MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., April 28, 2016 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2016.
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"Our first quarter results were in-line with our expectations as we continue our journey to execute our long term growth strategies," said Stephen P. Weisz, president and chief executive officer. "First time buyer tours were up in the quarter, sales of new tour packages continue to grow ahead of expectations, and we have six new sales distributions coming on-line this year. For these reasons and more, I remain confident in our overall strategy and in reaffirming our previously provided full year 2016 guidance."
First quarter 2016 highlights:
-- Adjusted fully diluted earnings per share (EPS) was $0.87, up 2.4
percent from $0.85 in the first quarter of 2015.
-- Adjusted EBITDA totaled $51.6 million, a decrease of $8.6 million
year-over-year.
-- Company vacation ownership contract sales (which exclude residential
sales) were $153.5 million, down 9.7 percent year-over-year. North
America vacation ownership contract sales were $139.7 million, down 10.5
percent year-over-year.
-- Financing revenues, net of expenses and consumer financing interest
expense, were $19.2 million, a $1.1 million, or 6.1 percent, increase
from the first quarter of 2015.
-- Adjusted resort management and other services revenues, net of expenses,
totaled $23.6 million, a $1.6 million, or 7.4 percent, increase from the
first quarter of 2015.
-- During the first quarter of 2016, the company repurchased over 1.3
million shares of its common stock for $73.2 million.
-- The company completed the acquisition of an operating property located
in the South Beach area of Miami Beach for $23.5 million for future use
in its Marriott Vacation Club Destinations program.
First quarter 2016 net income was $24.4 million, or $0.82 diluted EPS, compared to net income of $34.1 million, or $1.03 diluted EPS, in the first quarter of 2015.
Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-12 of the Financial Schedules that follow.
First Quarter 2016 Results
Company Results
Total company vacation ownership contract sales were $153.5 million, $16.5 million lower than the first quarter of last year. The decrease was driven mainly by $15.9 million of lower contract sales to existing owners in the company's North America segment, as the prior year benefited from enhancements the company made to owner recognition levels. These enhancements helped drive a 7 percent increase in owner tours and a 1.4 point improvement in owner closing efficiency last year, resulting in contract sales growth of over 10 percent as compared to the first quarter of 2014. In addition, our Latin America sales channels were down roughly $2.5 million compared to the first quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.
Adjusted development margin was $23.7 million, a $10.1 million decrease from the first quarter of 2015. Adjusted development margin percentage was 17.3 percent in the first quarter of 2016 compared to 21.6 percent in the first quarter of 2015 reflecting higher marketing and sales spending which included costs to drive future tour flow and start-up costs associated with the company's new sales distributions as well as the impact of lower contract sales volumes. Development margin was $24.3 million, a $14.6 million decrease from the first quarter of 2015. Development margin percentage was 17.6 percent in the first quarter of 2016 compared to 21.2 percent in the first quarter of 2015.
Excluding the results of operations for the portion of the Surfers Paradise, Australia property that the company intends to sell, adjusted rental revenues totaled $78.2 million, a $2.0 million increase from the first quarter of 2015. Results reflected $1.4 million of higher revenue from operating properties we intend to convert to timeshare inventory, and $0.4 million of higher plus points revenue. Rental revenues net of expenses were $15.6 million, a $0.4 million decrease from the first quarter of 2015.
Excluding the results of operations for the portion of the Surfers Paradise, Australia property that the company intends to sell, adjusted resort management and other services revenues totaled $67.9 million, a $3.5 million increase from the first quarter of 2015. Adjusted resort management and other services revenues, net of expenses, were $23.6 million, a $1.6 million increase, or 7.4 percent, over the first quarter of 2015. Resort management and other services revenues, net of expenses, totaled $23.8 million, a $1.8 million increase, or 8.3 percent, from the first quarter of 2015.
Financing revenues totaled $29.2 million, a $0.2 million increase from the first quarter of 2015. Financing revenues, net of expenses and consumer financing interest expense, were $19.2 million, a $1.1 million increase, or 6.1 percent, from the first quarter of 2015.
General and administrative expenses were $25.3 million in the first quarter of 2016, a $2.5 million increase from the first quarter of 2015, driven by nearly $2 million of higher spending related to enhancements to the company's owner facing technology as well as inflationary cost increases.
Adjusted EBITDA was $51.6 million in the first quarter of 2016, an $8.6 million, or 14.2 percent, decrease from $60.2 million in the first quarter of 2015.
Segment Results
North America
North America vacation ownership contract sales were $139.7 million in the first quarter of 2016, a decrease of $16.3 million, or 10.5 percent, from the prior year period. The decrease was driven mainly by $15.9 million of lower contract sales to existing owners, as the prior year benefited from enhancements the company made to owner recognition levels that helped drive a 7 percent increase in owner tours and a 1.4 point improvement in owner closing efficiency, resulting in contract sales growth of over 10 percent as compared to the first quarter of 2014. In addition, our Latin America sales channels were down roughly $2.5 million, as the company continued to be impacted by a stronger U.S. dollar.
Total tours in the first quarter of 2016 decreased 4.0 percent, driven by a decline in owner tours, which were down nearly 7 percent year-over-year. VPG decreased 3.9 percent to $3,496 in the first quarter of 2016 from $3,640 in the first quarter of 2015, driven by an 8 percent decline in owner VPG. The overall decline in VPG in the quarter was driven by lower closing efficiency, offset partially by higher points purchased per contract and pricing.
First quarter 2016 North America adjusted segment financial results were $91.5 million, a decrease of $5.2 million from the first quarter of 2015. The decrease was driven primarily by $6.5 million of lower development margin and $0.6 million of lower rental revenues net of expenses. These decreases were partially offset by $1.9 million of higher resort management and other services revenues net of expenses and $0.4 million of higher financing revenues. North America segment financial results were $89.5 million, an $8.2 million decrease from the first quarter of 2015.
Adjusted development margin was $25.7 million, an $8.7 million decrease from the prior year quarter. Adjusted development margin percentage was 20.6 percent in the first quarter of 2016 compared to 23.7 percent in the first quarter of 2015. Development margin was $25.7 million, a $6.5 million decrease from the first quarter of 2015. Development margin percentage was 20.6 percent in the first quarter of 2016 compared to 22.7 percent in the prior year quarter.
Asia Pacific
Total vacation ownership contract sales in the segment were $9.4 million, an increase of $0.8 million, or nearly 9 percent, from the first quarter of 2015. Adjusted segment financial results were $1.0 million, a $2.5 million decrease from the first quarter of 2015. Adjusted development margin was $2.2 million lower than the first quarter of last year, reflecting $0.8 million of higher marketing and sales costs related to start-up costs associated with the company's new sales distribution in Surfers Paradise, Australia and $1.1 million of positive product cost true-up activity in 2015. Segment financial results were $1.0 million, an $8.4 million decrease from the first quarter of 2015 also reflecting $5.9 million of development margin in the prior year quarter related to the sale of all 18 residential units at the company's former Macau location.
Europe
First quarter 2016 contract sales were $4.4 million, a decrease of $0.9 million from the first quarter of 2015. Segment financial results were $0.4 million, a $0.4 million increase from the first quarter of 2015 due primarily to higher development margin.
Share Repurchase Program and Dividends
During the first quarter of 2016, the company repurchased over 1.3 million shares of its common stock for a total of $73.2 million under its share repurchase program and paid two quarterly cash dividends totaling $17.6 million.
Balance Sheet and Liquidity
On March 25, 2016, cash and cash equivalents totaled $106.6 million. Since the beginning of the year, real estate inventory balances increased $46.0 million to $709.9 million, including $317.8 million of finished goods, $30.0 million of work-in-progress, and $362.1 million of land and infrastructure. The company had $699.3 million in gross debt outstanding at the end of the first quarter, an increase of $11.2 million from year-end 2015, consisting primarily of $688.0 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the first quarter of 2016.
As of March 25, 2016, the company had approximately $196.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $102.3 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.
Outlook
The company is reaffirming the following guidance for the full year 2016:
Adjusted EBITDA $261 million to $276 million
Adjusted fully diluted
EPS $4.31 to $4.66
Adjusted net income $126 million to $136 million
Adjusted free cash flow $135 million to $155 million
Company contract sales 4 percent to 8
growth percent
Pages A-1 through A-12 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2016 expected GAAP results: net income of $123 million to $134 million; net cash provided by operating activities of $136 million to $146 million; and fully diluted EPS of $4.21 to $4.59, which increased from the previous guidance of $4.16 to $4.50 due entirely to a reduction in shares outstanding.
First Quarter 2016 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. ET today to discuss these results and its guidance for full year 2016. 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 13633825. 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 over 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 April 28, 2016 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Financial Schedules Follow
MARRIOTT VACATIONS WORLDWIDE CORPORATION
FINANCIAL SCHEDULES
QUARTER 1, 2016
TABLE OF CONTENTS
Consolidated Statements of
Income -12 Weeks Ended March
25, 2016 and March 27, 2015 A-1
North America Segment Financial
Results -12 Weeks Ended March
25, 2016 and March 27, 2015 A-2
Asia Pacific Segment Financial
Results -12 Weeks Ended March
25, 2016 and March 27, 2015 A-3
Europe Segment Financial Results
-12 Weeks Ended March 25, 2016
and March 27, 2015 A-4
Corporate and Other Financial
Results -12 Weeks Ended March
25, 2016 and March 27, 2015 A-5
Consolidated Contract Sales to Sale of Vacation
Ownership Products and Adjusted Development
Margin
(Adjusted Sale of Vacation
Ownership Products Net of
Expenses) -12 Weeks Ended
March 25, 2016 and March 27,
2015 A-6
North America Contract Sales to Sale of Vacation
Ownership Products and Adjusted Development
Margin
(Adjusted Sale of Vacation
Ownership Products Net of
Expenses) -12 Weeks Ended
March 25, 2016 and March 27,
2015 A-7
EBITDA and Adjusted EBITDA -12
Weeks Ended March 25, 2016 and
March 27, 2015 A-8
2016 Outlook -Adjusted Net
Income, Adjusted Earnings Per
Share -Diluted and Adjusted
EBITDA A-9
2016 Outlook - Adjusted Free
Cash Flow and Normalized
Adjusted Free Cash Flow A-10
Non-GAAP Financial Measures A-11
Consolidated Balance Sheets A-13
Consolidated Statements of Cash
Flows A-14
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
12 Weeks Ended March 25, 2016 and March 27, 2015
(In thousands, except per share amounts)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 25, 2016 Items March 25, 2016 ** March 27, 2015 Items March 27, 2015 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation
ownership products $138,369 $ - $138,369 $183,906 $(28,420) $155,486
Resort management and
other services 69,629 (1,736) 67,893 64,417 - 64,417
Financing 29,224 - 29,224 29,052 - 29,052
Rental 80,288 (2,056) 78,232 76,199 - 76,199
Cost reimbursements 107,533 - 107,533 101,306 - 101,306
Total revenues 425,043 (3,792) 421,251 454,880 (28,420) 426,460
------- ------ ------- ------- ------- -------
Expenses
Cost of vacation
ownership products 35,617 - 35,617 64,962 (21,583) 43,379
Marketing and sales 78,412 - 78,412 79,995 (922) 79,073
Resort management and
other services 45,797 (1,548) 44,249 42,409 - 42,409
Financing 4,629 - 4,629 4,905 - 4,905
Rental 64,660 (2,060) 62,600 60,158 - 60,158
General and
administrative 25,297 - 25,297 22,777 - 22,777
Organizational and
separation related - - - 192 (192) -
Reversal of litigation
expense (303) 303 - (262) 262 -
Consumer financing
interest 5,362 - 5,362 6,021 - 6,021
Royalty fee 13,357 - 13,357 13,000 - 13,000
Cost reimbursements 107,533 - 107,533 101,306 - 101,306
Total expenses 380,361 (3,305) 377,056 395,463 (22,435) 373,028
------- ------ ------- ------- ------- -------
Gains and other income 7 (7) - 887 (887) -
Interest expense (1,982) - (1,982) (2,974) - (2,974)
Other (2,542) 2,570 28 13 - 13
Income before income taxes 40,165 2,076 42,241 57,343 (6,872) 50,471
Provision for income taxes (15,757) (779) (16,536) (23,289) 975 (22,314)
Net income $24,408 $1,297 $25,705 $34,054 $(5,897) $28,157
======= ====== ======= ======= ======= =======
Earnings per share - Basic $0.84 $0.88 $1.05 $0.87
===== ===== ===== =====
Earnings per share - Diluted $0.82 $0.87 $1.03 $0.85
===== ===== ===== =====
Basic Shares 29,123 29,123 32,299 32,299
Diluted Shares 29,640 29,640 33,009 33,009
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
March 25, 2016 March 27, 2015
-------------- --------------
Contract Sales
Vacation ownership $153,494 $169,950
Residential products - 28,420
--- ------
Total
contract
sales $153,494 $198,370
======== ========
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our
reasons for providing these alternative financial measures and limitations on their use.
NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.
A-2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
12 Weeks Ended March 25, 2016 and March 27, 2015
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 25, 2016 Items March 25, 2016 ** March 27, 2015 Items March 27, 2015 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation
ownership products $124,684 $ - $124,684 $141,728 $ - $141,728
Resort management and
other services 61,665 - 61,665 58,575 - 58,575
Financing 27,408 - 27,408 27,056 - 27,056
Rental 72,508 - 72,508 71,715 - 71,715
Cost reimbursements 99,182 - 99,182 92,854 - 92,854
Total revenues 385,447 - 385,447 391,928 - 391,928
------- --- ------- ------- --- -------
Expenses
Cost of vacation
ownership products 30,662 - 30,662 40,501 - 40,501
Marketing and sales 68,315 - 68,315 69,017 - 69,017
Resort management and
other services 38,152 - 38,152 36,968 - 36,968
Rental 55,956 - 55,956 54,611 - 54,611
Organizational and
separation related - - - 139 (139) -
Reversal of litigation
expense (303) 303 - (262) 262 -
Royalty fee 1,686 - 1,686 1,260 - 1,260
Cost reimbursements 99,182 - 99,182 92,854 - 92,854
Total expenses 293,650 303 293,953 295,088 123 295,211
------- --- ------- ------- --- -------
Gains and other income 7 (7) - 880 (880) -
Other (2,280) 2,308 28 16 - 16
Segment financial results $89,524 $1,998 $91,522 $97,736 $(1,003) $96,733
======= ====== ======= ======= ======= =======
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
March 25, 2016 March 27, 2015
-------------- --------------
Contract Sales
Vacation ownership $139,650 $155,993
-------- --------
Total
contract
sales $139,650 $155,993
======== ========
** Denotes non-GAAP
financial measures. Please
see pages A-11 and A-12 for
additional information about
our reasons for providing
these alternative financial
measures and limitations on
their use.
A-3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
12 Weeks Ended March 25, 2016 and March 27, 2015
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 25, 2016 Items March 25, 2016 ** March 27, 2015 Items March 27, 2015 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation ownership
products $8,525 $ - $8,525 $36,278 $(28,420) $7,858
Resort management and other
services 3,497 (1,736) 1,761 863 - 863
Financing 981 - 981 1,006 - 1,006
Rental 5,621 (2,056) 3,565 2,352 - 2,352
Cost reimbursements 873 - 873 866 - 866
Total revenues 19,497 (3,792) 15,705 41,365 (28,420) 12,945
------ ------ ------ ------ ------- ------
Expenses
Cost of vacation ownership
products 1,709 - 1,709 21,996 (21,583) 413
Marketing and sales 6,211 - 6,211 5,557 (922) 4,635
Resort management and other
services 3,552 (1,548) 2,004 850 - 850
Rental 5,788 (2,060) 3,728 2,496 - 2,496
Royalty fee 146 - 146 157 - 157
Cost reimbursements 873 - 873 866 - 866
Total expenses 18,279 (3,608) 14,671 31,922 (22,505) 9,417
------ ------ ------ ------ ------- -----
Gains and other income - - - 3 (3) -
Other (208) 208 - (3) - (3)
---
Segment financial results $1,010 $24 $1,034 $9,443 $(5,918) $3,525
====== === ====== ====== ======= ======
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
March 25, 2016 March 27, 2015
-------------- --------------
Contract Sales
Vacation ownership $9,426 $8,659
Residential products - 28,420
--- ------
Total contract
sales $9,426 $37,079
====== =======
** Denotes non-GAAP
financial measures. Please
see pages A-11 and A-12 for
additional information about
our reasons for providing
these alternative financial
measures and limitations on
their use.
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
12 Weeks Ended March 25, 2016 and March 27, 2015
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 25, 2016 Items March 25, 2016 ** March 27, 2015 Items March 27, 2015 **
-------------- ----- -------------- -------------- ----- --------------
Revenues
Sale of vacation
ownership products $5,160 $ - $5,160 $5,900 $ - $5,900
Resort management and
other services 4,467 - 4,467 4,979 - 4,979
Financing 835 - 835 990 - 990
Rental 2,159 - 2,159 2,132 - 2,132
Cost reimbursements 7,478 - 7,478 7,586 - 7,586
Total revenues 20,099 - 20,099 21,587 - 21,587
------ --- ------ ------ --- ------
Expenses
Cost of vacation
ownership products 1,291 - 1,291 852 - 852
Marketing and sales 3,886 - 3,886 5,421 - 5,421
Resort management and
other services 4,093 - 4,093 4,591 - 4,591
Rental 2,916 - 2,916 3,051 - 3,051
Royalty fee 49 - 49 76 - 76
Cost reimbursements 7,478 - 7,478 7,586 - 7,586
Total expenses 19,713 - 19,713 21,577 - 21,577
------ --- ------ ------ --- ------
Gains and other income - - - 4 (4) -
Segment financial results $386 $ - $386 $14 $(4) $10
==== ============== ==== === === ===
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
March 25, 2016 March 27, 2015
-------------- --------------
Contract Sales
Vacation ownership $4,418 $5,298
------ ------
Total
contract
sales $4,418 $5,298
====== ======
** Denotes non-GAAP
financial measures. Please
see pages A-11 and A-12 for
additional information about
our reasons for providing
these alternative financial
measures and limitations on
their use.
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER
12 Weeks Ended March 25, 2016 and March 27, 2015
(In thousands)
As Reported As Adjusted As Reported As Adjusted
12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain 12 Weeks Ended
March 25, 2016 Items March 25, 2016 ** March 27, 2015 Items March 27, 2015 **
-------------- ----- -------------- -------------- ----- --------------
Expenses
Cost of vacation
ownership products $1,955 $ - $1,955 $1,613 $ - $1,613
Financing 4,629 - 4,629 4,905 - 4,905
General and
administrative 25,297 - 25,297 22,777 - 22,777
Organizational and
separation related - - - 53 (53) -
Consumer Financing
Interest 5,362 - 5,362 6,021 - 6,021
Royalty fee 11,476 - 11,476 11,507 - 11,507
Total expenses 48,719 - 48,719 46,876 (53) 46,823
------ --- ------ ------ --- ------
Interest expense (1,982) - (1,982) (2,974) - (2,974)
Other (54) 54 - - - -
---
Financial results $(50,755) $54 $(50,701) $(49,850) $53 $(49,797)
======== === ======== ======== === ========
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about
our reasons for providing these alternative financial measures and limitations on their use.
NOTE: Corporate and Other consists of results not specifically attributable to an individual segment,
including expenses incurred to support our financing operations, non-capitalizable development expenses
supporting overall company development, company-wide general and administrative costs, and the fixed royalty
fee payable under the license agreements with Marriott International, consumer financing interest expense,
other interest expense and other charges.
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
12 Weeks Ended
--------------
March 25, 2016 March 27, 2015
-------------- --------------
Contract sales
Vacation
ownership $153,494 $169,950
Residential
products - 28,420
Total
contract
sales 153,494 198,370
------- -------
Revenue recognition adjustments:
Reportability(1) 786 (1,513)
Sales Reserve
(2) (8,223) (8,367)
Other
(3) (7,688) (4,584)
Sale of vacation ownership products $138,369 $183,906
======== ========
1 Adjustment for lack of required
downpayment or contract sales in
rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
(In thousands)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended
March 25, 2016 Items Adjustment March 25, 2016 ** March 27, 2015 Items Adjustment March 27, 2015 **
-------------- ----- ---------- -------------- -------------- ----- ---------- --------------
Sale of vacation ownership products $138,369 $ - $(786) $137,583 $183,906 $(28,420) $1,513 $156,999
Less:
Cost of vacation ownership
products 35,617 - (104) 35,513 64,962 (21,583) 562 43,941
Marketing and sales 78,412 - (82) 78,330 79,995 (922) 105 79,178
Development margin $24,340 $ - $(600) $23,740 $38,949 $(5,915) $846 $33,880
======= ============== ===== ======= ======= ======= ==== =======
Development margin
percentage(1) 17.6% 17.3% 21.2% 21.6%
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these
alternative financial measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is
calculated using whole dollars.
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
12 Weeks Ended
--------------
March 25, 2016 March 27, 2015
-------------- --------------
Contract sales
Vacation
ownership $139,650 $155,993
Residential
products - -
Total
contract
sales 139,650 155,993
------- -------
Revenue recognition adjustments:
Reportability(1) 88 (3,444)
Sales Reserve
(2) (7,406) (6,334)
Other
(3) (7,648) (4,487)
Sale of vacation ownership products $124,684 $141,728
======== ========
1 Adjustment for lack of required
downpayment or contract sales in
rescission period.
2 Represents allowance for bad
debts for our financed vacation
ownership product sales, which we
also refer to as sales reserve.
3 Adjustment for sales incentives
that will not be recognized as
Sale of vacation ownership
products revenue.
----------------------------------
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
(In thousands)
Revenue Revenue
As Reported Recognition As Adjusted As Reported Recognition As Adjusted
12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Reportability 12 Weeks Ended
March 25, 2016 Items Adjustment March 25, 2016 ** March 27, 2015 Items Adjustment March 27, 2015 **
-------------- ----- ---------- -------------- -------------- ----- ---------- --------------
Sale of vacation ownership products $124,684 $ - $(88) $124,596 $141,728 $ - $3,444 $145,172
Less:
Cost of vacation ownership
products 30,662 - (24) 30,638 40,501 - 980 41,481
Marketing
and sales 68,315 - (8) 68,307 69,017 - 324 69,341
Development margin $25,707 $ - $(56) $25,651 $32,210 $ - $2,140 $34,350
======= ============ ==== ======= ======= ============ ====== =======
20.6% 20.6% 22.7% 23.7%
Development margin
percentage(1)
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial
measures and limitations on their use.
(1) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using
whole dollars.
A-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EBITDA AND ADJUSTED EBITDA
12 Weeks Ended March 25, 2016 and March 27, 2015
(In thousands)
12 Weeks Ended
--------------
March 25, 2016 March 27, 2015
-------------- --------------
Net income $24,408 $34,054
Interest expense (1) 1,982 2,974
Tax provision 15,757 23,289
Depreciation and amortization 5,125 4,065
EBITDA ** 47,272 64,382
------ ------
Non-cash share-based compensation (2) 2,524 2,643
Certain items 1,795 (6,872)
ADJUSTED EBITDA
** $51,591 $60,153
======= =======
** Denotes non-GAAP financial measures. Please see pages A-11 and A-
12 for additional information about our reasons for providing these
alternative financial measures and limitations on their use.
(1) Interest expense excludes consumer financing
interest expense.
(2) Beginning with the first quarter of 2016, non-cash share-based
compensation expense is excluded from our Adjusted EBITDA, and prior
period presentation has been recast for consistency. Please see pages
A-11 and A-12 for additional information.
A-9
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2016 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
(In millions, except per share amounts)
Fiscal Year Fiscal Year
2016 (low) 2016 (high)
--------- ----------
Net income $123 $134
Adjustments to
reconcile Net income
to Adjusted net
income
Certain items(1) 5 4
Provision for income
taxes on adjustments
to net income (2) (2)
--- ---
Adjusted net income** $126 $136
==== ====
Earnings per share -
Diluted (2) $4.21 $4.59
Adjusted earnings per
share -Diluted**, 2 $4.31 $4.66
Diluted shares(2) 29.2 29.2
** Denotes non-GAAP financial measures. Please see pages A-11
through A-12 for additional information about our reasons for
providing these alternative financial measures and limitations on
their use.
(1) Certain items adjustment includes approximately $4 million to $5
million of non-capitalizable transaction costs.
2 Earnings per share -Diluted, Adjusted earnings per share -
Diluted, and Diluted shares outlook includes the impact of share
repurchase activity only through April 28, 2016.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2016 ADJUSTED EBITDA OUTLOOK
(In millions)
Fiscal Year Fiscal Year
2016 (low) 2016 (high)
--------- ----------
Adjusted net income ** $126 $136
Interest expense(1) 8 8
Tax provision 90 95
Depreciation and
amortization 22 22
Non-cash share-based
compensation (2) 15 15
Adjusted
EBITDA** $261 $276
** Denotes non-GAAP financial
measures. Please see pages A-11
through A-12 for additional
information about our reasons for
providing these alternative
financial measures and
limitations on their use.
(1) Interest expense excludes
consumer financing interest
expense.
(2) Beginning with the first
quarter of 2016, non-cash share-
based compensation expense is
excluded from our Adjusted
EBITDA, and prior period
presentation has been recast for
consistency. Please see pages A-
11 and A-12 for additional
information.
A-10
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2016 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK
(In millions)
Current Guidance
----------------
Low High Mid-Point Adjustments Normalized
--- ---- --------- ----------- ----------
Adjusted net income ** $126 $136 $131 $ - $131
Adjustments to
reconcile Adjusted
net income to net
cash provided by
operating
activities:
Adjustments for
non-cash
items(1) 84 84 84 - 84
Deferred income
taxes 30 35 33 - 33
Net changes in
assets and
liabilities:
Notes
receivable
originations (355) (370) (363) - (363)
Notes
receivable
collections 239 245 242 - 242
Inventory (10) (5) (8) 8 4 -
Other working
capital
changes 22 21 22 - 22
--- --- ---
Net cash provided by
operating activities 136 146 141 8 149
Capital expenditures
for property and
equipment (excluding
inventory):
New sales centers
(2) (20) (18) (19) 19 (2) -
Other (24) (22) (23) 3 5 (20)
Decrease in
restricted cash (5) (5) (5) 5 6 -
Borrowings from
securitization
transactions 290 292 291 - 291
Repayment of debt
related to
securitizations (235) (233) (234) - (234)
---- ---- ---- --- ----
Free cash
flow** 142 160 151 35 186
Adjustments:
Net change in borrowings
available from the
securitization of
eligible vacation
ownership notes
receivable through the
warehouse credit
facility (3) (7) (5) (6) - (6)
Adjusted free
cash flow** $135 $155 $145 $35 $180
==== ==== ==== === ====
** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.
(2) Represents the incremental investment in new sales centers.
(3) Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2015 and 2016 year ends.
4 Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).
5 Represents normalized capital expenditures for property and equipment.
6 Represents normalized restricted cash activity.
A-11
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
In our press release and schedules, and on the related conference call, we report
certain financial measures that are not prescribed or authorized by United States
generally accepted accounting principles ("GAAP"). We discuss our reasons for
reporting these non-GAAP financial measures below, and the financial schedules
reconcile the most directly comparable GAAP financial measure to each non-GAAP
financial measure that we report (identified by a double asterisk ("**") on the
preceding pages). Although we evaluate and present these non-GAAP financial
measures for the reasons described below, please be aware that these non-GAAP
financial measures have limitations and should not be considered in isolation or as
a 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
items in the 12 weeks ended March 25, 2016 and March 27, 2015 because these non-
GAAP financial measures allow for period-over-period comparisons of our on-going
core operations before the impact of these items. These non-GAAP financial
measures also facilitate our comparison of results from our on-going core
operations before these items with results from other vacation ownership companies.
Certain items - 12 weeks ended March 25, 2016. In our Statement of Income for the
12 weeks ended March 25, 2016, we recorded $2.1 million of net pre-tax charges,
which included $2.6 million of adjustments for transaction costs associated with
acquisitions ($2.3 million in our North America segment, $0.2 million in our Asia
Pacific segment and less than $0.1 million in our Corporate and Other segment)
recorded under the "Other" caption, partially offset by a $0.3 million reversal of
litigation expense in our in our North America segment recorded under the "Reversal
of litigation expense" caption because actual costs were lower than expected, $0.2
million of net adjustments to exclude the results of operations from the portion of
the Surfers Paradise, Australia property that we intend to sell, comprised of $2.1
million of Rental revenue and $1.7 million of Resort management and other services
Certain items - 12 weeks ended March 27, 2015. In our Statement of Income for the
12 weeks ended March 27, 2015, we recorded $6.9 million of net pre-tax items, which
included a $28.4 million adjustment to exclude the bulk sale of 18 units in our Asia
Pacific segment recorded under the "sale of vacation ownership products" caption,
with corresponding adjustments of $21.6 million and $0.9 million to the "Cost of
vacation ownership products" and Marketing and sales" captions, respectively, a $0.9
million gain associated with the sale of a golf course and adjacent undeveloped land
in our North America segment under the "Gains and other income" caption, and a $0.3
million reversal of litigation expense in our North America segment recorded under
the "Reversal of litigation expense" caption because actual costs were lower than
expected, partially offset by $0.2 million of organizational and separation related
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.
A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA is defined as earnings,
or net income, before interest expense (excluding consumer financing interest expense), provision for
income taxes, depreciation and amortization. For purposes of our EBITDA calculation, we do not adjust for
consumer financing interest expense because the associated debt is secured by vacation ownership notes
receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse
to us. Further, we consider consumer financing interest expense to be an operating expense of our
business.
We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to
service debt, fund capital expenditures and expand our business. We also use it, as do analysts, lenders,
investors and others, because it excludes certain items that can vary widely across different industries or
among companies within the same industry. For example, interest expense can be dependent on a company's
capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings
can vary significantly among companies. The tax positions of companies can also vary because of their
differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions
in which they operate. As a result, effective tax rates and provision for income taxes can vary
considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize
productive assets of different ages and use different methods of both acquiring and depreciating productive
assets. These differences can result in considerable variability in the relative costs of productive
Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain items,
as itemized in the discussion of Adjusted Net Income on page A-11. Additionally, beginning with the first
quarter of 2016, we exclude non-cash share-based compensation expense to address considerable variability
among companies in recording compensation expense because companies use share-based payment awards
differently, both in the type and quantity of awards granted. Prior period presentation has been recast for
consistency. 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 these items.
Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core
operations before the impact of these items with results from other vacation ownership companies.
Free Cash Flow. We also evaluate Free Cash Flow as a liquidity measure that provides useful information to
management and investors about the amount of cash provided by operating activities after capital
expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment
activity related to our securitizations. We consider Free Cash Flow to be a liquidity measure that
provides useful information to management and investors about the amount of cash generated by the business
that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet.
Analysis of Free Cash Flow also facilitates management's comparison of our results with our competitors'
results.
Adjusted Free Cash Flow. We also evaluate Adjusted Free Cash Flow, which reflects additional adjustments
for organizational and separation related, litigation, and other cash items, as referred to in the
discussion of Adjusted Net Income above. We evaluate Adjusted Free Cash Flow as a liquidity measure that
provides useful information to management and investors about the amount of cash provided by operating
activities after capital expenditures for property and equipment, changes in restricted cash, and the
borrowing and repayment activity related to our securitizations, excluding the impact of organizational and
separation related, litigation, and other cash charges. We consider Adjusted Free Cash Flow to be a
liquidity measure that provides useful information to management and investors about the amount of cash
generated by the business that can be used for strategic opportunities, including acquisitions and
strengthening the balance sheet. Analysis of Adjusted Free Cash Flow also facilitates management's
comparison of our results with our competitors' results.
Normalized Adjusted Free Cash Flow. We also evaluate Normalized Adjusted Free Cash Flow as a liquidity
measure that provides useful information to management and investors about the amount of cash provided by
operating activities after capital expenditures for property and equipment, changes in restricted cash, the
borrowing and repayment activity related to our securitizations, and adjustments to remove the impact of
cash flow items not expected to occur on a regular basis. Adjustments eliminate the impact of excess cash
taxes, payments for Marriott Rewards Points issued prior to the Spin-off, payments for organizational and
separation related efforts, litigation cash settlements and other working capital changes. We consider
Normalized Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management
and investors about the amount of cash generated by the business that can be used for strategic
opportunities, including acquisitions and strengthening the balance sheet. Analysis of Normalized Adjusted
Free Cash Flow also facilitates management's comparison of our results with our competitors' results.
A-13
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
March 25, January 1,
2016 2016
---- ----
ASSETS
Cash and cash
equivalents $106,613 $177,061
Restricted cash
(including $24,768
and $26,884 from
VIEs, respectively) 55,252 71,451
Accounts and contracts
receivable, net
(including $4,527 and
$4,893 from VIEs,
respectively) 131,538 131,850
Vacation ownership
notes receivable, net
(including $680,888
and $669,179 from
VIEs, respectively) 908,587 920,631
Inventory 715,072 669,243
Property and equipment 222,516 288,803
Other 191,207 140,679
Total Assets $2,330,785 $2,399,718
========== ==========
LIABILITIES AND EQUITY
Accounts payable $80,618 $139,120
Advance deposits 77,141 69,064
Accrued liabilities
(including $292 and
$669 from VIEs,
respectively) 178,642 164,791
Deferred revenue 28,562 35,276
Payroll and benefits
liability 75,749 104,331
Liability for Marriott
Rewards customer
loyalty program - 35
Deferred compensation
liability 55,437 51,031
Mandatorily redeemable
preferred stock of
consolidated
subsidiary, net 39,029 38,989
Debt, net (including
$688,023 and $684,604
from VIEs,
respectively) 689,234 678,793
Other 72,582 32,945
Deferred taxes 114,765 109,076
------- -------
Total Liabilities 1,411,759 1,423,451
--------- ---------
Preferred stock -$.01
par value; 2,000,000
shares authorized;
none issued or
outstanding - -
Common stock -$.01 par value;
100,000,000 shares authorized;
36,564,810 and 36,393,800 shares
issued, respectively
366 364
Treasury stock -at
cost; 8,171,238 and
6,844,256 shares,
respectively (503,218) (429,990)
Additional paid-in
capital 1,149,442 1,150,731
Accumulated other
comprehensive income 12,937 11,381
Retained earnings 259,499 243,781
------- -------
Total Equity 919,026 976,267
Total Liabilities and
Equity $2,330,785 $2,399,718
========== ==========
The abbreviation VIEs above means Variable Interest Entities.
A-14
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
12 weeks ended
--------------
March 25, 2016 March 27, 2015
-------------- --------------
OPERATING ACTIVITIES
Net income $24,408 $34,054
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,125 4,065
Amortization of debt issuance costs 1,300 1,267
Provision for loan losses 8,287 8,437
Share-based compensation 2,524 2,643
Deferred income taxes 5,549 8,600
Equity method income (28) (13)
Gain on disposal of property and
equipment, net (7) (887)
Non-cash reversal of litigation expense (303) (262)
Net change in assets and liabilities:
Accounts and contracts receivable 21 (4,643)
Notes receivable originations (57,524) (48,946)
Notes receivable collections 60,532 67,518
Inventory (14,970) 44,883
Purchase of operating hotels for future
conversion to inventory - (46,614)
Other assets (5,285) (8,096)
Accounts payable, advance deposits and
accrued liabilities (27,836) (25,064)
Deferred revenue (6,785) (11,624)
Payroll and benefit liabilities (28,586) (19,583)
Liability for Marriott Rewards customer
loyalty program (36) (4,474)
Deferred compensation liability 4,406 2,921
Other liabilities 39,399 27,937
Other, net (313) (50)
Net cash provided by operating activities 9,878 32,069
----- ------
INVESTING ACTIVITIES
Capital expenditures for property and
equipment (excluding inventory) (6,331) (10,562)
Decrease in restricted cash 16,133 47,103
Dispositions, net 9 197
Net cash provided by investing activities 9,811 36,738
FINANCING ACTIVITIES
Borrowings from securitization
transactions 51,130 -
Repayment of debt related to
securitization transactions (47,711) (78,811)
Proceeds from vacation ownership
inventory arrangement - 5,375
Repurchase of common stock (73,228) (51,281)
Payment of dividends (17,585) (8,081)
Proceeds from stock option exercises - 90
Payment of withholding taxes on vesting
of restricted stock units (3,864) (9,061)
Other 591 80
Net cash used in financing activities (90,667) (141,689)
------- --------
Effect of changes in exchange rates on
cash and cash equivalents 530 (1,453)
DECREASE IN CASH AND CASH EQUIVALENTS (70,448) (74,335)
CASH AND CASH EQUIVALENTS, beginning of
period 177,061 346,515
CASH AND CASH EQUIVALENTS, end of period $106,613 $272,180
======== ========
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SOURCE Marriott Vacations Worldwide
