June 20, 2014 ------------- ------------- Vacation ownership $335,888 $319,837 Residential products 28,420 6,326 ------ ----- Total contract sales $364,308 $326,163 ======== ========
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Earnings per share -Basic and Earnings per share -Diluted are calculated using whole dollars. Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-3 MARRIOTT VACATIONS WORLDWIDE CORPORATION NORTH AMERICA SEGMENT 12 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $142,148 $ - $142,148 $134,590 $ - $134,590 Resort management and other services 66,194 - 66,194 65,480 - 65,480 Financing 26,354 - 26,354 27,807 - 27,807 Rental 65,756 - 65,756 54,404 - 54,404 Cost reimbursements 84,037 - 84,037 80,642 - 80,642 Total revenues 384,489 - 384,489 362,923 - 362,923 ------- --- ------- ------- --- ------- Expenses Cost of vacation ownership products 40,834 - 40,834 37,433 - 37,433 Marketing and sales 67,837 - 67,837 61,722 - 61,722 Resort management and other services 39,101 - 39,101 40,527 - 40,527 Rental 55,128 - 55,128 47,985 - 47,985 Organizational and separation related 115 (115) - 388 (388) - Litigation settlement (108) 108 - (7,575) 7,575 - Royalty fee 1,686 - 1,686 1,820 - 1,820 Impairment - - - 834 (834) - Cost reimbursements 84,037 - 84,037 80,642 - 80,642 Total expenses 288,630 (7) 288,623 263,776 6,353 270,129 ------- --- ------- ------- ----- ------- Gains and other income 8,658 (8,658) - 448 (448) - Equity in earnings 86 - 86 81 - 81 Impairment reversals on equity investment - - - 2,000 (2,000) - --- --- --- ----- ------ --- Segment financial results $104,603 $(8,651) $95,952 $101,676 $(8,801) $92,875 ======== ======= ======= ======== ======= ======= As Reported As Reported 12 Weeks Ended 12 Weeks Ended Contract Sales June 19, 2015 June 20, 2014 ------------- ------------- Vacation ownership $150,605 $145,597 Residential products - - --- --- Total contract sales $150,605 $145,597 ======== ========
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-4 MARRIOTT VACATIONS WORLDWIDE CORPORATION NORTH AMERICA SEGMENT 24 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $283,876 $ - $283,876 $265,932 $ - $265,932 Resort management and other services 124,769 - 124,769 122,640 - 122,640 Financing 53,410 - 53,410 56,368 - 56,368 Rental 137,471 - 137,471 113,727 - 113,727 Cost reimbursements 176,891 - 176,891 170,585 - 170,585 Total revenues 776,417 - 776,417 729,252 - 729,252 ------- --- ------- ------- --- ------- Expenses Cost of vacation ownership products 81,335 - 81,335 78,938 - 78,938 Marketing and sales 136,854 - 136,854 124,409 - 124,409 Resort management and other services 76,069 - 76,069 79,616 - 79,616 Rental 109,739 - 109,739 99,022 - 99,022 Organizational and separation related 254 (254) - 405 (405) - Litigation settlement (370) 370 - (7,575) 7,575 - Royalty fee 2,946 - 2,946 3,497 - 3,497 Impairment - - - 834 (834) - Cost reimbursements 176,891 - 176,891 170,585 - 170,585 Total expenses 583,718 116 583,834 549,731 6,336 556,067 ------- --- ------- ------- ----- ------- Gains and other income 9,538 (9,538) - 1,690 (1,690) - Equity in earnings 102 - 102 120 - 120 --- --- --- --- --- --- Segment financial results $202,339 $(9,654) $192,685 $181,331 $(8,026) $173,305 ======== ======= ======== ======== ======= ======== As Reported As Reported 24 Weeks Ended 24 Weeks Ended Contract Sales June 19, 2015 June 20, 2014 ------------- ------------- Vacation ownership $306,598 $285,774 Residential products - 6,326 --- ----- Total contract sales $306,598 $292,100 ======== ========
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-5 MARRIOTT VACATIONS WORLDWIDE CORPORATION ASIA PACIFIC SEGMENT 12 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $7,575 $ - $7,575 $7,954 $ - $7,954 Resort management and other services 964 - 964 926 - 926 Financing 1,043 - 1,043 1,047 - 1,047 Rental 1,503 - 1,503 1,581 - 1,581 Cost reimbursements 632 - 632 722 - 722 Total revenues 11,717 - 11,717 12,230 - 12,230 ------ --- ------ ------ --- ------ Expenses Cost of vacation ownership products 1,803 - 1,803 2,047 - 2,047 Marketing and sales 4,432 - 4,432 4,243 - 4,243 Resort management and other services 655 - 655 642 - 642 Rental 2,794 - 2,794 2,936 - 2,936 Royalty fee 150 - 150 147 - 147 Cost reimbursements 632 - 632 722 - 722 Total expenses 10,466 - 10,466 10,737 - 10,737 ------ --- ------ ------ --- ------ Gains and other income (33) 33 - - - - Equity in losses (1) - (1) - - - Other (1,272) 1,272 - - - - Segment financial results $(55) $1,305 $1,250 $1,493 $ - $1,493 ==== ====== ====== ====== ============== ====== As Reported As Reported 12 Weeks Ended 12 Weeks Ended Contract Sales June 19, 2015 June 20, 2014 ------------- ------------- Vacation ownership $7,992 $7,337 Residential products - - --- --- Total contract sales $7,992 $7,337 ====== ======
** Denotes non-GAAP financial measures. Please see pages A- 17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-6 MARRIOTT VACATIONS WORLDWIDE CORPORATION ASIA PACIFIC SEGMENT 24 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $43,853 $(28,420) $15,433 $14,222 $ - $14,222 Resort management and other services 1,827 - 1,827 1,832 - 1,832 Financing 2,049 - 2,049 2,104 - 2,104 Rental 3,855 - 3,855 3,556 - 3,556 Cost reimbursements 1,498 - 1,498 1,663 - 1,663 Total revenues 53,082 (28,420) 24,662 23,377 - 23,377 ------ ------- ------ ------ --- ------ Expenses Cost of vacation ownership products 23,799 (21,583) 2,216 3,500 - 3,500 Marketing and sales 9,989 (922) 9,067 8,021 - 8,021 Resort management and other services 1,505 - 1,505 1,342 - 1,342 Rental 5,290 - 5,290 5,532 - 5,532 Royalty fee 307 - 307 324 - 324 Cost reimbursements 1,498 - 1,498 1,663 - 1,663 Total expenses 42,388 (22,505) 19,883 20,382 - 20,382 ------ ------- ------ ------ --- ------ Gains and other income (30) 30 - (8) 8 - Equity in losses (4) - (4) (2) - (2) Other (1,272) 1,272 - - - - Segment financial results $9,388 $(4,613) $4,775 $2,985 $8 $2,993 ====== ======= ====== ====== === ====== As Reported As Reported 24 Weeks Ended 24 Weeks Ended Contract Sales June 19, 2015 June 20, 2014 ------------- ------------- Vacation ownership 16,651 13,960 Residential products 28,420 - ------ --- Total contract sales $45,071 $13,960 ======= =======
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Asia Pacific segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-7 MARRIOTT VACATIONS WORLDWIDE CORPORATION EUROPE SEGMENT 12 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $5,647 $ - $5,647 $10,018 $ - $10,018 Resort management and other services 6,905 - 6,905 8,415 - 8,415 Financing 897 - 897 963 - 963 Rental 5,383 - 5,383 5,842 - 5,842 Cost reimbursements 7,789 - 7,789 9,511 - 9,511 Total revenues 26,621 - 26,621 34,749 - 34,749 ------ --- ------ ------ --- ------ Expenses Cost of vacation ownership products 1,233 - 1,233 2,389 - 2,389 Marketing and sales 4,868 - 4,868 6,262 (287) 5,975 Resort management and other services 5,724 - 5,724 7,139 - 7,139 Rental 3,913 - 3,913 4,070 - 4,070 Royalty fee 88 - 88 180 - 180 Cost reimbursements 7,789 - 7,789 9,511 - 9,511 Total expenses 23,615 - 23,615 29,551 (287) 29,264 ------ --- ------ ------ ---- ------ Gains and other income - - - (39) 39 - Segment financial results $3,006 $ - $3,006 $5,159 $326 $5,485 ====== ============== ====== ====== ==== ====== As Reported As Reported 12 Weeks Ended 12 Weeks Ended June 19, 2015 June 20, 2014 ------------- ------------- Contract Sales $7,341 $11,655 ====== =======
** Denotes non-GAAP financial measures. Please see pages A- 17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-8 MARRIOTT VACATIONS WORLDWIDE CORPORATION EUROPE SEGMENT 24 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Revenues Sale of vacation ownership products $11,547 $ - $11,547 $17,258 $ - $17,258 Resort management and other services 11,884 - 11,884 13,895 - 13,895 Financing 1,887 - 1,887 1,985 - 1,985 Rental 7,515 - 7,515 8,069 - 8,069 Cost reimbursements 15,375 - 15,375 18,013 - 18,013 Total revenues 48,208 - 48,208 59,220 - 59,220 ------ --- ------ ------ --- ------ Expenses Cost of vacation ownership products 2,085 - 2,085 3,835 - 3,835 Marketing and sales 10,289 - 10,289 11,017 (287) 10,730 Resort management and other services 10,315 - 10,315 12,246 200 12,446 Rental 6,964 - 6,964 7,227 - 7,227 Royalty fee 164 - 164 282 - 282 Cost reimbursements 15,375 - 15,375 18,013 - 18,013 Total expenses 45,192 - 45,192 52,620 (87) 52,533 ------ --- ------ ------ --- ------ Gains and other income 4 (4) - (39) 39 - Segment financial results $3,020 $(4) $3,016 $6,561 $126 $6,687 ====== === ====== ====== ==== ====== As Reported As Reported 24 Weeks Ended 24 Weeks Ended June 19, 2015 June 20, 2014 ------------- ------------- Contract Sales $12,639 $20,103 ======= =======
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Europe segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.
A-9 MARRIOTT VACATIONS WORLDWIDE CORPORATION CORPORATE AND OTHER 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Expenses Cost of vacation ownership products $1,249 $ - $1,249 $1,545 $ - $1,545 Financing 6,085 - 6,085 5,438 - 5,438 General and administrative 22,892 - 22,892 23,153 - 23,153 Organizational and separation related (14) 14 - 701 (701) - Litigation settlement 134 (134) - - - - Consumer financing interest 5,248 - 5,248 5,737 - 5,737 Royalty fee 11,507 - 11,507 11,506 - 11,506 Total expenses $47,101 $(120) $46,981 $48,080 $(701) $47,379 ======= ===== ======= ======= ===== ======= As Reported As Adjusted As Reported As Adjusted 24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Expenses Cost of vacation ownership products $2,862 $ - $2,862 $4,012 $ - $4,012 Financing 10,990 - 10,990 10,542 - 10,542 General and administrative 45,669 - 45,669 44,981 - 44,981 Organizational and separation related 39 (39) - 1,535 (1,535) - Litigation settlement 134 (134) - - - - Consumer financing interest 11,269 - 11,269 12,362 - 12,362 Royalty fee 23,014 - 23,014 22,978 - 22,978 Total expenses $93,977 $(173) $93,804 $96,410 $(1,535) $94,875 ======= ===== ======= ======= ======= =======
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. NOTE: Corporate and Other consists of results not specifically attributable to an individual segment, including expenses incurred to support our financing operations, non-capitalizable development expenses supporting overall company development, company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements that we entered into with Marriott International in connection with the spin-off, as well as consumer financing interest expense.
A-10 MARRIOTT VACATIONS WORLDWIDE CORPORATION CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In thousands) 12 Weeks Ended -------------- June 19, 2015 June 20, 2014 ------------- ------------- Contract sales Vacation ownership $165,938 $164,589 Residential products - - Total contract sales 165,938 164,589 ------- ------- Revenue recognition adjustments: Reportability(1) 1,440 829 Sales Reserve(2) (7,179) (8,047) Other(3) (4,829) (4,809) Sale of vacation ownership products $155,370 $152,562 ======== ========
1 Adjustment for lack of required downpayment or contract sales in rescission period. 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In thousands) Revenue Revenue As Reported Recognition As Adjusted As Reported Recognition As Adjusted 12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended June 19, 2015 Items Adjustment June 19, 2015 ** June 20, 2014 Items Adjustment June 20, 2014 ** ------------- ----- ---------- ------------- ------------- ----- ---------- ------------- Sale of vacation ownership products $155,370 $ - $(1,440) $153,930 $152,562 $ - $(829) $151,733 Less: Cost of vacation ownership products 45,119 - (464) 44,655 43,414 - (198) 43,216 Marketing and sales 77,137 - (157) 76,980 72,227 (287) (121) 71,819 Development margin $33,114 $ - $(819) $32,295 $36,921 $287 $(510) $36,698 ======= ============== ===== ======= ======= ==== ===== ======= 21.3% 21.0% 24.2% 24.2% Development margin percentage(1)
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.
A-11 MARRIOTT VACATIONS WORLDWIDE CORPORATION CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In thousands) 24 Weeks Ended -------------- June 19, 2015 June 20, 2014 ------------- ------------- Contract sales Vacation ownership $335,888 $319,837 Residential products 28,420 6,326 Total contract sales 364,308 326,163 ------- ------- Revenue recognition adjustments: Reportability(1) (73) (3,725) Sales Reserve(2) (15,546) (15,698) Other(3) (9,413) (9,328) Sale of vacation ownership products $339,276 $297,412 ======== ========
1 Adjustment for lack of required downpayment or contract sales in rescission period. 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In thousands) Revenue Revenue As Reported Recognition As Adjusted As Reported Recognition As Adjusted 24 Weeks Ended Certain Reportability 24 Weeks Ended 24 Weeks Ended Certain Reportability 24 Weeks Ended June 19, 2015 Items Adjustment June 19, 2015 ** June 20, 2014 Items Adjustment June 20, 2014 ** ------------- ----- ---------- ------------- ------------- ----- ---------- ------------- Sale of vacation ownership products $339,276 $(28,420) $73 $310,929 $297,412 $ - $3,725 $301,137 Less: Cost of vacation ownership products 110,081 (21,583) 98 88,596 90,285 - 1,216 91,501 Marketing and sales 157,132 (922) (52) 156,158 143,447 (287) 253 143,413 Development margin $72,063 $(5,915) $27 $66,175 $63,680 $287 $2,256 $66,223 ======= ======= === ======= ======= ==== ====== ======= 21.2% 21.3% 21.4% 22.0% Development margin percentage(1)
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.
A-12 MARRIOTT VACATIONS WORLDWIDE CORPORATION NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In thousands) 12 Weeks Ended -------------- June 19, 2015 June 20, 2014 ------------- ------------- Contract sales Vacation ownership $150,605 $145,597 Residential products - - Total contract sales 150,605 145,597 ------- ------- Revenue recognition adjustments: Reportability(1) 1,942 208 Sales Reserve (2) (5,651) (6,424) Other (3) (4,748) (4,791) Sale of vacation ownership products $142,148 $134,590 ======== ========
(1) Adjustment for lack of required downpayment or contract sales in rescission period. 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In thousands) Revenue Revenue As Reported Recognition As Adjusted As Reported Recognition As Adjusted 12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended June 19, 2015 Items Adjustment June 19, 2015 ** June 20, 2014 Items Adjustment June 20, 2014 ** ------------- ----- ---------- ------------- ------------- ----- ---------- ------------- Sale of vacation ownership products $142,148 $ - $(1,942) $140,206 $134,590 $ - $(208) $134,382 Less: Cost of vacation ownership products 40,834 - (553) 40,281 37,433 - (58) 37,375 Marketing and sales 67,837 - (182) 67,655 61,722 - (20) 61,702 Development margin $33,477 $ - $(1,207) $32,270 $35,435 $ - $(130) $35,305 ======= ============ ======= ======= ======= ============ ===== ======= 23.6% 23.0% 26.3% 26.3% Development margin percentage(1)
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.
A-13 MARRIOTT VACATIONS WORLDWIDE CORPORATION NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In thousands) 24 Weeks Ended -------------- June 19, 2015 June 20, 2014 ------------- ------------- Contract sales Vacation ownership $306,598 $285,774 Residential products - 6,326 Total contract sales 306,598 292,100 ------- ------- Revenue recognition adjustments: Reportability(1) (1,502) (4,192) Sales Reserve (2) (11,985) (12,751) Other (3) (9,235) (9,225) Sale of vacation ownership products $283,876 $265,932 ======== ========
(1) Adjustment for lack of required downpayment or contract sales in rescission period. 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In thousands) Revenue Revenue As Reported Recognition As Adjusted As Reported Recognition As Adjusted 24 Weeks Ended Certain Reportability 24 Weeks Ended 24 Weeks Ended Certain Reportability 24 Weeks Ended June 19, 2015 Items Adjustment June 19, 2015 ** June 20, 2014 Items Adjustment June 20, 2014 ** ------------- ----- ---------- ------------- ------------- ----- ---------- ------------- Sale of vacation ownership products $283,876 $ - $1,502 $285,378 $265,932 $ - $4,192 $270,124 Less: Cost of vacation ownership products 81,335 - 427 81,762 78,938 - 1,318 80,256 Marketing and sales 136,854 - 142 136,996 124,409 - 394 124,803 Development margin $65,687 $ - $933 $66,620 $62,585 $ - $2,480 $65,065 ======= ============ ==== ======= ======= ============ ====== ======= 23.1% 23.3% 23.5% 24.1% Development margin percentage(1)
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.
A-14 MARRIOTT VACATIONS WORLDWIDE CORPORATION EBITDA AND ADJUSTED EBITDA 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014 (In thousands) As Reported As Adjusted As Reported As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Net income $34,041 $(4,422) $29,619 $35,303 $(4,616) $30,687 Interest expense 1 3,009 - 3,009 2,601 - 2,601 Tax provision 23,403 (2,804) 20,599 22,344 (3,158) 19,186 Depreciation and amortization 4,493 - 4,493 4,264 - 4,264 ----- --- ----- ----- --- ----- EBITDA ** $64,946 $(7,226) $57,720 $64,512 $(7,774) $56,738 ======= ======= ======= ======= ======= ======= As Reported As Adjusted As Reported As Adjusted 24 Weeks Ended Certain 24 Weeks Ended 24 Weeks Ended Certain 24 Weeks Ended June 19, 2015 Items June 19, 2015 ** June 20, 2014 Items June 20, 2014 ** ------------- ----- ------------- ------------- ----- ------------- Net income $68,095 $(10,319) $57,776 $54,611 $(3,819) $50,792 Interest expense 1 5,983 - 5,983 4,748 - 4,748 Tax provision 46,692 (3,779) 42,913 35,107 (2,537) 32,570 Depreciation and amortization 8,558 - 8,558 8,922 - 8,922 ----- --- ----- ----- --- ----- EBITDA ** $129,328 $(14,098) $115,230 $103,388 $(6,356) $97,032 ======== ======== ======== ======== ======= =======
** Denotes non-GAAP financial measures. Please see pages A-17 through A- 19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Interest expense excludes consumer financing interest expense.
A-15 MARRIOTT VACATIONS WORLDWIDE CORPORATION 2015 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK (In millions, except per share amounts) Fiscal Year 2015 (low) Fiscal Year 2015 (high) --------------------- ---------------------- Net income $114 $121 Adjustments to reconcile Net income to Adjusted net income Organizational and separation related and other charges(1) 7 6 Gain on dispositions (2) (10) (10) Bulk sales (3) (6) (6) Provision for income taxes on adjustments to net income 3 3 --- --- Adjusted net income** $108 $114 ==== ==== Earnings per share -Diluted 4 $3.49 $3.70 Adjusted earnings per share - Diluted**, 4 $3.29 $3.48 Diluted shares4 32.7 32.7
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Organizational and separation related and other charges adjustment includes $1.8 million for organizational and separation related efforts and $4 million to $5 million of non-capitalizable transaction costs in our Asia Pacific and North America segments. (2) Gain on dispositions adjustment includes a $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land and an $8.7 million gain on the sale of undeveloped land in our North America segment. 3 Bulk sales adjustment includes the net $5.9 million of pre-tax income associated with the sale of the 18 units in the Asia Pacific segment. 4 Earnings per share - Diluted, Adjusted earnings per share -Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through June 19, 2015.
MARRIOTT VACATIONS WORLDWIDE CORPORATION 2015 ADJUSTED EBITDA OUTLOOK (In millions) Fiscal Year 2015 (low) Fiscal Year 2015 (high) --------------------- ---------------------- Adjusted net income ** $108 $114 Interest expense1 12 12 Tax provision 81 85 Depreciation and amortization 21 21 --- --- Adjusted EBITDA** $222 $232
** Denotes non-GAAP financial measures. Please see pages A-17 through A- 19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Interest expense excludes consumer financing interest expense.
MARRIOTT VACATIONS WORLDWIDE CORPORATION 2015 ADJUSTED DEVELOPMENT MARGIN OUTLOOK Total MVW --------- Fiscal Year 2015 Fiscal Year 2015 (low) (high) ----------------- ----------------- Development margin(1) 21.1% 22.1% Adjustments to reconcile Development margin to Adjusted development margin Revenue recognition reportability (0.1%) (0.1%) Adjusted development margin**, 1 21.0% 22.0% ==== ====
** Denotes non-GAAP financial measures. Please see pages A- 17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Development margin represents Development margin dollars divided by Sale of vacation ownership products revenues. Development margin is calculated using whole dollars.
A-16 MARRIOTT VACATIONS WORLDWIDE CORPORATION 2015 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK (In millions) Current Guidance ---------------- Low High Mid-Point Adjustments Normalized --- ---- --------- ----------- ---------- Adjusted net income ** $108 $114 $111 $ - $111 Adjustments to reconcile Adjusted net income to net cash provided by operating activities: Adjustments for non-cash items(1) 73 75 74 - 74 Deferred income taxes /income taxes payable 18 20 19 - 19 Net changes in assets and liabilities: Notes receivable originations (293) (299) (296) - (296) Notes receivable collections 269 275 272 - 272 Inventory 47 52 50 (60) 6 (10) Purchase of operating hotel for future conversion to inventory(2) (47) (47) (47) 47 (2) - Liability for Marriott Rewards customer loyalty program (21) (21) (21) 21 7 - Organizational and separation related and other charges (5) (5) (5) 5 8 - Other working capital changes 21 21 21 (6) 9 15 --- --- --- Net cash provided by operating activities 170 185 178 7 185 Capital expenditures for property and equipment (excluding inventory): New sales centers (3) (20) (18) (19) 19 (3) - Organizational and separation related capital expenditures (4) (4) (4) 4 8 - Other (24) (23) (24) 4 10 (20) Investment in operating portion of Surfers Paradise hotel that will be sold 4 (45) (45) (45) 45 4 - Decrease in restricted cash 1 5 3 - 3 Borrowings from securitization transactions 251 258 255 (45) 11 210 Repayment of debt related to securitizations (244) (250) (247) - (247) Free cash flow** 85 108 97 34 131 Adjustments: Organizational and separation related and other charges 9 9 9 (9) 7 - Proceeds from sale of operating portion of Surfers Paradise hotel4 45 45 45 (45) 4 - Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 5 36 38 37 - 37 Adjusted free cash flow** $175 $200 $188 $(20) $168 ==== ==== ==== ==== ====
** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. (1) Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation. (2) Represents adjustment for investment in an operating hotel prior to future conversion to inventory. (3) Represents incremental investment in new sales centers, mainly to support new sales distributions. 4 Represents the estimated investment in, as well as the estimated proceeds from the subsequent sale of, the operating portion of the Surfers Paradise hotel. 5 Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2014 and 2015 year ends. 6 Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs). 7 Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016. 8 Represents costs associated with organizational and separation related efforts. 9 Represents normalized other working capital changes. 10 Represents normalized capital expenditures for property and equipment. 11 Represents normalized borrowings from securitization transactions.
A-17 MARRIOTT VACATIONS WORLDWIDE CORPORATION NON-GAAP FINANCIAL MEASURES In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP"). We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules reconcile the most directly comparable GAAP financial measure to each non-GAAP financial measure that we report (identified by a double asterisk ("**") on the preceding pages). Although we evaluate and present these non-GAAP financial measures for the reasons described below, please be aware that these non-GAAP financial measures have limitations and should not be considered in Adjusted Net Income. We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items and net gains in the 12 weeks and 24 weeks ended June 19, 2015 and June 20, 2014 because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain items and gains. These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain items and gains with results from other vacation ownership companies. Certain items - 12 weeks and 24 weeks ended June 19, 2015. In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded $1.4 million of net pre-tax items, which included a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the "Other transaction related" caption, $0.1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption and less than $0.1 million of net litigation related matters recorded under the "Litigation settlement" caption. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $4.6 million of net Certain items - 12 weeks and 24 weeks ended June 20, 2014. In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $7.4 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the "Litigation settlement" caption and the reversal of a $2.0 million reserve for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the "Impairment reversals on equity investment" caption, partially offset by $1.1 million of organizational and separation related costs recorded
A-18 MARRIOTT VACATIONS WORLDWIDE CORPORATION NON-GAAP FINANCIAL MEASURES Net gains -12 weeks and 24 weeks ended June 19, 2015. In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded an $8.7 million gain associated with the sale of undeveloped land in our North America segment under the "Gains and other income" caption. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $9.5 million of net gains associated with the sale of undeveloped land and the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption. Net gains -12 weeks and 24 weeks ended June 20, 2014. In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $0.4 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the "Gains and other income" caption. In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $1.6 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the "Gains and other income" caption. Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses). We evaluate Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) as an indicator of operating performance. Adjusted Development Margin adjusts Sale of vacation ownership products revenues for the impact of revenue reportability, includes corresponding adjustments to Cost of vacation ownership products expense and Marketing and sales expense associated with the change in revenues from the Sale of vacation ownership products, and includes adjustments for certain items as itemized in the discussion of Adjusted Net Income above. We evaluate Adjusted Development Margin because it allows for period-over-period comparisons of our on-going core operations before the impact of revenue reportability and certain items to our Development Margin. Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization. For purposes of our EBITDA calculation (which previously adjusted for consumer financing interest expense), we do not adjust for consumer financing interest expense because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us. Further, we consider consumer financing interest expense to be an operating expense of our business. We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to service debt, fund capital expenditures and expand our business. We also use it, as do analysts, lenders, investors and others, because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain items and gains, as itemized in the discussion of Adjusted Net Income above. We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over- period comparisons of our on-going core operations before the impact of certain items and gains. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain items and gains with results from other vacation ownership companies.
A-19 MARRIOTT VACATIONS WORLDWIDE CORPORATION NON-GAAP FINANCIAL MEASURES Free Cash Flow. We also evaluate Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations. We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Free Cash Flow also facilitates management's comparison of our results with our competitors' results. Adjusted Free Cash Flow. We also evaluate Adjusted Free Cash Flow, which reflects additional adjustments for organizational and separation related, litigation, and other cash items, as referred to in the discussion of Adjusted Net Income above. We evaluate Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations, excluding the impact of organizational and separation related, litigation, and other cash charges. We consider Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results. Normalized Adjusted Free Cash Flow. We also evaluate Normalized Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, the borrowing and repayment activity related to our securitizations, and adjustments to remove the impact of cash flow items not expected to occur on a regular basis. Adjustments eliminate the impact of excess cash taxes, payments for Marriott Rewards Points issued prior to the Spin-off, payments for organizational and separation related efforts, litigation cash settlements and other working capital changes. We consider Normalized Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Normalized Adjusted Free Cash Flow also facilitates management's comparison of our results with our
A-20 MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (unaudited) June 19, 2015 January 2, 2015 ------------- --------------- ASSETS Cash and cash equivalents $250,906 $346,515 Restricted cash (including $37,017 and $34,986 from VIEs, respectively) 65,559 109,907 Accounts and contracts receivable (including $3,429 and $4,992 from VIEs, respectively) 116,544 109,700 Vacation ownership notes receivable (including $547,158 and $750,680 from VIEs, respectively) 878,858 917,228 Inventory 704,707 772,784 Property and equipment 188,714 147,379 Other 117,924 127,066 Total Assets $2,323,212 $2,530,579 ========== ========== LIABILITIES AND EQUITY Accounts payable $80,450 $114,079 Advance deposits 64,148 60,192 Accrued liabilities (including $1,576 and $1,088 from VIEs, respectively) 137,261 165,969 Deferred revenue 32,845 38,818 Payroll and benefits liability 74,582 93,073 Liability for Marriott Rewards customer loyalty program 79,939 89,285 Deferred compensation liability 46,534 41,677 Mandatorily redeemable preferred stock of consolidated subsidiary 38,895 38,816 Debt (including $564,657 and $708,031 from VIEs, respectively) 561,133 703,013 Other 50,053 27,071 Deferred taxes 96,748 78,883 ------ ------ Total Liabilities 1,262,588 1,450,876 --------- --------- Preferred stock -$.01 par value; 2,000,000 shares authorized; none issued or outstanding - - Common stock -$.01 par value; 100,000,000 shares authorized; 36,346,990 and 36,089,513 shares issued, respectively 363 361 Treasury stock -at cost; 4,814,451 and 3,996,725 shares, respectively (295,466) (229,229) Additional paid-in capital 1,135,143 1,137,785 Accumulated other comprehensive income 14,756 17,054 Retained earnings 205,828 153,732 ------- ------- Total Equity 1,060,624 1,079,703 Total Liabilities and Equity $2,323,212 $2,530,579 ========== ========== The abbreviation VIEs above means Variable Interest Entities.
A-21 MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) 24 weeks ended -------------- June 19, 2015 June 20, 2014 ------------- ------------- OPERATING ACTIVITIES Net income $68,095 $54,611 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,558 8,922 Amortization of debt issuance costs 2,506 2,566 Provision for loan losses 15,662 15,603 Share-based compensation 6,588 6,180 Deferred income taxes 17,850 (5,299) Equity method income (98) (118) Gain on disposal of property and equipment, net (9,512) (1,642) Non-cash litigation settlement (262) - Impairment charges - 834 Impairment charges on equity investment - - Net change in assets and liabilities: Accounts and contracts receivable (6,068) (11,822) Notes receivable originations (112,060) (103,908) Notes receivable collections 132,397 137,460 Inventory 68,629 36,805 Purchase of operating hotel for future conversion to inventory (46,614) - Other assets 8,154 26,546 Accounts payable, advance deposits and accrued liabilities (66,223) (55,865) Liability for Marriott Rewards customer loyalty program (9,345) (14,284) Deferred revenue (5,955) (310) Payroll and benefit liabilities (18,382) (14,832) Deferred compensation liability 4,858 1,882 Other liabilities 18,013 15,397 Other, net 1,874 (564) Net cash provided by operating activities 78,665 98,162 ------ ------ INVESTING ACTIVITIES Capital expenditures for property and equipment (excluding inventory) (15,718) (3,003) Decrease in restricted cash 43,758 43,958 Dispositions, net 20,346 33,169 Net cash provided by investing activities 48,386 74,124 ------ ------ FINANCING ACTIVITIES Borrowings from securitization transactions - 22,638 Repayment of debt related to securitization transactions (143,374) (130,954) Debt issuance costs (30) (140) Proceeds from vacation ownership inventory arrangement 5,375 - Repurchase of common stock (66,237) (89,448) Payment of dividends (8,085) - Proceeds from stock option exercises 92 968 Payment of withholding taxes on vesting of restricted stock units (9,353) (5,091) Other 109 - Net cash used in financing activities (221,503) (202,027) -------- -------- Effect of changes in exchange rates on cash and cash equivalents (1,157) 3 DECREASE IN CASH AND CASH EQUIVALENTS (95,609) (29,738) CASH AND CASH EQUIVALENTS, beginning of period 346,515 199,511 CASH AND CASH EQUIVALENTS, end of period $250,906 $169,773 ======== ========
Logo - http://photos.prnewswire.com/prnh/20130702/CG40568LOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/marriott-vacations-worldwide-reports-second-quarter-2015-financial-results-300117283.html
SOURCE Marriott Vacations Worldwide Corporation