MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., May 4, 2017 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2017. Due to the change in the company's financial reporting calendar beginning in 2017, the first quarter of 2017 included the period from December 31, 2016 through March 31, 2017 (91 days) compared to the 2016 first quarter, which included the period from January 2, 2016 to March 25, 2016 (84 days). Prior year results have not been restated for the change in the company's reporting calendar.
First quarter 2017 highlights:
-- Net income was $33.7 million, or $1.21 fully diluted earnings per share
(EPS), compared to net income of $24.4 million, or $0.82 fully diluted
EPS, in the first quarter of 2016, an increase of 38.1 percent and 47.6
percent, respectively.
-- Adjusted net income was $34.0 million, compared to adjusted net income
of $25.7 million in the first quarter of 2016, an increase of 32.3
percent. Adjusted fully diluted EPS was $1.22, compared to adjusted
fully diluted EPS of $0.87 in the first quarter of 2016, an increase of
40.2 percent.
-- Adjusted EBITDA totaled $62.1 million, an increase of $10.5 million, or
20.3 percent, year-over-year.
-- Revenue reportability negatively impacted results for the first
quarter of 2017 by $2.7 million.
-- Total company vacation ownership contract sales were $193.8 million, an
increase of $40.3 million, or 26.3 percent, compared to the prior year
period. North America vacation ownership contract sales were $177.4
million, an increase of $37.8 million, or 27.1 percent, compared to the
prior year period.
-- Excluding the estimated impact of the change in the company's
financial reporting calendar, total company and North America
vacation ownership contract sales would have increased 15.7 percent
and 16.9 percent, respectively.
-- North America VPG totaled $3,691, a 5.6 percent increase from the first
quarter of 2016.
-- North America tours increased 23.6 percent year-over-year.
-- Excluding the estimated impact of the change in the company's
financial reporting calendar, tours would have increased 13.5
percent.
"I couldn't be more pleased with our start to 2017. In the first quarter, adjusted EBITDA grew over 20 percent to over $62 million, and contract sales, on a year-over-year comparable basis, grew nearly 16 percent," said Stephen P. Weisz, president and chief executive officer. "Our first quarter was a continuation of the strong performance we delivered in the fourth quarter of 2016 and gives us confidence that we will achieve 2017 full year contract sales growth of 9 to 15 percent, net income of $139 million to $148 million, and adjusted EBITDA of $276 million to $291 million."
Non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted fully diluted earnings per share, and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-11 of the Financial Schedules that follow.
First Quarter 2017 Results
As a result of a change in the company's financial reporting calendar, financial results for the first quarter 2017 include the impact of seven additional days of operations.
Company Results
First quarter 2017 company net income was $33.7 million, a $9.3 million increase from the first quarter of 2016. These results were driven by $8.6 million of higher resort management and other services revenues net of expenses, $4.5 million of higher development margin, $2.2 million of lower acquisition related transaction costs, $1.7 million of higher financing revenues net of expenses and consumer financing interest expense, and $1.2 million of lower interest expense, partially offset by $2.7 million of higher royalty fees, $2.2 million of higher general and administrative costs, and $0.8 million of lower rental revenues net of expenses.
Total company vacation ownership contract sales were $193.8 million, $40.3 million, or 26.3 percent, higher than the first quarter of 2016. These results were driven by $37.8 million of higher contract sales in the company's North America segment and $2.5 million of higher contract sales in the company's Asia Pacific segment. Excluding the estimated impact of the change in the company's financial reporting calendar, total company vacation ownership contract sales would have increased 15.7 percent.
Development margin was $28.9 million, a $4.5 million increase from the first quarter of 2016. Development margin percentage was 16.8 percent compared to 17.6 percent in the prior year quarter. The increase in development margin reflects $8.3 million from higher contract sales volumes net of expenses, $3.1 million from lower product costs and $1.6 million related mainly to lower usage of plus points for sales incentives, partially offset by $3.3 million related to unfavorable revenue reportability year-over-year, $3.0 million of higher marketing and sales costs primarily from ramping up the company's new sales distributions, $1.4 million from higher sales reserve activity mainly associated with a 7.6 percentage point increase in financing propensity, and $0.8 million of higher other development and inventory costs. Adjusted development margin percentage, which excludes the impact of revenue reportability year-over-year, was 17.9 percent in the first quarter of 2017 compared to 17.3 percent in the first quarter of 2016.
Rental revenues totaled $85.3 million, a $5.0 million increase from the first quarter of 2016. Rental revenues net of expenses were $14.8 million, a $0.8 million decrease from the first quarter of 2016.
Resort management and other services revenues totaled $74.3 million, a $10.6 million increase from the first quarter of 2016. Resort management and other services revenues, net of expenses, totaled $32.5 million, an $8.6 million, or 36.1 percent, increase from the first quarter of 2016.
Financing revenues totaled $32.1 million, a $2.9 million increase from the first quarter of 2016. Financing revenues, net of expenses and consumer financing interest expense, were $21.0 million, a $1.7 million, or 9.0 percent, increase from the first quarter of 2016.
Net income was $33.7 million, compared to net income of $24.4 million in the first quarter of 2016, an increase of $9.3 million, or 38.1 percent. Adjusted EBITDA was $62.1 million in the first quarter of 2017, a $10.5 million, or 20.3 percent, increase from $51.6 million in the first quarter of 2016.
Segment Results
North America
North America vacation ownership contract sales were $177.4 million in the first quarter of 2017, an increase of $37.8 million, or 27.1 percent, from the prior year period, reflecting higher sales from existing sales centers driven by the success of our new marketing programs, as well as the continued ramp-up of new sales centers. VPG increased $195, or 5.6 percent, to $3,691 in the first quarter of 2017 from the first quarter of 2016. Total tours in the first quarter of 2017 increased 23.6 percent, reflecting a 23.9 percent increase in first time buyer tours and a 23.5 percent increase in owner tours. Excluding the estimated impact of the change in the company's financial reporting calendar, vacation ownership contract sales and tours would have increased 16.9 percent and 13.5 percent, respectively.
First quarter 2017 North America segment financial results were $105.7 million, an increase of $16.1 million from the first quarter of 2016. The increase was driven primarily by $8.3 million of higher resort management and other services revenues net of expenses, $4.4 million of higher development margin, $2.8 million of higher financing revenues, and $2.3 million of lower acquisition related transaction costs, partially offset by $1.0 million of higher royalty fees and $0.4 million of lower rental revenues net of expenses.
Development margin was $30.2 million, a $4.4 million increase from the first quarter of 2016. Development margin percentage was 19.2 compared to 20.6 percent in the prior year quarter. The increase in development margin reflects $8.2 million from higher contract sales volumes net of expenses, $2.3 million from lower product costs and $1.6 million related mainly to lower usage of plus points for sales incentives, partially offset by $3.2 million related to unfavorable revenue reportability year-over-year, $3.1 million of higher marketing and sales costs primarily from ramping up the company's new sales distributions, $0.9 million from higher sales reserve activity mainly associated with a 9.2 percentage point increase in financing propensity, and $0.5 million of higher other development and inventory costs. Adjusted development margin percentage, which excludes the impact of revenue reportability, was 20.7 percent in the first quarter of 2017, slightly above the first quarter of 2016.
Asia Pacific
Total vacation ownership contract sales in the segment were $11.9 million, an increase of $2.5 million, or 26.7 percent, from the first quarter of 2016, due primarily to the opening of the new sales location in Surfers Paradise, Australia in the second quarter of 2016. Segment financial results were $1.1 million, relatively flat to the first quarter of 2016. Excluding the estimated impact of the change in the company's financial reporting calendar, vacation ownership contract sales would have increased 16.0 percent.
Europe
First quarter 2017 contract sales were $4.4 million and segment financial results were $0.7 million, both relatively flat to the first quarter of 2016.
Balance Sheet and Liquidity
On March 31, 2017, cash and cash equivalents totaled $101.8 million. Since the beginning of the year, real estate inventory balances decreased $19.9 million to $688.3 million, including $324.4 million of finished goods, $28.7 million of work-in-progress and $335.2 million of land and infrastructure. The company had $692.1 million in gross debt outstanding at the end of the first quarter, a decrease of $54.4 million from year-end 2016, consisting primarily of $684.0 million in gross non-recourse securitized notes.
As of March 31, 2017, the company had approximately $199 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $201.5 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.
Fiscal Year Change
The table below shows the number of days for each reporting period in 2017 and 2016:
2017 2016
---- ----
First Quarter 91 days 84 days
Second Quarter 91 days 84 days
Third Quarter 92 days 84 days
Fourth Quarter 92 days 112 days
Full Year 366 days 364 days
Outlook
The company is reaffirming guidance for the full year 2017 on the non-GAAP financial measures provided below. Pages A-1 through A-11 of the Financial Schedules reconcile the non-GAAP financial measures set forth below to the following full year 2017 expected GAAP results:
Net income $139 million to $148 million
Fully diluted EPS $4.97 to $5.29
Net cash provided by
operating activities $110 million to $125 million
Adjusted net income $139 million to $148 million
Adjusted fully diluted
EPS $4.97 to $5.29
Adjusted EBITDA $276 million to $291 million
Adjusted free cash flow $160 million to $180 million
Contract sales growth 9
percent
to 15
percent
First Quarter 2017 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. EDT today to discuss these results and the guidance for full year 2017. 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 13659218. 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 May 4, 2017 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, 2017 (1)
TABLE OF CONTENTS
Consolidated Statements of
Income A-1
Adjusted Net Income, Adjusted
Earnings Per Share -Diluted,
EBITDA and Adjusted EBITDA A-2
North America Segment Financial
Results A-3
Asia Pacific Segment Financial
Results A-4
Europe Segment Financial Results A-5
Corporate and Other Financial
Results A-6
Consolidated Contract Sales to Sale of Vacation
Ownership Products and Adjusted Development
Margin
(Adjusted Sale of Vacation
Ownership Products Net of
Expenses) A-7
North America Contract Sales to Sale of Vacation
Ownership Products and Adjusted Development
Margin
(Adjusted Sale of Vacation
Ownership Products Net of
Expenses) A-8
2017 Outlook -Adjusted Net
Income, Adjusted Earnings Per
Share -Diluted, Adjusted
EBITDA and Adjusted Free Cash
Flow A-9
Non-GAAP Financial Measures A-10
Consolidated Balance Sheets A-12
Consolidated Statements of Cash
Flows A-13
(1) Due to the change in
the company's financial
reporting calendar
beginning in 2017, the 2017
first quarter included the
period from December 31,
2016 through March 31, 2017
(91 days) compared to the
2016 first quarter, which
included the period from
January 2, 2016 to March
25, 2016 (84 days). Prior
year results have not been
restated for the change in
fiscal calendar.
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Revenues
Sale of vacation ownership
products $172,155 $138,369
Resort management and other
services 74,339 63,757
Financing 32,111 29,224
Rental 85,256 80,288
Cost reimbursements 123,633 107,533
Total
revenues 487,494 419,171
------- -------
Expenses
Cost of vacation ownership
products 42,620 35,617
Marketing and sales 100,661 78,412
Resort management and other
services 41,831 39,863
Financing 5,206 4,629
Rental 70,432 64,660
General and administrative 27,539 25,359
Litigation settlement - (303)
Consumer financing interest 5,938 5,362
Royalty fee 16,070 13,357
Cost reimbursements 123,633 107,533
Total
expenses 433,930 374,489
------- -------
(Losses) gains and other (expense) income (59) 7
Interest expense (781) (1,982)
Other (369) (2,542)
Income
before
income
taxes 52,355 40,165
Provision for income taxes (18,655) (15,757)
Net income $33,700 $24,408
======= =======
Earnings per share - Basic $1.24 $0.84
===== =====
Earnings per share - Diluted $1.21 $0.82
===== =====
Basic Shares 27,251 29,123
Diluted Shares 27,900 29,640
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Vacation ownership contract sales $193,834 $153,494
======== ========
NOTE: Earnings per share -Basic
and Earnings per share -Diluted
are calculated using whole
dollars. In the 2016 fourth
quarter, we reclassified certain
revenues and expenses to correct
immaterial presentation errors
within the following line items:
Resort management and other
services revenues, Resort
management and other services
expenses and General and
administrative expenses. We have
recast prior year presentation
for consistency.
A-2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In thousands, except per share amounts)
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Net income $33,700 $24,408
Less certain items:
Transaction costs 412 2,570
Operating results
from the sold
portion of the
Surfers Paradise,
Australia property - (465)
Litigation
settlement - (303)
Losses (gains) and
other expense
(income) 59 (7)
Certain
items
before
depreciation
and
provision
for income
taxes (1) 471 1,795
Depreciation on the
sold portion of
the Surfers
Paradise,
Australia property - 281
Provision for
income taxes on
certain items (173) (779)
Adjusted net
income ** $33,998 $25,705
======= =======
Earnings per share - Diluted $1.21 $0.82
===== =====
Adjusted earnings per share - Diluted ** $1.22 $0.87
===== =====
Diluted Shares 27,900 29,640
EBITDA AND ADJUSTED EBITDA
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Net income $33,700 $24,408
Interest expense (2) 781 1,982
Tax provision 18,655 15,757
Depreciation and amortization 5,191 5,125
EBITDA ** 58,327 47,272
------ ------
Non-cash share-based compensation 3,276 2,524
Certain items before depreciation and provision for
income taxes (1) 471 1,795
Adjusted EBITDA ** $62,074 $51,591
======= =======
** Denotes non-GAAP financial measures. Please see pages A-10 and A-
11 for additional information about our reasons for providing these
alternative financial measures and limitations on their use.
(1) Please see pages A-10 and A-11 for additional information
regarding these items. The certain items adjustments for the Adjusted
EBITDA reconciliations exclude depreciation and the provision for income
taxes on certain items included in the Adjusted Net Income
reconciliations.
(2) Interest expense excludes consumer financing
interest expense.
A-3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Revenues
Sale of vacation ownership products $156,657 $124,684
Resort management and other
services 68,818 56,382
Financing 30,239 27,408
Rental 79,140 72,508
Cost reimbursements 114,955 99,182
-------
Total revenues 449,809 380,164
------- -------
Expenses
Cost of vacation ownership products 37,635 30,662
Marketing and sales 88,870 68,315
Resort management and other
services 36,945 32,807
Rental 63,005 55,956
Litigation settlement - (303)
Royalty fee 2,690 1,686
Cost reimbursements 114,955 99,182
-------
Total expenses 344,100 288,305
------- -------
(Losses) gains and other (expense) income (34) 7
Other 51 (2,280)
Segment financial
results $105,726 $89,586
======== =======
Segment financial results $105,726 $89,586
Less certain items:
Transaction costs - 2,308
Litigation settlement - (303)
Losses (gains) and other expense
(income) 34 (7)
---
Certain items 34 1,998
--- -----
Adjusted segment
financial results ** $105,760 $91,584
======== =======
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Vacation ownership contract sales $177,436 $139,650
======== ========
** Denotes non-GAAP financial
measures. Please see pages A-10
and A-11 for additional
information about our reasons for
providing these alternative
financial measures and
limitations on their use.
NOTE: In the 2016 fourth quarter,
we reclassified certain revenues
and expenses to correct
immaterial presentation errors
within the following line items:
Segment Resort management and
other services revenues, Segment
Resort management and other
services expenses and Corporate
General and administrative
expenses. We have recast prior
year presentation for
consistency.
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Revenues
Sale of vacation
ownership products $10,922 $8,525
Resort management and
other services 1,097 3,446
Financing 1,123 981
Rental 3,738 5,621
Cost reimbursements 1,147 873
Total
revenues 18,027 19,446
------ ------
Expenses
Cost of vacation
ownership products 2,089 1,709
Marketing and sales 8,201 6,211
Resort management and
other services 1,093 3,501
Rental 4,137 5,788
Royalty fee 228 146
Cost reimbursements 1,147 873
Total
expenses 16,895 18,228
------ ------
Losses and other expense (20) -
Other (8) (208)
Segment
financial
results $1,104 $1,010
====== ======
Segment financial results $1,104 $1,010
Less certain items:
Transaction costs - 208
Operating results from
the sold portion of
the Surfers Paradise,
Australia property - (184)
Losses and other
expense 20 -
Certain items 20 24
--- ---
Adjusted
segment
financial
results
** $1,124 $1,034
====== ======
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Vacation ownership contract sales $11,948 $9,426
======= ======
** Denotes non-GAAP financial
measures. Please see pages A-
10 and A-11 for additional
information about our reasons
for providing these alternative
financial measures and
limitations on their use.
NOTE: In the 2016 fourth
quarter, we reclassified
certain revenues and expenses
to correct immaterial
presentation errors within the
following line items: Segment
Resort management and other
services revenues and Segment
Resort management and other
services expenses. We have
recast prior year presentation
for consistency.
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Revenues
Sale of vacation
ownership products $4,576 $5,160
Resort management and
other services 4,424 3,929
Financing 749 835
Rental 2,378 2,159
Cost reimbursements 7,531 7,478
Total
revenues 19,658 19,561
------ ------
Expenses
Cost of vacation
ownership products 661 1,291
Marketing and sales 3,590 3,886
Resort management and
other services 3,793 3,555
Rental 3,290 2,916
Royalty fee 46 49
Cost reimbursements 7,531 7,478
Total
expenses 18,911 19,175
------ ------
Segment
financial
results $747 $386
==== ====
Adjusted
segment
financial
results
** $747 $386
==== ====
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Vacation ownership contract sales $4,450 $4,418
====== ======
** Denotes non-GAAP financial
measures. Please see pages A-
10 and A-11 for additional
information about our reasons
for providing these alternative
financial measures and
limitations on their use.
NOTE: In the 2016 fourth
quarter, we reclassified
certain revenues and expenses
to correct immaterial
presentation errors within the
following line items: Segment
Resort management and other
services revenues and Segment
Resort management and other
services expenses. We have
recast prior year presentation
for consistency.
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Expenses
Cost of vacation
ownership products $2,235 $1,955
Financing 5,206 4,629
General and
administrative 27,539 25,359
Consumer financing
interest 5,938 5,362
Royalty fee 13,106 11,476
Total
expenses 54,024 48,781
------ ------
Losses and other expense (5) -
Interest expense (781) (1,982)
Other (412) (54)
Financial
results $(55,222) $(50,817)
======== ========
Financial results $(55,222) $(50,817)
Less certain items:
Transaction costs 412 54
Losses and other
expense 5 -
Certain items 417 54
--- ---
Adjusted
financial
results
** $(54,805) $(50,763)
======== ========
** Denotes non-GAAP financial
measures. Please see pages A-10
and A-11 for additional
information about our reasons for
providing these alternative
financial measures and
limitations on their use.
NOTE: In the 2016 fourth quarter,
we reclassified certain revenues
and expenses to correct
immaterial presentation errors
within the following line items:
Segment Resort management and
other services revenues, Segment
Resort management and other
services expenses and Corporate
General and administrative
expenses. We have recast prior
year presentation for
consistency.
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Contract sales
Vacation ownership $193,834 $153,494
Total
contract
sales 193,834 153,494
------- -------
Revenue recognition adjustments:
Reportability(1) (4,030) 786
Sales reserve (2) (12,221) (8,223)
Other (3) (5,428) (7,688)
Sale of vacation ownership products $172,155 $138,369
======== ========
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)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Sale of vacation ownership products $172,155 $138,369
Less:
Cost of
vacation
ownership
products 42,620 35,617
Marketing and
sales 100,661 78,412
Development margin 28,874 24,340
Revenue
recognition
reportability
adjustment 2,689 (600)
Adjusted development margin** $31,563 $23,740
======= =======
Development
margin
percentage(1) 16.8% 17.6%
Adjusted
development
margin
percentage 17.9% 17.3%
** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 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.
A-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Contract sales
Vacation ownership $177,436 $139,650
Total
contract
sales 177,436 139,650
------- -------
Revenue recognition adjustments:
Reportability(1) (4,694) 88
Sales reserve (2) (10,682) (7,406)
Other (3) (5,403) (7,648)
Sale of vacation ownership products $156,657 $124,684
======== ========
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)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
Sale of vacation ownership products $156,657 $124,684
Less:
Cost of
vacation
ownership
products 37,635 30,662
Marketing and
sales 88,870 68,315
Development margin 30,152 25,707
Revenue
recognition
reportability
adjustment 3,186 (56)
Adjusted development margin** $33,338 $25,651
======= =======
Development
margin
percentage(1) 19.2% 20.6%
Adjusted
development
margin
percentage 20.7% 20.6%
** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 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.
A-9
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In millions, except per share amounts)
2017 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
Fiscal Year Fiscal Year
2017 (low) 2017 (high)
--------- ----------
Net income $139 $148
Adjustments to
reconcile Net
income to
Adjusted net
income(1) - -
Adjusted
net
income** $139 $148
==== ====
Earnings per
share -
Diluted (2) $4.97 $5.29
Adjusted
earnings per
share -
Diluted**, 2 $4.97 $5.29
Diluted
shares(2) 28.0 28.0
1 While we expect adjustments
to net income for 2017
consistent with the
adjustments to net income for
the 2017 first quarter
described on page A-10, the
amount is shown as $0 as it
is currently expected to
round to less than $1
million.
2 Earnings per share -
Diluted, Adjusted earnings
per share -Diluted, and
Diluted shares outlook
includes the impact of share
repurchase activity only
through May 3, 2017.
2017 ADJUSTED EBITDA OUTLOOK
Fiscal Year Fiscal Year
2017 (low) 2017 (high)
--------- ----------
Adjusted
net
income** $139 $148
Interest
expense(1) 6 6
Tax
provision 92 98
Depreciation
and
amortization 22 22
--- ---
EBITDA
** 259 274
Non-cash
share-
based
compensation 17 17
Adjusted
EBITDA** $276 $291
(1) Interest expense
excludes consumer
financing interest
expense.
2017 ADJUSTED FREE CASH FLOW OUTLOOK
Fiscal Year Fiscal Year
2017 (low) 2017 (high)
--------- ----------
Net cash provided by operating activities $110 $125
Capital expenditures
for property and
equipment
(excluding
inventory):
New sales centers
(1) (11) (9)
Other (29) (26)
Borrowings from
securitization
transactions 335 345
Repayment of debt
related to
securitizations (255) (265)
----------------
Free cash flow** 150 170
Adjustments:
Net change in
borrowings
available from the
securitization of
eligible vacation
ownership notes
receivable through
the warehouse
credit facility (2) 20 20
Increase in
restricted cash (10) (10)
Adjusted free cash
flow** $160 $180
==== ====
(1) Represents the incremental investment in new sales centers.
(2) Represents the net change in borrowings available from the securitization of eligible vacation ownership notes
receivable through the warehouse credit facility between the 2016 and 2017 year ends.
** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our
reasons for providing these alternative financial measures and limitations on their use.
A-10
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 by United States generally accepted accounting principles ("GAAP").
We discuss our reasons for reporting these non-GAAP financial measures below, and the financial
schedules reconcile the most directly comparable GAAP financial measure to each non-GAAP financial
measure that we report (identified by a double asterisk ("**") on the preceding pages). Although we
evaluate and present these non-GAAP financial measures for the reasons described below, please be
aware that these non-GAAP financial measures have limitations and should not be considered in
isolation or as a substitute for revenues, net income, earnings per share or any other comparable
operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be
calculated and /or presented differently than measures with the same or similar names that are
reported by other companies, and as a result, the non-GAAP financial measures we report may not be
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 quarters ended
March 31, 2017 and March 25, 2016 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 - Quarter Ended March 31, 2017. In our Statement of Income for the quarter ended
March 31, 2017, we recorded $0.5 million of net pre-tax items, which included $0.4 million of
acquisition costs and $0.1 million of losses and other expense not associated with our on-going
core operations.
Certain items - Quarter Ended March 25, 2016. In our Statement of Income for the quarter ended
March 25, 2016, we recorded $2.1 million of net pre-tax items, which included $2.6 million of
acquisition costs, $0.2 million of income (or $0.5 million of EBITDA) from the operations of the
property we acquired in Australia in 2015 that we sold in the second quarter of 2016, and a $0.3
million reversal of litigation settlement expense.
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.
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A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
March 31, 2017 December 30, 2016
-------------- -----------------
ASSETS
Cash and cash
equivalents $101,841 $147,102
Restricted cash
(including $32,762
and $27,525 from
VIEs, respectively) 64,033 66,000
Accounts and contracts
receivable, net
(including $4,522 and
$4,865 from VIEs,
respectively) 127,347 161,733
Vacation ownership
notes receivable, net
(including $659,191
and $717,543 from
VIEs, respectively) 997,419 972,311
Inventory 692,757 712,536
Property and equipment 202,380 202,802
Other (including
$8,427 and $0 from
VIEs, respectively) 160,397 128,935
Total Assets $2,346,174 $2,391,419
========== ==========
LIABILITIES AND EQUITY
Accounts payable $72,277 $124,439
Advance deposits 61,685 55,542
Accrued liabilities
(including $564 and
$584 from VIEs,
respectively) 154,056 147,469
Deferred revenue 127,607 95,495
Payroll and benefits
liability 81,175 95,516
Deferred compensation
liability 67,022 62,874
Debt, net (including
$684,023 and $738,362
from VIEs,
respectively) 683,767 737,224
Other 15,762 15,873
Deferred taxes 149,574 149,168
------- -------
Total Liabilities 1,412,925 1,483,600
--------- ---------
Preferred stock -$.01
par value; 2,000,000
shares authorized;
none issued or
outstanding - -
Common stock -$.01 par value;
100,000,000 shares authorized;
36,787,613 and 36,633,868 shares
issued, respectively
368 366
Treasury stock -at
cost; 9,640,067 and
9,643,562 shares,
respectively (606,411) (606,631)
Additional paid-in
capital 1,159,454 1,162,283
Accumulated other
comprehensive income 9,701 5,460
Retained earnings 370,137 346,341
------- -------
Total Equity 933,249 907,819
Total Liabilities and
Equity $2,346,174 $2,391,419
========== ==========
The abbreviation VIEs above means
Variable Interest Entities.
A-13
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Quarters Ended
--------------
March 31, 2017 March 25, 2016
(91 days) (84 days)
-------- --------
OPERATING ACTIVITIES
Net income $33,700 $24,408
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,191 5,125
Amortization of debt issuance costs 1,386 1,300
Provision for loan losses 12,042 8,287
Share-based compensation 3,276 2,524
Deferred income taxes 5,472 5,549
Net change in assets and liabilities:
Accounts and contracts receivable 34,586 21
Notes receivable originations (112,832) (57,524)
Notes receivable collections 76,068 60,532
Inventory 21,944 (14,970)
Other assets (27,119) (5,285)
Accounts payable, advance deposits and
accrued liabilities (30,179) (32,204)
Deferred revenue 31,861 30,317
Payroll and benefit liabilities (14,500) (28,586)
Deferred compensation liability 4,147 4,406
Other liabilities (242) 6,665
Other, net 903 (687)
Net cash provided by operating activities 45,704 9,878
------ -----
INVESTING ACTIVITIES
Capital expenditures for property and
equipment (excluding inventory) (5,055) (6,331)
Purchase of company owned life insurance (8,200) -
Dispositions, net 1 9
Net cash used in investing activities (13,254) (6,322)
FINANCING ACTIVITIES
Borrowings from securitization
transactions - 51,130
Repayment of debt related to
securitization transactions (54,340) (47,711)
Debt issuance costs (1,219) -
Repurchase of common stock - (73,228)
Payment of dividends (19,010) (17,585)
Payment of withholding taxes on vesting
of restricted stock units (6,644) (3,864)
Other, net (16) 591
Net cash used in financing activities (81,229) (90,667)
------- -------
Effect of changes in exchange rates on
cash, cash equivalents and restricted
cash 1,551 464
DECREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH (47,228) (86,647)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
beginning of period 213,102 248,512
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
end of period $165,874 $161,865
======== ========
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/marriott-vacations-worldwide-reports-first-quarter-financial-results-300451044.html
SOURCE Marriott Vacations Worldwide
