Marriott Vacations Worldwide Reports Third Quarter 2013 Financial Results

ORLANDO, Fla., Oct. 10, 2013 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter 2013 financial results and provided updated guidance for the full year 2013. In addition, the company announced that its Board of Directors has authorized a share repurchase program under which the company may repurchase up to 3,500,000 shares of its outstanding common stock.

(Logo: http://photos.prnewswire.com/prnh/20130702/CG40568LOGO)

Third Quarter 2013 highlights include:

  • Adjusted EBITDA (earnings before interest expense (excluding consumer financing interest expense), income taxes, depreciation and amortization, as adjusted for organizational and separation related costs in connection with the company's spin-off from Marriott International, Inc. (the "Spin-Off") and other activity) totaled $50 million, a $17 million increase from the third quarter of 2012.
  • Company and North America adjusted development margin was 20.3 percent and 22.2 percent, respectively.
  • North America volume per guest (VPG) increased 6.6 percent year-over-year to $3,252.
  • Adjusted fully diluted earnings per share (EPS) in the third quarter were $0.72 compared to $0.23 in the third quarter of 2012.
  • The company completed a securitization of $263 million of vacation ownership notes receivable at a blended borrowing rate of 2.21 percent.
  • The company disposed of $7 million of excess built residential inventory in its North America segment.

Third quarter 2013 net income totaled $25 million, or $0.67 per diluted share, compared to net income of $5 million, or $0.12 per diluted share, in the third quarter of 2012. Company development margin increased to 21.1 percent in the third quarter of 2013 from 15.6 percent in the third quarter of 2012; North America development margin for the third quarter increased to 22.7 percent from 19.2 percent year over year.

Third quarter 2013 adjusted net income totaled $27 million, a $19 million increase from $8 million of adjusted net income in the third quarter of 2012. Third quarter 2013 adjusted net income reflects a $3 million increase in pre-tax income that resulted from the exclusion of $4 million of organizational and separation related costs, partially offset by the exclusion of $1 million of pre-tax income related to the impact of extended rescission periods in the company's Europe segment. Third quarter 2012 adjusted net income reflects a $5 million increase to pre-tax income that resulted from the exclusion of $3 million of organizational and separation related costs and the inclusion of $2 million of pre-tax income related to the impact of extended rescission periods in the company's Europe segment. In addition, adjusted development margin for both periods is adjusted, as appropriate, for the impact of revenue reportability.

Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income and adjusted development margin, are reconciled in the Press Release Schedules that follow. Adjustments are shown and described in further detail on schedules A-1 through A-20. The company now reports consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as used in this release is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted, reported in prior releases.

"Our third quarter results demonstrate strong execution across our business. Adjusted EBITDA increased over 50 percent year over year, driven by VPG growth and solid development margin performance, as well as stronger results from our rental and resort management businesses," said Stephen P. Weisz, president and chief executive officer. "Based on our year-to-date performance and our outlook for the fourth quarter, we are increasing our full year adjusted development margin, free cash flow and EBITDA guidance."

Weisz concluded, "Given our confidence in our long-term growth outlook and cash flow generation potential, our Board of Directors approved a share repurchase program reflecting our commitment to return cash to shareholders and increase overall shareholder returns."

Third Quarter 2013 Results

Total company contract sales were $168 million, a $3 million decrease from $171 million in the third quarter of 2012, driven mainly by $10 million of higher contract sales in the company's North America segment, offset by $13 million of lower contract sales in the company's Europe and Asia Pacific segments.

For the third quarter ended September 6, 2013, total revenues from the sale of vacation ownership products were $162 million, an increase of $19 million over the prior year period. 

Reported development margin was $34 million, a $12 million increase from the third quarter of 2012. Adjusted development margin was $32 million, a $1 million decrease from the third quarter of 2012. Reported development margin increased 5.5 percentage points to 21.1 percent in the third quarter of 2013 from 15.6 percent in the third quarter of 2012. Adjusted development margin percentage decreased 0.6 percentage points to 20.3 percent in the third quarter of 2013 from 20.9 percent in the third quarter of 2012. The adjustments are illustrated on schedule A-10.

Rental revenues totaled $65 million, an $8 million, or 17 percent, increase from the third quarter of 2012. These results reflect an 11 percent increase in transient keys rented as well as a 10 percent increase in average transient rate driven by stronger consumer demand and a favorable mix of available rental inventory. Rental revenues, net of expenses, were $8 million, $9 million higher than the third quarter of 2012.

Resort management and other services revenues totaled $62 million, a $2 million increase from the third quarter of 2012. Resort management and other services revenues, net of expenses were $17 million, a $4 million increase over the third quarter of 2012. Results reflected higher annual fees in connection with the company's Marriott Vacation Club Destinations program and improvements in ancillary operations driven by the disposition of a golf course and related assets at one of the company's Ritz-Carlton branded resorts late in 2012.

Adjusted EBITDA was $50 million in the third quarter of 2013, a $17 million increase from $33 million in the third quarter of 2012.

Segment Results

Effective December 29, 2012, the company combined the reporting of the financial results of its former Luxury segment with its North America segment based upon its decision to scale back separate development activity and to aggregate future marketing and sales of inventory in the upscale and luxury tiers. Existing service standards and on-site management remain unaffected by these reporting changes. Prior year amounts have been recast for consistency with current year's presentation.

North America

VPG increased 6.6 percent to $3,252 in the third quarter of 2013 from $3,051 in the third quarter of 2012, driven by higher pricing and improved closing efficiency. Total North America contract sales were $152 million in the third quarter of 2013, an increase of $10 million over the prior year period. Contract sales in the quarter included $7 million related to the disposition of excess built residential inventory primarily at a project in Florida.

Third quarter 2013 North America segment financial results increased 32 percent, or $21 million, to $87 million. The increase was primarily driven by $10 million of higher rental revenues net of expenses, $9 million of higher development margin and approximately $4 million of higher resort management and other services revenues net of expenses. These increases were partially offset by $3 million of lower financing revenues.

Revenues from the sale of vacation ownership products increased $23 million to $145 million in the third quarter, resulting from $15 million of higher year-over-year revenue reportability and $10 million of higher contract sales. Development margin was $33 million, a $9 million increase from the third quarter of 2012. This was driven by the impact of higher revenue reportability and lower marketing and sales expenses, offset partially by higher cost of vacation ownership products in the current quarter from the impact of the residential sales, as well as lower cost of vacation ownership products in the prior year quarter from favorable product cost true-up activity.  

Excluding the impact of revenue reportability, adjusted development margin was $32 million, a $1 million increase from the prior year quarter. Adjusted development margin percentage decreased to 22.2 percent in the third quarter of 2013 from 22.8 percent in the third quarter of 2012. Reported development margin percentage increased to 22.7 percent in the third quarter of 2013 as compared to 19.2 percent in the prior year quarter. The impact of revenue reportability is illustrated on schedule A-12.

Asia Pacific

Asia Pacific contract sales declined $8 million to $7 million in the third quarter of 2013 and total revenues declined $7 million to $13 million, reflecting the impact of the closure of two under-performing off-site sales centers in the fourth quarter of 2012. Segment financial results were break-even, $1 million lower than the third quarter of 2012.

Europe

Third quarter 2013 contract sales declined $5 million to $9 million as the Europe segment continued to sell through its remaining inventory. Europe adjusted segment financial results were $6 million, in line with the third quarter of 2012. Reported segment financial results were $7 million, up $3 million from the third quarter of 2012.

Organizational and Separation Plan

During the third quarter of 2013, the company incurred $6 million of costs in connection with its continued organizational and separation related efforts, of which approximately $2 million was capitalized during the quarter. Total future spending for these efforts is expected to be approximately $10 million to $15 million, with costs being incurred through 2014.

These costs primarily relate to establishing the company's own information technology systems and services, independent accounts payable functions and reorganization of existing human resources and information technology organizations to support the company's standalone public company needs. Once completed, these efforts are expected to generate approximately $15 million to $20 million of annualized savings, of which approximately $8 million has been realized to date, including $3 million reflected in the company's year-to-date 2013 financial results.

Share Repurchase Program

On October 8, 2013, the company's Board of Directors authorized a share repurchase program under which the company may purchase up to 3,500,000 shares of its common stock prior to March 28, 2015. The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements and other factors. In connection with the repurchase program, the company may adopt one or more plans pursuant to the provisions of Rule 10b5-1 under the Securities and Exchange Act of 1934.

Balance Sheet and Liquidity

On September 6, 2013, cash and cash equivalents totaled $288 million. Since the end of 2012, real estate inventory balances declined $28 million to $853 million, including $390 million of finished goods, $193 million of work-in-process and $270 million of land and infrastructure. The company had $751 million in debt outstanding at the end of the third quarter of 2013, an increase of $73 million from year-end 2012, including $747 million in non-recourse securitized notes. In addition, $40 million of mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the third quarter of 2013.

In August the company completed a securitization of $263 million of vacation ownership loans at a weighted average interest rate of 2.21 percent and an advance rate of 95 percent. This transaction generated approximately $250 million of gross cash proceeds. Net cash proceeds to the company after transaction costs, cash reserves and repayment of amounts outstanding under the company's warehouse credit facility were $148 million, which are available for general corporate purposes.

As of September 6, 2013, the company had $196 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and had $17 million of vacation ownership notes receivable eligible for securitization.

Outlook

For the full year 2013, the company is updating its guidance as reflected in the chart below. The earnings per share and cash flow guidance do not reflect the impact of any stock repurchases that may be made under the company's share repurchase program.


Current Guidance

Previous Guidance

Adjusted EBITDA

$165 million to $175 million

$155 million to $165 million

Adjusted net income

$81 million to $87 million

$72 million to $78 million

Adjusted fully diluted earnings per share

$2.21 to $2.37

$1.94 to $2.10

Adjusted company development margin

18.0 percent to 19.0 percent

17.0 percent to 18.0 percent

Adjusted free cash flow, as adjusted

$170 million to $185 million

$120 million to $135 million

Company contract sales growth

(1) percent to 3 percent

0 percent to 5 percent

North America contract sales growth

4 percent to 8 percent

5 percent to 10 percent

Schedules A-1 through A-20 reconcile the non-GAAP financial measures set forth above to the company's expected full year 2013 reported net income of $80 million to $86 million and reported development margin of 19.0 percent to 20.0 percent.

Third Quarter 2013 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EDT today to discuss these results. Participants may access the call by dialing (800) 762-8779 or (480) 629-9645 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 (800) 406-7325 or (303) 590-3030 for international callers. The replay passcode is 4641471. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company. In late 2011, Marriott Vacations Worldwide was established as an independent, public company focusing primarily on vacation ownership experiences. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. Marriott Vacations Worldwide offers a diverse portfolio of quality products, programs and management expertise with more than 60 resorts and more than 420,000 Owners and Members. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about earnings trends, organizational and separation related efforts, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. We caution 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 our 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 presentation. These statements are made as of October 10, 2013 and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Press Release Schedules Follow

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

PRESS RELEASE SCHEDULES

QUARTER 3, 2013

TABLE OF CONTENTS

































Consolidated Statements of Operations - 12 Weeks Ended September 6, 2013 and September 7, 2012

A-1

















Consolidated Statements of Operations - 36 Weeks Ended September 6, 2013 and September 7, 2012

A-2

















North America Segment Financial Results - 12 Weeks Ended September 6, 2013 and September 7, 2012

A-3

















North America Segment Financial Results - 36 Weeks Ended September 6, 2013 and September 7, 2012

A-4

















Asia Pacific Segment Financial Results - 12 Weeks Ended September 6, 2013 and September 7, 2012

A-5

















Asia Pacific Segment Financial Results - 36 Weeks Ended September 6, 2013 and September 7, 2012

A-6

















Europe Segment Financial Results - 12 Weeks Ended September 6, 2013 and September 7, 2012

A-7

















Europe Segment Financial Results - 36 Weeks Ended September 6, 2013 and September 7, 2012

A-8

















Corporate and Other Financial Results - 12 Weeks and 36 Weeks Ended September 6, 2013 and September 7, 2012

A-9

















Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin


    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended September 6, 2013 and September 7, 2012

A-10

















Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin


    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 36 Weeks Ended September 6, 2013 and September 7, 2012

A-11

















North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin


    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended September 6, 2013 and September 7, 2012

A-12

















North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin


    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 36 Weeks Ended September 6, 2013 and September 7, 2012

A-13

















EBITDA and Adjusted EBITDA - 12 Weeks and 36 Weeks Ended September 6, 2013 and September 7, 2012

A-14

















Adjusted Net Income and Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Development Margin - 2013 Outlook

A-15

















2013 Adjusted Free Cash Flow Outlook

A-16

















2013 Normalized Adjusted Free Cash Flow Outlook





A-17

















Non-GAAP Financial Measures


A-18

















Interim Consolidated Balance Sheets

A-21

















Interim Consolidated Statements of Cash Flows

A-22

 


A-1

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

12 Weeks Ended September 6, 2013 and September 7, 2012

(In millions, except per share amounts)


































As Reported




Europe


As Adjusted



As Reported




Europe


As Adjusted










12 Weeks Ended


Certain


Rescission


12 Weeks Ended



12 Weeks Ended


Certain


Rescission


12 Weeks Ended










September 6, 2013


Charges


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


September 7, 2012

**

Revenues






















Sale of vacation ownership products

$                        162


$           -


$               (2)


$                     160



$                        143


$           -


$                3


$                        146



Resort management and other services

62


-


-


62



60


-


-


60



Financing

32


-


-


32



35


-


-


35



Rental

65


-


-


65



57


-


-


57



Other


7


-


-


7



7


-


-


7



Cost reimbursements

84


-


-


84



81


-


-


81







Total revenues

412


-


(2)


410



383


-


3


386


Expenses






















Cost of vacation ownership products

56


-


(1)


55



42


-


-


42



Marketing and sales

72


-


-


72



79


-


1


80



Resort management and other services

45


-


-


45



47


-


-


47



Financing

5


-


-


5



5


-


-


5



Rental

57


-


-


57



58


-


-


58



Other


4


-


-


4



3


-


-


3



General and administrative

23


-


-


23



20


-


-


20



Organizational and separation related


4


(4)


-


-



3


(3)


-


-



Consumer financing interest


7


-


-


7



10


-


-


10



Royalty fee

13


-


-


13



14


-


-


14



Cost reimbursements

84


-


-


84



81


-


-


81







Total expenses

370


(4)


(1)


365



362


(3)


1


360


Interest expense


2


-


-


2



5


-


-


5


Impairment reversals on equity investment

-


-


-


-



-


-


-


-







Income before income taxes

40


4


(1)


43



16


3


2


21


Provision for income taxes

(15)


(1)


-


(16)



(11)


(1)


(1)


(13)


Net income


$                          25


$          3


$               (1)


$                       27



$                            5


$          2


$                1


$                            8



























Earnings per share - Basic


$                       0.70






$                    0.74



$                       0.13






$                       0.24



























Earnings per share - Diluted


$                       0.67






$                    0.72



$                       0.12






$                       0.23



























Basic Shares



35.5






35.5



34.4






34.4


Diluted Shares


36.7






36.7



36.2






36.2



































As Reported









As Reported
















12 Weeks Ended









12 Weeks Ended
















September 6, 2013









September 7, 2012








Contract Sales





















Vacation ownership


$                        161









$                        171










Residential products


7









-












Total contract sales


$                        168









$                        171


























































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

We have restated 2012 Sale of vacation ownership products and Cost reimbursements revenues, Cost of vacation ownership products, Marketing and sales and Cost reimbursements expenses, Income before income taxes, Provision for income taxes, Net income, Earnings per share - Basic, and Earnings per share - Diluted to correct prior period misstatements. Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

 


A-2

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

36 Weeks Ended September 6, 2013 and September 7, 2012

(In millions, except per share amounts)


































As Reported




Europe


As Adjusted



As Reported




Europe


As Adjusted










36 Weeks Ended


Certain


Rescission


36 Weeks Ended



36 Weeks Ended


Certain


Rescission


36 Weeks Ended










September 6, 2013


Charges


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


September 7, 2012

**

Revenues






















Sale of vacation ownership products

$                        472


$           -


$             (20)


$                        452



$                        416


$           -


$                9


$                        425



Resort management and other services

179


-


-


179



176


-


-


176



Financing

97


-


-


97



106


-


-


106



Rental

193


-


-


193



167


-


-


167



Other


22


-


-


22



21


-


-


21



Cost reimbursements

260


-


-


260



254


-


-


254







Total revenues

1,223


-


(20)


1,203



1,140


-


9


1,149


Expenses






















Cost of vacation ownership products

157


-


(7)


150



139


-


2


141



Marketing and sales

220


(2)


(2)


216



231


(1)


1


231



Resort management and other services

132


-


-


132



140


-


-


140



Financing

16


-


-


16



18


-


-


18



Rental

169


-


-


169



158


-


-


158



Other


11


-


-


11



8


-


-


8



General and administrative

66


-


-


66



59


-


-


59



Organizational and separation related


7


(7)


-


-



9


(9)


-


-



Litigation settlement


(1)


1


-


-



2


(2)


-


-



Consumer financing interest


22


-


-


22



30


-


-


30



Royalty fee

41


-


-


41



41


-


-


41



Impairment

1


(1)


-


-



-


-


-


-



Cost reimbursements

260


-


-


260



254


-


-


254







Total expenses

1,101


(9)


(9)


1,083



1,089


(12)


3


1,080


Gains and other income

1


-


-


1



-


-


-


-


Interest expense


9


-


-


9



12


-


-


12


Impairment reversals on equity investment

-


-


-


-



2


(2)


-


-







Income before income taxes

114


9


(11)


112



41


10


6


57


Provision for income taxes

(40)


(2)


3


(39)



(23)


(4)


(1)


(28)


Net income


$                          74


$          7


$               (8)


$                          73



$                          18


$          6


$                5


$                          29



























Earnings per share - Basic


$                       2.10






$                       2.06



$                       0.52






$                       0.87



























Earnings per share - Diluted


$                       2.03






$                       1.99



$                       0.50






$                       0.82



























Basic Shares



35.4






35.4



34.2






34.2


Diluted Shares


36.6






36.6



36.0






36.0



































As Reported









As Reported
















36 Weeks Ended









36 Weeks Ended
















September 6, 2013









September 7, 2012








Contract Sales





















Vacation ownership


$                        473









$                        493










Residential products


8









-












Total contract sales


$                        481









$                        493


























































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

We have restated 2012 Sale of vacation ownership products and Cost reimbursements revenues, Cost of vacation ownership products, Marketing and sales and Cost reimbursements expenses, Income before income taxes, Provision for income taxes, Net income, Earnings per share - Basic, and Earnings per share - Diluted to correct prior period misstatements. Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

 


A-3

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

12 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



















































As Reported




As Adjusted



As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended










September 6, 2013


Charges


September 6, 2013

**


September 7, 2012


Charges


September 7, 2012

**

Revenues


















Sale of vacation ownership products

$                        145


$           -


$                        145



$                        122


$           -


$                        122



Resort management and other services

53


-


53



51


-


51



Financing

30


-


30



33


-


33



Rental

56


-


56



47


-


47



Other

6


-


6



6


-


6



Cost reimbursements

75


-


75



73


-


73







Total revenues

365


-


365



332


-


332


Expenses


















Cost of vacation ownership products

51


-


51



36


-


36



Marketing and sales

61


-


61



62


-


62



Resort management and other services

37


-


37



39


-


39



Rental

49


-


49



50


-


50



Other

3


-


3



2


-


2



Organizational and separation related

-


-


-



1


(1)


-



Royalty fee

2


-


2



3


-


3



Cost reimbursements

75


-


75



73


-


73







Total expenses

278


-


278



266


(1)


265







Segment financial results

$                          87


$           -


$                          87



$                          66


$          1


$                          67































As Reported







As Reported














12 Weeks Ended







12 Weeks Ended














September 6, 2013







September 7, 2012






Contract Sales

















Vacation ownership


$                        145







$                       142








Residential products

7







-










Total contract sales


$                        152







$                       142
















































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.























NOTE:

We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency. As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Cost reimbursements revenues and expenses to correct a prior period misstatement.

 


A-4

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

36 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



















































As Reported




As Adjusted



As Reported




As Adjusted










36 Weeks Ended


Certain


36 Weeks Ended



36 Weeks Ended


Certain


36 Weeks Ended










September 6, 2013


Charges


September 6, 2013

**


September 7, 2012


Charges


September 7, 2012

**

Revenues


















Sale of vacation ownership products

$                        407


$           -


$                        407



$                        359


$           -


$                        359



Resort management and other services

155


-


155



153


-


153



Financing

91


-


91



100


-


100



Rental

172


-


172



147


-


147



Other


21


-


21



20


-


20



Cost reimbursements

231


-


231



228


-


228







Total revenues

1,077


-


1,077



1,007


-


1,007


Expenses


















Cost of vacation ownership products

137


-


137



121


-


121



Marketing and sales

187


-


187



183


(1)


182



Resort management and other services

111


-


111



120


-


120



Rental

148


-


148



138


-


138



Other


10


-


10



7


-


7



Organizational and separation related


-


-


-



1


(1)


-



Litigation settlement


(1)


1


-



2


(2)


-



Royalty fee

6


-


6



6


-


6



Cost reimbursements

231


-


231



228


-


228







Total expenses

829


1


830



806


(4)


802


Gains and other income

1


-


1



-


-


-


Impairment reversals on equity investment

-


-


-



2


(2)


-







Segment financial results


$                        249


$         (1)


$                        248



$                        203


$          2


$                        205































As Reported







As Reported














36 Weeks Ended







36 Weeks Ended














September 6, 2013







September 7, 2012






Contract Sales

















Vacation ownership


$                       429







$                        419








Residential products


8







-










Total contract sales


$                       437







$                        419
















































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency. As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Cost reimbursements revenues and expenses to correct a prior period misstatement.

 


A-5

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

12 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



















































As Reported




As Adjusted



As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended










September 6, 2013


Charges


September 6, 2013

**


September 7, 2012


Charges


September 7, 2012

**

Revenues


















Sale of vacation ownership products

$                             7


$            -


$                             7



$                           14


$            -


$                           14



Resort management and other services

1


-


1



1


-


1



Financing

1


-


1



1


-


1



Rental

1


-


1



2


-


2



Cost reimbursements

3


-


3



2


-


2







Total revenues

13


-


13



20


-


20


Expenses


















Cost of vacation ownership products

1


-


1



3


-


3



Marketing and sales

5


-


5



10


-


10



Resort management and other services

1


-


1



1


-


1



Rental

3


-


3



3


-


3



Cost reimbursements

3


-


3



2


-


2







Total expenses

13


-


13



19


-


19







Segment financial results

$                              -


$            -


$                             -



$                             1


$            -


$                             1




















































As Reported







As Reported














12 Weeks Ended







12 Weeks Ended














September 6, 2013







September 7, 2012



























Contract Sales


$                           7







$                         15
















































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments.Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Cost reimbursements revenues and expenses to correct a prior period misstatement.

 


A-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

36 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



















































As Reported




As Adjusted



As Reported




As Adjusted










36 Weeks Ended


Certain


36 Weeks Ended



36 Weeks Ended


Certain


36 Weeks Ended










September 6, 2013


Charges


September 6, 2013

**


September 7, 2012


Charges


September 7, 2012

**

Revenues


















Sale of vacation ownership products

$                           23


$            -


$                           23



$                           40


$            -


$                           40



Resort management and other services

3


-


3



3


-


3



Financing

3


-


3



3


-


3



Rental

5


-


5



5


-


5



Cost reimbursements

10


-


10



8


-


8







Total revenues

44


-


44



59


-


59


Expenses


















Cost of vacation ownership products

4


-


4



9


-


9



Marketing and sales

14


-


14



28


-


28



Resort management and other services

2


-


2



2


-


2



Rental

8


-


8



7


-


7



Royalty fee

1


-


1



1


-


1



Cost reimbursements

10


-


10



8


-


8







Total expenses

39


-


39



55


-


55







Segment financial results

$                             5


$            -


$                             5



$                             4


$            -


$                             4




















































As Reported







As Reported














36 Weeks Ended







36 Weeks Ended














September 6, 2013







September 7, 2012



























Contract Sales


$                           24







$                           43
















































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Cost reimbursements revenues and expenses to correct a prior period misstatement.

 


A-7

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

12 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



























































As Reported




Europe


As Adjusted



As Reported




Europe


As Adjusted










12 Weeks Ended


Certain


Rescission


12 Weeks Ended



12 Weeks Ended


Certain


Rescission


12 Weeks Ended










September 6, 2013


Charges


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


September 7, 2012

**

Revenues






















Sale of vacation ownership products

$                          10


$           -


$               (2)


$                            8



$                            7


$           -


$                3


$                          10



Resort management and other services

8


-


-


8



8


-


-


8



Financing

1


-


-


1



1


-


-


1



Rental

8


-


-


8



8


-


-


8



Other

1


-


-


1



1


-


-


1



Cost reimbursements

6


-


-


6



6


-


-


6







Total revenues

34


-


(2)


32



31


-


3


34


Expenses






















Cost of vacation ownership products

2


-


(1)


1



1


-


-


1



Marketing and sales

6


-


-


6



7


-


1


8



Resort management and other services

7


-


-


7



7


-


-


7



Rental

5


-


-


5



5


-


-


5



Other

1


-


-


1



1


-


-


1



Cost reimbursements

6


-


-


6



6


-


-


6







Total expenses

27


-


(1)


26



27


-


1


28







Segment financial results

$                            7


$           -


$               (1)


$                            6



$                            4


$           -


$                2


$                            6




























































As Reported









As Reported
















12 Weeks Ended









12 Weeks Ended
















September 6, 2013









September 7, 2012

































Contract Sales


$                           9









$                          14


























































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.



NOTE:

As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Sale of vacation ownership products and Cost reimbursements revenues, Cost of vacation ownership products, Marketing and sales and Cost reimbursements expenses, and Segment financial results to correct prior period misstatements.

 


A-8

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

36 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



























































As Reported




Europe


As Adjusted



As Reported




Europe


As Adjusted










36 Weeks Ended


Certain


Rescission


36 Weeks Ended



36 Weeks Ended


Certain


Rescission


36 Weeks Ended










September 6, 2013


Charges


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


September 7, 2012

**

Revenues






















Sale of vacation ownership products

$                          42


$           -


$             (20)


$                          22



$                          17


$           -


$                9


$                          26



Resort management and other services

21


-


-


21



20


-


-


20



Financing

3


-


-


3



3


-


-


3



Rental

16


-


-


16



15


-


-


15



Other

1


-


-


1



1


-


-


1



Cost reimbursements

19


-


-


19



18


-


-


18







Total revenues

102


-


(20)


82



74


-


9


83


Expenses






















Cost of vacation ownership products

11


-


(7)


$ 4



4


-


2


$ 6



Marketing and sales

19


(2)


(2)


15



20


-


1


21



Resort management and other services

19


-


-


19



18


-


-


18



Rental

13


-


-


13



13


-


-


13



Other

1


-


-


1



1


-


-


1



Impairment

1


(1)


-


-



-


-


-


-



Cost reimbursements

19


-


-


19



18


-


-


18







Total expenses

83


(3)


(9)


71



74


-


3


77







Segment financial results

$                          19


$          3


$             (11)


$                          11



$                             -


$           -


$                6


$                            6




























































As Reported









As Reported
















36 Weeks Ended









36 Weeks Ended
















September 6, 2013









September 7, 2012

































Contract Sales


$                          20









$                          31

























































** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Sale of vacation ownership products and Cost reimbursements revenues, Cost of vacation ownership products, Marketing and sales and Cost reimbursements expenses, and Segment financial results to correct prior period misstatements.

 


A-9

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

12 Weeks and 36 Weeks Ended September 6, 2013 and September 7, 2012

($ in millions)



















































As Reported




As Adjusted



As Reported




As Adjusted










12 Weeks Ended


Certain


12 Weeks Ended



12 Weeks Ended


Certain


12 Weeks Ended










September 6, 2013


Charges


September 6, 2013

**


September 7, 2012


Charges


September 7, 2012

**

Expenses


















Cost of vacation ownership products

$                            2


$           -


$                            2



$                            2


$           -


$                            2



Financing

5


-


5



5


-


5



General and administrative

23


-


23



20


-


20



Organizational and separation related


4


(4)


-



2


(2)


-



Consumer financing interest


7




7



10


-


10



Royalty fee

11


-


11



11


-


11



Interest

2


-


2



5


-


5







Total expenses

54


(4)


50



55


(2)


53







Financial results


$                         (54)


$          4


$                        (50)



$                         (55)


$          2


$                         (53)






























































































As Reported




As Adjusted



As Reported




As Adjusted










36 Weeks Ended


Certain


36 Weeks Ended



36 Weeks Ended


Certain


36 Weeks Ended










September 6, 2013


Charges


September 6, 2013

**


September 7, 2012


Charges


September 7, 2012

**

Expenses


















Cost of vacation ownership products

$                            5


$          -


$ 5



$                            5


$           -


$                            5



Financing

16


-


16



18


-


18



General and administrative

66


-


66



59


-


59



Organizational and separation related


7


(7)


-



8


(8)


-



Consumer financing interest


22


-


22



30


-


30



Royalty fee

34


-


34



34


-


34



Interest

9


-


9



12


-


12







Total expenses

159


(7)


152



166


(8)


158







Financial results


$                       (159)


$          7


$                      (152)



$                       (166)


$          8


$                      (158)























** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


NOTE:

Corporate and Other captures information not specifically attributable to any individual segment including expenses in support of our financing operations, non-capitalizable development expenses supporting overall company development, company-wide general and administrative costs, interest expense and the fixed royalty fee payable under the license agreements with Marriott International, Inc. As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change.

 


A-10

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

($ in millions)













































































 

12 Weeks Ended



























September 6, 2013



September 7, 2012














































Contract sales









$                       168



$                       171














































Revenue recognition adjustments:




























Reportability1








3



(16)

















Europe rescission adjustment2







2



(3)

















Sales Reserve3








(8)



(6)

















Other4








(3)



(3)
















Sale of vacation ownership products








$                       162



$                       143














































1 Adjustment for lack of required downpayment, contract sales in rescission period, or percentage completion accounting.



















2 Adjustment to eliminate the impact of extended rescission periods in our Europe segment. Please see schedule A-19 for additional information.
















3 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.



















4 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.



































































MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)















($ in millions)


























































Revenue











Revenue













As Reported




Europe


Recognition


As Adjusted



As Reported




Europe


Recognition


As Adjusted











12 Weeks Ended


Certain


Rescission


Reportability


12 Weeks Ended



12 Weeks Ended


Certain


Rescission


Reportability


12 Weeks Ended











September 6, 2013


Charges


Adjustment


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


Adjustment


September 7, 2012

**


Sale of vacation ownership products



$                       162


$          -


$             (2)


(3)


$                       157



$                       143


$         -


$               3


$              16


$                       162



Less:






























Cost of vacation ownership products


56


-


(1)


(1)


54



42


-


-


6


48




Marketing and sales





72


-


-


(1)


71



79


-


1


1


81

































Development margin






$                         34


$          -


$             (1)


$              (1)


$                        32



$                         22


$         -


$               2


$                9


$                         33


































































Development margin percentage1


21.1%








20.3%



15.6%








20.9%




** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.



NOTE:

We have restated 2012 Sale of vacation ownership products, Cost of vacation ownership products, Marketing and sales, and Development margin to correct prior period misstatements.

 


A-11

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

($ in millions)













































































 

36 Weeks Ended



























September 6, 2013



September 7, 2012














































Contract sales









$                       481



$                       493














































Revenue recognition adjustments:




























Reportability1








8



(30)

















Europe rescission adjustment2







20



(9)

















Sales Reserve3








(26)



(29)

















Other4








(11)



(9)
















Sale of vacation ownership products








$                       472



$                       416














































1Adjustment for lack of required downpayment, contract sales in rescission period, or percentage completion accounting.



















2 Adjustment to eliminate the impact of extended rescission periods in our Europe segment. Please see schedule A-19 for additional information.

















3 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.



















4 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.



































































MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)

($ in millions)













































Revenue











Revenue













As Reported




Europe


Recognition


As Adjusted



As Reported




Europe


Recognition


As Adjusted











36 Weeks Ended


Certain


Rescission


Reportability


36 Weeks Ended



36 Weeks Ended


Certain


Rescission


Reportability


36 Weeks Ended











September 6, 2013


Charges


Adjustment


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


Adjustment


September 7, 2012

**


Sale of vacation ownership products



$                       472


$         -


$           (20)


(8)


$                       444



$                       416


$         -


$               9


$              30


$                       455



Less:






























Cost of vacation ownership products


157


-


(7)


(3)


147



139


-


2


11


152




Marketing and sales





220


(2)


(2)


(1)


215



231


(1)


1


2


233

































Development margin






$                         95


$        2


$           (11)


$              (4)


$                         82



$                         46


$       1


$               6


$              17


$                         70




































































Development margin percentage1



20.3%








18.4%



11.2%








15.4%




** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.




NOTE:

We have restated 2012 Sale of vacation ownership products, Cost of vacation ownership products, Marketing and sales, and Development margin to correct prior period misstatements.

 


A-12

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

($ in millions)

































































 

12 Weeks Ended






















September 6, 2013



September 7, 2012






































Contract sales







$                       152



$                       142






































Revenue recognition adjustments:























Reportability1






2



(13)














Sales Reserve 2






(6)



(4)














Other 3






(3)



(3)













Sale of vacation ownership products






$                       145



$                       122






































1 Adjustment for lack of required downpayment, contract sales in rescission period, or percentage completion accounting.











2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.









3 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.



















































MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)

($ in millions)






































Revenue









Revenue












As Reported




Recognition


As Adjusted



As Reported




Recognition


As Adjusted










12 Weeks Ended


Certain


Reportability


12 Weeks Ended



12 Weeks Ended


Certain


Reportability


12 Weeks Ended










September 6, 2013


Charges


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


September 7, 2012

**

Sale of vacation ownership products



$                       145


$         -


$              (2)


$                       143



$                       122


$         -


$              13


$                       135


Less:

























Cost of vacation ownership products


51


-


(1)


50



36


-


6


42



Marketing and sales





61


-


-


61



62


-


-


62



























Development margin






$                         33


$         -


$              (1)


$                         32



$                         24


$         -


$                7


$                         31

























































Development margin percentage1



22.7%






22.2%



19.2%






22.8%



** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.



NOTE:

We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency.

 


A-13

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

($ in millions)

































































 

36 Weeks Ended






















September 6, 2013



September 7, 2012






































Contract sales







$                       437



$                       419






































Revenue recognition adjustments:























Reportability1






2



(29)














Sales Reserve 2






(21)



(22)














Other 3






(11)



(9)













Sale of vacation ownership products






$                       407



$                       359






































1 Adjustment for lack of required downpayment, contract sales in rescission period, or percentage completion accounting.











2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.











3 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.



















































MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)

($ in millions)






































Revenue









Revenue












As Reported




Recognition


As Adjusted



As Reported




Recognition


As Adjusted










36 Weeks Ended


Certain


Reportability


36 Weeks Ended



36 Weeks Ended


Certain


Reportability


36 Weeks Ended










September 6, 2013


Charges


Adjustment


September 6, 2013

**


September 7, 2012


Charges


Adjustment


September 7, 2012

**

Sale of vacation ownership products



$                       407


$         -


$ (2)


$                       405



$                       359


$         -


$              29


$                       388


Less:

























Cost of vacation ownership products


137


-


(1)


136



121


-


11


132



Marketing and sales





187


-


-


187



183


(1)


2


184



























Development margin






$                         83


$         -


$ (1)


$                         82



$                         55


$        1


$              16


$                         72

























































Development margin percentage1



20.4%






20.2%



15.3%






18.4%



** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.


NOTE:

We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency.

 


A-14


MARRIOTT VACATIONS WORLDWIDE CORPORATION


EBITDA AND ADJUSTED EBITDA


12 Weeks and 36 Weeks Ended September 6, 2013 and September 7, 2012


($ in millions)























































As Reported




Europe


As Adjusted


As Reported




Europe


As Adjusted









12 Weeks Ended


Certain


Rescission


12 Weeks Ended


12 Weeks Ended


Certain


Rescission


12 Weeks Ended









September 6, 2013


Charges


Adjustment


September 6, 2013

**

September 7, 2012


Charges


Adjustment


September 7, 2012

**















































Net income

$                          25


$          3


$               (1)


$                          27


$                            5


$          2


$                1


$                            8


Interest expense1

2


-


-


2


5


-


-


5


Tax provision

15


1


-


16


11


1


1


13


Depreciation and amortization

5


-


-


5


7


-


-


7







EBITDA **

$                          47


$          4


$               (1)


$                          50


$                          28


$          3


$                2


$                          33





































































































As Reported




Europe


As Adjusted


As Reported




Europe


As Adjusted









36 Weeks Ended


Certain


Rescission


36 Weeks Ended


36 Weeks Ended


Certain


Rescission


36 Weeks Ended









September 6, 2013


Charges


Adjustment


September 6, 2013

**

September 7, 2012


Charges


Adjustment


September 7, 2012

**















































Net income

$                          74


$          7


$              (8)


$                          73


$                          18


$          6


$                5


$                          29


Interest expense1

9


-


-


9


12


-


-


12


Tax provision

40


2


(3)


39


23


4


1


28


Depreciation and amortization

16


-


-


16


21


-


-


21







EBITDA **

$                        139


$          9


$            (11)


$                        137


$                          74


$        10


$                6


$                          90

























** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.


1 Interest expense excludes consumer financing interest expense.


NOTE:

We now report consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as reported in these schedules is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted reported in prior releases. In addition, we have restated 2012 Net income and Tax provision to correct prior period misstatements.

 

A-15



MARRIOTT VACATIONS WORLDWIDE CORPORATION



2013 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK



($ in millions)
























Fiscal Year 2013

 (low)


Fiscal Year 2013

 (high)








Net income



$                    80


$                    86









Adjustments to reconcile Net income to Adjusted net income














Organizational and separation related, litigation, and other charges1

15


15










Europe rescission adjustment2


(12)


(12)










Provision for income taxes on adjustments to net income

(2)


(2)











Adjusted net income**


$                    81


$                    87
























Earnings per share - Diluted3


$                 2.19


$                 2.35









Adjusted earnings per share - Diluted**,3


$                 2.21


$                 2.37









Diluted shares3


36.7


36.7





















** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1 Organizational and separation related, litigation, and other charges adjustment includes $13 million for organizational and separation related efforts, $2 million for severance costs in our Europe segment, and $1 million for an impairment charge related to a leased golf course in our Europe segment, partially offset by a $1 million reversal of a previously recorded legal settlement related to a former Luxury segment project in our North America segment.

2 Adjustment to eliminate the impact of extended rescission periods in our Europe segment. Please see schedule A-19 for additional information.

3 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook does not reflect the impact of share repurchase activity.
































MARRIOTT VACATIONS WORLDWIDE CORPORATION



2013 ADJUSTED EBITDA OUTLOOK



($ in millions)
























Fiscal Year 2013

 (low)


Fiscal Year 2013

(high)








Adjusted net income **


$                    81


$                    87








Interest expense1


12


12








Tax provision


50


54








Depreciation and amortization


22


22









Adjusted EBITDA**


$                  165


$                  175





















** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1 Interest expense excludes consumer financing interest expense.





































MARRIOTT VACATIONS WORLDWIDE CORPORATION



2013 ADJUSTED DEVELOPMENT MARGIN OUTLOOK









Fiscal Year 2013

 (low)


Fiscal Year 2013

 (high)








Development margin1


19.0%


20.0%









Adjustments to reconcile Development margin to Adjusted development margin













Other charges2


0.4%


0.4%










Revenue recognition reportability


(0.3%)


(0.3%)










Europe rescission adjustment3


(1.1%)


(1.1%)











Adjusted development margin**, 1


18.0%


19.0%





















** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1 Development margin represents Development margin dollars divided by Sale of vacation ownership products revenues. Development margin is calculated using whole dollars.

2 Other charges adjustment includes $2 million for severance costs in our Europe segment under the "Marketing and sales" caption.

3 Adjustment to eliminate the impact of extended rescission periods in our Europe segment. Please see schedule A-19 for additional information.


 

A - 16

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2013 ADJUSTED FREE CASH FLOW OUTLOOK

($ in millions)


















Fiscal Year 2013

 (low)


Fiscal Year 2013

 (high)


Adjusted net income **


$                     81


$                     87



Adjustments to reconcile Adjusted net income to net cash







provided by operating activities:








Adjustments for non-cash items1


70


72




Deferred income taxes / income taxes payable


25


30




Net changes in assets and liabilities:









Notes receivable originations


(255)


(260)





Notes receivable collections


300


305





Inventory



15


25





Liability for Marriott Rewards customer loyalty program


(50)


(48)





Organizational and separation related, litigation, and other charges

(35)


(33)





Other working capital changes


13


1


Net cash provided by operating activities

164


179



Capital expenditures for property and equipment








Organizational and separation related capital expenditures


(10)


(7)




Other



(15)


(13)



Increase in restricted cash


(10)


(5)





Free cash flow**


129


154


Borrowings from securitization transactions


361


361


Repayment of debt related to securitizations

(365)


(370)





Subtotal



(4)


(9)





Adjusted free cash flow**


125


145


Add:










Organizational and separation related, litigation and other charges


45


40





Adjusted free cash flow, as adjusted**


$                   170


$                   185














** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.




1Includes depreciation, amortization of debt issuance costs, provision for loan losses, gain / loss on disposals, and share-based compensation.





 

A-17

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2013 NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK

($ in millions)


























Current Guidance














Low


High


Mid-Point


Adjustments


Normalized




Adjusted net income **


$     81


$    87


$          84


$                   -


$             84





Adjustments to reconcile Adjusted net income to net cash















provided by operating activities:
















Adjustments for non-cash items1


70


72


71


-


71






Deferred income taxes / income taxes payable


25


30


28


(18)

2

10






Net changes in assets and liabilities:

















Notes receivable originations


(255)


(260)


(258)


(17)

3

(275)







Notes receivable collections


300


305


303


(18)

3

285







Inventory



15


25


20


(20)

4

-







Liability for Marriott Rewards customer loyalty program


(50)


(48)


(49)


49

5

-







Organizational and separation related, litigation, and other charges

(35)


(33)


(34)


34

6

-







Other working capital changes


13


1


7


(7)

7

-




Net cash provided by operating activities

164


179


172


3


175





Capital expenditures for property and equipment
















Organizational and separation related capital expenditures


(10)


(7)


(9)


9

6

-






Other



(15)


(13)


(14)


-


(14)





Increase in restricted cash


(10)


(5)


(8)


-


(8)







Free cash flow**


129


154


141


12


153




Borrowings from securitization transactions


361


361


361


(10)

8

351




Repayment of debt related to securitizations

(365)


(370)


(368)


-


(368)







Subtotal



(4)


(9)


(7)


(10)


(17)







Adjusted free cash flow**


125


145


134


2


136




Add:


















Organizational and separation related, litigation and other charges


45


40


43


(43)


-







Adjusted free cash flow, as adjusted**


$   170


$  185


$        177


$               (41)


$           136






















** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.



1 Includes depreciation, amortization of debt issuance costs, provision for loan losses, gain / loss on disposals, and share-based compensation.



2 Represents cash taxes slightly lower than tax provision.






3 Represents originations and collections associated with a 45% financing propensity rate.




4 Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).




5 Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016.




6 Represents costs associated with organizational and separation related efforts (efforts projected to be completed in 2014) as well as litigation cash settlements paid in 2013.



7 Represents normalized working capital activity.




8 Represents elimination of additional 2013 securitization volume.























 

A-18

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES































In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP").  We discuss our reasons for reporting these non-GAAP financial measures below, and the press release 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 charges incurred in the 12 weeks and 36 weeks ended September 6, 2013 and September 7, 2012, and exclude adjustments related to the extension of rescission periods in our Europe segment ("Europe Rescission Adjustments"), because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain charges and Europe Rescission Adjustments.  These non-GAAP financial measures also facilitate our comparison of results from our on-going operations before certain charges and Europe Rescission Adjustments with results from other vacation ownership companies.
















         Certain Charges - 12 weeks and 36 weeks ended September 6, 2013.  In our Statement of Operations for the 12 weeks ended September 6, 2013, we recorded $4 million of pre-tax charges, which included $4 million of organizational and separation related costs recorded under the "Organizational and separation related" caption.  In our Statement of Operations for the 36 weeks ended September 6, 2013, we recorded $9 million of pre-tax charges, which included a $7 million increase in our accrual for remaining costs we expect to incur in connection with our interest in an equity method investment in a former Luxury segment joint venture project in our North America segment, $7 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, $2 million of severance costs in our Europe segment recorded under the "Marketing and sales" caption, and a $1 million pre-tax non-cash impairment charge related to a leased golf course at a project in our Europe segment recorded under the "Impairment" caption, partially offset by a $7 million gain for cash received in payment of fully reserved receivables in connection with an equity method investment in a former Luxury segment joint venture project in our North America segment and a $1 million reversal of a previously recorded legal settlement related to a former Luxury segment project in our North America segment, based upon an agreement to settle the matter for an amount less than our accrual, recorded under the "Litigation settlement" caption. 
















        Certain Charges - 12 weeks and 36 weeks ended September 7, 2012.  In our Statement of Operations for the 12 weeks ended September 7, 2012, we recorded $3 million of pre-tax charges, which included $3 million of organizational and separation related costs recorded under the "Organizational and separation related" caption.  In our Statement of Operations for the 36 weeks ended September 7, 2012, we recorded $10 million of pre-tax charges, which included $9 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, $2 million for a legal settlement in our North America segment related to a former Luxury segment project recorded under the "Litigation settlement" caption, and $1 million of severance in our North America segment recorded under the "Marketing and sales" caption, partially offset by the reversal of $2 million of a previously recorded impairment charge recorded in our North America segment under the "Impairment reversals on equity investment" caption related to an equity investment in a former Luxury segment vacation ownership joint venture project because the actual costs incurred to suspend our marketing and sales operations at the project were lower than previously estimated.  

 

A-19

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES































Adjusted Net Income (continued)



























        Europe Rescission Adjustments.  In the second quarter of 2013, during the course of an internal review of certain sales documentation processes related to the sale of certain vacation ownership interests in properties associated with our Europe segment, we determined that the documentation we provided for certain sales of vacation ownership products was not strictly compliant.  As a result, in accordance with applicable European regulation, the period of time during which purchasers of such interests may rescind their purchases was extended.  We record revenues from the sale of vacation ownership products once the rescission period has ended.  Originally, we recorded revenues from these sales of vacation ownership products based on the rescission periods in effect assuming compliant documentation had been provided to the purchasers, rather than the extended periods.  As a result, we recognized revenue in incorrect periods between fiscal years 2010 and 2013 and misstated revenues in our previously filed consolidated financial statements.  We provided compliant documentation to purchasers for whom the extended rescission period had not yet expired.  As compliant documentation was subsequently provided as part of the corrective actions we took, the extended rescission period for most of the purchases at issue ended during the second quarter of 2013.  To better reflect our on-going core operations and allow for period-over-period comparisons, we have excluded the impact associated with the extended rescission periods in our adjusted financial measures for each period presented.

















        12 weeks and 36 weeks ended September 6, 2013.  In our Statement of Operations for the 12 weeks ended September 6, 2013, we recorded after-tax Europe Rescission Adjustments of $1 million, which included a $2 million pre-tax increase in Sale of vacation ownership products revenues and a $1 million pre-tax increase in Cost of vacation ownership products expense associated with the change in revenues from the Sale of vacation ownership products.  In our Statement of Operations for the 36 weeks ended September 6, 2013, we recorded after-tax Europe Rescission Adjustments of $8 million, which included a $20 million pre-tax increase in Sale of vacation ownership products revenues, pre-tax increases of $7 million and $2 million in Cost of vacation ownership products expense and Marketing and sales expense, respectively, associated with the change in revenues from the Sale of vacation ownership products, and a $3 million increase in the Provision for income taxes associated with the change in Income before income taxes. 

















        12 weeks and 36 weeks ended September 7, 2012.  In our Statement of Operations for the 12 weeks ended September 7, 2012, we recorded after-tax Europe Rescission Adjustments of $1 million, which included a $3 million pre-tax decrease in Sale of vacation ownership products revenues, a $1 million pre-tax decrease in Marketing and sales expense associated with the change in revenues from the Sale of vacation ownership products, and a $1 million decrease in the Provision for income taxes associated with the change in Income before income taxes.  In our Statement of Operations for the 36 weeks ended September 7, 2012, we recorded after-tax Europe Rescission Adjustments of $5 million, which included a $9 million pre-tax decrease in Sale of vacation ownership products revenues, pre-tax decreases of $2 million and $1 million in Cost of vacation ownership products expense and Marketing and sales expense, respectively, associated with the change in revenues from the Sale of vacation ownership products, and a $1 million decrease in the Provision for income taxes associated with the change in Income before income taxes.
















Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses).  We evaluate Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) as an indicator of operating performance.  Adjusted Development 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 charges and Europe Rescission Adjustments 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, certain charges and Europe Rescission Adjustments to our Development Margin.

 

A-20

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES





































Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA").  EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization.  For the purposes of our EBITDA calculation (which previously adjusted for consumer financing interest expense), we do not adjust for consumer financing interest expense because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us.  Further, we consider consumer financing interest expense to be an operating expense of our business.  We now report consumer financing interest expense separately from all other interest expense.  As a result, adjusted EBITDA as reported in these schedules is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted reported in prior releases.



















We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to service debt, fund capital expenditures and expand our business. We also use it, as do analysts, lenders, investors and others, because it excludes certain items that can vary widely across different industries or among companies within the same industry.  For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings.  Accordingly, the impact of interest expense on earnings can vary significantly among companies.  The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate.  As a result, effective tax rates and provision for income taxes can vary considerably among companies.  EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets.  These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.



















Adjusted EBITDA.  We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain charges and Europe Rescission Adjustments for the 12 weeks and 36 weeks ended September 6, 2013 and September 7, 2012, as itemized in the discussion of Adjusted Net Income above.  We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of certain charges and Europe Rescission Adjustments.  Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain charges and Europe Rescission Adjustments with results from other vacation ownership companies.



















Free Cash Flow.  We also evaluate Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment and changes in restricted cash.  We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet.  Analysis of Free Cash Flow also facilitates management's comparison of our results with our competitors' results. 



















Adjusted Free Cash Flow.  We also evaluate Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations.  We consider Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet.  Analysis of Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results. 



















Normalized Adjusted Free Cash Flow.  We also evaluate Normalized Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, the borrowing and repayment activity related to our securitizations, and adjustments to remove the impact of cash flow items not expected to occur on a regular basis.  Adjustments eliminate the impact of excess cash taxes, payments for Marriott Rewards Points issued prior to the Spin-off, payments for organizational and separation related efforts, litigation cash settlements and other working capital changes.  We consider Normalized Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet.  Analysis of Normalized Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results. 

 

A-21


MARRIOTT VACATIONS WORLDWIDE CORPORATION


INTERIM CONSOLIDATED BALANCE SHEETS


(In millions, except per share amounts)











(Unaudited)


December 28,





September 6, 2013


2012



ASSETS






Cash and cash equivalents

$                          288


$                 103



Restricted cash (including $41 and $31 from VIEs, respectively)

65


68



Accounts and contracts receivable (including $5 and $5 from VIEs, respectively)

117


100



Vacation ownership notes receivable (including $784 and $727 from VIEs, respectively)

978


1,056



Inventory

859


888



Property and equipment

250


261



Other

103


137



     Total Assets

$                       2,660


$              2,613










LIABILITIES AND EQUITY






Accounts payable

$                            94


$                 113



Advance deposits

44


64



Accrued liabilities (including $2 and $1 from VIEs, respectively)

149


181



Deferred revenue

19


32



Payroll and benefits liability

80


82



Liability for Marriott Rewards customer loyalty program

126


159



Deferred compensation liability

37


45



Mandatorily redeemable preferred stock of consolidated subsidiary

40


40



Debt (including $747 and $674 from VIEs, respectively)

751


678



Other

36


38



Deferred taxes

66


42



     Total Liabilities

1,442


1,474










Preferred stock - $.01 par value; 2,000,000 shares authorized; none issued or outstanding

-


-



Common stock - $.01 par value; 100,000,000 shares authorized; 35,394,854 and 35,026,533 shares






issued and outstanding, respectively

-


-



Additional paid-in capital

1,122


1,116



Accumulated other comprehensive income

20


21



Retained earnings

76


2



     Total Equity

1,218


1,139










     Total Liabilities and Equity

$                       2,660


$              2,613










The abbreviation VIEs above means Variable Interest Entities.













NOTE: We have restated 2012 Inventory, Other assets, Advance deposits, Deferred taxes and Retained earnings to correct prior period misstatements.



 

A-22

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)




36 weeks ended




September 6, 2013


September 7, 2012

OPERATING ACTIVITIES





Net income


$                          74


$                          18

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation


16


21


Amortization of debt issuance costs


4


5


Provision for loan losses


26


29


Share-based compensation


8


8


Deferred income taxes


23


(23)


Impairment charges


1


-


Impairment reversals on equity investment


-


(2)


Gain on disposal of property and equipment, net


(1)


-


Net change in assets and liabilities:






Accounts and contracts receivable


(16)


(15)


Notes receivable originations


(166)


(164)


Notes receivable collections


217


217


Inventory


33


61


Other assets


33


44


Accounts payable, advance deposits and accrued liabilities


(74)


(35)


Liability for Marriott Rewards customer loyalty program


(33)


(46)


Deferred revenue


(13)


20


Payroll and benefit liabilities


(2)


17


Deferred compensation liability


(8)


(2)


Other liabilities


1


4


Other, net


-


1







                  Net cash provided by operating activities


123


158

INVESTING ACTIVITIES






Capital expenditures for property and equipment (excluding inventory)


(11)


(11)


Decrease in restricted cash


4


9


Dispositions


3


3







                  Net cash (used in) provided by investing activities


(4)


1

FINANCING ACTIVITIES






Borrowings from securitization transactions


361


238


Repayment of debt related to securitization transactions


(288)


(295)


Borrowings on Revolving Corporate Credit Facility


25


15


Repayment of Revolving Corporate Credit Facility


(25)


(15)


Debt issuance costs


(5)


-


Proceeds from stock option exercises


2


4


Payment of withholding taxes on vesting of restricted stock units


(4)


(3)







                 Net cash provided by (used in) financing activities


66


(56)








Effect of changes in exchange rates on cash and cash equivalents


-


(1)







INCREASE IN CASH AND CASH EQUIVALENTS


185


102







CASH AND CASH EQUIVALENTS, beginning of period


103


110







CASH AND CASH EQUIVALENTS, end of period


$                        288


$                        212



















NOTE: We have restated 2012 Net income and reclassified certain items within Operating Activities to correct prior period misstatements.

SOURCE Marriott Vacations Worldwide Corporation



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