MARRIOTT VACATIONS WORLDWIDE CORPORATION ORLANDO, Fla., Nov. 2, 2017 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter financial results and updated its guidance for the full year 2017.
Due to the change in the company's financial reporting calendar beginning in 2017, the third quarter of 2017 included the period from July 1, 2017 through September 30, 2017 (92 days) compared to the 2016 third quarter, which included the period from June 18, 2016 through September 9, 2016 (84 days). Prior year results have not been restated for the change in the company's reporting calendar.
During the third quarter of 2017, over 20 of the company's properties in its North America segment were negatively impacted by one or both of Hurricane Irma and Hurricane Maria (the "Hurricanes"). As a result of the mandatory evacuations, shutdowns and cancellations of reservations and scheduled tours resulting from the Hurricanes, the company's sales operations at several of its locations, primarily those located on St. Thomas (USVI) and on Marco Island and Singer Island in Florida, were adversely impacted along with rental and ancillary operations.
Third Quarter 2017 Highlights:
-- Net income was $40.8 million, or $1.47 fully diluted earnings per share
("EPS"), compared to net income of $26.8 million, or $0.97 fully diluted
EPS, in the third quarter of 2016.
-- Adjusted net income was $39.0 million, compared to adjusted net income
of $26.6 million in the third quarter of 2016, an increase of 47
percent. Adjusted fully diluted EPS was $1.41, compared to adjusted
fully diluted EPS of $0.96 in the third quarter of 2016, an increase of
47 percent.
-- The company estimates that the Hurricanes negatively impacted
adjusted net income and adjusted fully diluted EPS by $1.1 million,
and $0.04, respectively, in the third quarter. Excluding that
impact, adjusted net income and adjusted fully diluted EPS would
have totaled $40.1 million, and $1.45, respectively.
-- Adjusted EBITDA totaled $74.0 million, an increase of $23.3 million, or
46 percent, year-over-year.
-- The company estimates that the Hurricanes negatively impacted
adjusted EBITDA by approximately $3.3 million in the third quarter.
Excluding that impact, adjusted EBITDA would have totaled
approximately $77.3 million in the third quarter, an increase of 53
percent.
-- Total company vacation ownership contract sales were $198.5 million, an
increase of $28.6 million, or 17 percent, compared to the prior year
period. North America vacation ownership contract sales were $179.2
million, an increase of $28.3 million, or 19 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 6 percent and
8 percent, respectively, compared to the prior year period.
-- The company estimates that the Hurricanes negatively impacted
contract sales by approximately $12 million in the third quarter.
Excluding that impact, as well as the impact of the change in the
financial reporting calendar, total company and North America
vacation ownership contract sales would have grown by approximately
13 percent and 15 percent, respectively, over the prior year period.
-- North America VPG totaled $3,482, a 3 percent increase from the third
quarter of 2016. North America tours increased 18 percent
year-over-year.
-- Excluding the estimated impact of the change in the company's
financial reporting calendar, tours would have increased 7 percent
compared to the prior year period.
-- In addition, the company estimates that the Hurricanes negatively
impacted tour growth by approximately 6.5 percentage points.
Excluding that impact, as well as the impact of the change in the
financial reporting calendar, tours would have increased 13 percent
over the prior year period.
-- During the third quarter of 2017, the company repurchased 695,885 shares
of its common stock for $79 million.
"I am very pleased with our continued contract sales and adjusted EBITDA growth in the third quarter of 2017. While obviously impacted by the hurricanes in the Caribbean and southeastern U.S., our business continues to grow from the ramp-up of our new locations, as well as from marketing programs that continue to grow our tour flow," said Stephen P. Weisz, president and chief executive officer. "Excluding the adverse impacts from the hurricanes, our expectations for contract sales, adjusted EBITDA, and adjusted free cash flow remain on target for the full year. On a more personal level, I could not be more proud of how our entire company came through the many challenges we faced in the quarter. Our associates survived historic storms and unexplainable tragedies by displaying their unending flexibility, tenacity, and perseverance to help each other, their communities, and our guests."
Non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted fully diluted earnings per share, adjusted free cash flow, and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-14 of the Financial Schedules that follow.
Third Quarter 2017 Results
As a result of the change in the company's financial reporting calendar, financial results for the third quarter 2017 include the impact of eight additional days of operations.
Company Results
Third quarter 2017 company net income was $40.8 million, a $14.0 million increase from the third quarter of 2016. Excluding the impact of the provision for income taxes, these results were driven by $20.0 million of higher development margin, $6.5 million of higher gains and other income, $4.0 million of higher financing revenues net of expenses and consumer financing interest expense, $1.8 million of higher resort management and other services revenues net of expenses, and $0.2 million of lower acquisition costs, partially offset by $4.5 million of higher general and administrative costs, $2.7 million of lower rental revenues net of expenses, $2.0 million of higher litigation settlement costs, $0.6 million of higher royalty fees, and $0.4 million of higher interest expense.
Total company vacation ownership contract sales were $198.5 million, $28.6 million, or 17 percent, higher than the third quarter of 2016. These results were driven by $28.3 million of higher contract sales in the company's North America segment and $1.4 million of higher contract sales in the company's Asia Pacific segment, partially offset by $1.0 million of lower contract sales in the company's Europe segment. Excluding the estimated impact of the change in the company's financial reporting calendar, total company vacation ownership contract sales would have increased 6 percent, compared to the prior year period. In addition, the company estimates that the Hurricanes negatively impacted contract sales by approximately $12 million in the third quarter. Excluding that impact, as well as the impact of the change in the financial reporting calendar, contract sales would have grown by approximately 13 percent over the prior year period.
Development margin was $37.2 million, a $20.0 million increase from the third quarter of 2016. Development margin percentage was 20.6 percent compared to 13.1 percent in the prior year quarter. The increase in development margin reflected $13.1 million related to favorable revenue reportability year-over-year, $5.5 million from higher contract sales volumes net of expenses, $4.5 million from lower product costs, and $3.4 million from lower sales reserve activity, partially offset by $6.5 million of higher marketing and sales costs including costs to ramp-up the company's newest sales distributions. Adjusted development margin percentage, which excludes the impact of revenue reportability and other charges, was 21.3 percent in the third quarter of 2017 compared to 19.7 percent in the third quarter of 2016. The company estimates that the Hurricanes negatively impacted adjusted development margin by 0.5 percentage points in the third quarter of 2017.
Rental revenues totaled $81.2 million, a $7.4 million increase from the third quarter of 2016. Rental revenues net of expenses were $10.1 million, a $2.7 million decrease from the third quarter of 2016. The company estimates that the Hurricanes impacted rental revenues net of expenses by roughly $1.5 million in the third quarter of 2017.
Resort management and other services revenues totaled $76.9 million, a $6.7 million increase from the third quarter of 2016. Resort management and other services revenues, net of expenses, totaled $32.2 million, a $1.8 million, or 6 percent, increase from the third quarter of 2016.
Financing revenues totaled $34.7 million, a $5.6 million increase from the third quarter of 2016. Financing revenues, net of expenses and consumer financing interest expense, were $23.1 million, a $4.0 million, or 21 percent, increase from the third quarter of 2016.
Gains and other income totaled $7.0 million in the third quarter of 2017 including $8.7 million in net insurance proceeds related to the settlement of business interruption insurance claims arising from Hurricane Matthew, partially offset by a charge of $1.7 million associated with the estimated property damage insurance deductibles and impairment of property and equipment at several of our resorts that were impacted by the 2017 Hurricanes.
Net income was $40.8 million, compared to net income of $26.8 million in the third quarter of 2016, an increase of $14.0 million, or 52 percent. Adjusted net income was $39.0 million, compared to adjusted net income of $26.6 million in the third quarter of 2016, an increase of 47 percent. Adjusted EBITDA was $74.0 million, a $23.3 million, or 46 percent, increase from $50.6 million in the third quarter of 2016. The company estimates that the Hurricanes negatively impacted adjusted net income and adjusted EBITDA by approximately $1.1 million and $3.3 million, respectively, in the third quarter. Excluding that impact, adjusted net income and adjusted EBITDA would have totaled approximately $40.1 million and $77.3 million, respectively, in the third quarter of 2017.
Segment Results
North America
North America vacation ownership contract sales were $179.2 million, an increase of $28.3 million, or 19 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 the company's newest sales distributions. VPG increased 3 percent to $3,482 in the third quarter of 2017 from the third quarter of 2016. Total tours in the third quarter of 2017 increased 18 percent, reflecting a 23 percent increase in first time buyer tours and a 15 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 8 percent and 7 percent, respectively, compared to the prior year period. In addition, the company estimates that the Hurricanes negatively impacted contract sales by approximately $12 million and tour growth by roughly 6.5 percentage points in the third quarter. Excluding that impact, as well as the impact of the change in the financial reporting calendar, contract sales and tours would have grown by approximately 15 percent and 13 percent, respectively, over the prior year period.
Third quarter 2017 North America segment financial results were $103.9 million, an increase of $21.6 million from the third quarter of 2016. The increase was driven primarily by $20.4 million of higher development margin, $5.4 million of higher financing revenues, $1.7 million of higher resort management and other services revenues net of expenses, $0.9 million of lower royalty fees, and $0.1 million of lower acquisition costs, partially offset by $3.0 million of lower rental revenues net of expenses, $2.0 million of higher litigation settlement costs and $1.7 million of lower gains and other income.
Development margin was $38.7 million, a $20.4 million increase from the third quarter of 2016. Development margin percentage was 23.7 percent compared to 15.8 percent in the prior year quarter. The increase in development margin reflected $11.8 million related to favorable revenue reportability year-over-year, $5.9 million from higher contract sales volumes net of expenses, $4.4 million from lower product costs, $2.8 million from lower sales reserve activity, and $0.5 million from favorable product cost true-up activity year-over-year, partially offset by $5.1 million of higher marketing and sales costs including costs to ramp-up the company's newest sales distributions. Adjusted development margin percentage, which excludes the impact of revenue reportability and other charges, was 24.4 percent in the third quarter of 2017, compared to 22.0 percent in the third quarter of 2016. The company estimates that the Hurricanes negatively impacted adjusted development margin by 0.3 percentage points in the third quarter of 2017.
Asia Pacific
Total vacation ownership contract sales in the segment were $12.6 million, an increase of $1.4 million, or 13 percent, from the third quarter of 2016, due primarily to the opening of the newest sales distribution in Surfers Paradise, Australia in the second quarter of 2016. Segment financial results were a loss of $0.5 million, a $1.7 million decrease from the third quarter of 2016. Excluding the estimated impact of the change in the company's financial reporting calendar, vacation ownership contract sales would have decreased 1 percent compared to the prior year period.
Europe
Third quarter 2017 contract sales were $6.7 million, a decrease of $1.0 million, or 13 percent, from the third quarter of 2016. Segment financial results were $6.8 million, an increase of $2.2 million, or 49 percent, from the third quarter of 2016. Excluding the estimated impact of the change in the company's financial reporting calendar, vacation ownership contract sales would have decreased 17 percent compared to the prior year period.
Share Repurchase Program and Dividends
During the third quarter of 2017, the company repurchased 695,885 shares of its common stock for $79 million, bringing the total amount returned to shareholders, including nearly $29 million of dividends, to nearly $112 million for the first three quarters of 2017.
Balance Sheet and Liquidity
On September 30, 2017, cash and cash equivalents totaled $440.1 million. Since the beginning of the year, real estate inventory balances increased $22.3 million to $730.5 million, including $390.4 million of finished goods, $2.0 million of work-in-progress, and $338.1 million of land and infrastructure. The company had $1.2 billion in debt outstanding at the end of the third quarter, an increase of $416.0 million from year-end 2016, consisting primarily of $895.4 million of debt related to our securitized notes receivable.
During the third quarter of 2017, the company completed the securitization of a pool of $360.8 million of vacation ownership notes receivable at a blended borrowing rate of 2.51 percent and an advance rate of 97 percent. In connection with the securitization, investors purchased in a private placement $350.0 million in vacation ownership loan backed notes.
During the third quarter of 2017, the company issued $230.0 million of 1.50% convertible senior notes due 2022. In connection with the offering of the convertible notes, the company also entered into privately-negotiated convertible hedge and warrant transactions. Taken together, the convertible note hedges and the warrants are generally expected to reduce the potential dilution to the company's common stock (or, in the event the conversion is settled in cash, to reduce the company's cash payment obligation) in the event that at the time of conversion the company's stock price exceeds the conversion price under the convertible notes and to effectively increase the overall conversion price from $148.19 (or a conversion premium of 30 percent) to $176.68 per share (or a conversion premium of 55 percent).
As of September 30, 2017, the company had approximately $245.4 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $47.6 million of gross vacation ownership notes receivable eligible for securitization.
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
Full Year Impact of the Hurricanes
While many of the company's properties and sales centers impacted by the Hurricanes were fully or partially open by the end of September, two properties and a sales center on St. Thomas remain closed and the company is not currently in a position to predict when they will reopen. Further, while some of the properties were fully or partially open, many of the operations will continue to ramp-up throughout the fourth quarter of 2017, and potentially into 2018. At this time, the company estimates the following impacts from the Hurricanes on its financial results as shown on page A-14 of the Financial Schedules.
Third Quarter Fourth Quarter Full Year 2017
------------- -------------- --------------
Net income $4.5 million $3.8 million $8.3 million
Adjusted net
income $1.1 million $2.0 million $3.1 million
Adjusted EBITDA $3.3 million $3.6 million $6.9 million
Contract sales $11.9 million $8.6 million $20.5 million
Outlook (reflecting the adverse impact of the Hurricanes)
Pages A-1 through A-14 of the Financial Schedules reconcile the non-GAAP financial measures set forth below to the following full year 2017 expected GAAP results:
Net income $146 million to $149 million
Fully diluted EPS $5.26 to $5.37
Net cash provided by
operating activities $120 million to $130 million
The company has updated its guidance for the full year 2017 for changes primarily related to the adverse impact of the Hurricanes as well as for changes in shares outstanding and to increase its adjusted free cash flow guidance.
Current Guidance Previous Guidance
Adjusted
net
income $147 million to $150 million $149 million to $155 million
Adjusted
fully
diluted
EPS $5.30 to $5.41 $5.31 to $5.52
Adjusted
EBITDA $278 million to $283 million $282 million to $292 million
Adjusted
free
cash
flow $205 million to $225 million $190 million to $210 million
Contract
sales
growth 10 percent to 13 percent 12 percent to 16 percent
Third 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 13669704. 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 65 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 November 2, 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 3, 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
Hurricane Impacts A-14
(1) Due to the change in the company's
financial reporting calendar
beginning in 2017, the 2017 third
quarter included the period from
July 1, 2017 through September 30,
2017 (92 days) compared to the 2016
third quarter, which included the
period from June 18, 2016 to
September 9, 2016 (84 days), and
the 2017 first three quarters
included the period from December
31, 2016 through September 30, 2017
(274 days) compared to the 2016
first three quarters which included
the period from January 2, 2016 to
September 9, 2016 (252 days). Prior
year results have not been restated
for the change in fiscal calendar.
NOTE: When presenting contract
sales performance on a comparable
basis, we adjusted the prior year
period to include contract sales
from the same calendar days as the
current year period.
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
REVENUES
Sale of vacation ownership
products $180,522 $131,012 $543,687 $415,831
Resort management and other
services 76,882 70,185 229,004 208,049
Financing 34,685 29,066 99,326 86,944
Rental 81,177 73,776 250,621 229,133
Cost reimbursements 113,724 97,598 348,091 303,973
------- ------
TOTAL REVENUES 486,990 401,637 1,470,729 1,243,930
------- ------- --------- ---------
EXPENSES
Cost of vacation ownership
products 42,826 34,779 131,589 104,149
Marketing and sales 100,527 79,017 305,217 236,348
Resort management and other
services 44,696 39,825 130,349 123,695
Financing 5,062 4,581 12,528 11,782
Rental 71,048 60,970 211,643 191,658
General and administrative 26,666 22,151 83,739 72,871
Litigation settlement 2,033 - 2,216 (303)
Consumer financing interest 6,498 5,361 18,090 15,840
Royalty fee 15,220 14,624 47,597 42,007
Cost reimbursements 113,724 97,598 348,091 303,973
------- ------ ------- -------
TOTAL EXPENSES 428,300 358,906 1,291,059 1,102,020
------- ------- --------- ---------
Gains and other income, net 6,977 454 6,752 11,129
Interest expense (2,642) (2,262) (5,180) (6,331)
Other 104 (75) (365) (4,528)
--- --- ---- ------
INCOME BEFORE INCOME TAXES 63,129 40,848 180,877 142,180
Provision for income taxes (22,367) (14,041) (62,139) (54,656)
------- ------- ------- -------
NET INCOME $40,762 $26,807 $118,738 $87,524
======= ======= ======== =======
Earnings per share - Basic $1.50 $0.99 $4.36 $3.10
===== ===== ===== =====
Earnings per share - Diluted $1.47 $0.97 $4.26 $3.05
===== ===== ===== =====
Basic Shares 27,090 27,152 27,219 28,207
Diluted Shares 27,713 27,680 27,858 28,718
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Vacation ownership contract
sales $198,460 $169,831 $602,186 $489,317
======== ======== ======== ========
NOTE: Earnings per share -Basic
and Earnings per share -Diluted
are calculated using whole
dollars. We have reclassified
certain prior year amounts to
conform to our current period
presentation. In addition, we
reclassified certain revenues and
expenses for the 2016 third
quarter and 2016 first three
quarters to correct immaterial
presentation errors within the
following lines: Resort management
and other services revenues,
Resort management and other
services expenses and General and
administrative expenses.
A-2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In thousands, except per share amounts)
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Net income $40,762 $26,807 $118,738 $87,524
Less certain items:
Acquisition costs (56) 138 555 4,713
Variable compensation expense
related to the impact of the
Hurricanes 3,673 - 3,673 -
Operating results from the sold
portion of the Surfers Paradise,
Australia property - - - (275)
Litigation settlement 2,033 - 2,216 (303)
Gains and other income, net (6,977) (454) (6,752) (11,129)
------ ---- ------ -------
Certain items before depreciation
and provision for income taxes
(1) (1,327) (316) (308) (6,994)
Depreciation on the sold portion
of the Surfers Paradise,
Australia property - - - 469
Provision for income taxes on
certain items (459) 86 (845) 2,568
Adjusted net income ** $38,976 $26,577 $117,585 $83,567
======= ======= ======== =======
Earnings per share - Diluted $1.47 $0.97 $4.26 $3.05
===== ===== ===== =====
Adjusted earnings per share -
Diluted ** $1.41 $0.96 $4.22 $2.91
===== ===== ===== =====
Diluted Shares 27,713 27,680 27,858 28,718
EBITDA AND ADJUSTED EBITDA
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Net income $40,762 $26,807 $118,738 $87,524
Interest expense (2) 2,642 2,262 5,180 6,331
Tax provision 22,367 14,041 62,139 54,656
Depreciation and amortization 5,610 4,679 15,802 14,856
----- ----- ------ ------
EBITDA ** 71,381 47,789 201,859 163,367
------ ------ ------- -------
Non-cash share-based compensation 3,898 3,139 12,349 9,995
Certain items before depreciation
and provision for income taxes
(1) (1,327) (316) (308) (6,994)
------ ---- ---- ------
Adjusted EBITDA ** $73,952 $50,612 $213,900 $166,368
======= ======= ======== ========
** 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)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
REVENUES
Sale of vacation ownership
products $163,454 $116,184 $495,958 $373,341
Resort management and other
services 68,236 62,956 206,830 182,665
Financing 32,854 27,438 93,812 81,699
Rental 69,458 63,387 224,588 201,524
Cost reimbursements 103,799 88,834 320,242 278,190
------- ------ ------- -------
TOTAL REVENUES 437,801 358,799 1,341,430 1,117,419
------- ------- --------- ---------
EXPENSES
Cost of vacation ownership
products 37,404 30,134 116,715 89,876
Marketing and sales 87,308 67,662 266,962 202,888
Resort management and other
services 37,453 33,849 111,664 101,322
Rental 62,236 53,131 187,141 164,680
Litigation settlement 2,033 - 2,033 (303)
Royalty fee 1,956 2,813 7,684 6,753
Cost reimbursements 103,799 88,834 320,242 278,190
------- ------ ------- -------
TOTAL EXPENSES 332,189 276,423 1,012,441 843,406
------- ------- --------- -------
(Losses) gains and other
(expense) income, net (1,754) (27) (1,950) 12,297
Other 46 (55) 171 (4,068)
--- --- --- ------
SEGMENT FINANCIAL RESULTS $103,904 $82,294 $327,210 $282,242
======== ======= ======== ========
SEGMENT FINANCIAL RESULTS $103,904 $82,294 $327,210 $282,242
Less certain items:
Acquisition costs 1 123 28 4,260
Variable compensation expense
related to the impact of the
Hurricanes 1,754 - 1,754 -
Litigation settlement 2,033 - 2,033 (303)
Losses (gains) and other
expense (income), net 1,754 27 1,950 (12,297)
-----
Certain items 5,542 150 5,765 (8,340)
----- --- ----- ------
ADJUSTED SEGMENT FINANCIAL
RESULTS ** $109,446 $82,444 $332,975 $273,902
======== ======= ======== ========
Quarter Ended Year to Date Ended
September 30, September 9, 2016 September 30,
2017 2017 September 9, 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Vacation ownership contract
sales $179,227 $150,964 $547,546 $436,214
======== ======== ======== ========
** 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: We have reclassified certain
prior year amounts to conform to our
current period presentation. In
addition, we reclassified certain
revenues and expenses for the 2016
third quarter and 2016 first three
quarters to correct immaterial
presentation errors within the
following lines: Resort management and
other services revenues, Resort
management and other services expenses
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASIA PACIFIC SEGMENT
(In thousands)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
REVENUES
Sale of vacation ownership
products $11,362 $10,010 $32,378 $26,645
Resort management and other
services 1,022 816 3,055 8,594
Financing 1,122 918 3,350 2,906
Rental 2,733 2,324 9,115 12,773
Cost reimbursements 713 692 2,584 2,250
--- --- ----- -----
TOTAL REVENUES 16,952 14,760 50,482 53,168
------ ------ ------ ------
EXPENSES
Cost of vacation ownership
products 2,687 1,712 6,642 5,018
Marketing and sales 8,754 7,166 25,672 20,072
Resort management and other
services 1,144 900 3,297 8,546
Rental 3,902 3,330 12,136 15,884
Royalty fee 225 239 674 564
Cost reimbursements 713 692 2,584 2,250
--- --- ----- -----
TOTAL EXPENSES 17,425 14,039 51,005 52,334
------ ------ ------ ------
Gains (losses) and other
income (expense), net - 490 (20) (1,008)
Other 1 (20) (9) (249)
--- --- --- ----
SEGMENT FINANCIAL RESULTS $(472) $1,191 $(552) $(423)
===== ====== ===== =====
SEGMENT FINANCIAL RESULTS $(472) $1,191 $(552) $(423)
Less certain items:
Acquisition costs - 15 - 242
Operating results from the
sold portion of the Surfers
Paradise, Australia property - - - 194
(Gains) losses and other
(income) expense, net - (490) 20 1,008
---
Certain items - (475) 20 1,444
--- ---- --- -----
ADJUSTED SEGMENT FINANCIAL
RESULTS ** $(472) $716 $(532) $1,021
===== ==== ===== ======
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Vacation ownership contract
sales $12,569 $11,169 $36,131 $31,049
======= ======= ======= =======
** 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: We have reclassified certain
prior year amounts to conform to our
current period presentation. In
addition, we reclassified certain
revenues and expenses for the 2016
third quarter and 2016 first three
quarters to correct immaterial
presentation errors within the
following lines: Resort management and
other services revenues and Resort
management and other services
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
EUROPE SEGMENT
(In thousands)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
REVENUES
Sale of vacation ownership
products $5,706 $4,818 $15,351 $15,845
Resort management and other
services 7,624 6,413 19,119 16,790
Financing 709 710 2,164 2,339
Rental 8,986 8,065 16,918 14,836
Cost reimbursements 9,212 8,072 25,265 23,533
----- ----- ------ ------
TOTAL REVENUES 32,237 28,078 78,817 73,343
------ ------ ------ ------
EXPENSES
Cost of vacation ownership
products 715 1,599 2,081 4,158
Marketing and sales 4,465 4,189 12,583 13,388
Resort management and other
services 6,099 5,076 15,388 13,827
Rental 4,910 4,509 12,366 11,094
Royalty fee 70 97 195 264
Cost reimbursements 9,212 8,072 25,265 23,533
----- ----- ------ ------
TOTAL EXPENSES 25,471 23,542 67,878 66,264
------ ------ ------ ------
SEGMENT FINANCIAL RESULTS $6,766 $4,536 $10,939 $7,079
====== ====== ======= ======
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Vacation ownership contract
sales $6,664 $7,698 $18,509 $22,054
====== ====== ======= =======
** 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: We have reclassified certain
prior year amounts to conform to our
current period presentation. In
addition, we reclassified certain
revenues and expenses for the 2016
third quarter and 2016 first three
quarters to correct immaterial
presentation errors within the
following lines: Resort management and
other services revenues and Resort
management and other services
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER
(In thousands)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
EXPENSES
Cost of vacation ownership
products $2,020 $1,334 $6,151 $5,097
Financing 5,062 4,581 12,528 11,782
General and administrative 26,666 22,151 83,739 72,871
Litigation settlement - - 183 -
Consumer financing interest 6,498 5,361 18,090 15,840
Royalty fee 12,969 11,475 39,044 34,426
------ ------ ------ ------
TOTAL EXPENSES 53,215 44,902 159,735 140,016
------ ------ ------- -------
Gains (losses) and other
income (expense), net 8,731 (9) 8,722 (160)
Interest expense (2,642) (2,262) (5,180) (6,331)
Other 57 - (527) (211)
--- --- ---- ----
TOTAL FINANCIAL RESULTS $(47,069) $(47,173) $(156,720) $(146,718)
======== ======== ========= =========
TOTAL FINANCIAL RESULTS $(47,069) $(47,173) $(156,720) $(146,718)
Less certain items:
Acquisition costs (57) - 527 211
Variable compensation
expense related to the
impact of the Hurricanes 1,919 - 1,919 -
Litigation settlement - - 183 -
(Gains) losses and other
(income) expense, net (8,731) 9 (8,722) 160
Certain items (6,869) 9 (6,093) 371
------ --- ------ ---
ADJUSTED FINANCIAL RESULTS
** $(53,938) $(47,164) $(162,813) $(146,347)
======== ======== ========= =========
** 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: We have reclassified certain
prior year amounts to conform to our
current period presentation. In
addition, we reclassified certain
revenues and expenses for the 2016
third quarter and 2016 first three
quarters to correct immaterial
presentation errors within the
following lines: Resort management and
other services revenues, Resort
management and other services expenses
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Vacation ownership contract
sales $198,460 $169,831 $602,186 $489,317
Revenue recognition
adjustments:
Reportability (1) 1,135 (18,994) 1,150 (17,029)
Sales reserve (2) (11,740) (13,872) (38,597) (33,447)
Other (3) (7,333) (5,953) (21,052) (23,010)
------ ------ ------- -------
Sale of vacation ownership
products $180,522 $131,012 $543,687 $415,831
======== ======== ======== ========
(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)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Sale of vacation ownership
products $180,522 $131,012 $543,687 $415,831
Less:
Cost of vacation ownership
products 42,826 34,779 131,589 104,149
Marketing and sales 100,527 79,017 305,217 236,348
------- ------ ------- -------
Development margin 37,169 17,216 106,881 75,334
Revenue recognition reportability
adjustment (718) 12,369 (690) 11,043
Variable compensation expense
related to the impact of the
Hurricanes 1,754 - 1,754 -
----- --- ----- ---
Adjusted development margin ** $38,205 $29,585 $107,945 $86,377
======= ======= ======== =======
Development margin percentage (1) 20.6% 13.1% 19.7% 18.1%
Adjusted development margin
percentage 21.3% 19.7% 19.9% 20.0%
** 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)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Vacation ownership contract
sales $179,227 $150,964 $547,546 $436,214
Revenue recognition
adjustments:
Reportability (1) 1,446 (16,853) 1,887 (12,982)
Sales reserve (2) (10,277) (11,923) (33,090) (26,960)
Other (3) (6,942) (6,004) (20,385) (22,931)
------ ------ ------- -------
Sale of vacation ownership
products $163,454 $116,184 $495,958 $373,341
======== ======== ======== ========
(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)
Quarter Ended Year to Date Ended
September 30, September 9, September 30, September 9,
2017 2016 2017 2016
(92 days) (84 days) (274 days) (252 days)
-------- -------- --------- ---------
Sale of vacation ownership
products $163,454 $116,184 $495,958 $373,341
Less:
Cost of vacation ownership
products 37,404 30,134 116,715 89,876
Marketing and sales 87,308 67,662 266,962 202,888
------ ------ ------- -------
Development margin 38,742 18,388 112,281 80,577
Revenue recognition reportability
adjustment (971) 10,836 (1,260) 8,363
Variable compensation expense
related to the impact of the
Hurricanes 1,754 - 1,754 -
----- --- ----- ---
Adjusted development margin ** $39,525 $29,224 $112,775 $88,940
======= ======= ======== =======
Development margin percentage (1) 23.7% 15.8% 22.6% 21.6%
Adjusted development margin
percentage 24.4% 22.0% 22.8% 23.0%
** 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 $146 $149
Adjustments to reconcile Net income
to Adjusted net income
Certain items (1) 13 13
Business interruption insurance
proceeds (2) (9) (9)
Provision for income taxes on
adjustments to net income (3) (3)
--- ---
Adjusted net income ** $147 $150
==== ====
Earnings per share - Diluted (3) $5.26 $5.37
Adjusted earnings per share -Diluted
**, 3 $5.30 $5.41
Diluted shares (3) 27.7 27.7
(1) Certain items adjustment includes
$7 million of variable
compensation expense related to
the impact of the Hurricanes, $2
million of Hurricane related
insurance deductibles, $2 million
of litigation settlements and $2
million of acquisition costs.
(2) Includes net business interruption
insurance proceeds associated with
Hurricane Matthew.
(3) Earnings per share -Diluted,
Adjusted earnings per share -
Diluted, and Diluted shares
outlook includes the impact of
share repurchase activity only
through November 2, 2017.
2017 ADJUSTED EBITDA OUTLOOK
Fiscal Year Fiscal Year
2017 (low) 2017 (high)
--------- ----------
Net income $146 $149
Interest expense
(1) 10 10
Tax provision 80 82
Depreciation and
amortization 22 22
--- ---
EBITDA ** 258 263
Non-cash share-
based
compensation 16 16
Certain items (2)
and business
interruption
insurance
proceeds (3) 4 4
--- ---
Adjusted EBITDA
** $278 $283
==== ====
(1) Interest expense excludes consumer
financing interest expense.
(2) Certain items adjustment includes
$7 million of variable
compensation expense related to
the impact of the Hurricanes, $2
million of Hurricane related
insurance deductibles, $2 million
of litigation settlements and $2
million of acquisition costs.
(3) Includes net business interruption
insurance proceeds associated with
Hurricane Matthew.
2017 ADJUSTED FREE CASH FLOW OUTLOOK
Fiscal Year Fiscal Year
2017 (low) 2017 (high)
--------- ----------
Net cash provided by operating activities $120 $130
Capital expenditures for property and
equipment (excluding inventory):
New sales centers (1) (8) (7)
Other (22) (21)
Borrowings from securitization
transactions 400 400
Repayment of debt related to
securitizations (302) (297)
---- ----
Free cash flow ** 188 205
Adjustments:
Net change in borrowings available from
the securitization of eligible vacation
ownership notes receivable through the
warehouse credit facility (2) 27 30
Increase in restricted cash (10) (10)
--- ---
Adjusted free cash flow ** $205 $225
==== ====
(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 comparable to those reported
by others.
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 and first three quarters ended
September 30, 2017 and September 9, 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 and Three
Quarters Ended September 30, 2017
In our Statement of Income for the
quarter ended September 30, 2017, we
recorded $1.3 million of net pre-tax
items, which included $8.7 million in
net insurance proceeds related to the
settlement of business interruption
insurance claims arising from Hurricane
Matthew and a charge of $1.7 million
associated with the estimated property
damage insurance deductibles at several
of our properties, primarily in Florida
and the Caribbean, that were impacted by
Hurricane Irma and Hurricane Maria (both
of which were recorded in gains and
other income), $3.7 million of variable
compensation expense related to the
impact of the Hurricanes, $2.0 million
of litigation settlement expenses and a
$0.1 million favorable true up of
previously recorded acquisition costs.
In our Statement of Income for the first
three quarters ended September 30, 2017,
we recorded $0.3 million of net pre-tax
items, which included $8.7 million in
net insurance proceeds related to the
settlement of business interruption
insurance claims arising from Hurricane
Matthew and a charge of $1.7 million
associated with the estimated property
damage insurance deductibles at several
of our properties, primarily in Florida
and the Caribbean, that were impacted by
Hurricane Irma and Hurricane Maria (both
of which were recorded in gains and
other income), $3.7 million of variable
compensation expense related to the
impact of the Hurricanes, $2.2 million
of litigation settlement expenses, $0.6
million of acquisition costs and $0.2
million of losses and other expense.
Certain items -Quarter and Three
Quarters Ended September 9, 2016
In our Statement of Income for the
quarter ended September 9, 2016, we
recorded $0.3 million of net pre-tax
items, which included $0.5 million of
gains and other income and $0.1 million
of acquisition costs.
In our Statement of Income for the three
quarters ended September 9, 2016, we
recorded $6.5 million of net pre-tax
items, which included $11.1 million of
gains and other income, $4.7 million of
acquisition costs, a $0.3 million
reversal of litigation settlement
expense, and $0.2 million of losses
(including $0.5 million of depreciation)
from the operations of the property we
acquired in Australia in 2015 that we
sold in the second quarter of 2016.
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 may include 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-11
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
Earnings Before Interest Expense, Taxes,
Depreciation and Amortization ("EBITDA")
and Adjusted 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 and Adjusted
EBITDA calculations, 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 and
Adjusted EBITDA to be indicators of
operating performance, which we use to
measure our ability to service debt,
fund capital expenditures and expand our
business. We also use EBITDA and
Adjusted EBITDA, as do analysts,
lenders, investors and others, because
these measures exclude 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 and
Adjusted EBITDA also exclude
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 assets
and the depreciation and amortization
expense among companies. Adjusted EBITDA
reflects additional adjustments for
certain items, as itemized in the
discussion of Adjusted Net Income above,
and excludes 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 the excluded 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 and Adjusted Free Cash
Flow
We evaluate Free Cash Flow and Adjusted
Free Cash Flow as liquidity measures
that provide 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, which cash can be used
for strategic opportunities, including
acquisitions and strengthening the
balance sheet. Adjusted Free Cash Flow,
which reflects additional adjustments to
Free Cash Flow for the impact of
organizational and separation related,
litigation, and other cash charges,
allows for period-over-period
comparisons of the cash generated by our
business before the impact of these
items. Analysis of Free Cash Flow and
Adjusted Free Cash Flow also facilitates
management's comparison of our results
with our competitors' results.
A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited) December
September 30, 2016
30, 2017
--------
ASSETS
Cash and cash equivalents $440,074 $147,102
Restricted cash (including
$34,413 and $27,525 from
VIEs, respectively) 61,701 66,000
Accounts and contracts
receivable, net
(including $5,702 and
$4,865 from VIEs,
respectively) 136,107 161,733
Vacation ownership notes
receivable, net
(including $875,237 and
$717,543 from VIEs,
respectively) 1,076,402 972,311
Inventory 735,072 712,536
Property and equipment 253,738 202,802
Other (including $13,153
and $0 from VIEs,
respectively) 119,942 128,935
------- -------
TOTAL ASSETS $2,823,036 $2,391,419
========== ==========
LIABILITIES AND EQUITY
Accounts payable $76,766 $124,439
Advance deposits 60,247 55,542
Accrued liabilities
(including $739 and $584
from VIEs, respectively) 128,236 147,469
Deferred revenue 103,376 95,495
Payroll and benefits
liability 97,080 95,516
Deferred compensation
liability 72,803 62,874
Debt, net (including
$906,701 and $738,362
from VIEs, respectively) 1,153,222 737,224
Other 12,789 15,873
Deferred taxes 169,295 149,168
TOTAL LIABILITIES 1,873,814 1,483,600
--------- ---------
Preferred stock -$0.01
par value; 2,000,000
shares authorized; none
issued or outstanding - -
Common stock -$0.01 par
value; 100,000,000 shares
authorized; 36,857,186
and 36,633,868 shares
issued, respectively 369 366
Treasury stock -at cost;
10,363,139 and 9,643,562
shares, respectively (689,134) (606,631)
Additional paid-in capital 1,184,635 1,162,283
Accumulated other
comprehensive income 17,156 5,460
Retained earnings 436,196 346,341
------- -------
TOTAL EQUITY 949,222 907,819
------- -------
TOTAL LIABILITIES AND
EQUITY $2,823,036 $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)
(Unaudited)
Year to Date Ended
September 30, September 9,
2017 2016
(274 days) (252 days)
--------- ---------
OPERATING ACTIVITIES
Net income $118,738 $87,524
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 15,802 14,856
Amortization of debt discount
and issuance costs 5,783 3,784
Provision for loan losses 38,577 31,817
Share-based compensation 12,349 9,995
Loss (gain) on disposal of
property and equipment, net 1,683 (11,129)
Deferred income taxes 20,769 21,823
Net change in assets and liabilities:
Accounts and contracts
receivable 25,094 (2,824)
Notes receivable originations (345,663) (218,190)
Notes receivable collections 203,840 177,451
Inventory 27,112 (6,118)
Purchase of vacation ownership
units for future transfer to
inventory (33,594) -
Other assets 23,110 38,103
Accounts payable, advance
deposits and accrued
liabilities (64,994) (73,935)
Deferred revenue 7,121 26,832
Payroll and benefit liabilities 1,241 (20,898)
Deferred compensation liability 9,928 8,846
Other liabilities (638) 1,190
Other, net 4,529 1,758
Net cash provided by operating
activities 70,787 90,885
------ ------
INVESTING ACTIVITIES
Capital expenditures for
property and equipment
(excluding inventory) (21,167) (22,445)
Purchase of company owned life
insurance (12,100) -
Dispositions, net 17 68,525
Net cash (used in) provided by
investing activities (33,250) 46,080
------- ------
FINANCING ACTIVITIES
Borrowings from securitization
transactions 400,260 376,622
Repayment of debt related to
securitization transactions (231,921) (254,510)
Borrowings from Revolving
Corporate Credit Facility 87,500 85,000
Repayment of Revolving Corporate
Credit Facility (87,500) (85,000)
Proceeds from issuance of
Convertible Notes 230,000 -
Purchase of Convertible Note
Hedges (33,235) -
Proceeds from issuance of
Warrants 20,332 -
Debt issuance costs (14,459) (4,065)
Repurchase of common stock (83,067) (163,359)
Accelerated stock repurchase
forward contract - (14,470)
Payment of dividends (28,590) (26,067)
Payment of withholding taxes on
vesting of restricted stock
units (10,713) (3,972)
Other, net (502) 194
Net cash provided by (used in)
financing activities 248,105 (89,627)
------- -------
Effect of changes in exchange
rates on cash, cash equivalents
and restricted cash 3,031 (3,247)
Increase in cash, cash
equivalents, and restricted
cash 288,673 44,091
Cash, cash equivalents and
restricted cash, beginning of
period 213,102 248,512
------- -------
Cash, cash equivalents and
restricted cash, end of period $501,775 $292,603
======== ========
A-14
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In thousands, except per share amounts)
The information below in the column
headed "Quarter and Year to Date Ended
September 30, 2017" should be read in
conjunction with our net income,
adjusted net income, adjusted earnings
per share - diluted, EBITDA and
adjusted EBITDA results for such periods
presented on pages A-1 and A-2 of
these schedules, and provides our
estimate of the amount by which the
presented line items would have been
increased or decreased had the
Hurricanes not occurred. The information
below in the column headed "Full Year
Outlook 2017" should be read in
conjunction with our outlook for net
income, adjusted net income, adjusted
earnings per share - diluted, EBITDA
and adjusted EBITDA presented on page A-
9 of these schedules, and provides our
estimate of the amount by which our
expectations for the presented line
items have been increased or decreased
due to the Hurricanes.
HURRICANE IMPACT ON ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED
Quarter and Full Year
Outlook
2017
Year to Date
Ended
September 30,
2017
--------------
Vacation ownership contract sales $11,900 $20,500
======= =======
REVENUES
Sale of vacation ownership products $11,200 $19,300
Resort management and other services 900 2,200
Rental 1,800 4,000
TOTAL REVENUES 13,900 25,500
------ ------
EXPENSES
Cost of vacation ownership products 2,600 4,500
Marketing and sales 3,500 5,900
Resort management and other services 200 500
Rental 400 800
Royalty fee 200 300
Variable compensation expense related
to the impact of the Hurricanes 3,700 6,600
----- -----
TOTAL EXPENSES 10,600 18,600
------ ------
IMPACT BEFORE INCOME TAXES 3,300 6,900
Provision for income taxes (1) (2,200) (3,800)
Hurricane impact on adjusted net
income $1,100 $3,100
====== ======
Hurricane impact on Adjusted Earnings
per share -Diluted $0.04 $0.11
===== =====
Diluted shares 27,713 27,741
HURRICANE IMPACT ON NET INCOME, EBITDA AND ADJUSTED EBITDA
Quarter and Full Year
Outlook
2017
Year to Date
Ended
September 30,
2017
--------------
Adjusted net income $1,100 $3,100
Add certain items:
Variable compensation expense related
to the impact of the Hurricanes 3,700 6,600
Hurricane related insurance
deductibles 1,700 1,700
Certain items before provision for
income taxes 5,400 8,300
Provision for income taxes on certain
items (2,000) (3,100)
------
Net income 4,500 8,300
Interest expense - -
Tax provision (1) 4,200 6,900
Depreciation and amortization - -
EBITDA 8,700 15,200
Certain items (5,400) (8,300)
Adjusted EBITDA $3,300 $6,900
====== ======
1 Includes employee disaster relief
credits ($1 million and $1.2
million for the third quarter
and full year, respectively).
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SOURCE Marriott Vacations Worldwide Corporation
