MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., Oct. 16, 2014 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter 2014 financial results and provided updated guidance for the full year 2014. In addition, the company announced that its Board of Directors has authorized a cash dividend program under which it intends to pay a regular quarterly dividend and the repurchase of up to an additional 3.4 million shares, or approximately 10 percent, of its outstanding common stock, under its share repurchase program.
Highlights for the third quarter of 2014 include:
-- Adjusted EBITDA totaled $54 million, an increase of $4 million, or 8
percent, year-over-year.
-- Company adjusted development margin was 22.6 percent and North America
adjusted development margin was 25.5 percent, an increase of 230 and 330
basis points, respectively, year-over-year.
-- North America volume per guest (VPG) increased 6.9 percent
year-over-year to $3,477.
-- Adjusted fully diluted earnings per share (EPS) increased 12.5 percent
to $0.81 compared to $0.72 in the third quarter of 2013.
-- Through October 15, 2014, the company has repurchased nearly 3.4 million
of the 3.5 million shares of its common stock under its initial
authorization from October 2013 for a total of $186 million.
-- In October 2014, the company completed a securitization of $250 million
of vacation ownership notes receivable at a blended borrowing rate of
2.29 percent, generating gross proceeds of $240 million.
Third quarter 2014 net income totaled $25 million, or $0.75 per diluted share, compared to net income of $25 million, or $0.67 per diluted share, in the third quarter of 2013. Company development margin increased to 21.5 percent in the third quarter of 2014 from 21.1 percent in the third quarter of 2013; North America development margin for the third quarter increased to 24.4 percent from 22.7 percent last year. 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-20 of the Financial Schedules that follow.
"We had a strong third quarter, with solid performance in adjusted EBITDA and development margin, and another exceptional quarter of VPG growth," said Stephen P. Weisz, president and chief executive officer. "With our strong cash position and cash flow outlook, I am pleased to announce that our Board of Directors has approved a quarterly dividend, our first as a public company. This is a significant milestone for Marriott Vacations Worldwide and demonstrates our confidence in our business model. In less than a year, we have repurchased $186 million of common stock under our share repurchase program, virtually exhausting the Board's original repurchase authorization. Underscoring our commitment to a balanced capital allocation strategy, our Board has also authorized the repurchase of up to an additional 3.4 million shares, representing approximately 10 percent of the company's outstanding common stock. We believe our capital allocation strategy gives us financial flexibility to pursue our growth objectives and continue to drive long-term shareholder value."
Third Quarter 2014 Results
Total company contract sales were $172 million, a $4 million increase from $168 million in the third quarter of 2013, driven by $3 million of higher vacation ownership contract sales in the company's North America segment, $2 million of higher contract sales in the company's Europe segment and $1 million of higher contract sales in the company's Asia Pacific segment, partially offset by $2 million of lower residential contract sales in the company's North America segment.
Adjusted development margin was $35 million, a $3 million increase from the third quarter of 2013. Adjusted development margin percentage increased 2.3 percentage points to 22.6 percent in the third quarter of 2014 from 20.3 percent in the third quarter of 2013. The adjustments are illustrated on page A-10 of the Financial Schedules. Development margin was $33 million, a $1 million decrease from the third quarter of 2013, as the prior year period benefited from the impact of extended rescission periods in the company's Europe segment and favorable revenue reportability. Development margin percentage increased slightly to 21.5 percent in the third quarter of 2014 from 21.1 percent in the third quarter of 2013.
Rental revenues totaled $65 million, unchanged compared to the third quarter of 2013. These results reflect a 3 percent increase in transient keys rented offset by nearly $2 million of lower plus points revenue. Rental revenues, net of expenses, were $11 million, a $3 million, or 28 percent, increase from the third quarter of 2013.
Resort management and other services revenues totaled $67 million, a $2 million increase from the third quarter of 2013. Resort management and other services revenues, net of expenses, were $23 million, a $3 million, or 15 percent, increase over the third quarter of 2013.
Adjusted EBITDA was $54 million in the third quarter of 2014, a $4 million, or 8 percent, increase from $50 million in the third quarter of 2013.
Segment Results
North America
VPG increased 6.9 percent to $3,477 in the third quarter of 2014 from $3,252 in the third quarter of 2013, driven mainly by an increase in the average number of points purchased per contract, higher pricing and a modest improvement in closing efficiency. North America vacation ownership contract sales were $148 million in the third quarter of 2014, an increase of $3 million over the prior year period.
Third quarter 2014 North America segment financial results were $86 million, a decrease of $1 million from the third quarter of 2013. The decrease was primarily driven by a $3 million accrual related to a litigation settlement and $2 million of lower financing revenues, offset partially by $4 million of higher resort management and other services revenues net of expenses.
Development margin was $33 million, unchanged compared to the third quarter of 2013. Development margin percentage increased to 24.4 percent in the third quarter of 2014 as compared to 22.7 percent in the prior year quarter. Excluding the impact of revenue reportability, adjusted development margin was $35 million, a $3 million increase from the prior year quarter. Adjusted development margin percentage increased to 25.5 percent in the third quarter of 2014 from 22.2 percent in the third quarter of 2013. The impact of revenue reportability is illustrated on page A-12 of the Financial Schedules.
Asia Pacific
Asia Pacific contract sales increased $1 million to $8 million in the third quarter of 2014. Segment financial results were $1 million, an increase of $1 million from the third quarter of 2013.
Europe
Third quarter 2014 contract sales improved $2 million to $11 million. Segment financial results were $6 million, $1 million below the third quarter of 2013. Adjusting for the $1 million impact related to extended rescission periods in the prior year, segment financial results were flat compared to the prior year quarter.
Organizational and Separation Plan
During the third quarter of 2014, the company incurred $3 million of costs in connection with its organizational and separation related efforts, of which $2 million was capitalized during the quarter. Remaining spending for these efforts of approximately $7 million to $9 million is expected to be incurred by the end of 2015. Once completed, these efforts are expected to generate over $15 million of annualized savings, of which approximately $13 million has been realized cumulatively to date.
Return of Capital
On October 14, 2014, the company's Board of Directors authorized a cash dividend program under which it intends to pay a regular quarterly dividend, and declared a quarterly dividend of $0.25 per share payable on November 12, 2014 to shareholders of record as of October 28, 2014. In addition, the Board of Directors authorized the company to repurchase up to 3.4 million additional shares of its common stock under its share repurchase program through March 25, 2016.
Any future dividend payments will be subject to Board approval. The specific timing, amount and other terms of the repurchases will continue to depend on market conditions, corporate and regulatory requirements and other factors.
During the third quarter of 2014, the company repurchased 787,796 shares of its common stock at an average price of $58.02 per share for a total of nearly $46 million under its share repurchase program. Since the launch of the program on October 20, 2013 through October 15, 2014, the company has repurchased nearly 3.4 million shares of the 3.5 million shares originally authorized.
Balance Sheet and Liquidity
On September 12, 2014, cash and cash equivalents totaled $146 million. Since the end of 2013, real estate inventory balances declined $70 million to $794 million, including $446 million of finished goods and $348 million of land and infrastructure. The company had $538 million in debt outstanding at the end of the third quarter of 2014, a decrease of $140 million from year-end 2013, including $534 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 third quarter of 2014.
In October the company completed a securitization of $250 million of vacation ownership loans at a weighted average interest rate of 2.29 percent and an advance rate of 96 percent. This transaction generated approximately $240 million of gross cash proceeds. Net cash proceeds to the company after transaction costs and cash reserves were $236 million, which are available for general corporate purposes.
As of September 12, 2014, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit.
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 $230 million to $245 million $190 million to $205 million
Adjusted
fully
diluted
earnings
per share $2.67 to $2.84 $2.64 to $2.82
The company is also reaffirming the following guidance for full year 2014 as previously provided on July 24, 2014:
Adjusted EBITDA $190 million to $200 million
Adjusted net income $93 million to $99 million
Adjusted development margin:
Company 21.0 percent to 22.0
percent
North America 23.0 percent to 24.0
percent
Contract sales growth (excluding
residential):
Company 1 percent to 3 percent
North America flat to 2 percent
Pages A-1 through A-20 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2014 expected GAAP results: reported net income of $93 million to $99 million; reported company development margin of 20.7 percent to 21.7 percent; reported North America development margin of 22.8 percent to 23.8 percent; and net cash provided by operating activities of $216 million to $228 million.
Third 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 13591642. 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 59 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, future dividend payments, 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 October 16, 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
FINANCIAL SCHEDULES
QUARTER 3, 2014
TABLE OF CONTENTS
Interim Consolidated Statements of Income - 12 Weeks Ended September 12, 2014 and September 6, 2013 A-1
Interim Consolidated Statements of Income - 36 Weeks Ended September 12, 2014 and September 6, 2013 A-2
North America Segment Financial Results - 12 Weeks Ended September 12, 2014 and September 6, 2013 A-3
North America Segment Financial Results - 36 Weeks Ended September 12, 2014 and September 6, 2013 A-4
Asia Pacific Segment Financial Results - 12 Weeks Ended September 12, 2014 and September 6, 2013 A-5
Asia Pacific Segment Financial Results - 36 Weeks Ended September 12, 2014 and September 6, 2013 A-6
Europe Segment Financial Results - 12 Weeks Ended September 12, 2014 and September 6, 2013 A-7
Europe Segment Financial Results - 36 Weeks Ended September 12, 2014 and September 6, 2013 A-8
Corporate and Other Financial Results - 12 Weeks and 36 Weeks Ended September 12, 2014 and September 6, 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 September 12, 2014 and September 6, 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) - 36 Weeks Ended September 12, 2014 and September 6, 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 September 12, 2014 and September 6, 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) - 36 Weeks Ended September 12, 2014 and September 6, 2013 A-13
EBITDA and Adjusted EBITDA - 12 Weeks and 36 Weeks Ended September 12, 2014 and September 6, 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
INTERIM CONSOLIDATED STATEMENTS OF INCOME
12 Weeks Ended September 12, 2014 and September 6, 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
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- ---------- -----------------
Revenues
Sale of vacation
ownership products $156 $ - $156 $162 $ - $(2) $160
Resort management and
other services 67 - 67 65 - - 65
Financing 30 - 30 32 - - 32
Rental 65 - 65 65 - - 65
Other 4 - 4 4 - - 4
Cost reimbursements 91 - 91 84 - - 84
Total revenues 413 - 413 412 - (2) 410
--- --- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 49 - 49 56 - (1) 55
Marketing and sales 74 - 74 72 - - 72
Resort management and
other services 44 - 44 45 - - 45
Financing 5 - 5 5 - - 5
Rental 54 - 54 57 - - 57
Other 4 - 4 4 - - 4
General and
administrative 22 - 22 23 - - 23
Organizational and
separation related 1 (1) - 4 (4) - -
Litigation settlement 3 (3) - - - - -
Consumer financing
interest 6 - 6 7 - - 7
Royalty fee 14 - 14 13 - - 13
Cost reimbursements 91 - 91 84 - - 84
Total expenses 367 (4) 363 370 (4) (1) 365
--- --- --- --- --- --- ---
Interest expense 3 - 3 2 - - 2
Income before income taxes 43 4 47 40 4 (1) 43
Provision for income taxes (18) (2) (20) (15) (1) - (16)
Net income $25 $2 $27 $25 $3 $(1) $27
=== === === === === === ===
Earnings per share - Basic $0.77 $0.83 $0.70 $0.74
===== ===== ===== =====
Earnings per share - Diluted $0.75 $0.81 $0.67 $0.72
===== ===== ===== =====
Basic Shares 33.4 33.4 35.5 35.5
Diluted Shares 34.4 34.4 36.7 36.7
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales
Vacation ownership $167 $161
Residential products 5 7
--- ---
Total contract
sales $172 $168
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
NOTE: Earnings per share -Basic and Earnings per share -Diluted are calculated using whole dollars. 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
INTERIM CONSOLIDATED STATEMENTS OF INCOME
36 Weeks Ended September 12, 2014 and September 6, 2013
(In millions, except per share amounts)
As Reported As Adjusted As Reported Europe As Adjusted
36 Weeks Ended Certain 36 Weeks Ended 36 Weeks Ended Certain Rescission 36 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- ---------- -----------------
Revenues
Sale of vacation
ownership products $453 $ - $453 $472 $ - $(20) $452
Resort management and
other services 197 - 197 188 - - 188
Financing 90 - 90 97 - - 97
Rental 191 - 191 193 - - 193
Other 12 - 12 13 - - 13
Cost reimbursements 282 - 282 260 - - 260
Total revenues 1,225 - 1,225 1,223 - (20) 1,203
----- --- ----- ----- --- --- -----
Expenses
Cost of vacation
ownership products 139 - 139 157 - (7) 150
Marketing and sales 217 - 217 220 (2) (2) 216
Resort management and
other services 132 - 132 134 - - 134
Financing 16 - 16 16 - - 16
Rental 166 - 166 169 - - 169
Other 9 - 9 9 - - 9
General and
administrative 67 - 67 66 - - 66
Organizational and
separation related 3 (3) - 7 (7) - -
Litigation settlement (5) 5 - (1) 1 - -
Consumer financing
interest 18 - 18 22 - - 22
Royalty fee 41 - 41 41 - - 41
Impairment 1 (1) - 1 (1) - -
Cost reimbursements 282 - 282 260 - - 260
Total expenses 1,086 1 1,087 1,101 (9) (9) 1,083
----- --- ----- ----- --- --- -----
Gains and other income 2 (2) - 1 - - 1
Interest expense 8 - 8 9 - - 9
Income before income taxes 133 (3) 130 114 9 (11) 112
Provision for income taxes (53) 1 (52) (40) (2) 3 (39)
Net income $80 $(2) $78 $74 $7 $(8) $73
=== === === === === === ===
Earnings per share - Basic $2.35 $2.30 $2.10 $2.06
===== ===== ===== =====
Earnings per share - Diluted $2.28 $2.23 $2.03 $1.99
===== ===== ===== =====
Basic Shares 34.2 34.2 35.4 35.4
Diluted Shares 35.2 35.2 36.6 36.6
As Reported As Reported
36 Weeks Ended 36 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales
Vacation ownership $487 $473
Residential products 11 8
--- ---
Total contract
sales $498 $481
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
NOTE: Earnings per share -Basic and Earnings per share -Diluted are calculated using whole dollars. We now report in Resort management
and other services certain external exchange company results previously included in Other and have recast prior year presentation for
consistency.
A-3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
12 Weeks Ended September 12, 2014 and September 6, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- -----------------
Revenues
Sale of vacation ownership
products $138 $ - $138 $145 $ - $145
Resort management and
other services 58 - 58 55 - 55
Financing 28 - 28 30 - 30
Rental 55 - 55 56 - 56
Other 4 - 4 4 - 4
Cost reimbursements 81 - 81 75 - 75
Total revenues 364 - 364 365 - 365
--- --- --- --- --- ---
Expenses
Cost of vacation ownership
products 41 - 41 51 - 51
Marketing and sales 64 - 64 61 - 61
Resort management and
other services 36 - 36 37 - 37
Rental 47 - 47 49 - 49
Other 3 - 3 3 - 3
Organizational and
separation related - - - - - -
Litigation settlement 3 (3) - - - -
Royalty fee 3 - 3 2 - 2
Cost reimbursements 81 - 81 75 - 75
Total expenses 278 (3) 275 278 - 278
--- --- --- --- --- ---
Segment financial results $86 $3 $89 $87 $ - $87
=== === === === ================ ===
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales
Vacation ownership $148 $145
Residential products 5 7
--- ---
Total contract
sales $153 $152
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
NOTE: We now report in Resort management and other services certain external exchange company results previously included
in Other and have recast prior year presentation for consistency.
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
36 Weeks Ended September 12, 2014 and September 6, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
36 Weeks Ended Certain 36 Weeks Ended 36 Weeks Ended Certain 36 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- -----------------
Revenues
Sale of vacation
ownership products $404 $ - $404 $407 $ - $407
Resort management and
other services 172 - 172 163 - 163
Financing 84 - 84 91 - 91
Rental 169 - 169 172 - 172
Other 12 - 12 13 - 13
Cost reimbursements 252 - 252 231 - 231
Total revenues 1,093 - 1,093 1,077 - 1,077
----- --- ----- ----- --- -----
Expenses
Cost of vacation
ownership products 120 - 120 137 - 137
Marketing and sales 188 - 188 187 - 187
Resort management and
other services 111 - 111 113 - 113
Rental 146 - 146 148 - 148
Other 8 - 8 8 - 8
Organizational and
separation related 1 (1) - - - -
Litigation settlement (5) 5 - (1) 1 -
Royalty fee 6 - 6 6 - 6
Cost reimbursements 252 - 252 231 - 231
Total expenses 828 3 831 829 1 830
--- --- --- --- --- ---
Gains and other income 2 (2) - 1 - 1
Impairment reversals on equity investment - - - - - -
--- --- --- --- --- ---
Segment financial results $267 $(5) $262 $249 $(1) $248
==== === ==== ==== === ====
As Reported As Reported
36 Weeks Ended 36 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales
Vacation ownership $434 $429
Residential products 11 8
--- ---
Total contract
sales $445 $437
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
NOTE: We now report in Resort management and other services certain external exchange company results previously included
in Other and have recast prior year presentation for consistency.
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
12 Weeks Ended September 12, 2014 and September 6, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- -----------------
Revenues
Sale of vacation
ownership products $8 $ - $8 $7 $ - $7
Resort management and
other services 1 - 1 1 - 1
Financing 1 - 1 1 - 1
Rental 1 - 1 1 - 1
Cost reimbursements - - - 1 - 1
Total revenues 11 - 11 11 - 11
--- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 3 - 3 1 - 1
Marketing and sales 4 - 4 5 - 5
Resort management and
other services 1 - 1 1 - 1
Rental 2 - 2 3 - 3
Cost reimbursements - - - 1 - 1
Total expenses 10 - 10 11 - 11
--- --- --- --- --- ---
Segment financial results $1 $ - $1 $ - $ - $ -
=== ================ === ==================================== ================ ====================================
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales $8 $7
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
NOTE: Asia Pacific segment revenues and expenses for the twelve weeks ended September 6, 2013 have been restated to
reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain
immaterial prior period errors.
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
36 Weeks Ended September 12, 2014 and September 6, 2013
($ in millions)
As Reported As Adjusted As Reported As Adjusted
36 Weeks Ended Certain 36 Weeks Ended 36 Weeks Ended Certain 36 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- -----------------
Revenues
Sale of vacation
ownership products $22 $ - $22 $23 $ - $23
Resort management and
other services 3 - 3 3 - 3
Financing 3 - 3 3 - 3
Rental 5 - 5 5 - 5
Cost reimbursements 2 - 2 5 - 5
Total revenues 35 - 35 39 - 39
--- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 6 - 6 4 - 4
Marketing and sales 12 - 12 14 - 14
Resort management and
other services 2 - 2 2 - 2
Rental 8 - 8 8 - 8
Royalty fee 1 - 1 1 - 1
Cost reimbursements 2 - 2 5 - 5
Total expenses 31 - 31 34 - 34
--- --- --- --- --- ---
Segment financial results $4 $ - $4 $5 $ - $5
=== ================ === === ================ ===
As Reported As Reported
36 Weeks Ended 36 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales $22 $24
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
NOTE: Asia Pacific segment revenues and expenses for the thirty six weeks ended September 12, 2014 (related to the twelve
weeks ended March 28, 2014) and September 6, 2013 have been restated to reclassify a portion of Cost reimbursements from the
Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors.
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
12 Weeks Ended September 12, 2014 and September 6, 2013
($ 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
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- ---------- -----------------
Revenues
Sale of vacation
ownership products $10 $ - $10 $10 $ - $(2) $8
Resort management and
other services 8 - 8 9 - - 9
Financing 1 - 1 1 - - 1
Rental 9 - 9 8 - - 8
Cost reimbursements 10 - 10 8 - - 8
Total revenues 38 - 38 36 - (2) 34
--- --- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 3 - 3 2 - (1) 1
Marketing and sales 6 - 6 6 - - 6
Resort management and
other services 7 - 7 7 - - 7
Rental 5 - 5 5 - - 5
Other 1 - 1 1 - - 1
Cost reimbursements 10 - 10 8 - - 8
Total expenses 32 - 32 29 - (1) 28
--- --- --- --- --- --- ---
Segment financial results $6 $ - $6 $7 $ - $(1) $6
=== ================ === === ================ === ===
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales $11 $9
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
NOTE: Europe segment revenues and expenses for the twelve weeks ended September 6, 2013 have been restated to reclassify a portion of
Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. We now report
in Resort management and other services certain external exchange company results previously included in Other and have recast prior year
presentation for consistency.
A-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
36 Weeks Ended September 12, 2014 and September 6, 2013
($ in millions)
As Reported As Adjusted As Reported Europe As Adjusted
36 Weeks Ended Certain 36 Weeks Ended 36 Weeks Ended Certain Rescission 36 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- ---------- -----------------
Revenues
Sale of vacation
ownership products $27 $ - $27 $42 $ - $(20) $22
Resort management and
other services 22 - 22 22 - - 22
Financing 3 - 3 3 - - 3
Rental 17 - 17 16 - - 16
Other - - - - - - -
Cost reimbursements 28 - 28 24 - - 24
Total revenues 97 - 97 107 - (20) 87
--- --- --- --- --- --- ---
Expenses
Cost of vacation
ownership products 7 - 7 11 - (7) 4
Marketing and sales 17 - 17 19 (2) (2) 15
Resort management and
other services 19 - 19 19 - - 19
Rental 12 - 12 13 - - 13
Other 1 - 1 1 - - 1
Impairment - - - 1 (1) - -
Cost reimbursements 28 - 28 24 - - 24
Total expenses 84 - 84 88 (3) (9) 76
--- --- --- --- --- --- ---
Segment financial results $13 $ - $13 $19 $3 $(11) $11
=== ================ === === === ==== ===
As Reported As Reported
36 Weeks Ended 36 Weeks Ended
September 12, 2014 September 6, 2013
------------------ -----------------
Contract Sales $31 $20
=== ===
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
NOTE: Europe segment revenues and expenses for the thirty six weeks ended September 12, 2014 (related to the twelve weeks ended March 28,
2014) and September 6, 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. 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-9
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER
12 Weeks and 36 Weeks Ended September 12, 2014 and September 6, 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
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- -----------------
Expenses
Cost of vacation
ownership products $2 $ - $2 $2 $ - $2
Financing 5 - 5 5 - 5
General and
administrative 22 - 22 23 - 23
Organizational and
separation related 1 (1) - 4 (4) -
Consumer financing
interest 6 6 7 7
Royalty fee 11 - 11 11 - 11
Total expenses $47 $(1) $46 $52 $(4) $48
=== === === === === ===
As Reported As Adjusted As Reported As Adjusted
36 Weeks Ended Certain 36 Weeks Ended 36 Weeks Ended Certain 36 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- -----------------
Expenses
Cost of vacation
ownership products $6 $ - $6 $5 $ - $5
Financing 16 - 16 16 - 16
General and
administrative 67 - 67 66 - 66
Organizational and
separation related 2 (2) - 7 (7) -
Consumer financing
interest 18 - 18 22 - 22
Royalty fee 34 - 34 34 - 34
Total expenses $143 $(2) $141 $150 $(7) $143
==== === ==== ==== === ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
NOTE: Corporate and Other consists of results not specifically attributable to an individual segment, including expenses in
support of our financing operations, non-capitalizable development expenses supporting overall company development,
company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements that we
entered into with Marriott International, Inc. in connection with the spin-off, as well as consumer financing interest
expense. Beginning with the fourth quarter of 2013 we no longer report Interest expense in Corporate and Other and have
recast prior year information for consistency.
A-10
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
12 Weeks Ended
--------------
September 12, 2014 September 6, 2013
------------------ -----------------
Contract sales $172 $168
Revenue recognition adjustments:
Reportability(1) (4) 3
Europe rescission adjustment(2) - 2
Sales Reserve(3) (7) (8)
Other4 (5) (3)
Sale of vacation ownership
products $156 $162
==== ====
(1) Adjustment for lack of
required downpayment or contract
sales in rescission period.
(2) Adjustment to eliminate the
impact of extended rescission
periods in our Europe segment.
Please see page A-19 for
additional information.
3 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
4 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
----------------------------------
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Rescission Reportability 12 Weeks Ended
September 12, 2014 Charges Adjustment September 12, 2014 ** September 6, 2013 Charges Adjustment Adjustment September 6, 2013 **
------------------ ------- ---------- ------------------ ----------------- ------- ---------- ---------- -----------------
Sale of vacation ownership products $156 $ - $4 $160 $162 $ - $(2) $(3) $157
Less:
Cost of vacation
ownership
products 49 - 1 50 56 - (1) (1) 54
Marketing and
sales 74 - 1 75 72 - - (1) 71
Development margin $33 $ - $2 $35 $34 $ - $(1) $(1) $32
=== ================ === === === ================ === === ===
Development margin percentage(1) 21.5% 22.6% 21.1% 20.3%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for
providing these alternative financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development
margin percentage is calculated using whole dollars.
A-11
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
36 Weeks Ended
--------------
September 12, 2014 September 6, 2013
------------------ -----------------
Contract sales $498 $481
Revenue recognition adjustments:
Reportability(1) (8) 8
Europe rescission adjustment(2) - 20
Sales Reserve(3) (23) (26)
Other4 (14) (11)
Sale of vacation ownership
products $453 $472
==== ====
(1) Adjustment for lack of required
downpayment or contract sales in rescission
period.
(2) Adjustment to eliminate the impact of
extended rescission periods in our Europe
segment. Please see page A-19 for additional
information.
3 Represents allowance for bad debts for our
financed vacation ownership product sales,
which we also refer to as sales reserve.
4 Adjustment for sales incentives that will
not be recognized as Sale of vacation
ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted
36 Weeks Ended Certain Reportability 36 Weeks Ended 36 Weeks Ended Certain Rescission Reportability 36 Weeks Ended
September 12, 2014 Charges Adjustment September 12, 2014 ** September 6, 2013 Charges Adjustment Adjustment September 6, 2013 **
------------------ ------- ---------- ------------------ ----------------- ------- ---------- ---------- -----------------
Sale of vacation ownership
products $453 $ - $8 $461 $472 $ - $(20) $(8) $444
Less:
Cost of vacation ownership
products 139 - 2 141 157 - (7) (3) 147
Marketing and sales 217 - 1 218 220 (2) (2) (1) 215
Development margin $97 $ - $5 $102 $95 $2 $(11) $(4) $82
=== ================ === ==== === === ==== === ===
Development margin percentage(1) 21.4% 22.2% 20.3% 18.4%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products.
Development margin percentage is calculated using whole dollars.
A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
12 Weeks Ended
--------------
September 12, 2014 September 6, 2013
------------------ -----------------
Contract sales $153 $152
Revenue recognition adjustments:
Reportability(1) (4) 2
Sales Reserve (2) (6) (6)
Other (3) (5) (3)
Sale of vacation ownership
products $138 $145
==== ====
(1) Adjustment for lack of required
downpayment or contract sales in rescission
period.
2 Represents allowance for bad debts for our
financed vacation ownership product sales,
which we also refer to as sales reserve.
3 Adjustment for sales incentives that will
not be recognized as Sale of vacation
ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended
September 12, 2014 Charges Adjustment September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ---------- ------------------ ----------------- ------- ---------- -----------------
Sale of vacation ownership
products $138 $ - $4 $142 $145 $ - $(2) $143
Less:
Cost of vacation ownership
products 41 - 1 42 51 - (1) 50
Marketing and sales 64 - 1 65 61 - - 61
Development margin $33 $ - $2 $35 $33 $ - $(1) $32
=== ============== === === === ============== === ===
Development margin percentage(1) 24.4% 25.5% 22.7% 22.2%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information
about our reasons for providing these alternative financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership
products. Development margin percentage is calculated using whole dollars.
A-13
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
($ in millions)
36 Weeks Ended
--------------
September 12, 2014 September 6, 2013
------------------ -----------------
Contract sales $445 $437
Revenue recognition adjustments:
Reportability(1) (8) 2
Sales Reserve (2) (19) (21)
Other (3) (14) (11)
Sale of vacation ownership
products $404 $407
==== ====
(1) Adjustment for lack of required
downpayment or contract sales in rescission
period.
2 Represents allowance for bad debts for our
financed vacation ownership product sales,
which we also refer to as sales reserve.
3 Adjustment for sales incentives that will
not be recognized as Sale of vacation
ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
($ in millions)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
36 Weeks Ended Certain Reportability 36 Weeks Ended 36 Weeks Ended Certain Reportability 36 Weeks Ended
September 12, 2014 Charges Adjustment September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ---------- ------------------ ----------------- ------- ---------- -----------------
Sale of vacation ownership
products $404 $ - $8 $412 $407 $ - $(2) $405
Less:
Cost of vacation ownership
products 120 - 2 122 137 - (1) 136
Marketing and sales 188 - 1 189 187 - - 187
Development margin $96 $ - $5 $101 $83 $ - $(1) $82
=== ============== === ==== === ============== === ===
Development margin percentage(1) 23.8% 24.6% 20.4% 20.2%
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information
about our reasons for providing these alternative financial measures and limitations on their use.
1 Development margin percentage represents Development margin divided by Sale of vacation ownership products.
Development margin percentage is calculated using whole dollars.
A-14
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EBITDA AND ADJUSTED EBITDA
12 Weeks and 36 Weeks Ended September 12, 2014 and September 6, 2013
($ 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
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- ---------- -----------------
Net income $25 $2 $27 $25 $3 $(1) $27
Interest expense1 3 - 3 2 - - 2
Tax provision 18 2 20 15 1 - 16
Depreciation and amortization 4 - 4 5 - - 5
--- --- --- --- --- --- ---
EBITDA ** $50 $4 $54 $47 $4 $(1) $50
=== === === === === === ===
As Reported As Adjusted As Reported Europe As Adjusted
36 Weeks Ended Certain 36 Weeks Ended 36 Weeks Ended Certain Rescission 36 Weeks Ended
September 12, 2014 Charges September 12, 2014 ** September 6, 2013 Charges Adjustment September 6, 2013 **
------------------ ------- ------------------ ----------------- ------- ---------- -----------------
Net income $80 $(2) $78 $74 $7 $(8) $73
Interest expense1 8 - 8 9 - - 9
Tax provision 53 (1) 52 40 2 (3) 39
Depreciation and amortization 13 - 13 16 - - 16
--- --- --- --- --- --- ---
EBITDA ** $154 $(3) $151 $139 $9 $(11) $137
==== === ==== ==== === ==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons
for providing these alternative financial measures and limitations on their use.
(1) Interest expense excludes consumer financing interest expense.
A-15
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
(In millions, except per share amounts)
Fiscal Year 2014 (low) Fiscal Year 2014 (high)
--------------------- ----------------------
Net income $93 $99
Adjustments to
reconcile Net income
to Adjusted net
income
Organizational
and separation
related and
other charges(1) 1 1
Gain on
disposition (2) (2) (2)
Provision for
income taxes on
adjustments to
net income 1 1
--- ---
Adjusted net income** $93 $99
=== ===
Earnings per share -
Diluted (3) $2.67 $2.84
Adjusted earnings per
share -Diluted**, 3 $2.67 $2.84
Diluted shares3 34.8 34.8
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Organizational and separation related and other charges adjustment includes $4 million for organizational and separation related efforts, $3 million for a litigation settlement, $1 million for an impairment charge 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 October 15, 2014.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 ADJUSTED EBITDA OUTLOOK
(In millions)
Fiscal Year 2014 (low) Fiscal Year 2014 (high)
--------------------- ----------------------
Adjusted net income ** $93 $99
Interest expense1 12 12
Tax provision 66 70
Depreciation and
amortization 19 19
--- ---
Adjusted EBITDA** $190 $200
==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Interest expense excludes consumer financing interest expense.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2014 ADJUSTED DEVELOPMENT MARGIN OUTLOOK
Total MVW North America
--------- -------------
Fiscal Year 2014 (low) Fiscal Year 2014 (high) Fiscal Year 2014 Fiscal Year 2014
(low) (high)
--------------------- ---------------------- ----------------- -----------------
Development margin(1) 20.7% 21.7% 22.8% 23.8%
Adjustments to
reconcile
Development margin
to Adjusted
development margin
Other charges(2) 0.1% 0.1% 0.0% 0.0%
Revenue
recognition
reportability 0.2% 0.2% 0.2% 0.2%
Adjusted development margin**, 1 21.0% 22.0% 23.0% 24.0%
==== ==== ==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Development margin represents Development margin dollars divided by Sale of vacation ownership products revenues. Development margin is calculated using whole dollars.
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) 69 71
Deferred income
taxes /income
taxes payable 7 9
Net changes in
assets and
liabilities:
Notes receivable originations (263) (269)
Notes receivable collections 288 292
Inventory 43 45
Liability for Marriott Rewards
customer loyalty program (30) (28)
Organizational and separation
related and other charges (1) (1)
Other working capital changes 10 10
Net cash provided by
operating activities 216 228
Capital expenditures
for property and
equipment
(excluding
inventory)
Organizational
and separation
related capital
expenditures (4) (4)
Other (17) (15)
Increase in
restricted cash (9) (8)
Borrowings from
securitization
transactions 263 263
Repayment of debt
related to
securitizations (224) (224)
---- ----
Free cash flow** 225 240
Add:
Organizational and
separation related
and other charges 5 5
--- ---
Adjusted free cash flow** $230 $245
==== ====
** Denotes non-
GAAP financial
measures. Please
see pages A-18
through A-20 for
additional
information about
our reasons for
providing these
alternative
financial measures
and limitations on
their use.
(1)Includes
depreciation,
amortization of
debt issuance
costs, provision
for loan losses,
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) 69 71 70 - 70
Deferred income
taxes /income
taxes payable 7 9 8 - 8
Net changes in
assets and
liabilities:
Notes receivable originations (263) (269) (266) - (266)
Notes receivable collections 288 292 290 - 290
Inventory 43 45 44 (44) (2) -
Liability for Marriott Rewards
customer loyalty program (30) (28) (29) 29 (3) -
Organizational and separation
related and other charges (1) (1) (1) 1 4 -
Other working capital changes 10 10 10 (20) 5 (10)
--- --- ---
Net cash provided by
operating activities 216 228 222 (34) 188
Capital expenditures
for property and
equipment (excluding
inventory)
Organizational
and separation
related capital
expenditures (4) (4) (4) 4 4 -
Other (17) (15) (16) (4) 6 (20)
Increase in
restricted cash (9) (8) (9) - (9)
Borrowings from
securitization
transactions 263 263 263 (45) 7 218
Repayment of debt
related to
securitizations (224) (224) (224) - (224)
---- ---- ---- --- ----
Free cash flow** 225 240 232 (79) 153
Add:
Organizational and
separation related
and other charges 5 5 5 (5) -
--- --- --- ---
Adjusted free cash flow** $230 $245 $237 $(84) $153
==== ==== ==== ==== ====
** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information
about our reasons for providing these alternative financial measures and limitations on their use.
NOTE: 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 adjustment to align real estate inventory spending with real estate inventory costs (i.e.,
product costs).
(3) Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully
paid in 2016.
4 Represents costs associated with organizational and separation related efforts (efforts projected to be
substantially completed by the end of 2015), a litigation settlement, impairment activity, and restructuring
/severance costs in our Europe segment, offset by the settlement of a dispute with a former service
provider.
5 Represents normalized other working capital changes.
6 Represents normalized capital expenditures for property and equipment.
7 Represents normalized borrowings from securitization transactions.
A-18
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
In our press release and schedules, and on the related conference call, we report
certain financial measures that are not prescribed or authorized by United States
generally accepted accounting principles ("GAAP"). We discuss our reasons for
reporting these non-GAAP financial measures below, and the financial schedules
reconcile the most directly comparable GAAP financial measure to each non-GAAP
financial measure that we report (identified by a double asterisk ("**") on the
preceding pages). Although we evaluate and present these non-GAAP financial
measures for the reasons described below, please be aware that these non-GAAP
financial measures have limitations and should not be considered in isolation or as
a substitute for revenues, net income, earnings per share or any other comparable
operating measure prescribed by GAAP. In addition, these non-GAAP financial
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 36 weeks ended September 12, 2014 and September
6, 2013, exclude the gain on the disposition of a golf course and adjacent
undeveloped land in the 36 weeks ended September 12, 2014, and exclude adjustments
related to the extension of rescission periods in our Europe segment discussed below
("Europe Rescission Adjustments") in the 12 weeks and 36 weeks ended September 6,
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 - 12 weeks and 36 weeks ended September 12, 2014. In our Statement
of Income for the 12 weeks ended September 12, 2014, we recorded $4 million of pre-
tax charges, which included a $3 million accrual for a litigation settlement in our
North America segment recorded under the "Litigation settlement" caption and $1
million of organizational and separation related costs recorded under the
"Organizational and separation related" caption. In our Statement of Income for the
36 weeks ended September 12, 2014, we recorded $1 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, partially offset by a $3 million litigation
settlement in our North America segment recorded under the "Litigation settlement"
Certain Charges - 12 weeks and 36 weeks ended September 6, 2013. In our Statement
of Income for the 12 weeks ended September 6, 2013, we recorded $4 million of pre-
tax charges, which included $4 million of organizational and separation related
costs recorded under the "Organizational and separation related" caption. In our
Statement of Income for the 36 weeks ended September 6, 2013, we recorded $9 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, $7 million of
organizational and separation related costs recorded under the "Organizational and
separation related" caption, $2 million of severance costs in our Europe segment
Gain on the disposition of a golf course and adjacent undeveloped land -36 weeks
ended September 12, 2014. In our Statement of Income for the 36 weeks ended
September 12, 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.
A-19
MARRIOTT VACATIONS
WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Europe Rescission
Adjustments. In the second
quarter of 2013, during the
course of an internal
review of certain sales
documentation processes
related to the sale of
certain vacation ownership
interests in properties
associated with our Europe
segment, we determined that
the documentation we
provided for certain sales
of vacation ownership
products was not strictly
compliant. As a result, in
accordance with applicable
European regulation, the
period of time during which
purchasers of such
interests may rescind their
purchases was extended. We
record revenues from the
sale of vacation ownership
products once the
rescission period has
ended. Originally, we
recorded revenues from
these sales of vacation
ownership products based on
the rescission periods in
effect assuming compliant
documentation had been
provided to the purchasers,
rather than the extended
periods. As a result, we
recognized revenue in
incorrect periods between
fiscal years 2010 and 2013
and misstated revenues in
our previously filed
consolidated financial
statements. We provided
compliant documentation to
purchasers for whom the
extended rescission period
had not yet expired. As
compliant documentation was
subsequently provided as
part of the corrective
actions we took, the
extended rescission period
for most of the purchases
at issue ended during the
second quarter of 2013. To
better reflect our on-
going core operations and
allow for period-over-
period comparisons, we have
excluded the impact
associated with the
extended rescission periods
in our adjusted financial
measures.
12 weeks ended September 6,
2013. In our Statement of
Income for the 12 weeks ended
September 6, 2013, we recorded
after-tax Europe Rescission
Adjustments of $1 million,
which included a $2 million
pre-tax increase in Sale of
vacation ownership products
revenues and a $1 million pre-
tax increase in Cost of
vacation ownership products
expense associated with the
change in revenues from the
Sale of vacation ownership
products.
36 weeks ended September 6,
2013. In our Statement of
Income for the 36 weeks ended
September 6, 2013, we recorded
after-tax Europe Rescission
Adjustments of $8 million,
which included a $20 million
pre-tax increase in Sale of
vacation ownership products
revenues, pre-tax increases of
$7 million and $2 million in
Cost of vacation ownership
products expense and Marketing
and sales expense,
respectively, associated with
the change in revenues from the
Sale of vacation ownership
products, and a $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
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
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
A-20
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain
charges, gains and Europe Rescission Adjustments, as itemized in the discussion of Adjusted Net Income
above. We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for
period-over-period comparisons of our on-going core operations before the impact of certain charges,
gains and Europe Rescission Adjustments. Together, EBITDA and Adjusted EBITDA facilitate our comparison
of results from our on-going core operations before the impact of certain charges, gains and Europe
Rescission Adjustments with results from other vacation ownership companies.
Free Cash Flow. We also evaluate Free Cash Flow as a liquidity measure that provides useful information
to management and investors about the amount of cash provided by operating activities after capital
expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment
activity related to our securitizations. We consider Free Cash Flow to be a liquidity measure that
provides useful information to management and investors about the amount of cash generated by the
business that can be used for strategic opportunities, including acquisitions and strengthening the
balance sheet. Analysis of Free Cash Flow also facilitates management's comparison of our results with
our competitors' results. 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 these
schedules 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 these schedules is equivalent to
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,
September 12, 2014 2014
------------------ ----
ASSETS
Cash and cash
equivalents $146 $200
Restricted cash
(including $36 and
$34 from VIEs,
respectively) 65 86
Accounts and contracts
receivable (including
$3 and $5 from VIEs,
respectively) 113 109
Vacation ownership
notes receivable
(including $580 and
$719 from VIEs,
respectively) 912 970
Inventory 799 870
Property and equipment 212 254
Other 100 143
Total Assets $2,347 $2,632
====== ======
LIABILITIES AND EQUITY
Accounts payable $79 $129
Advance deposits 55 48
Accrued liabilities
(including $2 and $1
from VIEs,
respectively) 147 185
Deferred revenue 23 19
Payroll and benefits
liability 77 82
Liability for Marriott
Rewards customer
loyalty program 92 114
Deferred compensation
liability 40 37
Mandatorily redeemable
preferred stock of
consolidated
subsidiary 40 40
Debt (including $534
and $674 from VIEs,
respectively) 538 678
Other 33 31
Deferred taxes 93 60
--- ---
Total Liabilities 1,217 1,423
----- -----
Preferred stock -$.01
par value; 2,000,000
shares authorized;
none issued or
outstanding - -
Common stock -$.01 par value; 100,000,000 shares authorized; 35,961,779 and
35,637,765 shares
issued, respectively - -
Treasury stock -at
cost; 2,963,020 and
505,023 shares,
respectively (161) (26)
Additional paid-in
capital 1,109 1,130
Accumulated other
comprehensive income 20 23
Retained earnings 162 82
--- ---
Total Equity 1,130 1,209
Total Liabilities and
Equity $2,347 $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)
36 weeks ended
--------------
September 12, 2014 September 6, 2013
------------------ -----------------
OPERATING ACTIVITIES
Net income $80 $74
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 13 16
Amortization of debt issuance costs 4 4
Provision for loan losses 22 26
Share-based compensation 9 8
Deferred income taxes 29 23
Impairment charges 1 1
Gain on disposal of property and
equipment, net (2) (1)
Net change in assets and liabilities:
Accounts and contracts receivable (8) (16)
Notes receivable originations (170) (166)
Notes receivable collections 204 217
Inventory 62 33
Other assets 46 33
Accounts payable, advance deposits and
accrued liabilities (66) (74)
Liability for Marriott Rewards customer
loyalty program (23) (33)
Deferred revenue 4 (13)
Payroll and benefit liabilities (5) (2)
Deferred compensation liability 3 (8)
Other liabilities 3 1
Net cash provided by operating activities 206 123
--- ---
INVESTING ACTIVITIES
Capital expenditures for property and
equipment (excluding inventory) (8) (11)
Decrease in restricted cash 21 4
Dispositions, net 33 3
Net cash provided by (used in) investing
activities 46 (4)
--- ---
FINANCING ACTIVITIES
Borrowings from securitization
transactions 23 361
Repayment of debt related to
securitization transactions (163) (288)
Borrowings on Revolving Corporate Credit
Facility - 25
Repayment of Revolving Corporate Credit
Facility - (25)
Debt issuance costs (2) (5)
Repurchase of common stock (160) -
Proceeds from stock option exercises 2 2
Payment of withholding taxes on vesting
of restricted stock units (5) (4)
Net cash (used in) provided by financing
activities (305) 66
---- ---
Effect of changes in exchange rates on
cash and cash equivalents (1) -
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (54) 185
CASH AND CASH EQUIVALENTS, beginning of
period 200 103
CASH AND CASH EQUIVALENTS, end of period $146 $288
==== ====
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SOURCE Marriott Vacations Worldwide Corporation
